National Steel Car Limited v. City of Hamilton, 2024 ONSC 4120

COURT FILE NO.: 12-36015 (Hamilton)

DATE: 2024/07/24

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

NATIONAL STEEL CAR LIMITED

Plaintiff

– and –

THE CORPORATION OF THE CITY

OF HAMILTON, ARCELORMITTAL

DOFASCO INC. and HAMILTON

PORT AUTHORITY

Defendants

Jerome Morse and David Trafford, Counsel for the Plaintiff, National Steel Car Limited

Adam Bucci and Nicole Pelaia, Counsel for

The Defendant, The Corporation of the City

Of Hamilton

Jordan Diacur, Counsel for the Defendant,

ArcelorMittal Dofasco Inc.

Mark Abradjian and Greta Ladanyi, Counsel

For the Defendant, Hamilton Port Authority

HEARD: March 20, 21, 22, 23, 24, 27, 28 and 29, April 11, 12, 13, 14, 17, 18, 19, 20, 21, 24, 25, 26, and 27, May 1, and November 23, 2023

GIBSON J.

REASONS FOR DECISION

TABLE OF CONTENTS

I. OVERVIEW 2

II. THE POSITION OF THE PARTIES5

III. ISSUES9

IV. THE CLAIM OF THE PLAINTIFF NATIONAL STEEL CAR 9

V. SUMMARY OF THE FACTS ESTABLISHED FROM THE EVIDENCE 17

VI. LAW AND ANALYSIS 52

VII. CONCLUSION ………………………………………………………………………. 86

VIII. ORDER ………………………………………………………………………………. 88

I. OVERVIEW

[1] The Plaintiff, National Steel Car Limited (“National”), has for many years manufactured steel railroad cars in the industrial sector of Hamilton, Ontario. Its property lies in the industrial north end of the city and fronts on Hamilton Harbour. National brings this action against the Defendants, the City of Hamilton (“the City”), another heavy industry enterprise National’s neighbour, ArcelorMittal Dofasco (“AMD”), and the Hamilton Port Authority (“HPA”) for damages suffered by reoccurring flooding to its property from the Kenilworth Avenue Drainage Channel (also referred to as the “Channel”), which flows from south to north along the western boundary of National’s property, ultimately discharging into Hamilton Harbour. National asserts that it has experienced 15 distinct floods between September 2010 and October 2021.

[2] National seeks damages caused by the flooding due to what it submits is the negligence and private nuisance of the City and AMD and further to the rule in Rylands v Fletcher. In addition, National seeks a permanent injunction prohibiting the Defendants from causing further damage to its property by requiring them to take immediate steps to remediate the Channel and thereafter to maintain the Channel as required by the accepted standard of practice.

[3] National claims damages of $5,287,325.58, comprised of labour/clean-up costs, lost inventory, costs relating to a ‘pump and cistern’ system (including past and future electricity costs), and the costs of a proposed floodwall. The City and AMD, National also asserts, should be punished by an award of punitive damages given what National says is their “wanton and contumelious” disregard of National’s right to private use and enjoyment of its property for more than two decades. National seeks punitive damages of $1.6 million against each of the City and AMD. The claimed punitive damages award - if made against either the City or AMD, let alone both - would be the largest punitive damages award ever made in Canada.

The Location

[4] AMD currently operates its steel-making facility on lands to the north and west of the Channel, on Burlington Street/Nicola Tesla Blvd. in Hamilton. The AMD property is accordingly located proximate to the National property, but the two properties are separated by the 66-foot-wide Kenilworth Avenue Road allowance, laid out since a Crown Survey in 1791. A drainage channel (“the Channel”) abuts the National property. The Channel lies within the road allowance.

[5] The City’s sewer infrastructure in the vicinity is designed such that, when it reaches capacity-when the City’s combined (storm and sanitary) sewer system and the downstream Woodward Ave. Water Treatment Plant can accept no additional flow during large storm events -the excess flow is diverted. It discharges to a Combined Sewer Outlet (“CSO”). The twin box culverts located on the Road Allowance (described at this trial as Location 1, which will be identified in more detail below) are one such CSO. The Location 1 culverts were constructed in 1922. The City therefore sometimes discharges a mix of its collected stormwater and “sanitary” (a euphemism for raw sewage) water from Location 1 into the Channel. Originally, these discharges went directly into Ogg’s Inlet, a natural inlet of the body of water at the western end of Lake Ontario now known as Hamilton Harbour (at the time of the 1791 survey, this body of water was known as Lake Geneva). Now they go into the Channel, due to the incremental infill of the lands in the vicinity since that time. The impact of this infilling and “channelization” of the Channel is one of the key issues in this trial. The stormwater portion of the mixture discharged into the Channel by the City from Location 1 is collected by the City in sewer infrastructure spanning a 311-hectacre sewer catchment area, the Kenilworth Sewer Catchment. The stormwater is sediment-bearing, or “turbid”. The maximum volume of discharge that can pass through the Location 1 CSO is 11.7 million liters per hour, and discharges of this volume can continue for several hours during a major storm. Due to the turbidity of the mixture discharged into the Channel by the City, there is an ongoing deposition of sediment along the entire length of the Channel, at Locations 2 and 3, and at the Sediment Basin Pond and Location 4 culverts (all of these locations will be identified in more detail below).

