Jan 9, 2019

Environmental Law: Downstream Pollution; Corporate Transfers

Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007 (CanLII)
In the 1960s, a pulp and paper operation owned and operated by the Dryden Paper Company Limited discharged mercury into the nearby river system, causing harm to the First Nations downstream. In 1971, a waste disposal site was constructed. In 1976, Dryden Paper and Dryden Chemicals were amalgamated to form Reed Ltd., and, in 1977, the First Nations bands sued Reed, Dryden Paper and Dryden Chemicals for various damages resulting from the mercury waste contamination of the river (the “Grassy Narrows litigation”). In 1979, Reed was sold to Great Lakes Forest Products Limited. The Grassy Narrows litigation was settled with court approval in 1985. Great Lakes and Reed paid $11.75 million to the First Nations and released Ontario in respect of two previous indemnities. Ontario gave a new indemnity (the “1985 Indemnity”, sometimes referred to as the “Ontario Indemnity”). It promised to indemnify Great Lakes, Reed and others against claims and proceedings arising from “any damage, loss, event or circumstances, caused or alleged to be caused by or with respect to…the discharge or escape or presence of any pollutant by Reed or its predecessors, including mercury or any other substance, from or in the plant or plants or lands or premises forming part of the Dryden assets sold by Reed Ltd. to Great Lakes under the Dryden Agreement”. It was to “be binding upon and enure to the benefit of the respective successors and assigns of Ontario, Reed and Great Lakes”. Thereafter, Reed’s successor was dissolved, and Great Lakes, essentially, became Bowater, which became Abitibi Bowater, which became Resolute. In the interim, Weyerhaeuser purchased certain Dryden assets (including the waste disposal site, which could not be severed from the other assets in time to complete the sale) from Bowater in 1998. Bowater leased the waste disposal site back until the severance was completed, when it was reconveyed to Bowater. Eventually, the owner of the waste disposal site abandoned it with court approval and was discharged from any associated liability in 2011, under the Companies’ Creditors Arrangements Act. On August 25, 2011, the Ontario Ministry of the Environment issued a Director’s Order requiring Weyerhaeuser and Resolute, as prior owners of the site, to perform remedial work on the waste disposal site. Weyerhaeuser unsuccessfully sought to revoke or amend the Director’s Order before the Environmental Review Tribunal. Weyerhaeuser and Resolute both appealed the result, and that appeal was ongoing when Weyerhaeuser commenced this action against Ontario, with Resolute as an intervener. All of the parties moved for summary judgment, asking whether the 1985 Indemnity covers the costs of complying with the Director’s Order, and, if so, whether Weyerhaeuser and Resolute are entitled to its benefit. The motions judge granted Resolute leave to intervene, dismissed Ontario’s motion for summary judgment, and granted Weyerhaeuser and Resolute’s cross-motions for summary judgment. The C.A. set aside the motions judge’s decision. It granted Ontario summary judgment against Resolute. As to Weyerhaeuser, it substituted a declaration that Bowater assigned the full benefit of the 1985 Indemnity to Weyerhaeuser under the 1998 Asset Purchase Agreement and directed a final adjudication by the court below on the issue of what rights, if any, Weyerhaeuser possessed as assignee of the 1985 Indemnity when the Director’s Order was made in 2011. 'The applications for leave to appeal...are granted. Costs in the cause are granted in the third application for leave to appeal. The schedule for serving and filing materials will be set by the Registrar.'