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Environmental Appeal Board

Fourth Floor 747 Fort Street Victoria British Columbia Telephone: (250) 387-3464 Facsimile: (250) 356-9923 Mailing Address: PO Box 9425 Stn Prov Govt Victoria BC V8W 9V1 Website: www.eab.gov.bc.ca E-mail: [email protected]

DECISION NOs. 2010-EMA-005(c) and 2010-EMA-006(c)

In the matter of two appeals under section 100 of the Environmental Management Act, S.B.C. 2003, c. 53.

BETWEEN: Seaspan ULC (formerly Seaspan International Ltd.)

APPELLANT

AND: Vancouver Fraser Port Authority APPLICANT (Third Party)

AND: Fibreco Export Inc. and 602534 BC Ltd. APPLICANTS (Third Parties)

AND: Director, Environmental Management Act APPLICANT (Respondent)

AND: Domtar Inc. THIRD PARTY

AND: Attorney General of British Columbia PARTICIPANT

BEFORE: A Panel of the Environmental Appeal Board Robert Wickett, Q.C., Panel Chair Cindy Derkaz, Member Blair Lockhart, Member

DATES: October 15–18, 2013

PLACE: Vancouver, BC

APPEARING: For the Applicants: Vancouver Fraser Port Authority: Fibreco Export Inc. and 602534 BC Ltd: The Director: For Seaspan ULC: For Domtar Inc: For the Attorney General of BC:

Nicholas R. Hughes, Counsel Aiden Cameron, Counsel Janice H. Walton, Counsel Rachel Barker, Counsel Dennis Doyle, Counsel Robert W. Hunter, Counsel Jana McLean, Counsel Camille Chisholm, Counsel Gary A. Letcher, Counsel Andrea C. Akelaitis, Counsel E.W. Hughes, Counsel

http://www.eab.gov.bc.ca/

DECISION NOS. 2010-EMA- 005(c), 006(c)

APPLICATIONS FOR COSTS

APPLICATIONS

[1] The Vancouver Fraser Port Authority (the “Port”), Fibreco Export Inc. and 602534 BC Ltd. (collectively “Fibreco”), and the Director, Environmental Management Act (the “Director”), each apply to the Board for an order for costs against the Appellant, Seaspan ULC (“Seaspan”).

[2] The applications are made pursuant to section 95(2)(a) of the Environmental Management Act, S.B.C. 2003, c. 53 (the “EMA”), which states as follows:

95(2) In addition to the powers referred to in section 93(2) [environmental appeal board] … , the appeal board may make orders as follows:

(a) requiring a party to pay all or part of the costs of another party in connection with the appeal, as determined by the appeal board;

[3] The Applicants submit that Seaspan’s appeals, which Seaspan largely abandoned on the third day of a 20-day hearing, were manifestly deficient and without merit. They assert that the meritless appeals, combined with issues arising from the evidence of Seaspan’s expert witness, Mr. William Donald, warrant an order for costs by the Board under section 95(2)(a) of the EMA, and in accordance with the Board’s published policy regarding costs.

[4] Domtar Inc. (“Domtar”) is a Third Party in Seaspan’s appeals. It does not apply for costs against Seaspan and takes no position on these applications.

[5] The Attorney General of BC (the “AGBC”) is a Participant in the appeals and, similarly, makes no application for costs and takes no position on the applications.

BACKGROUND

[6] These appeals relate to a contaminated site located at 10 Pemberton Avenue, North Vancouver, BC, the current location of Seaspan’s Vancouver shipyard. The site is located adjacent to Burrard Inlet.

[7] To understand the history leading to these applications for costs, a fairly detailed background leading to the appeals, and these costs applications, is required.

The legislative regime

[8] The cleanup of contaminated sites in BC is governed by Part 4 of the EMA which is administered by the Ministry of Environment (the “Ministry”). The legislation provides the Director with broad powers to deal with contamination, including the authority to issue orders to any one or more persons responsible for the remediation of a contaminated site.

[9] The Ministry encourages voluntary remediation, particularly when dealing with sophisticated parties in respect to a complex site. The overarching goal of the


EMA is to encourage and, if necessary, require responsible persons to remediate the contamination in a timely and effective manner and to take steps to protect the environment from further degradation. A remediation order is usually issued as “a last resort” when efforts by the Ministry to persuade responsible persons to undertake voluntary remediation have failed.

[10] The EMA imposes joint and several liability on all responsible persons, subject to some exceptions or limitations. It contemplates that disputes among responsible persons with respect to liability, and the allocation of cleanup costs will, ultimately, be resolved in a cost recovery action in the BC Supreme Court. The EMA encourages responsible persons to deal with environmental contamination and damage resulting therefrom quickly, and to determine the monetary issues later.

The contamination and remediation order

[11] In the present case, Seaspan and Domtar were identified as “responsible persons” for the contamination at the site as early as 1995. Initially, they attempted to work together to identify, delineate and come up with a plan to remediate the contamination. Various options for remediation were considered; however, after ten years of protracted negotiations with respect to the responsibility to remediate and remediation methodology, no conclusions were reached, and no plan for remediation was agreed to.

[12] Given the seriousness of the contamination and its migration into Burrard Inlet, the Director issued two draft remediation orders to “encourage” the parties to engage in remediation. However, this strategy failed.

[13] On February 16, 2010, the Director issued a Remediation Order (the “Remediation Order”) to Seaspan and Domtar pursuant to section 48(1) of the EMA. In his 22-page Reasons for Decision, the Director states:

3. It is undisputed that the parcel of land on Burrard Inlet, previously owned and operated by Domtar and presently owned and operated by Seaspan, is the source of serious contamination and significant environmental concerns.

4. Those concerns were described as follows in a 2002 report prepared by Golder Associates Ltd. for Seaspan and Domtar:

Key environmental issues relate mainly to historical use of the western part of the Site as a wood-preserving (creosoting) plant, and past and present use of the entire Site for shipbuilding and ship repair activity.

5. A large portion of the past 15 years has been spent investigating the extent of the contamination problem.

6. …

7. The primary contaminants of concern are NAPL (creosote), PAHs, metals and tributyltin (TBT). The Ministry described these contaminants in its August 28, 2003 technical review of the site investigation reports conducted on behalf of Seaspan and Domtar:


NAPL – NAPL [non aqueous phase liquid] in the form of creosote is extensively distributed across the site. There is a major source zone in the northern area of the site (with a thickness of 7.5m), as well as several other large sources closer to the shoreline (with thicknesses up to 11m). The NAPL extends into the foreshore sediments essentially to the southern end of the Synchrolift ….

PAHs [Polycyclic aromatic hydrocarbons] – The additional coring work completed by Golder in the boat basins allowed for a vertical description of the contamination throughout the sediments. The highest mean total PAH concentration of 23,700 ug/kg was associated with the zone of NAPL at a depth of 2-3m below the 1967 dredge line, maximum total PAH concentrations were still up to 175x the SedQCts-criteria and 70x the site-specific risk-based value ….

Metals – The majority of the exceedances for metals in surface sediment were contained in the Inner Boat Basin area and within the upper 1m of sediment material ….

TBT – TBT concentrations were elevated in surficial sediments in the Inner Boat Basin and concentrations ranged up to 20,000 ug/kg under the Synchrolift.

8. Domtar and the various corporate predecessors for which it is responsible operated a wood preserving facility on the parcel presently owned by Seaspan from at least 1923 through 1965. These operations contaminated soil, sediment and groundwater. Because the contamination is mobile, it has been migrating into Burrard Inlet and contaminating a sensitive aquatic environment on an ongoing basis.

9. Seaspan has owned and operated the upland source site since 1965. When it acquired the Domtar parcel, Seaspan knew of the site’s previous use.

10 …

11. While the parties have received considerable regulatory prompting and committed resources to investigation and remediation planning, they have been unable, in the absence of legal compulsion, to produce a final remediation plan and begin the necessary remediation work.

…

[14] The creosote contamination referred to by the Director as migrating from the upland source site (Parcel A, identified below) to other portions of the site and Burrard Inlet, is often referred to as “the plume”.

[15] The Remediation Order requires Domtar and Seaspan to address contamination found in soil, groundwater and sediments in the following parcels of land, and a water lot, owned by various parties (the “Site”):

1. Parcel A – lands owned by Seaspan and acquired from Domtar, part in 1965, and part in 1971. Domtar had previously operated a sawmill and creosote treatment facility on this parcel.


2. Parcel B – federal lands owned by the Port and leased by Seaspan. This parcel consists of fill material placed on the tidal flats.1

3. Parcel C – the water lot parcels held by the Port and leased to Seaspan for ship building and repair operations. From 1923 to 1963, Domtar had leased part of Parcel C for creosote wood treatment.

4. Parcel D – federal lands owned by the Port and leased by the District of North Vancouver until 2013. In 2013, the District of North Vancouver surrendered its lease and Seaspan and Fibreco leased portions of this parcel. It was also previously a tidal flat.

5. Parcel E – land owned by 602534 BC Ltd. but occupied by Fibreco. This parcel was previously a tidal flat.

[16] In summary, at the date of the hearing, Seaspan either owned or leased Parcels A, B, C and part of Parcel D not leased by Fibreco. As such, Seaspan had sole control of the access to, and the activities on, those parcels.

[17] Parcels B, D and E are due west of Parcel A and are generally referred to by the parties as “the Western Front”. The water lot, Parcel C, is south of Parcel A.

[18] The Director determined that both Domtar and Seaspan were “responsible persons” under the EMA and liable for the cleanup of the Site. In his Reasons for Decision, the Director explained that he named Domtar to the order because Domtar is “the most substantial contributor” of the contamination and the primary polluter as a result of its former wood preserving activities. He named Seaspan to the order because Seaspan has owned and operated Parcel A, the upland source site, since 1965 and that, when it acquired the parcel from Domtar, Seaspan knew of its previous use. The Director also found that, while Seaspan did not produce the creosote, creosote-related contamination has been migrating into Burrard Inlet from Seaspan’s property, “on Seaspan’s watch”, and that Seaspan had likely added to that contamination by way of pile driving in the contaminated area.

[19] The Director ordered both responsible persons to prepare and deliver a remediation plan and put that plan into effect, to post financial security and to register a covenant under section 219 of the Land Title Act, among other things. In his Reasons for Decision, the Director acknowledged that the Port was likely a responsible person; however, he elected not to name the Port in the order.

[20] Subsequent to the Remediation Order, the Director issued further decisions to Seaspan and Domtar, including:

• An April 12, 2010 “final determination of contaminated site” pursuant to section 44 of the EMA. This decision confirmed the description of the Site and that it met the statutory definition of “contaminated site.”

• A January 8, 2013 decision approving two different final site remediation plans, one submitted by Seaspan and the other submitted by Domtar. It was left to these two parties to determine which plan to implement at the Site.

1 In this decision tidal flats are also referred to as mud flats.


The Appeals

[21] Although the three costs applications only relate to Seaspan’s appeals, a complete understanding of the applications, and this decision, must also include reference to Domtar’s appeals.

[22] The Board received five appeals against the Director’s above-noted decisions. Domtar and Seaspan each appealed the Remediation Order (Appeal Nos. 2010-EMA-004 and 2010-EMA-005). Seaspan alone appealed the Director’s “final determination of contaminated site” (Appeal No. 2010-EMA-006).

[23] Both Seaspan and Domtar also appealed the January 8, 2013 final site remediation plans (Appeal Nos. 2013-EMA-002 and 2013-EMA-003).

[24] The Port and Fibreco, as current owners and/or lessees of portions of the Site, were added as Third Parties to the appeals. Seaspan and Domtar were made Third Parties in each other’s appeals.

[25] In addition, the Port filed a “Notice of Constitutional Question” dated June 1, 2010. The AGBC was added as a Participant for the sole purpose of addressing the constitutional question.

[26] The Board consolidated the appeals and ordered that they be heard together. Due to the complexity of the appeals, a four-week hearing was scheduled from September 30, 2013 to November 1, 2013.

[27] Prior to the hearing, Seaspan applied to have its appeal of the January 8, 2013 decision heard and decided separately. The application was granted. In Seaspan ULC v. Director, Environmental Management Act, Decision No. 2013-EMA-002(c), May 9, 2013; [2013] B.C.E.A. No. 8 (Q.L.), the Board dismissed Seaspan’s appeal. With the disposition of this appeal, there were four appeals remaining to be heard, commencing September 30, 2013.

