Legal professionals ought to distinguish between reorganization and litigation prices: BC Court docket of Enchantment
The British Columbia Court of Appeals has reached a decision on a dispute over the remediation of a former gas station that lawyers say may help clear the confusion in the law on legal cost sharing in environmental remediation cases lead to further problems later.
The dispute between Victory Motors (Abbotsford) Ltd. and Actton Super-Save Gas Stations Ltd. 2021 BCCA 129 dates back to 2011 when Abbotsford-based Jansen Ltd. filed a lawsuit against the owner of a former gas station across the street from two parcels of land they owned, saying they had been contaminated from years of pollution from the station. Contamination on both sides was compounded by Victory Motors’ failure to remove buried gasoline storage tanks after the station closed in 1994.
In 2012, Jansen bought all of the shares in Victory Motors, giving them indirect control of both locations. Victory then took action against the previous operators of the gas station and hired an engineering firm to clean up the sites, which cost them almost $ 400,000. In 2018, certificates of conformity under the Provincial Environmental Management Act (EMA) were issued for both sites, which enabled all contaminated soils on the sites to remain in place.
Jansen subsequently settled his claims against two previous operators of the gas station, Chevron and Shell, but the lawsuit against Actton Super-Save has been brought to court. Victory and Jansen sought reimbursement of the remediation costs and related legal costs, and Victory requested the cost of removing the remaining underground gasoline storage tanks on its property, compensation for loss of rental income for a period of three years while the remediation was being undertaken, and expenses that could arise in the future due to legal disputes.
In the trial, British Columbia Supreme Court Justice Robert Sewell only granted the cost of the remediation engineering and gave Victory Motors a higher percentage of that cost as it benefited from the remediation of the land. He wrote that the circumstances in which the Jansen family acquired ownership of Victory should be taken into account (Jansen Industries 2010 Ltd. v Victory Motors (Abbotsford) Ltd. 2019 BCSC 1621).
“Although I have rejected the argument that the Victory Motors site was acquired for a nominal consideration and that Victory Motors made a profit from it, I believe it relevant that Victory Motors should receive the benefit of the refurbishment costs, although this is a significant contribution to contamination, ”he wrote. “Given Victory Motors’ failure to act responsibly, I also do not think it fair to take advantage of the Certificate of Conformity without paying a substantial portion of the cost of obtaining it.”
However, Chief Justice Robert Bauman, who wrote for a unanimous appeals court, found the decision wrong and sent the question of apportionment back to the lower court.
“Such an adjustment could prevent an owner who was also a ‘responsible person’ from rehabilitating their land in a timely manner,” he wrote. “Given the goals of the legislation, this certainly cannot be considered by the legislature.”
Chief Justice Bauman also dealt with the question of costs. A distinction must be made between the two legal costs – restructuring costs and litigation costs. He held the EMA’s “cost of cleanup” to be the cost of cleanup, but a party’s litigation costs must be assessed in the normal way under the rules of the court.
“The parties are advised to do this by setting up different files and time attendance logs to maintain the distinction,” he wrote. “A completely separate treatment of the legal costs incurred in restructuring and not in legal disputes avoids the mystery of the waiver of legal / client law in relation to the latter.”
Faskens Bridget Gilbride, who represented Jansen and Victory Motors, said the court’s decision cleared up a lot of confusing case law on how to deal with legal costs under the EMA.
“Most disputes on contaminated sites are settled, so this clarity in the law is important when it comes to mediation and settlement,” she said. “One area of confusion has been whether innocent owners are entitled to the same legal costs as those responsible are. There was case law that said responsible persons could get legal bills that innocent owners couldn’t access because of the wording of the legislation, and he’s put that to bed now. “
Malcolm Funt from Bojm, Funt & Gibbons LLP
Malcolm Funt of Bojm, Funt & Gibbons LLP, who represented Super-Save, agreed with the decision, which clarified how to deal with the legal costs of environmental remediation, but said he was concerned that the decision might cause companies to do so To set up companies as a way of relieving some of their responsibilities under the EMA. Throughout the case, he had argued that it was necessary for the judge to consider the benefits Victory had received from the cleanup of the land.
“On the matter of improvement or luck, I think the decision makes it clear what happens when a company buys stock as opposed to the property itself,” he said. “It remains to be seen, however, whether an improvement or a randomness can be brought forward in the circumstances where someone is only buying a property and not buying the stake in the company that owns that property.”
However, Gilbride said she was concerned that there may not even be a “clear line” between recovery and litigation costs, as the ruling suggests.
“They often started litigation as soon as the contamination was found, so it happens at the same time as any other remediation effort,” she said. “And when you have two parties who are fundamentally in very different positions, it is difficult to see what legal costs are restructuring costs. So I wonder if in practice this will lead to some uncertainty if we find that there is no clear line of space. “
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