Company Officers and Managers Can Be Subject to Fisheries Act Inspector’s Directions: What Terrapure Means for Industry and Individuals

The Federal Court (Court) recently set aside the direction of an Environment and Climate Change Canada inspector (Inspector) issued pursuant to the Fisheries Act (Direction). The Direction named the company as well as the company’s president and on-site managers of environmental affairs, in relation to alleged deposits of deleterious substances into waters frequented by fish. 

While the matter was ultimately sent back to the Inspector for redetermination, Terrapure BR Ltd. v. Canada (Attorney General) (Terrapure) highlights the risks for company officers and operational managers who may be personally named in a direction requiring immediate corrective measures, imposing direct compliance obligations for those individuals. For more information on individual culpability for environmental offences, please see our August 2023 Blakes Bulletin: “The Buck Stops at the Top” – Lessons Learned: Mining Company Executive Found Guilty of Environmental Offences. 

In addition, this decision confirms that inspector directions must be based on a reasonable interpretation of what constitutes a “deleterious substance”, and that corrective measures, including monitoring requirements, must be reasonable. A requirement that causes a company to cease operations while waiting for sampling results is unreasonable. 

THE DIRECTION: CONTEXT AND FINDINGS 

Terrapure BR Ltd. (Terrapure Ltd.) operates a lead-acid battery recycling facility whose treated wastewater discharges into a municipal storm sewer flowing into the St. Lawrence Seaway. The Inspector found there were reasonable grounds to believe Terrapure Ltd. was depositing deleterious substances, including sulfate, into water frequented by fish, and issued the Direction against the company and certain employees. This Direction required them to:

1. Cease the immediate discharge of effluent
2. Take all necessary measures to comply with the Fisheries Act
3. Develop an action plan
4. Monitor the final effluent by performing toxicity tests weekly
5. Implement measures proposed by the company into the action plan

 The company and individuals challenged the Direction by applying for judicial review.

THE COURT’S TAKE ON THE DIRECTION 

In Terrapure, the Court set aside the Direction and sent it back to the Inspector for redetermination. The Court found that the Direction was unreasonable because the Inspector adopted an overly broad interpretation of “deleterious substance” and imposed monitoring requirements so burdensome that the company would have to cease operations while awaiting test results.

While the Fisheries Act defines “deleterious substance” broadly, the Court held that the interpretation of the definition must be reasonable. Further, monitoring requirements or corrective measures imposed on a company in response to its infringement of the Fisheries Act, outlined in a direction, must be reasonable and in accordance with the governing statutory framework. 

The Court found the Inspector’s interpretation and monitoring requirements to be unreasonable because: 

• The Inspector’s reasoning as to why some of the discharged effluent contained a “deleterious substance”, specifically sulfate, was inconsistent and not sufficiently justified by the applicable statutory schemes or evidence.
• The Direction’s monitoring requirements were overly burdensome and imposed a “no deposit standard” on Terrapure Ltd. For this standard to be maintained, the requirements would have required the company to cease its activities, specifically the discharge of all effluent. This would effectively shut down the facility for a prolonged period.
• The Direction contained illogical sequencing and timing regarding rainbow trout testing, and samples were not required to be taken contemporaneously. 

These errors were significant enough to render the Direction unreasonable. 

Notably, the Inspector’s naming of the individuals was not an issue for the Court. Subsection 38(7.1) of the Fisheries Act allows inspectors to issue directions requiring corrective measures, and they are empowered to address those directions to any person who owns or has charge, management or control of the activity, or who caused or contributed to the occurrence. 

Terrapure Ltd. challenged the Inspector’s interpretation of this subsection, but the Court did not agree with its position. Rather, the Court was clear that individuals can be named where their responsibilities, position in the company and authority makes them appropriate addressees. The Court found it was reasonable for the Inspector to name the company’s president and on-site manager of environmental affairs in the Direction, given their roles with respect to environmental compliance, general authority to ensure adherence to the Fisheries Act, and on-site presence.

As such, the Court wholly rejected the company’s argument that naming individuals in the Direction was unreasonable. 

LESSONS LEARNED                 

Terrapure highlights several key considerations for companies and individuals that may be subject to, or at risk of, an inspector’s direction, including:

• Assessment of a substance as “deleterious” must be reasoned, logical and evidence based. Regulators are expected to provide a clear rationale when defining a deleteriousness, especially in situations where toxicity is concentration dependent. 
• Monitoring requirements must be operationally realistic. Directions that, when applied in practice, require a company to shut down operations pending environmental sampling—particularly where later testing has the potential to show compliance—risk being struck down as unreasonable. 
• While it is unusual and rare, this decision highlights that companies can expect personnel to be named in inspector’s directions where roles, authority and presence justify it. Further, not all these elements are required for an individual to be named; in the case at hand, one of the named individuals—the president—was not directly involved in on-site operations or environmental compliance. 

For more information, please contact the authors or any other member of our Environmental or Litigation & Dispute Resolution groups.