Seaspan’s remaining appeals

[28] Seaspan’s Notice of Appeal of the Remediation Order contained eight grounds for appeal. It alleged that the Director erred:

1. By finding that Seaspan is a responsible person with respect to all or some of the 5 parcels;

2. By finding that Seaspan is responsible for the contamination of all or some of the 5 parcels;

3. By not finding that the Port is a responsible person with respect to all or some of the 5 parcels;

4. By finding that he had the authority to make the Order with respect to the Port owned parcels (b), (c) and (d);

5. By imposing unreasonable requirements, including deadlines, under Remediation Requirements 1 and 4 of the Order;

6. By finding that Seaspan must post security for the remediation works at the Site;

7. By ordering a Land Title Act s. 219 covenant, … be registered against parcel (a), or alternatively only against parcel (a); and


8. By finding that the purposes in EMA s. 48(1) would be unlikely to be satisfactorily met by the entry of notations in the site registry.

[29] In contrast, Domtar’s appeal of the Remediation Order did not challenge the finding that it is a responsible person.

[30] Seaspan’s appeal of the April 12, 2010 “final determination of contaminated site” decision identified procedural fairness and due process grounds for appeal relating to the Director’s refusal to grant Seaspan an extension of a 31-day deadline for comments on the Director’s preliminary site determination of February 16, 2010. Seaspan had requested the extension “due to witness availability”.

[31] After the appeals were filed against the Remediation Order and final determination in 2010, there was a lengthy period of negotiation and submissions to the Director with respect to the form of remediation plan to be implemented at the Site. Although the appeals were originally scheduled to be heard in January 2011, the negotiations and submissions resulted in requests for postponements, first to October 2012, and then to April and May of 2013. Each postponement was sought by Seaspan, with the concurrence of Domtar. The hearing was later scheduled to be heard from September 30, 2013 to November 1, 2013.

[32] During the course of the appeal process leading up to the hearing, Seaspan’s grounds for appeal went through various changes and modifications. For instance, although it appeared from its Notice of Appeal that Seaspan was challenging the Director’s finding that Seaspan was a “responsible person” under section 48 of the EMA, Seaspan advised that this was incorrect; it was challenging its responsible person status under section 46, by claiming that it was an innocent purchaser. This occurred during its preliminary applications for production of documents in November and December of 2012, more than two and one-half years after it filed its Notice of Appeal with the Board.

[33] In the Board’s June 11, 2013 decisions on the applications for production of documents (Decision Nos. 2010-EMA-004(a), 005(a), 006(a); and 2011-EMA-003(a), June 11, 2013; [2013] B.C.E.A. No. 9 (Q.L.)), the Board states at paragraphs 76-79,

[76] Regarding its own appeal, Seaspan states in its November 16, 2012 submission that it is not alleging that it should be removed “entirely” from the Order. …. [Board’s emphasis]

[77] …

[78] Seaspan also clarifies that it is not appealing the finding that its shipyard operation contributed to the metals contamination found in parcel (a) and the inner boat basin. [Board’s emphasis]

[79] It further states that it “is not appealing the finding that, as the current owner of parcel (a) of the Site (the upland source parcel that was previously owned/operated by Domtar), it is a “responsible person” so far as the contamination on that parcel is concerned” [Seaspan’s emphasis]. However, it then states that this acceptance of responsibility for parcel (a) is subject to Seaspan being able to


“establish that it is entitled to an exemption under section 46 (1)(d) of the Act” [the “innocent purchaser” exemption]. ….

…

[83] Domtar also notes that Seaspan did not claim this section 46 exemption in its Notice of Appeal of the Order, or any of its other Notices of Appeal. Although Domtar does not object to Seaspan’s reliance on this section, it points out that subsection (iii) of section 46(1)(d) sets out the following essential precondition to establishing that a person is not responsible for remediation: “the owner or operator did not, by any act or omission, cause or contribute to the contamination of the site” [Domtar’s emphasis]. If Seaspan is relying upon the exemption in section 46(1)(d), then Domtar submits that Seaspan’s contribution to the contamination or its migration, its knowledge and diligence, are issues to be determined. Therefore, the documents that Domtar has requested are relevant on the basis of Seaspan’s exemption claim alone.

[34] Based on Seaspan’s submissions in the context of the document production application, the Board found that:

[98] It is apparent that Seaspan is not contesting contamination by the metals found in parcel (a) and in the inner boat basin in parcel (c). However, from its Notice of Appeal, remedies sought, and some of its statements in its submissions, the Panel cannot find, with any degree of confidence, that Seaspan is narrowing this exemption claim to only parcel (a). Unfortunately, Seaspan’s “clarifications” in its submissions have not made its intentions clear, in fact, the opposite is true.

[99] Having considered all of its statements, the clearest indication of Seaspan’s intent is found in its December 10, 2012 submissions, which were its final submissions in reply to Domtar’s application:

Seaspan is appealing the extent to which it is a ‘responsible person’ with respect to the other parcels comprising the Site, and the extent to which it is responsible for the contamination of ‘all or some of the 5 parcels’. However, those issues will involve a section 46 analysis, not a section 48 analysis. (page 9 of December 12, 2012 submission) [Emphasis added]

[35] Of particular relevance to these costs applications is another submission by Seaspan which is discussed by the Board regarding the Western Front (Parcels B, D and E), during the document production application:

[173] Seaspan states that it intends to argue that the creosote contamination on the “Western Front” did not end up there due to migration from parcel (a); rather, it was placed there by Domtar. It submits that photographs of the Site taken from 1926 and 1948 indicate that Domtar, or its corporate predecessors, may have dredged the inner boat basin and used the dredged material to infill the mud flats to the west of parcel (a). To the extent that the dredgeate


transported and placed by Domtar is the source of the contamination found at, and around, the Western Front, Seaspan maintains that it is not responsible for such contribution, as it did not migrate from parcel (a).

[Emphasis added]

[36] Seaspan’s position regarding the Western Front was confirmed in a June 21, 2013, letter to the Board and all parties. In it, Seaspan advised that it was abandoning certain grounds of appeal and amending other grounds. Seaspan conceded that it was a responsible person for Parcels A and C. It abandoned grounds 1 and 2 of its appeal with respect to Parcels A and C and “as a result has limited the document production so ordered.” Seaspan also asserted that it was not a responsible person for the Western Front (i.e., Parcels B, D and E) on the grounds that creosote contamination did not migrate from Parcel A to the Western Front.

[37] Seaspan’s claim that the contamination of the Western Front was not due to migration from Parcel A became its main argument on appeal. However, its theory as to the cause of the contamination on the Western Front appears to have changed from dredgeate located on the tidal flats (per the 2012 document application, above) to the presence of boomed creosote-laden timbers on the flats (evidence of Mr. Donald at the 2013 hearing, discussed below).

[38] Seaspan then goes on to state in its letter of June 21, 2013:

Seaspan’s position is that any creosote contamination of the Western Front was not due to migration from parcel (a), but was directly deposited there by Domtar’s storage of treated timber piles on the tidal flats that are now buried under the Western Front. As a result Seaspan is not a responsible person with respect to parcels (b), (d) and (e). (page 4)

[39] In advance of an oral hearing, the Board requires the parties to provide a Statement of Points which outlines their respective cases. Domtar and Seaspan delivered their Statements of Points with respect to their appeals on or about July 22, 2013.

[40] In its Statement of Points dated July 22, 2013, Seaspan claims, in the alternative, that it is an innocent purchaser with respect to Parcel B (para. 34). However in its opening written submissions at the hearing, Seaspan states on page 5: “With respect to Parcel (b), Seaspan abandons its claim to be an “innocent purchaser” for the purposes of these appeal proceedings only.” In the footnote to this statement, Seaspan states: “Seaspan reserves the right to claim the status of “innocent purchaser” and /or “minor contributor”, and to rely on any other claim or status that might limit its liability, in any future cost recovery action that may arise in relation to this or a related contaminated site.”

[41] Seaspan filed an expert report by Mr. William Donald, P.Eng., Keystone Environmental Ltd. (“Keystone”), dated August 8, 2013, in which he states that the tests did not indicate that the plume was continuous (from Parcel A to the Western Front). In his professional opinion, the creosote contamination found in the


Western Front more probably than not originated from the storage of creosote treated boomed timbers on the tidal flats of the Western Front.

[42] As Seaspan conceded that it was a responsible person for Parcels A and C, which it owns or leases, the primary issue going into the September 30th hearing in relation to its original grounds 1 and 2 was whether the creosote contamination plume extended from Parcel A into the Western Front. If the creosote contamination on the Western Front is part of a plume of contamination originating from Parcel A, then Seaspan is a responsible person and liable to remediate the entire Site pursuant to the EMA and the Remediation Order. However, if, as Seaspan maintains, the contamination on the Western Front is discontinuous, and unconnected to the plume of contamination originating on Parcel A, then it argues that it is not a responsible person liable to remediate the contamination located on the Western Front. This is because Seaspan did not cause the contamination (it being common ground that Domtar was responsible for the contamination in the first instance) and, Seaspan argues, it is not an “owner” of land from which contamination had migrated.

[43] Finally, one last requested change to Seaspan’s appeal should be noted.

[44] On September 11, 2013, Seaspan delivered a Supplemental Statement of Points raising, for the first time, a claim that it should be considered a “minor contributor” with respect to the contamination located on Parcels B, D and E (the “Western Front”) under section 50 of the EMA. The other parties objected to Seaspan’s proposed minor contributor argument on the basis that they were prejudiced by the late notice.

[45] At a prehearing conference on September 13, 2013, the Board directed the parties to tender written submissions with respect to Seaspan’s right to advance the minor contributor argument, it being anticipated that the Panel would deliver reasons at the outset of the hearing.

The Hearing

[46] The hearing commenced before this Panel of the Board on September 30, 2013, with Seaspan’s appeals scheduled to proceed first.

[47] Seaspan’s written opening submissions organized its appeal under two headings:

Issue 1: Director has no jurisdiction over federal land, but does have jurisdiction over federal authorities (the “Constitutional Issue”), and

Issues 2 and 3: Seaspan not responsible for the Western Front.

[48] Seaspan’s submission that the Director erred in finding it a “responsible person” for all of the contamination of the Western Front is set out in paragraphs 29 and 30 of its written opening submission as follows:

29. In this appeal, Seaspan will present evidence from Mr. John Wood, Mr. Allen Fowlis and its expert Mr. William Donald that shows why the Director erred in assuming all of the creosote contamination on the Western Front migrated from Parcel (a):


(a) Mr. Jack Wood is a professional engineer who attended the Domtar site many times in the 1950s, and was the lead engineer at Swan Wooster (the engineering firm used by Seaspan to design and construct the shipyard in 1965 to 1967). He will provide the Board with evidence of Domtar’s practice of storing creosote-treated timber piles on the Western Front prior to 1965.

(b) Mr. Allen Fowlis worked for Seaspan for 40 years, including as CEO for 20 years, and visited the North Vancouver shipyard site at the time Seaspan purchased the west half of Parcel (a) from Domtar. He will describe how Seaspan acquired a “clean site” from Domtar. His evidence about Seaspan’s activities immediately after acquisition of the property further supports the conclusion that Seaspan did not cause or contribute to creosote contamination on any Parcel.

(c) Seaspan’s expert, Mr. William Donald is a professional engineer and principal of Keystone. He will opine on the causes of creosote contamination on the Western Front. According to Mr. Donald, the creosote Plume on Parcel (a) has only migrated as far as Parcel (b) and a portion of Parcel (d). The remaining contamination on Parcels (d) and (e) is attributable to another cause, being the storage of creosote-treated timber piles by Domtar before 1965. Mr. Donald also will explain that the groundwater flow moves in a south to south-east direction. Certainly since Seaspan filled in the tidal flats (forming Parcels (b) and (d)), the groundwater has flowed in a south to south-east direction in Parcels (a), (b) and (d), suggesting it could not have carried contamination onto the Western Front from Parcel (a) after that time.

