Environmental Liability of Directors and Officers

May 14th, 2015

On August 29, 2013, the Minister of Sustainable Development, Environment and the Fight against Climate Change (the “Minister”) ordered the company Les Équipements de puissance Reliance Ltée (“Reliance”) to clean up its storage site for PCB-contaminated material in Pointe Claire, Quebec. Reliance failed to do so, whereupon the Minister proceeded to have the site decontaminated and secured, at a cost of $3.8 million. On March 5th of this year, Radio-Canada revealed1 that in connection with this matter, the Minister had registered a notice of legal hypothec against a house belonging to Ms. Birdie Marshall, on the basis that she was the director and shareholder of Reliance. This matter highlights the importance of being aware of certain rules in Quebec regarding the environmental liability of directors and officers.

It should first be noted that the directors and officers of a legal person are solidarily liable for the latter’s environmental liabilities, unless they establish that they exercised due care and diligence to prevent the breach that led to the environmental harm (section 115.50 of the Environment Quality Act, CQLR c. Q-2, hereinafter, the “EQA”).

The directors’ and officers’ liability towards the Minister for environmental damage can be secured by a legal hypothec on all their movable and immovable property, as was the case with Ms. Marshall (section 115.51 of the EQA).

In addition, the EQA creates a presumption of penal liability on the part of the directors and officers of a legal person, unless they establish that they exercised due diligence and took all necessary precautions to prevent the offence (section 115.40 of the EQA).

Finally, the EQA gives the Minister the discretionary power to refuse to issue or renew any authorization under the Act, and to amend, suspend or revoke any such authorization, if any of the directors, officers or shareholders of a legal person has committed certain environmental, fiscal or criminal offences during the last years (sections 115.5 et seq. of the EQA).

In light of the foregoing, legal persons should be careful when selecting directors and officers. By the same token, a prospective director should, before accepting that position, inquire into the environmental status of the legal person’s affairs. We recommend any prospective director to check, inter alia, the following:

  • whether the legal person has implemented environmental policies and measures to prevent the commission of offences and, more generally, to ensure compliance with statutory and regulatory norms;
  • whether the legal person has received a notice of non-compliance, an order to comply, or a statement of offence.

Similarly, a legal person should ensure that any prospective director or officer:

  • has not failed to comply with an order or injunction pursuant to the EQA or to pay any amount owing to the Minister;
  • has not been found guilty of an offence under the EQA or the regulations thereunder;
  • has not been a director, officer or shareholder of a legal person that has been found guilty of an offence under the EQA or the regulations thereunder.  

These are some examples of essential questions that should be addressed when a legal person selects its directors and officers, and such questions are all the more critical in the wake of legislative changes and the positions recently taken by the Minister.

Given the increased prominence of environmental issues and the implementation of the legislative measures canvassed above, legal persons and their directors and officers should be asking the right questions, exercising due care, and consulting if need be with environmental law specialists.

1 Marie-Ève Maheux, Entreposage illégal de BPC à Pointe-Claire : Québec veut récupérer 4 millions , Radio-Canada, March 5, 2015, http://ici.radio-canada.ca/nouvelles/societe/2015/03/05/001-entreposage-illegal-bpc-pointe-claire-avis-hypothque-legale-ministere-environnement.shtml