Defining the Scope of the Cost Recovery Action Under BC’s Environmental Management Act

In a recent post (found here), we discussed the BC Supreme Court’s decision in Cordy Environmental Inc. v. Obsidian Energy Ltd., 2023 BCSC 1198, in which a contractor (Cordy) was permitted to pursue a former owner of a contaminated site for unpaid remediation work pursuant to BC’s cost recovery action under the Environmental Management Act (EMA). This was a novel and unique application of the EMA’s cost recovery regime and expanded its potential application.

In reasons released the other week (read the full decision here), the BC Court of Appeal reversed the Supreme Court’s decision, concluding that it had taken an overly broad interpretation of the scope of the EMA’s cost recovery provisions. The BC Court of Appeal found that Cordy, as an unpaid contractor, did not have a statutory cause of action under the EMA.  

Background

A cost recovery action under the EMA is a statutory cause of action. The claims are usually commenced by current owners of a contaminated site seeking to recover costs of remediation they have incurred against “responsible persons” including former “owners” and “operators” of the site.

Section 47(5) of the EMA, which sets out the statutory cause of action, states that [emphasis added]:

“…any person, including, but not limited to, a responsible person and a director, who incurs costs in carrying out remediation of a contaminated site may commence an action or a proceeding to recover the reasonably incurred costs of remediation from one or more responsible persons in accordance with the principles of liability set out in this Part.”

The central question for the Court of Appeal was whether outside parties, such as unsecured contractors like Cordy, fell within the meaning of “any person” in section 47(5) of the EMA, thereby providing them with a statutory cause of action to recover “reasonably incurred costs of remediation”.

Decision

The Court of Appeal took a purposeful approach to interpreting section 47 of the EMA, considering its interaction with other sections and the Contaminated Sites Regulation, prior judicial decisions, and the overall scheme and objectives of the contaminated sites regime.

The language in section 47(5) is broad – “any person” – but the Court of Appeal concluded that some parameters must be placed on its application.  The Court of Appeal found that the EMA’s cost recovery action was intended to apply to “responsible persons”, such as owners, operators, or those with authoritative control of a contaminated site, who undertake and carry out remediation activities. This interpretation, the Court of Appeal said, was consistent with other parts of the EMA, which focused on “responsible persons” of contaminated sites to carry out remediation activities.

Cordy’s claim, as a contractor that performed remediation work at the site for the owner, did not arise out of any responsibility it had to undertake remediation at the contaminated site, such as someone with ownership, possession, control, or a proprietary interest in the site. Rather, Cordy’s claim was for debt “squarely and exclusively” grounded in its service contract with the owner. The Court of Appeal concluded that this was not the type of claim that is recoverable pursuant to the EMA’s cost recovery provisions.  

Implications

The Court of Appeal has limited the application of the EMA’s cost recovery provision to the class of defined “responsible persons”, thereby stemming the potential floodgates of future litigation brought by outside parties seeking to use the statutory cause of action in novel ways. On the other hand, the Court of Appeal’s interpretation that the cost recovery provisions only apply to “responsible persons” may have unintended consequences. For example, property owners whose land is impacted by migrating contaminants have an exemption to “responsible person” status under the EMA. The question that arises from the Court of Appeal’s decision is whether such persons, who are exempt from “responsible person” status under the EMA, are precluded from relying on section 47(5) to pursue recovery of their costs of remediation. Such an interpretation is contrary to the ‘polluter pay’ principle that underlies the EMA and will likely require future clarification from our courts.