30. Taken together, their evidence supports the conclusion that Seaspan did not deposit contamination on the Western Front, nor did creosote contamination migrate from Seaspan’s Parcel (a) onto the Western Front. Accordingly Seaspan should not have been named in the Remediation Order as a “responsible person” for all of parcels.

[Emphasis added]

[49] In the alternative, Seaspan claimed the status of a “minor contributor” on the Western Front. On October 1, 2013, the Panel dismissed Seaspan’s application to raise the minor contributor argument as a ground of appeal (see, Seaspan ULC and Domtar Inc. v. Director, Environmental Management Act (Decision Nos. 2010-EMA-004(b), 005(b), 006(b) and 2013-EMA-003(b), (September 15, 2014), unreported)).

Evidence of William Donald

[50] Seaspan called William Donald as its first witness and counsel advised the Panel that he anticipated Mr. Donald’s evidence, including cross-examination, would occupy the balance of the hearing week.


[51] As the submissions with respect to the costs applications turn, substantially, upon the evidence given by Mr. Donald, it is necessary to review his evidence in some detail, and to distinguish between the evidence he gave in direct examination and the evidence that he gave while under cross-examination.

i) Mr. Donald’s evidence in direct examination

[52] Mr. Donald was qualified as an expert witness to “give opinion evidence as a professional engineer with respect to the cause or causes and delineation of creosote contamination in soil, groundwater and sediments at the subject site.”2

[53] He testified that he is a “roster professional”3 and that he had prior experience in dealing with creosote contamination on a number of different sites.

[54] Mr. Donald had prepared a written expert opinion report dated August 8, 2013 (the “Report”). The Report was tendered as the third exhibit in the hearing. Mr. Donald’s curriculum vitae (“CV”) was attached to the Report.

[55] According to his CV, Mr. Donald is the president of Keystone, a well-known environmental consulting firm located in Burnaby, BC and has 40 years’ experience in project management and cost control with respect to remediation of contaminated sites.

[56] Mr. Donald testified that he was aware of the duty of an expert, as set out in the BC Supreme Court Rules as follows:

In giving an opinion to the court, an expert appointed under this Part by one or more parties or by the court has a duty to assist the court and is not to be an advocate for any party.

[57] He confirmed that he prepared the Report in accordance with that duty, and that he would provide his testimony in front of the Panel in accordance with that duty.

[58] The Report sets out Mr. Donald’s expert opinion with respect to the creosote contamination found in the Western Front as follows:

Based on the information I have considered and the Assumed Facts, it is my expert opinion that the creosote contamination found in parcels (b), (d), and (e) (“Western Front”), as described in the February 16, 2010 Remediation Order issued by MoE [Ministry of Environment], more probably than not originated from the storage of creosote treated boomed timbers on the tidal flats of the Western Front before the filling of the Western Front to its current elevation. (page 4)

[Emphasis added]

[59] Mr. Donald testified that, prior to writing the Report, he had considered several background reports prepared by Golder Associates Ltd. (“Golder”) (another

2 Transcript, October 1, 2013, page 13, lines 30-35. 3 Roster of Approved Professionals established by the Ministry of Environment.


well-known environmental consulting firm) prior to Keystone’s involvement with the Site.

[60] Mr. Donald further testified that he gave special attention to the borehole logs prepared by Golder in its efforts to delineate the contamination throughout the Site. In this regard, he testified that he also considered the notes of visual observations made by Golder that are recorded on the borehole logs. In particular, he paid attention to notes of observations of whether soil was fill or native soil. He also considered Golder’s observations of creosote sheen and odour in the soil. He noted whether Golder had observed DNAPL (dense non aqueous phase liquid, also known as free floating creosote) in its sampling. He then compared these visual observations of sheen, odour and DNAPL to the actual test results received from the lab in order to assess whether the visual observations were, in fact, evidence of contamination.

[61] Mr. Donald testified that the presence of a contaminating substance in soil or water does not inevitably lead to the conclusion that a site is contaminated. “Contaminated site” is a defined term in the EMA and supporting regulations; contaminating substances must be present in soil or water in amounts in excess of prescribed standards before a site will be defined as “contaminated”. Mr. Donald testified that, “So from my perspective and my opinion, while I would use sheen and odour to guide an investigation, I would rely upon the contaminated site regulation standards to determine whether I do or do not have contamination.”4

[62] Mr. Donald testified that his approach was to look for test results indicating that soil or water had contaminants in excess of the prescribed standards, failing which he could not conclude that a particular soil or water sample was “contaminated”. In his view, mere observations of odour, or sheen or DNAPL were, standing alone, insufficient to conclude that “contamination” was present.

[63] Mr. Donald testified that, having reviewed the Golder reports, and having been involved in developing a remediation plan for the Site over several years, it was his opinion that the contamination found on the Western Front originated from creosote treated timbers that had been gathered in booms and stored on the mud flats before fill was placed thereon. In his opinion, over a 40-year period, this creosote was released from the treated timbers to the mud flats on the Western Front.

[64] Mr. Donald testified that it was his further opinion that contamination resulting from the creosote treated timbers was to be distinguished from the plume of contamination originating from Parcel A. He testified that the contamination plume originating from Parcel A was discontinuous from the contamination on the Western Front. He formed this opinion following his review of the borehole logs prepared by Golder. In particular, he discounted evidence of odour, sheen and DNAPL unless it was confirmed by test results indicating that there was contamination in excess of the applicable standard.

4 Transcript, October 1, 2013, page 53, lines 20-25.


[65] Using this analysis, Mr. Donald prepared Figure 1 (Soil Analytical Results), annexed to the Report, to delineate the areas of contamination throughout the Site. Figure 1 shows that the plume of contamination originating on Parcel A is not connected to various pools of contamination present on the Western Front.

[66] Having given this opinion, Mr. Donald then took the Panel through the various borehole logs to demonstrate the existence of contamination in various locations. Mr. Donald distinguished between cases where the borehole log contained observations of DNAPL, odour or sheen, but no test results proving that contamination over the standard had been detected. In these instances, he concluded that, despite the presence of DNAPL, odour or sheen, there was no contamination. He also testified that, in those situations where contamination over the applicable standard was reflected in the test results, but where there were no visual observations, he concluded that contamination was present. In other words, his opinion was based entirely upon the existence, or non-existence, of test results indicating the presence of contamination over the applicable standard.

[67] Mr. Donald further testified that, in reaching his opinion, he did not take into account any data with respect to groundwater contamination on the Western Front and Parcel A. He testified that he did not consider this data because “a figure in the Golder 1998 report shows groundwater moving in a south-easterly direction” (away from the Western Front) after the Western Front was filled.5 He testified that the presence of groundwater contamination on the Western Front was to be expected because the contamination can be disturbed in the native material and will dissolve and move around.

[68] Mr. Donald continued:

Now that’s not to say that there is not groundwater contamination over the Western Front. But we do know that there is creosote contamination within the native materials and we know that … the compounds will dissolve to a certain degree in groundwater and they’ll move around with dispersion and move with tidal fluctuations as they affect the groundwater.

So it’s not surprising to see groundwater contamination. And when I look at groundwater contamination and the – - the concentrations that we consider contaminated for naphthalene [a constituent element of creosote], it’s for aquatic life, ten parts per billion. Naphthalene in soil is 50 parts per million. It’s quite a difference. … It’s not uncommon to see a contaminant --contaminated groundwater plume extend well beyond the area of the source area, the contamination, which may be soil contamination. So I do not draw a conclusion that the soil is contaminated based on groundwater data. I prefer to base soil contamination on soil data.6

5 Transcript, October 1, 2013, page 59. 6 Ibid, pages 59-60.


ii) Concessions of Mr. Donald on cross examination

[69] Following his evidence in chief, Mr. Donald was cross-examined by counsel for each of the Port, Domtar, Fibreco and the Director during which a number of important concessions were elicited.

[70] Mr. Donald was referred to the Assumed Facts in the Report as follows:

ASSUMED FACTS

…

1. The attached enlargement is [sic] portion of an aerial photograph taken in the 1950s showing 10 Pemberton Avenue and Adjacent lands as they then were. In that photograph, the items that appear to be boomed black timbers laying on the tidal flats on the Western Front, to the west of what was then the Domtar creosote wood treatment plant, are creosote treated timbers;

2. While it is not known over what period of time nor for how long boomed creosote treated timbers were stored in this way on the tidal flats to the west of what was then the Domtar creosote wood treatment plant, I may assume that this practice was followed for some time;

3. The investigations of the soils of the Western Front by Golder Associates Ltd. (“Golder”) which Keystone Environmental has previously referred to, have correctly identified the nature and extent of creosote contamination in those soils; and

4. The attached drawings correctly demonstrate the horizontal and vertical extent of the various components of creosote contamination of the soils of the Western Front and creosote contamination of the sediment in the vicinity of the former wharf head.

[71] Under cross-examination, Mr. Donald conceded that the location of the timber booms shown in the aerial photograph appended to his Report did not correspond to the location of the contamination found to exist in the tidal flats of the Western Front as indicated in the Golder reports.

[72] Counsel referred Mr. Donald to aerial photographs in Appendix D of the August 8, 2013 report prepared by Domtar’s expert, Professor Bernard H. Kueper, including eight photographs dating from 1950 to 1970 (prior to the tidal flats being filled). Mr. Donald acknowledged that the photos did not show boomed black (i.e., creosote treated) timbers stored on the tidal flats.

[73] Mr. Donald testified that he relied upon the one photo showing the presence of boomed black timbers on the Western Front as an accurate reflection of history as he had been instructed to do so.

[74] With respect to the borehole log data which Mr. Donald testified did not show a contiguous plume stretching from Parcel A to the Western Front, he conceded in cross-examination that, if an environmental consultant observes creosote DNAPL in a borehole or monitoring well, it would not be common practice to send such samples to the laboratory for testing. He agreed that most laboratory managers would be upset if they received samples filled with creosote DNAPL because DNAPL


(pure) creosote could damage the sensitive laboratory equipment designed to measure contaminants in parts per million. He conceded that there would be no need to test samples containing visible DNAPL creosote because the presence of the contaminant would be obvious to any environmental consultant.

[75] Despite this, Mr. Donald testified that, in his view, the presence of creosote DNAPL was not necessarily indicative of contamination as defined in the EMA. He remained of the view that contamination, so defined, can only be confirmed if test results prove the presence of contamination in excess of the numeric limits set out in the regulations to the EMA.

[76] Mr. Donald was then directed to the borehole logs for wells drilled in the area between the plume of contamination flowing from Parcel A, and the apparently disconnected plumes of contamination which, Mr. Donald testified, had resulted from the boomed creosote treated timbers on the Western Front. Mr. Donald conceded that the monitoring wells located between these two zones indicated creosote DNAPL, sheen and a strong creosote odour. Mr. Donald conceded that these wells were filled with creosote, but he would not concede that the presence of this creosote DNAPL indicated a connection between the two zones.

[77] Mr. Donald also admitted that it did not occur to him to explain in the Report how DNAPL operates in the subsurface of the soil as a mechanism for migration.

[78] Mr. Donald further conceded that his description of the soil unit comprising the original tidal flats provided in his Report was different from the description he gave in direct examination, without explanation. In the Report, Mr. Donald found that the contamination of the Western Front is coincident with the coarse-grained native soil (depicted as “unit 3” on Figures 2a and 2b of the Report) which formed the surface of the underwater sediment of the tidal flats when Domtar was operating the creosote wood treatment plant. The Report states that the soil above the coarse grained native material is fill material (i.e., units 1 and 2 on Figures 2a and 2b) which was placed on the Western Front after Domtar’s operations ceased at the Site. The Report states that creosote contamination “does not extend up into the fill”. This is an important point which supports the Report’s conclusion that, more probably than not, the contamination on the Western Front originated from the boomed creosote treated timbers.

[79] Between the date of the Report and Mr. Donald’s testimony, Domtar submitted an expert rebuttal report prepared by Dr. Kueper. In the rebuttal report dated September 9, 2013, Dr. Kueper noted that, contrary to the findings stated by Mr. Donald in the body of the Report, “his Figures 2a and 2b depict creosote impacts in Unit 2 (located above the former surface of the underwater sediment) and up into Unit 1.” Evidence of contamination in the fill material renders Mr. Donald’s conclusion about the source of the contamination unsustainable.

