Ontario appeal court overturns property value lawsuit

Globe and Mail

October 07, 2011

Jeff Gray, Law Reporter

Ontario appeal court overturns Port Colborne Inco ruling

The Ontario Court of Appeal has overturned a lower-court decision that would have forced mining giant Vale SA (VALE-N24.450.220.91%) to pay $36-million in compensation to residents of Port Colborne, Ont., for decades of pollution from an Inco nickel refiner.

In a ruling released Friday, a three-judge appeal court panel tossed out a Ontario Superior Court decision in a class action filed by residents of the town demanding compensation for the alleged effect of the pollution on their property values.

The original July, 2010, lower-court ruling was seen as unprecedented, and critics said it could have opened up potential liabilities for countless industries near residential areas.

The appeal judges overturned the lower court’s finding that the Inco nickel refinery constituted a “non-natural” use of land. The appeal ruling says the plaintiffs in the case did not prove the refinery was operated in a dangerous or unusual way.

“To the contrary, the evidence suggests that Inco operated a refinery in a heavily industrialized part of the city in a manner that was ordinary and usual and did not create risks beyond those incidental to virtually any industrial operation,” the judges write. “In our view, the claimants failed to establish that Inco’s operation of its refinery was a non-natural use of its property.”

The appeal court also disagreed with the way that the lower-court judge calculated the impact on the town’s property values. And it awarded Brazil-based Vale, which bought Inco in 2006, $100,000 in legal costs for the appeal.

Lawyers for the town’s residents, who fought a battle over the nickel pollution for more than a decade, could not be reached immediately for comment. Nor could a spokesman for Vale.

The original ruling issued last July, raised eyebrows. Some legal observers said it could mean more U.S.-style “toxic tort” class-action lawsuits against polluters, the kind of confrontation dramatized a decade ago in the Hollywood movie Erin Brockovich. Critics said the judgment should be “terrifying” to any industry with a smokestack, as it could expose to massive liabilities even companies that follow all environmental rules.

Despite the multi-million-dollar award in the original ruling, Inco was not found to have been negligent or to have broken any laws. Inco had stopped refining nickel at its Port Colborne plant in 1984. The company’s lawyers argued in their appeal that the nickel residue has not damaged people’s health or their properties. While the health effects of the nickel fumes that came out of its smokestacks have been hotly debated among people in Port Colborne, the plaintiffs dropped their health claims from the class action.