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Company Convicted Under Environmental and Safety Legislation For Lack of Preventative Systems

September-23-2013

Lawyer Catherine Lyons
Area Corporate Finance and Securities, Environmental Law, Mining and Natural Resources

Summary

The Ontario Court of Justice’s decision in Ontario (Ministry of Labour and Ministry of the Environment) v. Sunrise Propane Energy Group Inc. provides some insight as to the level of safety standards and environmental practices expected of industry players when dealing with dangerous environmental contaminants.  In this decision, Sunrise Propane Energy Group Inc. (“Sunrise”), 1367229 Ontario Inc. (a related entity), and two company directors were convicted of multiple charges under the Environmental Protection Act (the EPA) and the Occupational Health and Safety Act (the OHSA).  The exact penalties will be decided at the sentencing hearing in December.

Background

On August 10, 2008, a series of explosions occurred at a Sunrise propane facility during a transfer of propane from one truck to another.  Sunrise was relocating certain tanks at its North York facility without approval from the Ontario Technical Standards and Safety Authority (the TSSA) when a tank hose began to leak due to a mechanical failure.  The propane vapour cloud that was released ignited, causing a series of explosions.  Contaminants discharged by the blasts included asbestos, metal fragments and gas vapour.  The explosions killed one employee and forced over 10,000 nearby residents to evacuate the area.  Three days later, a Ministry of Environment (the MOE) provincial officer issued a cleanup order against Sunrise.

Sunrise and 1367229 Ontario Inc. were jointly charged with discharging a contaminant into the environment that caused or was likely to cause an adverse effect.  Sunrise was also charged with five counts of failing to: (i) comply with the provincial officer's cleanup order, (ii) provide employee training and supervision, and (iii)  take every reasonable precaution for the protection of an employee.  Sunrise’s directors, Shay Ben-Moshe and Valery Belahov, were also charged with failing to take reasonable care to prevent Sunrise from contravening the cleanup order.

All charges were “strict liability” regulatory offences; meaning that, once the Crown proves the impugned act beyond a reasonable doubt, the defendant can only avoid liability by establishing a due diligence defence.  In other words, the defendant must show on a balance of probabilities that it took reasonable care to prevent the harm or that there was a mistake of fact.

OHSA Offences

The Court found that Sunrise contravened ss. 25(2)(a), (h) of the OHSA by:

  • Failing to properly instruct and supervise a worker to protect the worker’s health or safety, and
  • Failing to take every reasonable precaution in the circumstance to protect a worker

Failing to Properly Instruct and Supervise a Worker

The first count related to the training and supervision of Mr. Saini, a Sunrise employee who died in the explosions.  There was no evidence that Mr. Saini had been properly trained regarding safe work practices or that he was properly supervised.  Although there was evidence that Sunrise took safety issues seriously, this did not prove that Mr. Saini was provided with sufficient information and instruction.  In fact, he ran in the direction of the explosion instead of away from it.  Moreover, the Court found that Sunrise lacked an internal responsibility system for supervising Mr. Saini despite his minimal experience with propane.

The Court commented on the importance of systems:

[I]n an inherently dangerous business[…] there must be a high degree of attention to detail and processes in place that address day-to-day issues[…].  People make mistakes and processes assist in mitigating any damage that arises when employees make those mistakes.

Failing to Take Every Reasonable Precaution in the Circumstance to Protect a Worker

The second count related to the moving of two tanks without proper TSSA approval, thereby failing to ensure that its storage tanks were being moved in a safe manner.  These tanks were moved near to the truck that was leaking propane and resulted in multiple explosions.  The Court found the movement of the tanks to be highly risky, especially because the site was near a densely populated neighbourhood.  Sunrise argued it exercised due diligence by hiring “trusted professionals who had complied with industry and regulatory requirements in the past” to move and install the tanks.  The Court found this unpersuasive, noting that Sunrise had control of the site and therefore could not rely on hired experts taking reasonable precautions.  It was Sunrise’s responsibility to have a preventative system in place for ensuring the propane tanks were properly installed.

EPA Offences

The Court found that Sunrise and 1367229 Ontario Inc. violated s. 14 of the EPA by discharging a contaminant into the environment and causing an adverse effect.  Sunrise also failed to comply with the provincial officer’s cleanup order.

Discharge of a Contaminant

The offending discharge occurred during a truck-to-truck propane transfer despite a TSSA order prohibiting such transfers.  Sunrise argued that it could not have foreseen the mechanical failure of the hose.  Indeed, whether a defendant could have reasonably foreseen (or predicted) the danger resulting from a given act is one factor considered in deciding whether a defendant took proper care in the circumstances.  However, the Court found that the proper question for Sunrise was whether it could have foreseen that a propane leak could result in an explosion (the answer was undoubtedly yes).  Therefore, lack of foreseeability was not a defence available to Sunrise.  Finally, there was no evidence of a proper system in place to prevent discharges of contaminants from the propane filling site.  Specifically, Sunrise ought to have ensured that its truck drivers knew how to avoid risks associated with handling propane by providing ongoing training regarding safety and compliance with new regulations.

Failure to Comply with a Provincial Officer’s Order

The cleanup order required Sunrise to: (i) confirm it would comply with the order; (ii) provide notification if it could not comply with the order; (iii) hire and verify it had hired qualified persons to carry out the required work; (iv) clean up the surrounding residential area; and (v) develop and provide a cleanup plan for the explosion site.  Most of these items were required to be completed by 5:00pm of the day the order was issued.  Sunrise argued that it was impossible to comply with the order due to financial constraints and because it received the order after the deadlines had expired.  Further, Sunrise relied on mistaken legal advice that the order was indeed impossible to comply with.  The Court held that Sunrise could not attack the order as unreasonable since it did not appeal the order despite knowing it could do so.  In addition, relying on mistaken legal advice is tantamount to ignorance of the law and not a valid defence.  Finally, the evidence revealed that Sunrise was financially capable of performing the cleanup.

In the result, Sunrise was found in breach of the order in all respects except for the requirement to notify the MOE that it would not comply with the order.  Accordingly, Sunrise was convicted of 4 of the 5 counts related to failure to comply with the order.  The directors, Shay Ben-Moshe and Valery Belahov, were similarly convicted for failing to take reasonable care to prevent Sunrise from contravening the cleanup order.

Importance of Processes and Systems

Whether reasonable safety standards and environmental practices have been implemented will always be judged post hoc.  Based on submissions by the MOE and comments by the Court, the due diligence required of Sunrise to escape liability might have included:

(1) a system of generating awareness of particular safety concerns, and updating employees on new safety procedures and changes in applicable regulations;
(2) a supervisory system such as an on-site supervisor or an off-site supervisor readily available by telephone;
(3) spot checks;
(4) a system to ensure compliance with TSSA requirements and other regulations; and
(5) a preventative maintenance system for equipment.

This decision demonstrates that a proactive approach by companies to meet their obligations under the EPA and OHSA is worthwhile.  Since obligations cannot be delegated to another party, it is imperative for companies to ensure specific preventative measures are in place and well documented in order to prevent (or mitigate) potential accidents, or to buttress a strong defence of due diligence if accidents occur.

For further information on this decision, please contact any member of our Environmental Law Group.