[80] At the hearing, Mr. Donald testified that the native material is the silt and sands layer (unit 2), which is the key area containing contamination. He did not draw the Panel’s attention to this important difference between his evidence in direct examination and his Report. Nor did he offer any explanation as to why he changed his conclusion as to which soil unit forms the native material of the tidal flats.


[81] Under cross-examination by counsel for the Director, Mr. Donald further conceded that a contaminated site can contain areas where particular samples of soil are below the applicable EMA standard indicating contamination. He agreed that the object in delineating the extent of a plume of contamination is to define its area, rather than the particular spots where soil or groundwater samples exceed the applicable standard.

[82] The Golder maps which showed one contiguous plume of contamination stretching from Parcel A to the Western Front were put to Mr. Donald. He testified that he disagreed with the boundaries of the contamination plume established by Golder, despite the fact that he had been instructed to assume that the Golder reports were accurate (see “Assumed Facts” #3, above).

[83] Mr. Donald testified that his assessment of discontinuity of the contaminant plume was based on “holes in the data”; i.e., where there was no analytical data, he assumed that it was not contaminated.7 Specifically, Mr. Donald assumed that, where there was no data indicating an exceedance (soil with contamination in excess of the applicable standard), he assumed that the area was not contaminated. In reaching this conclusion, he paid no attention to the presence of groundwater contamination, DNAPL or special waste. He testified that he ignored DNAPL, odour and sheen for which there were no confirmatory test results indicating contamination. He conceded, however, that he was aware that the Contaminated Sites Regulation, B.C. Reg. 375/96 provides that the presence of odour, sheen and DNAPL are prescribed factors indicating contamination, and can be relied on by the Director in making a determination that a site is a contaminated site.

[84] When faced with this suggestion, Mr. Donald conceded that he did err in failing to include DNAPL data in his opinion regarding the boundaries of the contaminant plume.

[85] Under cross-examination by counsel for Domtar, Mr. Donald conceded that his task was to look for a trail of creosote so as to delineate the source of the contamination. He conceded that evidence of the trail of contamination required more of an analysis than simply looking at exceedances as defined by the Contaminated Sites Regulation. He acknowledged that evidence, other than test results, can, or may be, evidence of where the creosote originated. In this regard, he testified that certainty is not something usually dealt with by environmental engineers; rather, the object is to use and develop lines of evidence to reach reasonable conclusions.

[86] Mr. Donald was then directed to other test results included in the Golder reports which disclosed an analysis of chemical constituents of creosote, other than those referred to in the table that he had relied on. Counsel took Mr. Donald through these various tables which indicated that there were, indeed, test results indicating the presence of contaminants in excess of applicable standards in those borehole logs indicating odour, sheen and DNAPL, but no confirmatory test for creosote. At the conclusion of this aspect of the cross-examination, Mr. Donald

7 Transcript, October 2, 2013, pages 22-23.


changed his evidence and agreed that if observations of odour, sheen or DNAPL are made by a consultant, then it is more likely than not that there is contamination present in excess of the applicable standard.

[87] Finally, Mr. Donald conceded that the observations of staining indicate that creosote had passed through the soil, and that the odour was evidence of naphthalene, a constituent element of creosote.

[88] At the conclusion of his cross-examination, Mr. Donald conceded that if any of the information that he had considered in reaching his conclusion was incomplete, or if any of the assumed facts were incorrect, then, at the very least, he would have to reconsider his opinion.

[89] Mr. Donald’s cross-examination concluded at the end of the second day of the hearing.

Conclusion of the hearing

[90] The hearing reconvened on the following day, as it was anticipated that Mr. Donald would be re-examined by counsel for Seaspan, and that the evidence of Mr. Fowlis would then commence. Instead, the Panel was presented with a copy of a letter that had been delivered by counsel for Seaspan to the other parties to the appeals. This letter was marked as Exhibit 6 in the hearing.

[91] In summary, the letter advised that Seaspan was abandoning both of its appeals, except with respect to its ground for appeal regarding the nature and form of security and the registration of the section 219 covenant (grounds 6, 7 and 8 of Appeal No. 2010-EMA-005). The Panel ruled that these aspects of the appeal would be adjourned generally.8

[92] Following the abandonments, counsel for Fibreco, the Port and the Director indicated that they were each contemplating an application for an order for costs in respect of the Seaspan appeals. Essentially, the Applicants were completely taken by surprise at the rapid collapse of Seaspan’s appeals after the evidence of one witness – the main witness - and they were concerned that they had been put to the expense of preparing for a lengthy, contentious hearing when Seaspan knew, or ought to have known, that its main claims (as they had evolved over the years) were built on a shaky, or completely absent, foundation.

[93] The Applicants sought from the Panel, and were granted, an order requiring counsel for Seaspan to produce Mr. Donald’s expert file, including all drafts of reports, working papers and communications with respect to the Report, both from counsel to Seaspan and from Seaspan itself.

8 The abandonments and the Panel’s decision to adjourn the remaining issues are set out in a separate decision (see, Seaspan ULC and Domtar Inc. v. Director, Environmental Management Act (Decision Nos. 2010-EMA-004(b), 005(b), 006(b) and 2013-EMA-003(b), (September 15, 2014), unreported)).


[94] The Panel directed that this disclosure was to occur by Tuesday, October 8, 2013, with liberty to apply in writing for extensions, if required. The Panel further directed that, subject to any issues arising on production of the expert’s file, the applications for costs would proceed before the Panel on October 15, 2013.

Additional evidence

[95] When the hearing reconvened on October 15, 2013, each of the Applicants and Seaspan tendered affidavit evidence in response to the Panel’s disclosure order.

[96] The affidavits provided information about the form and structure of the Report, communications between Seaspan’s counsel and Mr. Donald with respect to various drafts of the Report, communications amongst counsel for the parties and correspondence with the Board.

[97] The following evidence is relevant to the Panel’s decision.

[98] On November 10, 2010, counsel for Seaspan asked Mr. Donald to prepare a report. The question posed to Mr. Donald by counsel was as follows:

… I would like your objective expert opinion on whether the creosote contamination found in parcels (b), (d) and (e) (“Western Front”) as described in the February 16, 2010 Remediation Order issued by the MoE [Ministry of Environment] could have originated from the storage of creosote treated boomed timbers on the tidal flats of the Western Front before the filling of the Western Front to its current elevation.

[Emphasis added]

[99] On November 26, 2010, Mr. Donald provided a draft report which stated:

Based on the information I have considered and the Assumed Facts, it is my expert opinion that the creosote contamination found in parcels (b), (d) and (e) (“Western Front”) as described in the February 16, 2010 Remediation Order issued by the MOE could have originated from the storage of creosote treated boomed timbers on the tidal flats of the Western Front before the filling of the Western Front to its current elevation.

[Emphasis added]

[100] On June 27, 2012, Mr. Donald produced a final version of the Report which he signed and sealed as a Professional Engineer. At that time, the appeals were scheduled to commence October 1, 2012 and the Board had set July 3, 2012 as the deadline for filing expert reports. Two days later, on June 29th, this hearing date was postponed.

[101] In this version of the Report, the question posed remained the same, but Mr. Donald’s conclusion had changed to read as follows:

Based on the information I have considered and the Assumed Facts, it is my expert opinion that the creosote contamination found in parcels (b), (d) and (e) (“Western Front”) as described in the February 16,


2010 Remediation Order issued by the MOE, more probably than not originated from the storage of creosote treated boomed timbers on the tidal flats of the Western Front before the filling of the Western Front to its current elevation.

[Emphasis added]

[102] On June 21, 2013, Seaspan wrote to the Board to abandon certain grounds of appeal and to amend other grounds. That letter stated that creosote contamination did not migrate from Parcel A to the Western Front. This was the first notification from Seaspan that it intended to assert that the contamination on the Western Front resulted from the storage of treated timbers.

[103] On July 22, 2013, Mr. Donald responded to a request from Seaspan’s counsel that the Report include comment on groundwater flow direction. In this email, Mr. Donald cited three relevant excerpts from the Keystone Environmental 2011 Final Remediation Plan. [Mr. Donald’s firm, Keystone, has been engaged to effect the remediation on the Site and had produced a final remediation plan.]

[104] One of the excerpts quoted by Mr. Donald states:

The groundwater flow direction has been observed to be generally to the south toward Burrard Inlet, but may have historically been to the southwest caused by the gradient across the former timber bulkhead to the adjacent inter-tidal mudflats, or the presence of the former tidal channel west of the Site, i.e., the Western Front.

[105] In this July 22, 2013 email to Seaspan’s counsel, Mr. Donald further states:

The statement that historic direction may have been to the southwest introduces a transport mechanism for PAH migration to and past the western front. Unlike the premise that the creosote may be from the storage of treated piles, as illustrated in the photograph, there is only postulation that the flow was to the southwest. That postulation is, however, reasonable.

[106] It is of note that Mr. Donald himself, as President of Keystone, reviewed and signed the Keystone Environmental 2011 Final Remediation Plan from which he had quoted. This document contained a further statement not quoted in Mr. Donald’s email as follows at page 45:

… The source of creosote in the south west area is interpreted to be the result of the former storage of treated timbers on the mud flats and/or DNAPL migration from the Site caused by surface runoff or a previous hydraulic gradient to the southwest. ….

[Emphasis added]

[107] At the conclusion of Mr. Donald’s email of July 22, 2013, he asked counsel for Seaspan: “How would you like me to proceed?”

[108] In response to this question, counsel for Seaspan said as follows in an email, also dated July 22, 2013: “Let’s leave out the reference to ground water flow direction.”


[109] The opening paragraph of each of the four draft reports prepared by Mr. Donald for Seaspan dated November 29, 2010, June 22, 2012, June 27, 2012 and July 22, 2013, repeats the question posed to him by Seaspan’s counsel on November 10, 2010; i.e., whether the creosote contamination found in the Western Front “could have originated from the storage of creosote treated boomed timbers on the tidal flats of the Western Front before the filling of the Western Front to its current elevation.” [Emphasis added]

[110] The opening paragraph of the Report (dated August 8, 2013) sets out a significantly different question, as follows:

You asked that I prepare an objective expert opinion on the cause of creosote contamination found on parcels (b), (d) and (e) (the “Western Front”), ….

[Emphasis added]

[111] The Panel has considered this additional evidence, and the parties’ submissions on the three applications for costs, below. In this regard, it should be noted that as Seaspan’s two remaining appeals were being heard together, the evidence relating to one appeal applied to the other appeal and the Panel’s reasons on these costs applications apply to both of Seaspan’s remaining appeals.

ISSUES

[112] The issues to be decided on these applications are as follows:

1. What are the applicable principles or legal parameters for an award of costs under section 95(2)(a) of the EMA?

2. Whether any or all of the applications for costs should be granted in the circumstances of this case?

RELEVANT LEGISLATION AND POLICY

[113] The Board has had jurisdiction to award costs under the EMA since 1997. Section 95 (2) of the EMA provides as follows:

95(2) In addition to the powers referred to in section 93(2) [environmental appeal board] … , the appeal board may make orders as follows:

(a) requiring a party to pay all or part of the costs of another party in connection with the appeal, as determined by the appeal board;

[114] This section gives the Board a broad jurisdiction to award costs: there are no statutory tests or preconditions included in the section. This is unlike the following subsection which states:

(b) if the appeal board considers that the conduct of a party has been vexatious, frivolous or abusive, requiring the party to pay all or part of the expenses of the appeal board in connection with the appeal.


[115] Given the unrestricted discretion to award costs in section 95(2)(a), the Board has published a Procedure Manual which includes the Board’s policy with respect to the circumstances under which those costs may be ordered. The policy provides as follows:

Section 95(2) of the Environmental Management Act provides the Board with the power to order costs in respect of an appeal.

Party-and-Party Costs

Subsection 95(2)(a) authorizes the Board, subject to the regulations, to require a party to pay all or part of the costs of another party in connection with the appeal. A party seeking costs under this section may make a submission to the Panel hearing the appeal with respect to an award of costs at the conclusion of the hearing.

The Panel will not make an order for costs unless a party requests that it be awarded costs. However, the Panel may, on its own initiative, ask a party whether it seeks costs.

