Class Action, Legal Supplier

SCC rejection of Tar Ponds appeal underscores need for indemnity protection

The Supreme Court of Canada’s decision not to certify a class-action lawsuit – launched by Cape Breton residents who claim the Sydney tar ponds exposed them to contaminants – underscores the importance of indemnity protection for plaintiffs who, without such funding, wouldn’t be able to access justice, says BridgePoint Indemnity Company Chairman and CEO John Rossos.

In this case, the residents accessed indemnity protection from BridgePoint to launch their claim.

“Without our indemnity, they wouldn’t have been able to bring this claim forward and they wouldn’t have been able to obtain access to justice to seek compensation for their losses,” Rossos says.

The plaintiffs in Neila Catherine MacQueen, et al. v. Attorney General of Canada, et al. are landowners and residents of Sydney, N.S. They started their legal action in 2004 and alleged that airborne emissions from the operation of the steel works, which opened in 1903, caused damage to themselves and their properties. Their action was framed in battery, strict liability, nuisance, trespass, negligent operation of the steel works, regulatory negligence and breach of fiduciary duty.

While a Nova Scotia Supreme Court, 2011 NSSC 484 (CanLII), judge certified their claim as a class-action lawsuit, the Nova Scotia Court of Appeal013 NSCA 5 (CanLII), overturned the certification.

The plaintiffs then sought leave to appeal at the Supreme Court, which has been denied. As is the custom with high court leave applications, the SCC didn’t give reasons for its decision.

Rossos says the SCC decision is a massive loss for the people of Sydney and will have far-reaching implications for environmental class actions in Canada.

“I think this is a sad day for all Canadians," he says. "By refusing to grant leave, I believe the Supreme Court has effectively shut the door on certifying class actions in Canada for environmental claims. I think lawyers will think twice about bringing environmental claims forward for certification.”

The decision means there’s no further avenue of appeal for Sydney residents.

Rossos, who is both a chartered financial analyst and a member of the Ontario Bar, says the plaintiffs deserved to see their case argued for its merits in a common-issues trial.

“But to deny certification, in my view, runs contrary to the whole concept of a class action legislative regime and recent Supreme Court decisions that have had a much more liberal view of what should be certified,” he says.

Rossos compares the plaintiffs’ lawyer in this case, Ray Wagner, to the lawyer who led the environmental class action in Erin Brockovich, the American legal clerk and environmental activist portrayed by Julia Roberts in the Hollywood movie by the same name.

“As Ray was bringing the case closer to certification, he came to us to ask whether we would offer indemnity protection for the citizens of Sydney – meaning that if for some reason, they didn’t get their claim certified by the Nova Scotia Supreme Court and there were costs payable to the governments of Canada and Nova Scotia, the defendants, then we would pay those costs,” he says.

"Ray initially identified the claim, felt strongly that the citizens of Sydney needed a voice and worked tirelessly with Scott Ritchie at Siskinds to ensure their voices were heard. Both firms took on significant financial risk and now will be faced with paying out approximately $240,000 to cover the excess costs over and above BridgePoint’s indemnity."

BridgePoint, back in 2009, introduced the concept of third-party financing and indemnity protection for the class-action market in Canada.

Rossos says indemnity protection was “critical” in this case because the residents of Sydney are “ordinary people” who aren’t wealthy and would be unable to bear the financial risk to pay out thousands in legal costs.

“In my view, they have valid legal claims, but they didn’t have financial resources to withstand a situation where they brought their claim for certification and failed,” he says. “And now there is an actual cost award against them for $740,000 – they couldn’t bear that risk. Otherwise, the four representatives of the class would have been on the hook for the full $740,000.”

Instead, BridgePoint will pay out $500,000 to the governments for costs and counsel pays the rest of the costs of the unsuccessful motion.

“I’m disappointed there is a financial loss, but I’m more concerned about the fact that the people of Sydney aren’t going to have their day in court,” he says. “We’re a financial company and we have the resources to withstand those losses and we’re compensated for taking those risks. It's more about the impact of the decision on people who have suffered as a result of environmental contamination to their property."

Rossos says the case heightens the need and demand for the financing and indemnity protection that BridgePoint offers.

“It validates what we do,” he says.

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