The Inco case is an environmental class action by 7,000 surrounding property owners against Inco that went to trial in 2010. The main claim in the lawsuit was that property values in the Port Colborne area had been adversely affected over many years as a result of particle emissions from the operation of Inco's nickel refinery. Inco lost at trial and had a $36 million judgment awarded against it. Inco appealed.
The appeal decision was released on October 7, 2011. In it the Court of Appeal reversed the trial judgment. While the case is of interest for several reasons, we focus here on the impact of the decision on class actions.
It was not in dispute that the refinery emitted nickel oxide into the air and that as a result nickel made its way into the soil on many nearby properties. The main claim was that emissions in the area were responsible for property values in the early 2000’s not appreciating at the same rate as comparable property values in nearby towns and cities.
The trial judge found that Inco was liable for the loss of property value attributed to the perception created in the market arising from the exposure to these contaminants (and not to any actual damage). The Court of Appeal disagreed. Having disposed of the basis for liability, the Court of Appeal could have stopped there. However, it went on to address the issue that is the focus of this article which is the Court’s treatment of the applicability of the statutory limitation period in the Ontario Limitations Act in the context of class actions.
The emissions ceased in 1984. The lawsuit was commenced in March 2001, some 17 years later. Under the Limitations Act applicable when this action was commenced, an action of this type had to be brought within six (6) years. Inco argued that the limitation period had expired in 1990, six (6) years from when the last emission had occurred. Relying on the discoverability principle, the plaintiffs argued that the limitation period clock should not start ticking until some time in 2000 because that is when class members first acquired the knowledge that Inco’s conduct had caused damage to the values of their properties. Therefore, according to the plaintiffs, the lawsuit had been commenced in time.
The discoverability principle is well established. Where a limitation period is said to run from the time that “the cause of action arose”, the limitation period will not begin to run until the material facts upon which the action is based have been discovered or should have been discovered by the exercise of reasonable diligence. Inco argued that by 1990 the limitation period had expired as most of the class members would have been aware that the refinery had been operating and that Inco had been in the business of refining nickel. Class members would also have been aware or should have been aware, according to Inco, that there may be nickel particles in the soil on their properties which had come from Inco’s facility.
But the trial judge found that since damage is an essential element of the tort “on which the lawsuit was based”, the cause of action did not arise until the class members knew or should have known that Inco’s conduct caused damage in the form of the loss of property values.
The question for the trial judge was just how this discoverability principle should apply in a class action context. Did the limitation period start to run when ‘all’ of the class members knew or should have known all of the material facts? Or when only ‘one’ of the class members knew or ought to have known? Or when ‘a majority’ of class members knew or ought to have known?
The trial judge’s analysis of the issue went as follows:
In the present case, there were probably 10 or 12 property owners, out of approximately 7,000 property owners in the class, who had their own properties tested for nickel prior to the 1998 phytotoxicological study, and who therefore had some special knowledge of the general extent of nickel contamination of the soil in Port Colborne. However, I cannot assume that any of those property owners knew or ought to have known that their property values could be affected. Even if there were a few class members who knew or ought to have known the material facts upon which this case is based prior to February15, 2000, those class members would constitute only an insignificant minority of all of the members of the class. I find that the overwhelming majority of the class members did not know and ought not to have known the material facts until approximately February 15, 2000.
The trial judge therefore found that in the context of this class proceeding the cause of action had arisen as of February 15, 2000 because that was when “the overwhelming majority” of the class members knew or should have known of the necessary facts.
The Court of Appeal disagreed with this analysis. It was implicit in the trial judge’s finding (above), it said, that some class members would have been aware of the potential effect of the nickel on the value of their properties. To that extent, it was an error to have found in their favour on this issue. The problem, in other words, was in having allowed a procedural vehicle, the class action, to change the substantive law applicable to individual lawsuits, a point that has ample support in the class action case law.
If the entire class cannot be grouped for the purposes of the issue, it is clearly not a common issue and it should not have been treated as such by the trial judge. Discoverability in class actions, then, is likely to always be an individual and not a common issue.
While other certification decisions have recognized that discoverability will often require individual adjudication (after the common issues have been determined) Inco is a welcome and clear statement of the underlying rationale for this rule from Ontario’s highest court.