The Board has not adopted a policy that follows the civil court practice of “loser pays the winner’s costs.” The objectives of the Board’s costs policy are to encourage responsible conduct throughout the appeal process and to discourage unreasonable and/or abusive conduct. Thus, the Board’s policy is to award costs in special circumstances. Those circumstances include:

(a) where, having regard to all of the circumstances, an appeal is brought for improper reasons or is frivolous or vexatious in nature;

(b) where the action of a party, or the failure of a party to act in a timely manner, results in prejudice to any of the other parties;

(c) where a party, without prior notice to the Board, fails to attend a hearing or to send a representative to a hearing when properly served with a “notice of hearing”;

(d) where a party unreasonably delays the proceeding;

(e) where a party’s failure to comply with an order or direction of the Board, or a Panel, has resulted in prejudice to another party; and

(f) where a party has continued to deal with issues which the Board has advised are irrelevant.

A Panel of the Board is not bound to order costs when one of the above-mentioned examples occurs, nor does the Panel have to find that one of the examples must have occurred to order costs.

The Panel will not order a party to pay costs unless it has first given that party an opportunity to make submissions on this issue. If the Panel orders that all or part of a party’s costs be paid, the Panel may ask for submissions with respect to the amount of costs incurred.


The costs payable to a party under subsection 95(2)(a) will be determined on the basis of Rule 57(1) and Appendix B of the B.C. Supreme Court Rules,9 which lists items for which costs can be awarded, as well as the corresponding number of units for each item. The Panel will decide the scale under which costs are to be assessed. The scale chosen depends on the difficulty of the matter being appealed and provides increasing dollar values for matters of greater difficulty.

SUBMISSIONS OF THE PARTIES

The Port

[116] The Port acknowledges that an award of costs in its favour should only be made by the Board in “special circumstances”. It also submits that the principles applicable to an award of special costs in the Supreme Court of BC are relevant to a consideration of whether those “special circumstances” exist.

[117] The Port submits that special costs will be granted where a party’s conduct is reprehensible or deserving of reproof, or where there is misconduct from which the Board seeks to dissociate itself.

[118] In support of its application for costs, the Port relies upon the evidence of Mr. Donald in direct and cross-examination, and the evidence derived from the production of Mr. Donald’s expert file.

[119] The Port submits that special circumstances justifying an award of costs can be derived from:

(a) the conduct of Seaspan leading up to the hearing of these appeals;

(b) the evidence of Mr. Donald under oath, before the Panel; and

(c) the documents derived from Mr. Donald’s file after he had given evidence before the Panel.

[120] In particular, the Port submits as follows:

1. Seaspan recklessly advanced an unmeritorious position that the contamination on the Western Front was caused by the boomed creosote treated timbers, and that this position was advanced to support Seaspan’s position that it was not a responsible person for the Western Front.

2. Mr. Donald’s evidence morphed over time and was demonstrated to be fundamentally unsound. The Report was deceptive in that Mr. Donald was instructed to ignore the groundwater contamination plume and the groundwater flow direction prior to infilling (which was to the southwest in the direction of the Western Front, and which provided a transportation mechanism for the flow of creosote from Parcel A to the Western Front).

9 Now BC Supreme Court Civil Rules, Rule 14-1 and Appendix B.


3. Mr. Donald ignored the presence of DNAPL derived from boreholes in areas that Mr. Donald said were not contaminated because there were no laboratory test results confirming contamination.

4. Mr. Donald changed his opinion from the proposition that the contamination on the Western Front “could have originated” from the boomed creosote treated timbers, to the opinion (with the input of counsel) that the cause of creosote contamination on the Western Front was “more probably than not” caused by the boomed creosote treated timbers.

5. The Port submits that Mr. Donald’s evidence that all of the contamination on the Western Front was caused by the boomed creosote treated timbers was unlikely to be true, to the knowledge of both Mr. Donald and Seaspan.

6. In this regard, the Port submits that Mr. Donald had received instructions from Seaspan’s counsel to avoid discussion of any evidence contrary to the preferred opinion and, in particular, the opinion of Golder that groundwater flow prior to the infilling of the mud flats was from Parcel A and toward the Western Front.

7. The Port submits that Seaspan continued to assert its unsupportable position that the contamination was likely caused by the boomed creosote treated timbers, when it knew that this position had no prospect of success.

8. The Port submits that Mr. Donald directly contradicted his own instructions, having been asked to assume that Golder had correctly identified the nature and extent of the contamination on the Site. In fact, Mr. Donald went on to find that Golder’s delineation was inaccurate.

9. The Port submits that Seaspan’s abandonment of the appeals after three days of hearing also did away with issues before the Panel that did not turn on whether Mr. Donald’s opinion would be accepted. This, the Port submits, is evidence of reprehensible conduct. The Port submits that Seaspan could have continued to argue that the Director was constitutionally barred from including federally owned land in the Remediation Order. It could have also continued with its argument that the Port was a responsible person in respect of the Western Front and, therefore, should have been named in the Remediation Order. The Port submits that this behavior should be taken by the Board as leading to an inference that the claims were frivolous from the outset.

[121] In general, the Port submits that Seaspan’s position regarding the Western Front morphed over time and was advanced with no regard to the known facts.

[122] The Port also submits that, as of July 22, 2013 when Seaspan filed its Statement of Points, Seaspan’s position was that all of the contamination on the Western Front resulted from boomed creosote treated timbers. The Port submits that Seaspan took this position even though Seaspan knew that this position was not correct. It argues that Mr. Donald’s opinion was fundamentally unsound and, to Seaspan’s knowledge, deceptive.


[123] The Port submits that Seaspan’s manifest failure to come to grips with the factual issues in the appeals has resulted in prejudice to the Port, which was put to great inconvenience, and cost, in defending a proceeding without merit.

[124] The Port submits that, as a consequence, it is entitled to an award of costs at Scale C as these matters were of more than ordinary difficulty.

[125] The Port’s bill of costs presented to the Panel is for $23,324.00 (inclusive of taxes), plus disbursements of $36,473.98, for a total claim of $59,797.98.

Fibreco

[126] Fibreco submits that it should be awarded its costs because:

1. Seaspan’s assertion that it was not liable for remediation on the Fibreco lands (within the Western Front) because there was “no evidence of migration” from Parcel A had no prospect of success and was both frivolous and vexatious. In support of this submission, Fibreco referred to a number of documents, draft reports and emails derived from the files of Mr. Donald and to the admissions made by Mr. Donald in cross-examination.

2. Fibreco submits that Seaspan’s conduct during the appeal process increased costs for Fibreco for the following reasons:

• Fibreco was not aware until June 21, 2013 that Seaspan intended to argue that the contamination on the Western Front was not caused by migration of creosote from the plume on Parcel A. Fibreco was surprised by this because all prior reports prepared by the various consultants, including Keystone, had concluded that there was a connection between the soil and groundwater plumes emanating from Parcel A.

• Once Fibreco became aware of the revised Donald opinion on June 21, 2013, it was obliged to substantially increase its involvement in the appeals, including retaining an expert (Mr. Pringle) to respond to the Report, and to become fully involved in the appeals.

[127] Fibreco submits that Seaspan’s conduct is deserving of rebuke. Fibreco submits that Seaspan did not pursue these appeals for a valid public interest; rather, it pursued the appeals for the purpose of avoiding liability for the cost of remediating the contamination which had migrated from Parcel A. Fibreco further submits that Seaspan has consistently tried to avoid responsibility for remediation since the contamination first came to the Ministry’s attention in the 1990’s.

[128] Fibreco submits that an award of costs against Seaspan will not deter other parties from future participation before the Board; rather, it will deter other parties from bringing expensive technical appeals with no evidence in support.

The Director

[129] The Director seeks its costs from Seaspan, but concedes that an award of costs might be mitigated if Seaspan has some success with respect to those aspects of the appeal that have been adjourned (security for performance and the section


219 covenant). The Director also notes that there were initially five separate appeals before the Board, three of which were Seaspan’s. This hearing was to hear four appeals, only two of which were Seaspan’s appeals. Documents were produced with respect to all four of the appeals, and the substantial photocopying expenses in preparing documents were not, therefore, related solely to Seaspan’s appeals.

[130] The Director submits that this has been a very difficult process and that he has spent much of his time dealing with reports from the parties which were designed to point fingers at one another. The Director notes that neither Domtar, nor Seaspan, could come to any agreement with respect to implementing a workable remediation plan. These appeals, the Director submits, were the result of the failure of both Domtar and Seaspan to come to terms with their joint liability to remediate the Site.

[131] Having said that, the Director echoes the submissions of the Port and Fibreco that the Report avoided relevant evidence and reached misleading conclusions. In particular, the Director submits that Mr. Donald ignored all evidence with respect to odour and sheen, both of which were relevant considerations under the EMA definition of “contaminated site”.

[132] Further, the Director submits that Mr. Donald’s discontinuity theory regarding the boomed creosote treated timbers did not address the mobility of creosote within the environment, and the implausibility of there being discrete pockets of contamination with large uncontaminated gaps in the middle.

[133] The Director submits that, under cross-examination, Mr. Donald conceded that there was no explanation for this. He further conceded that he had made a mistake when he failed to take into account odour, sheen and DNAPL.

[134] The Director submits that Seaspan’s conduct goes far beyond good advocacy and should be penalized with an award of costs. The Director emphasizes that the unsupportable theory put forward by Seaspan has put the proper remediation of the Site at risk. The Director submits that, had the Director accepted Mr. Donald’s opinion, it would have led to a flawed remediation plan based on inaccurate evidence.

[135] The Director seeks an order that Seaspan pay the Director’s costs, but that the assessment of those costs be delayed until a later date.

Seaspan

[136] Seaspan submits that there is no basis to award costs in this case. It submits that neither its appeal, nor its conduct, was “frivolous” as that term is used in the authorities. Seaspan submits that if an appeal is pursued for what are valid concerns, on their face, it cannot be considered frivolous or vexatious.

[137] Seaspan submits that the Panel must recognize that it only heard one witness, Mr. Donald. There were a number of other allegations raised in the appeals, including the Constitutional Issue. Seaspan submits that it would be improper for the Panel to presume that those allegations were frivolous, having heard no evidence or argument on the point.


[138] Seaspan further submits that the proper conclusion to be drawn from its abandonment of the Constitutional Issue was that, without the expert opinion of Mr. Donald, the likelihood of succeeding was low. Seaspan therefore submits that it made a legitimate decision to abandon the Constitutional Issue, thus saving the parties time and expense.

[139] Seaspan submits that any suggestion that Mr. Donald’s opinion “morphed” (with the input of counsel) is inaccurate and, to the extent the opinion did change, the allegation that such a change was nefarious and intended to mislead is ungrounded. Seaspan argues that any such conclusion would require evidence which does not exist. It submits that changing the opinion from one where the contamination on the Western Front “could have originated” from the boomed creosote treated timbers, to the opinion that the contamination “more probably than not” originated from the creosote treated timbers, is of no significance. Seaspan submits that such language changes are common when developing expert reports and that, as an expert, Mr. Donald was entitled to adjust his opinion in consultation with counsel.

[140] Seaspan admits that Mr. Donald made errors in the Report. However, it submits that those errors are not sufficient to attract an award of costs. This was a complex site and a complex investigation. Seaspan points out that those errors in the Report were not known until Mr. Donald was cross-examined and, in particular, they were not known to Seaspan even after a review of the rebuttal expert reports tendered by the other parties on September 9, 2013. Any submission that Seaspan should have recognized that Mr. Donald’s Report was fundamentally flawed must be viewed in light of all of these factors.

[141] Regarding the latter, Seaspan states that it was never obvious that there was a flaw in the Report and in Mr. Donald’s evidence. It was only upon completion of the cross-examination that it was obvious to Seaspan that Mr. Donald’s opinion was unsustainable. Seaspan submits that it acted responsibly by immediately abandoning its appeals thereby saving substantial costs to the parties. Seaspan submits that, contrary to the assertions of the Applicants, it acted responsibly throughout the appeal proceedings, and did not engage in behaviour deserving of rebuke.

