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Institute of Corporate Directors Webinar on No-fault Director’s Liability

Many of you will be attending the Institute of Corporate Directors‘  very popular webinar this Thursday, on the Ministry of the Environment’s campaign to impose no-fault environmental liability on corporate officers and directors. I will be one of the presenters, together with Neil Baker of Baker v. Director, and Brian Rosenbaum of Aon. The ICD  will be circulating a brief “pre-read” package, but several of you have requested access to more detailed documents about the case. Here, for your convenience, are the following key documents, so you can assess the significance of this case for no-fault director’s liability:

  1.  Baker overview: one page summary
  2.  March 15, 2012 Provincial Officers Report Remedial Order, addressed to the two Northstar companies before their insolvency
  3.  May 31, 2012 Financial Assurance Order , rushed out to the two Northstar companies just before they entered CCAA, and which they could not pay
  4.  July 30, 2012 Northstar decision of Justice Morawetz, rejecting the Ministry of the Environment’s claim to priority over the secured creditor
  5.  Northstar Decision of the Ontario Court of Appeal, upholding Justice Morawetz
  6. November 14, 2012 MOE Cleanup Order, issued personally to Mr. Baker and other directors and officers
  7.  February 15, 2013 Stay motion decision of the Environmental Review Tribunal, refusing to stay the Baker order pending appeal
  8. April 2013 Amended Notice of Appeal by Mr. Baker
  9. July 8, 2013 Particulars decision of the Environmental Review Tribunal, refusing to require the MOE to specify what, if anything, the D&O allegedly did wrong
  10. Witness Statements Sept 27-2013 of the Director, Jane Glassco, admitting the D&O were not at fault for the release of the contaminants into the natural environment, plus report by MOE expert witness, Prof McIntosh, arguing that environmental regulators should not have to consider innocence or fairness when imposing liability
  11. Prof. Poonam Puri expert report on the corporate duties of officers and directors
  12. Expert Report of Sherry Cooper on the economic impact of imposing personal liability regardless of fault
  13. ICD Stan Magidson Witness Statement
  14. Order of the Environmental Review Tribunal, approving the settlement of the appeal

The key significance of the case is the risk that corporate officers and directors may now have unlimited, permanent, personal, no fault liability for environmental contamination, with no due diligence defence. You can be subjected to such orders even if there is no link between you and the release of the contamination into the environment, and regardless of when and why the contamination occurred.  Being innocent is not a defence.

The solutions?

  1.  do not buy, invest, or serve in Ontario – a terrible solution economically and environmentally, but one that many are choosing
  2.  lobby for policy change – the MOE chose this interpretation of the law, and could choose, instead, a different one.
  3.  obtain Records of Site Condition
  4.  financial assurance?  (But remember General Chemical)
  5.  directors and officers insurance and/or environmental insurance, if available.

In my view, no system of law is just when innocence and fairness are irrelevant and improper considerations.  Punishing the innocent destroys trust and support for the law, and produces undesirable behaviour, not good corporate citizens. It’s time for the government of Ontario to go back to the drawing board on how to pay for contaminated sites, once the actual polluter is dead, bankrupt or otherwise gone.

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