[142] Seaspan submits that the other parties’ assertions amount to an allegation that its expert is an advocate in disguise. Seaspan submits that, to establish this in law, the case authorities require findings that:

(a) the expert had previously been discredited in earlier court proceedings;

(b) was being deliberately untruthful or trying to mislead the court; or

(c) someone who shows open disrespect during his or her testimony.

[143] Seaspan submits that none of these circumstances arise in the present case. It submits that Mr. Donald’s failure to account for some subjective, qualified, qualitative data in two borehole logs does not support a finding that he acted with blatant disregard to his role as an expert. Seaspan also asks the Panel to be mindful that any adverse finding with respect to Mr. Donald’s professional competence will have substantial professional implications for him.


[144] Ultimately, Seaspan argues that it was entitled to advance its case, and was not obliged to accept the opinions of experts tendered by other parties. Mere errors are not the “special circumstances” contemplated by the Board in its costs policy. Seaspan submits that “20/20 hindsight” cannot be employed to find reprehensible conduct sufficient to justify an award of costs.

[145] Seaspan also submits that, even if an appeal is ultimately determined to have had little merit, that does not, in and of itself, constitute a special circumstance requiring an award of costs. Rather, Seaspan submits that the Applicants must establish that Seaspan’s behaviour was reprehensible, scandalous or outrageous. Seaspan states that no such conduct was demonstrated in this case, and that an award of costs would cast a chill over parties appearing before the Board in advancing new or novel grounds of appeal.

[146] Seaspan also urges the Panel to exercise caution in making an award of costs in this case since so many of the parties that appear before the Board do so without the benefit of counsel.

[147] Finally, Seaspan submits that, if an award of costs is made, it should be at Scale B only (matters of ordinary difficulty) and it should not compensate the Applicants for the entire costs and disbursements incurred with respect to the hearing. Seaspan submits that the nature and form of security and the section 219 covenant issues remain to be resolved, and there were disbursements incurred with respect to those issues that should not be assessed against Seaspan at this time. It also submits that some of the disbursements may have been incurred with respect to the issues not argued before the Panel. It maintains that there is no evidence that those other issues were frivolous, vexatious and deserving of a rebuke in the form of costs.

DISCUSSION AND ANALYSIS

1. What are the applicable principles or legal parameters for an award of costs under section 95(2)(a) of the EMA?

[148] The parties provided extensive case authorities and past Board decisions in support of their arguments. The Panel has carefully reviewed the case authorities and the Board’s decisions, and finds the following authorities most applicable to the Board’s jurisdiction and the circumstances of this case.

Objectives of Costs

[149] The Supreme Court of Canada discussed the policy objectives underlying how costs are awarded in British Columbia (Minister of Forests) v. Okanagan Indian Band, [2003] 3 S.C.R. 371 [Okanagan Indian Band]. The Court observed that the traditional rationale for awarding costs, indemnification of the successful party, is not the sole purpose, and in some cases not even the primary purpose, of a costs award (paragraph 22). The Court then states at paragraphs 25-26:

25 As the Fellowes and Skidmore cases illustrate, modern costs rules accomplish various purposes in addition to the traditional


objective of indemnification. An order as to costs may be designed to penalize a party who has refused a reasonable settlement offer; …. Costs can also be used to sanction behaviour that increases the duration and expense of litigation, or is otherwise unreasonable or vexatious. In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice.

26 Indeed, the traditional approach to costs can also be viewed as being animated by the broad concern to ensure that the justice system works fairly and efficiently. Because costs awards transfer some of the winner's litigation expenses to the loser rather than leaving each party's expenses where they fall (as is done in jurisdictions without costs rules), they act as a disincentive to those who might be tempted to harass others with meritless claims. And because they offset to some extent the outlays incurred by the winner, they make the legal system more accessible to litigants who seek to vindicate a legally sound position. These effects of the traditional rules can be connected to the court's concern with overseeing its own process and ensuring that litigation is conducted in an efficient and just manner. ….

[150] The Board’s policy on costs closely reflects the policy objectives identified by the Supreme Court. The objectives of the Board’s policy, outlined in its Procedure Manual, are to “encourage responsible conduct throughout the appeal process and to discourage unreasonable and/or abusive conduct.”

[151] In the Board’s most recent decision on costs, Burgoon v. British Columbia (Ministry of Environment), [2010] B.C.E.A. No. 15; 53 C.E.L.R. (3d) 1 [Burgoon], the Board described its policy on costs as follows at paragraph 469: “The Board’s policy on costs is essentially punitive in nature. It is awarded on the basis of unreasonable or bad behaviour. It is a form of punishment.” This Panel agrees. In this context, costs are intended to act as a deterrent; to prevent conduct that negatively impacts the integrity of the Board’s processes. It is in this light that “special circumstances” are interpreted and considered.

[152] However, as observed by Seaspan in its submission, when considering the type of conduct that will constitute “special circumstances” the Board must also be concerned with the potential for a “chilling effect” on the filing and pursuit of legitimate appeals, particularly the chilling effect a costs award may have on unrepresented parties. These are the competing values to be considered. In the Board’s decision in Delta Shake & Shingle (1989) Ltd. V. British Columbia (Ministry of Environment, Lands and Parks), [2000] B.C.E.A. No. 37 (Q.L.) [Delta Shake & Shingle], this tension was expressed as follows:

…. The Respondent notes that the [Board’s] policy recognizes the important public interest in environmental matters, and the need to avoid deterring individuals with legitimate concerns from using the Board's process. The Respondent submits, however, that the Board's ability to fulfil its mandate would be equally harmed if parties are allowed to abuse the Board's process with impunity. (paragraph 12)


[Emphasis added]

[153] The question for the Panel in an application for costs ultimately boils down to the following questions: when does a party’s behavior “cross the line” to become a “special circumstance”? At what point does it deserve to be punished? And how does the Board ensure that the threshold is not too low, such that it results in a “chill” on legitimate appeals and litigation strategies?

[154] The Port argues that the principles applicable to an award of “special costs” in the BC Supreme Court are relevant to a consideration of whether those special circumstances exist, and may achieve the appropriate balance.

[155] “Special costs” are typically awarded by the courts in those rare cases where a party’s conduct has been “reprehensible”. The leading authority on special costs in British Columbia remains Garcia v. Crestbrook Forest Industries Ltd. (1994), 119 D.L.R. (4th) 740 (B.C.C.A.) [Garcia]. In Garcia, the Court of Appeal wrote at paragraph 17:

… it is my opinion that the single standard for the awarding of special costs is that the conduct in question properly be categorized as "reprehensible". As Chief Justice Esson said in Leung v. Leung, the word reprehensible is a word of wide meaning. It encompasses scandalous or outrageous conduct but it also encompasses milder forms of misconduct deserving of reproof or rebuke.

[Emphasis added]

[156] The Court in Garcia cited, with approval, the rule with respect to special costs from Fullerton v Matsqui (1993), 73 B.C.L.R. (2d) 311 at page 318: “Special costs … are awarded when a court seeks to disassociate itself from some misconduct.”

[157] The Board has considered the application of special costs principles on at least two occasions. In O’Flaherty v. British Columbia (Ministry of Health), [2003] B.C.E.A. No. 5 (Q.L.) [O’Flaherty], the Board stated as follows at paragraph 169:

There is extensive case law on the courts' use of cost awards to discourage conduct by parties that can be characterized as an abuse of process. In British Columbia, the general principle behind special cost awards and the application of Rule 57(3) of the British Columbia Supreme Court Rules (the special costs provision) are summarized in Garcia v. Crestbrook Forest Industries Ltd. (1994), 119 D.L.R. (4th) 740. The Court wrote, "the single standard for the awarding of special costs is that the conduct in question properly be categorized as "reprehensible"... It encompasses scandalous or outrageous conduct but it also encompasses milder forms of misconduct deserving reproof or rebuke." In Heppner v. Schmand [1998] B.C.J. No. 2843 the Court described these milder forms of misconduct as behaviour from which the court seeks to "dissociate itself." These special costs principles are relevant to the Board in its consideration of a costs award to discourage the abuse of its own process.

[Emphasis added]


[158] In that case, the Board found that, while the Appellant's conduct prior to and during the hearing was “sometimes extreme”, it did not warrant an award of costs. However, the Board found that the Appellant’s conduct after the oral hearing concluded was abusive of the appeal process and resulted in additional expenses being incurred by the other parties and the Board. The Board found at paragraph 174 that:

The Appellant's additional evidence could have and should have been presented at the hearing. The Appellant's reasons for not doing so are not convincing. While the Panel accepted some of the additional evidence, at the end of the day, it did not impact the Panel's findings on the merits of this appeal. This application simply resulted in greater costs for all those involved in the appeal and is something that cannot be condoned. The application to introduce additional evidence in this case reflects conduct of a party that the Board wishes to "dissociate" from.

[159] In Burgoon, the Board found as follows at paragraph 471:

At the end of the day, the Panel is of the view that any further orders of costs against the Burgoons, as requested by the Respondent, is more punishment than is justified in the circumstances. This is particularly so because many of the issues can be directly attributed to the conduct of counsel, as opposed to the Burgoons. If the Board had jurisdiction to award special costs, the result may be different. However, given that all parties added some expense and delay to the proceedings at various times, the Panel finds that it would be unfair to make the Burgoons pay costs to the other parties for the additional time and expense incurred as a result of their counsel’s actions.

[160] Thus, although this Panel agrees that the Board does not have the jurisdiction to award special costs, the Panel also agrees with the Board in O’Flaherty that the special costs principles “are relevant to the Board in its consideration of a costs award to discourage the abuse of its own process.” The court authorities on special costs provide useful examples of the types of conduct that can, and have been found by the courts to, warrant sanction. Given that the special costs cases are examples of extreme situations and/or conduct, they may also help to prevent a “chilling effect”: the factual situations will “set the bar” on the high side of the continuum.

Conclusion

[161] Based upon a review of section 95(2)(a), the Board’s policy and the cases cited above, the Panel finds as follows regarding the principles that apply to an application for costs in an appeal before the Board.

[162] The power of the Board to award costs under section 95(2)(a) of the EMA is discretionary.

[163] An award of costs will depend on the particular facts of each case. It may be based on a single factor, such as one of the special circumstances listed in the


policy, or it may be based on the conduct of a party in an appeal considered as a whole.

[164] An award of costs in an appeal is connected to the Board’s concern with overseeing its own process and ensuring that appeals are conducted in an efficient and just manner. The stated objectives of the Board’s costs policy are “to encourage responsible conduct throughout the appeal process and to discourage unreasonable and/or abusive conduct.” Costs act as a disincentive to those who may bring meritless appeals or recklessly pursue appeals which turn out to have little prospect of success (Okanagan Indian Band and the Board’s policy).

[165] In other words, costs are punitive in nature: they are not compensatory, as in winner pays the losers’ costs. Rather, they are intended to punish and deter unwanted conduct.

[166] The special circumstances listed in the Board’s policy are a few examples of behaviour that may cause the Board to exercise its discretion to award costs. The examples are not exhaustive, and the Board is not bound to award costs when one of the examples occurs. Special costs principles “are relevant to the Board in its consideration of a costs award to discourage the abuse of its own process.”

[167] In this regard, the Panel may find that “special circumstances” exist and its discretion to award costs should be exercised when a party’s behaviour is “reprehensible”, the parameters of which were set out by the Court of Appeal in Garcia: “… reprehensible is a word of wide meaning. It encompasses scandalous or outrageous conduct but also encompasses milder forms of misconduct deserving of reproof or rebuke.”

[168] When assessing whether or not to award costs, the Board will also weight the importance of ordering costs in the circumstances against the likelihood that an award of costs in those circumstances will have an unwanted “chilling effect”.

2. Whether any or all of the applications for costs should be ordered in the circumstances of this case?

[169] In reaching its decision, the Panel has considered Seaspan’s conduct in the appeal as a whole, Mr. Donald’s evidence and the flaws in the Report, the particulars of which are set out earlier in the Background to this decision.

[170] With respect to Seaspan’s conduct in the appeal as a whole, the Panel notes the following:

• Seaspan did not provide any particulars when it filed the appeal on March 18, 2010 on the grounds, inter alia, that the Director erred by: 1) finding Seaspan is a “responsible person” with respect to all or some of the 5 parcels; and 2) finding that Seaspan is responsible for the contamination of all or some of the 5 parcels. Nor did Seaspan cite any provision of the EMA in support of its position.

• The Panel notes that these assertions were made after the Ministry, Seaspan and Domtar had:

o spent over 15 years investigating the extent of the contamination;


o engaged in protracted negotiations;

o received a number of environmental consultants’ reports, including Golder’s reports prepared under joint retainer by Seaspan and Domtar; and

o the Director had issued two draft remediation orders to “encourage” the parties to engage in remediation.

• Throughout this period, and for much of the time after the Order was issued, no remediation was undertaken, and creosote contamination continued to migrate into the sensitive aquatic environment of Burrard Inlet. The Panel is aware that this is not entirely the responsibility of Seaspan and that Domtar’s positions no doubt contributed to delay.

• The Panel further notes that, at the time that the Remediation Order was issued, Seaspan was the “owner” of Parcels A, B and C within the meaning of section 39 of the EMA and, prima facie, is a “responsible person” under section 45 unless an exemption under section 46 applies.10

• By 2013, Seaspan had become an “owner” for that part of Parcel D that it leases from the Port.

[171] The Panel has reviewed the materials filed by Seaspan from the Notice of Appeal on March 18, 2010 until the hearing commenced on September 30, 2013. The Panel finds that Seaspan’s grounds of appeal in respect of its responsibility for remediation “morphed” considerably during the three and one-half years of the appeal.

[172] In November 2010, Seaspan was working on a theory that boomed creosote treated timbers were the cause of contamination on the Western Front. Mr. Donald’s November 29, 2010 draft report opined that the creosote contamination found in the Western Front “could have originated” from the storage of creosote treated timbers. His June 27, 2012 finalized report stated that the contamination on the Western Front “more probably than not originated” from the storage of creosote treated timbers.

[173] However, when counsel for the Respondent asked Seaspan to clarify its grounds of appeal on October 10, 2012, counsel for Seaspan replied:

I do not believe that Seaspan is required to provide reasons for the appeals other than those set out in the Notice of Appeal.

[174] In its December 12, 2012 submission to the Board, in reply to Domtar’s application for production of documents, Seaspan advanced the theory that the

10 Section 45(1) of the EMA provides: “Subject to section 46 [persons not responsible for remediation], the following persons are responsible for remediation of a contaminated site:(a) a current owner or operator of the site; … Section 39 defines “owner” as a person “who (a) is in possession, (b) has the right of control, or (c) occupies or controls the use of real property, …


source of contamination found on the Western Front was caused by dredgeate transported and placed there by Domtar, and was not the result of migration from the plume on Parcel A.

[175] The other parties and the Board only became aware of Seaspan’s theory that the contamination on the Western Front was caused by boomed creosote treated timbers, and not by migration from the plume on Parcel A, when Seaspan wrote to the Board on June 21, 2013.

[176] Seaspan also raised two defences without providing particulars. Specifically:

• Seaspan advanced an innocent purchaser argument [EMA section 46(1)(d)] in November and December of 2012, during its submissions on document production. Its submissions appeared to suggest that this defence had always been the basis of grounds 1 and 2 of its Notice of Appeal (which disputed that it was a responsible person for any or all of the five parcels). This argument later appears as an alternative argument in Seaspan’s Statement of Points dated July 22, 2013, but was abandoned “for the purpose of these appeal proceedings only” in its written opening submissions.

• Seaspan advised of a minor contributor argument on September 11, 2013, over three and one-half years after it filed its original Notice of Appeal and 19 days from the commencement of the hearing.

[177] In addition to grounds of appeal 1 and 2 noted above, Seaspan’s appeal of the Remediation Order also alleged that the Director was constitutionally barred from including federally owned land in the Order, and that the Port should have been named as a responsible person in the Order (grounds 3 and 4). Seaspan abandoned grounds 3 and 4 of its appeal when Mr. Donald’s evidence and the Report were shown to be critically flawed on cross-examination. Seaspan did not provide any explanation as to why it considered the constitutional arguments to be dependent on the conclusions in the Report. The Panel notes that the jurisdictional issues applied to Parcel C, the large contaminated water lot held by the Port and leased to Seaspan, which is not part of the Western Front. Further, in its letter of June 21, 2013, Seaspan conceded that it was a responsible person for Parcel C.

[178] The Port submits that the Panel should infer from Seaspan’s abandonment of grounds 3 and 4 that these claims were frivolous from the outset. Although the Panel has some sympathy for this submission, it is not in a position to judge those aspects of Seaspan’s appeal as they were abandoned before the Panel heard its arguments. However, given that Parcel C is not part of the Western Front, Seaspan’s decision to abandon these grounds of appeal is curious. Nevertheless, the Panel will not second guess Seaspan in its management of its appeal after the serious flaws in its case were exposed.

[179] The Panel has also carefully considered the flaws that were exposed with the Report, and the parties’ submissions on the impact of those flaws and their significance to these applications.

[180] The Panel finds that Seaspan knew or ought to have known that the Report was fatally flawed and could not support the conclusion that the creosote


contamination on the Western Front “more probably than not originated from the storage of boomed creosote treated timbers”, and not from migration from the plume on Parcel A.

[181] The flaws in the Report are fully canvassed in the Background and have been carefully considered by the Panel. The Panel is particularly concerned by the following:

• The Report is deceptive in that it purports to address “the cause of creosote contamination” on the Western Front but, on instructions from counsel, Mr. Donald left out any reference to groundwater.

• Mr. Donald adopted an artificially technical definition of “contamination” in reaching his conclusion in the Report by only including analytical results with recorded exceedances. He ignored relevant data of soil samples with free product, even though he knew that these samples would not have been sent to a laboratory because they were obviously contaminated. On cross-examination, Mr. Donald conceded that he was aware that the Contaminated Sites Regulation provides that the presence of odour, sheen and DNAPL are prescribed factors indicating contamination, and can be relied on by the Director in making a determination that a site is a contaminated site.

• Once evidence of free product in the boreholes is included in the analysis, the fracture (non-contiguous) hypothesis in the Report collapses, and the conclusion in the Report is completely discredited.

• The Report was constructed such that a reader could not discern the unusual definition of contamination that Mr. Donald had employed to arrive at his opinion.

• The Report contradicts the conclusions in previous reports prepared for Seaspan and Domtar by Golder, even though Mr. Donald was instructed to assume that the Golder investigations correctly identified the nature and extent of creosote contamination in the soils. There is no explanation of this in the Report.

[182] The Panel has also carefully considered Mr. Donald’s evidence in direct and cross-examination, the essential parts of which are in the Background.

[183] Seaspan admits that Mr. Donald made errors in the Report, but submits that those errors are not sufficient to attract an award of costs. It submits that that the errors in the Report were not known to Seaspan until Mr. Donald was cross–examined, even though Seaspan had received and reviewed the rebuttal expert reports tendered by the other parties on September 9, 2013. Seaspan also urged the Panel to consider that an adverse finding with respect to Mr. Donald’s competence will have substantial professional implications for him.

[184] The Panel agrees that, for the Board to make an order of costs, more than a genuine error is required. Any person, including highly trained and respected professionals like Mr. Donald, can make mistakes.

[185] However, in this case the Panel is concerned about the following behavior which it considers to be beyond the scope of simple mistakes:


• The artificially technical interpretation of “contamination” for the purposes of the Report, contrary to the factors that are considered to be evidence of contamination in the Contaminated Sites Regulation, factors of which Mr. Donald was aware;

• The failure to address groundwater in the Report after discussions with counsel, and in light of the comments on groundwater flow direction in the Keystone 2011 Final Remediation Plan, which Mr. Donald signed off as President of Keystone;

• The change in the wording of the opening paragraph of the Report which poses a significantly different question from the four draft reports prepared by Mr. Donald. The change in the paragraph took place between July 22, 2013 and August 8, 2013, the date when Mr. Donald signed off on the Report. When questioned about the why the wording in the Report was different from the November 2010 question posed by counsel for Seaspan, Mr. Donald testified: “I cannot tell you how or why I chose the words that are in the first paragraph which were originally written two years ago.” [Emphasis added]

• At the hearing, Mr. Donald testified that the native material is the silt and sands layer (unit 2), which is the key area containing contamination. This was different than his Report which stated that the native material was unit 3. He did not draw the Panel’s attention to this important difference between his evidence and the Report. Nor did he offer any explanation as to why he changed his conclusion as to which soil unit forms the native material of the tidal flats.

[186] The Panel finds that Mr. Donald’s evidence reflected something more than mere error or “a bad day” on the witness stand. The Panel is not able, on the evidence, to make any finding as to the cause of the problem. In fairness to Mr. Donald, the Panel notes that he readily conceded the flaws in his Report and in his conclusions as soon as they were put to him in cross-examination. He was neither argumentative nor defensive in giving his evidence. Whatever the reason, Mr. Donald’s Report was fundamentally and irredeemably flawed.

[187] Seaspan claims that it did not know, or could not have known, of the flaws in Mr. Donald’s Report. The Panel disagrees. The Panel finds that Seaspan advanced a position that was fundamentally unsound from the outset, presumably, to avoid or lessen the costs of remediating the serious contamination at the Site. In this regard, the Panel finds that special costs case of FFS HK LTD. v. P.T. 25 et al, [2011] B.C.J. No. 1981 (Q.L.) [FFS HK Ltd.] is relevant.

[188] In FFS HK Ltd., the BC Supreme Court considered the legal parameters of a special costs award. In that case, the plaintiff was strictly liable under the Marine Liability Act for the $1 million remediation resulting from a spill of heavy fuel into Vancouver Harbour. It sued the defendants in negligence to recover a portion the costs. The defendants denied any liability. After a ten-day trial, the Court found that the plaintiff and the defendants were equally at fault. The plaintiffs sought an order of special costs and a determination of whether it was entitled to recover all


of its costs, or an apportionment of its costs based on the 50/50 apportionment of liability. The Court reviewed the case law and stated:

10. Most decisions involving special costs awards are not particularly helpful because they are fact driven. However, Concord Industrial Services Ltd. v. 371773 B.C. Ltd., 2002 BCSC 900, is instructive. Special costs were ordered where a party displayed “reckless indifference” by failing to acknowledge early on that its claim was manifestly deficient. The Court held at para. 27 that the plaintiff's failure to come to terms with that manifest deficiency at an early stage of the proceedings constituted “the sort of reckless indifference to the legitimate interests of the defendant as is envisioned by the authorities which cite reprehensible conduct as a basis for awarding special costs”.

11. I also find instructive the comment of Hall J.A. in Catalyst Paper Corporation v. Companhia de Navegaço Norsul, 2009 BCCA 16 at para. 16 concerning the function of costs in the litigation process:

[16] It seems to me that the trend of recent authorities is to the effect that the costs rules should be utilized to have a winnowing function in the litigation process. The costs rules require litigants to make careful assessments of the strength or lack thereof of their cases at commencement and throughout the course of litigation. The rules should discourage the continuance of doubtful cases or defences. This of course imposes burdens on counsel to carefully consider the strengths and weaknesses of particular fact situations. Such considerations should, among other things, encourage reasonable settlements.

[189] The Court found that the defendants’ conduct was reprehensible and deserving of an award of special costs against them, stating at paragraph 38:

38. Counsel for the defendants argued that his clients were entitled, in his words, to "put their best foot forward". I do not disagree with that proposition in the circumstances of most cases. In this case, I reject that argument because the defendants knew or ought to have known that their best foot was fundamentally unsound and incapable of supporting their theory of the case.

[Emphasis added]

[190] The Court went on to find that the “positions taken by the defendants throughout the litigation were both unreasonable and inappropriate” and that “a costs recovery based on proportionate liability would not bear a reasonable relationship to the cost in obtaining the results achieved …”. The plaintiff was entitled to 100% of its costs and disbursements. (para 55)

[191] An award of costs is a way for the Board to dissociate itself from misconduct. It sends a message to parties that, as the Court stated in FFS HK Ltd., they need to make careful assessments of the strength or lack thereof of their cases at the


commencement and throughout the course of an appeal. The rules should discourage the continuance of hopeless cases or defences.

[192] Seaspan’s reluctance to clearly identify its position from the outset, its change of position over the years, and the flaws in Mr. Donald’s Report and evidence, leads the Panel to conclude that, until day three of the hearing when it abandoned most of its grounds for appeal, Seaspan had either advanced a theory that it knew lacked merit or, at the least, had not undertaken a careful assessment “of the strength or lack thereof” of its case.

[193] Ultimately, the underlying theory of its case – the theory that it chose to pursue to a hearing – was so ill conceived that it crumbled almost immediately under cross-examination. Evidence that free phase DNAPL creosote found in bore holes did not signify “contamination” because of a lack of confirmatory test results was preposterous.

[194] As stated by the Court in FFS HK Ltd., an award of costs “should discourage the continuance of doubtful cases or defences.” The Panel finds that this was more than a “doubtful case”. Rather it was hopeless, and the theory advanced at the hearing should never have been pursued.

[195] The Board has awarded costs in an appeal in a very few cases. Most of the costs applications before the Board have involved “unsophisticated” and/or unrepresented parties. In this case, the Panel is faced with sophisticated parties, represented by experienced and knowledgeable counsel. Thus, the concern with “deterring individuals with legitimate concerns from using the Board’s process” (Delta Shake & Shingle) is not engaged. In this case, the Panel concludes that Seaspan, a sophisticated party, has clogged the system with an ill-founded appeal.

[196] In the Panel’s view, this is a case where an award of costs against Seaspan is justified. Fundamentally, as in Garcia, and in the Board’s decision in O’Flaherty, Seaspan’s conduct is conduct from which the Board wishes to dissociate itself. In the Panel’s view, even on a basic analysis of legislation and the undisputed facts, Seaspan’s appeal on grounds 1 and 2 had no possibility of success. This was confirmed by the relatively quick collapse of its expert witness, and then Seaspan’s case.

[197] Seaspan argues that, by abandoning most of its appeals once the flaws in its case were evident, is an example of reasonable or responsible conduct and ought not to be discouraged and refers to the Board’s decision in Spike Investments Ltd. v British Columbia (Ministry of Water, Land and Air Protection), [2003] B.C.E.A. No. 41 (Q.L.), [Spike Investments]. In that case, the Board declined to award costs in response to Spike's decision to abandon the appeal on the day before the hearing. The Board held: “The fact that the review of that report resulted in the withdrawal of the appeal on the eve of the commencement of the oral proceedings should not result in an award of costs when Spike's withdrawal saved the Board, Telus, the City, and the Assistant Manager the costs of attendance at the hearing.” The Board also found that Spike had a valid question about the decision under appeal and “it pursued the appeal in good faith until it became apparent that abandonment of the appeal was the best option.”


[198] As a general proposition, the Panel agrees that abandoning or withdrawing an appeal can be the responsible thing to do, even if it occurs “late in the day.” However, Seaspan’s abandonments do not fall within the “general proposition”.

[199] The Panel finds that Seaspan cannot take comfort from the Board’s decision in Spike Investments. In that case, Spike Investments, the owner of a gas station, appealed a Site Investigation Order issued by the Assistant Regional Waste Manager to determine the extent of contamination. Because the contamination affected the abilities of Telus Corporation and the City of Burnaby to upgrade underground services, they became Third Parties in the appeal. The parties exchanged expert reports; in particular, Telus and the City forwarded a report prepared by Stantec Consulting Ltd., by courier, to the Board and the other parties, approximately 33 days prior to the hearing. On the day before the hearing was scheduled to begin, Spike advised that it was withdrawing the appeal after discussions with its expert regarding the Stantec report.

[200] The City, Telus and the Assistant Manager all sought costs against Spike, arguing that Spike’s actions amounted to an abuse of process, that the appeal was frivolous and vexatious and that Spike failed to act in a timely manner with respect to the Stantec report.

[201] No evidence was presented to support the allegation of abuse of process. The Board found that Spike did have a justiciable issue that, on its face, had merit and substance, and therefore the appeal was neither frivolous nor vexatious. However, the reason that the Board concluded that Spike’s withdrawal of its appeal on the eve of the hearing was reasonable, was based upon this analysis at paragraph 56:

The Panel finds that Spike did not wait an unreasonable amount of time after it received the Stantec report, prior to reviewing it with its expert. It is not unreasonable or uncommon for expert reports to be reviewed by experts up to the commencement of proceedings such as a hearing before this Board. Indeed, to the contrary, it would be unreasonable to not review an expert report in preparation for a hearing. The fact that the review of that report resulted in the withdrawal of the appeal on the eve of the commencement of the oral proceedings should not result in an award of costs when Spike's withdrawal saved the Board, Telus, the City, and the Assistant Manager the costs of attendance at the hearing.

[202] In that case, the Board’s found that it was “not unreasonable or uncommon for expert reports to be reviewed by experts up to the commencement of proceedings”. However, in that case, the expert report was submitted by another party. In the present case, Mr. Donald was Seaspan’s own expert witness. Further, the Board found in Spike Investments that Spike had a valid question about the decision under appeal, and that it pursued the appeal in good faith until it determined that abandonment was the best option. That is not the situation in this case as there was no evidence upon which Seaspan could rely to support the proposition that the plume originating from Parcel A was discontinuous with the Western Front. Absent such evidence, the presence (or lack thereof) of timber treated booms on the Western Front was completely irrelevant. This was a case


where Seaspan began with a theory of liability in search of evidence, rather than beginning with evidence in search of a theory.

[203] Unlike Spike Investments, but similar to the Court’s decision in FSS HK Ltd., Seaspan “knew or ought to have known that their best foot was fundamentally unsound and incapable of supporting their theory of the case”.

[204] Further, there was no explanation for the change in the opinion from “contamination on the western front could have originated from creosote treated timber piles” to “contamination more probably than not originated from creosote treated timber piles.”

[205] In College of New Caledonia v. Kraft Construction Co., [2011] B.C.J. No. 726 (Q.L.) [College of New Caledonia] the BC Court of Appeal considered whether to grant leave to appeal an award of special costs. The summary trial chambers judge who awarded those costs had found as follows:

50. … this is a case like Concord Industrial Services Ltd. supra, where the plaintiff failed to come to terms with “the manifest deficiency of its claim, at an early stage” and after finally commencing the action delayed serving it on the Architects for 11 months. They then ignored repeated warnings about the deficiencies in their case and in the face of warnings of the Architects' intention to seek special costs chose to proceed.

51. This is an example of precisely the sort of reckless indifference envisioned by the authorities as coming within the broad definition of reprehensible conduct.

[Emphasis added]

[206] The Court of Appeal dismissed the application for leave to appeal on the ground that the Court of Appeal would be unlikely to interfere with the trial judge’s exercise of discretion in awarding special costs. The Court of Appeal agreed with the trial judge that “something more than pursuing a weak case was required” for special costs. The Court of Appeal concluded at paragraphs 39-40 as follows:

39. The chambers judge did not misdirect himself on the applicable legal principles. He stressed that no single factor was determinative and, particularly, that the fact the College pursued a weak claim was not in and of itself a ground for awarding special costs. In my view, the judge did not err taking that fact into account.

40. An analysis of the individual components of the factual matrix considered by the judge when deciding whether to order special costs is of limited assistance. In any event, in my view, the College's approach does not take into account the reasons of the judge as a whole. He concluded that causing the respondents to incur substantial legal costs in a weak case that could not be recovered from their insurer because of the delay of the College, was conduct worthy of rebuke. In the exercise of his discretion, the judge was entitled to do so.


[Emphasis added]

[207] The Panel finds that this reasoning applies to the present case.

[208] In the Panel’s view, Seaspan’s conduct falls far short of the standard of practice which the Board wishes to encourage in the appeals process. It is behavior that is deserving of reproof or rebuke. In the Panel’s opinion, a failure to award costs in this case would be contrary to the Board’s policy to encourage responsible conduct.

Quantum of costs

[209] The Panel has considered the quantum of costs to be awarded. The Panel finds that the matters involved in Seaspan’s appeals were of more than ordinary difficulty and, accordingly, costs are awarded at Scale C.

[210] The Panel has also considered that Seaspan’s remaining appeals were two of the four appeals set to be heard together on September 30, 2013, and that the nature and form of security and the covenant issues were not abandoned, and are currently adjourned.

[211] The Director notes that documents were produced in respect to all four appeals, and the Director’s and Fibreco’s costs and disbursement were not solely related to Seaspan’s appeals.

[212] The Panel is not in a position determine the quantum of costs payable pursuant to these reasons. In the absence of agreement between the parties, the Panel directs each of the Port, Fibreco and the Director provide a draft bill of costs, along with written submission respecting its claim to costs. These submissions must not exceed 10 pages each. The submissions should address the following issues, taking into account the matters set out in paragraphs 210 and 211 (above):

1. How many of the preliminary applications, or what portion of the preliminary applications, if any, should be subject to the costs award?

2. What percentage of the hearing should be the subject of the costs award?

3. What disbursements, or portions thereof, should be the subject of the costs award?

[213] Seaspan will then submit to the Panel, and the other parties, its response submission in writing, not to exceed 20 pages. The Port, Fibreco and the Director will have the right to file written reply submissions, not to exceed 3 pages.

[214] The Panel will not impose any timelines with respect to these submissions. However, undue delay by any single party will not be tolerated. If the parties require further direction, including direction respecting timelines for submissions, any party may apply to the Board, in writing, for directions.

Board’s expenses

[215] As set out above, the Panel has found that:


• Seaspan’s conduct with respect to its appeals is conduct from which the Board wishes to dissociate itself;

• Seaspan’s appeals had no reasonable prospect of success; and • Seaspan failed to realize the “manifest deficiency” of its claim, at an early

stage.

[216] Given these findings, the Panel is of the view that the issue of an order requiring the Board’s expenses to be paid pursuant to section 95(2)(b) of the EMA could be engaged.

[217] The Panel directs Seaspan to provide to the Board, and to the other parties, its submissions in respect of the Board’s expenses pursuant to section 95(2)(b) of the EMA. These submissions are to be received by the Board within 30 days of release of these reasons.

[218] For convenience, the Board’s policy on expenses is set out in its Procedure Manual at pages 46-47, as follows:

Where the panel considers that the conduct of a party has been frivolous, vexatious or abusive, the panel may order that party to pay all or part of the expenses of the Board in connection with the appeal (subsection 95(2)(b) of the Environmental Management Act). Decisions of the courts defining conduct that is frivolous, vexatious and abusive may be used to assist the panel in determining whether to apply this subsection.

Expenses of the Board that a party may be required to pay under subsection 95(2)(b) of the Environmental Management Act include:

a) recorder fees;

b) per diems of Board members on the Panel;

c) travel expenses;

d) hotel costs; and

e) charges for the hearing room.

These expenses will vary based on such factors as the nature and location of the appeal, the number of days of the hearing, and the number of panel members sitting on the appeal.

The panel will not order a party to pay the Board’s expenses unless it has first given that party an opportunity to make submissions on this issue.

DECISIONS

[219] In making these decisions, the Panel of the Environmental Appeal Board has carefully considered all of the submissions, arguments and evidence before it, as well as the purpose of the EMA, whether or not specifically reiterated here.

[220] For the reasons provided above, the applications by the Port, Fibreco and the Director are granted. Pursuant to section 95(2)(a) of the EMA, Seaspan is ordered


to pay all of the costs of the Port, Fibreco and the Director in relation to both of its appeals (2010-EMA-005 and 2010-EMA-006), except those portions of its appeals relating to security and the Land Title Act covenant (i.e., the portions of appeal 2010-EMA-005 that were not abandoned, and have yet to be heard and decided). Those costs are to be assessed at scale C.

[221] In the absence of agreement, the parties will tender written submissions to the Board as directed above, respecting the quantum of costs to be awarded.

[222] Seaspan will, within 30 days of release of these reasons, deliver its written submission to the Board, and to the other parties, respecting payment of the Board’s expenses pursuant to section 95(2)(b) of the EMA.

“Robert Wickett”

Robert Wickett, Q.C. Panel Chair Environmental Appeal Board

“Cindy Derkaz”

Cindy Derkaz, Member Environmental Appeal Board

“Blair Lockhart”

Blair Lockhart, Member Environmental Appeal Board

September 15, 2014