The Action

[6] National initially commenced this action by way of a Notice of Action and Statement of Claim on July 18, 2012 and August 16, 2012 respectively, and initially named only the City of Hamilton as a defendant. Subsequently, on December 12, 2014, the City issued a third-party claim as against AMD and the HPA, for contribution and indemnity. On June 6, 2018, National amended its claim and added AMD and HPA as defendants in this action.

[7] National’s earlier motion for a mandatory interlocutory injunction in this matter was heard by Ramsay J. and was dismissed: National Steel Car Limited v. AMD, 2022 ONSC 6742.

The Trial

[8] A plethora of viva voce and written evidence was presented during the course of the trial, including extensive read-ins from the evidence on examination for discovery. The parties made written final submissions, supplemented by later oral submissions. At the request of all the parties, the Court also took a View of the property.

[9] National called eight witnesses: John MacDonald, the NSC managing director for maintenance; John Hutter, from King Paving; Victor Kooistra, a construction estimator from King Paving; Brian Enter, an engineer; Norman Kahn, a real estate expert; George Thomas, an engineer; Vincenzo De Luca, the CFO of National; and Gregory Aziz, the President and CEO and directing mind of National. The City called seven witnesses: Catherine Jeske, a land development lawyer; Steven Robichaud, an urban planner; Rob Divinski, a tax administrator for the City of Hamilton; Udo Ehrenberg, a senior water program manager with the City of Hamilton; Ron Scheckenberger, a civil engineer; Dave Alberton, a wastewater manager; and Matt Senior, a water resources engineer. AMD called three witnesses: Petar Jovic, a civil engineering technologist; James Walker, an engineer; and Scott Paulin, an accountant.

II. The position of the Parties

National

[10] After all the evidence at trial has been heard, National now acknowledges that the evidence does not establish liability against the HPA, which is subject to a cross-claim by both AMD and the City.

[11] National submits that the basic premise underlying this action is that an owner or occupier of property is responsible to maintain their property to avoid damage to their neighbour. Whether framed in the law of negligence, which requires an owner or occupier to maintain their property in accordance with an accepted standard of practice or else be liable for damage caused by a failure to meet that duty, nuisance, which prohibits a substantial and unreasonable interference with a neighbour’s property, or the rule in Rylands v. Fletcher, which provides for strict liability for the escape of dangerous substances arising from a non-natural use of property, National contends that at the heart of this action is the widely-recognized general principle that one cannot disregard the maintenance requirements of one’s property to the detriment of a neighbour. In addition, National relies on the widely-recognized principle that a landowner, such as the City and AMD, may not alter the flow of water over their land in a manner that floods a downstream or upstream neighbour.

[12] National submits that AMD and the City have knowingly failed to meet their obligations to maintain their properties for over two decades. It was no later than the year 2000 when both the City and AMD knew that their respective portion of the Kenilworth Ave Drainage Channel that abuts the western boundary of the National property, and their failure to maintain that property, was causing National reoccurring damage by flooding.

[13] AMD and the City, by their own admission, have done almost nothing to maintain the Channel in the more than 20 years that National has experienced flooding.

[14] The flooding of National’s property is caused by water escaping the Kenilworth Avenue Drainage Channel. There is no other significant source of flood waters. The flood waters that escape the Channel originate from the City’s Kenilworth catchment area (“Kenilworth CSO”) where it is diverted by the City from the combined sewer system during heavy storm events into the City’s double box culvert at the southern end of the Channel (“Location 1”).

The position of the City

[15] The City contends that it is not liable for the flooding caused by the industrial infilling and progressive alteration of Ogg’s Inlet, a blocked twin culvert belonging to AMD at the end of the Kenilworth Channel (“Location 4”), and historically rising lake levels in the Hamilton Harbour in relation to the relatively low-lying lands of the NSC property. The City, it says, is not responsible for maintaining AMD’s private hydraulic infrastructure, nor is it liable for the susceptibility of NSC’s low-lying lands to flooding from external factors. As such, the City contends, it is not liable in nuisance, negligence or under the rule in Rylands v. Fletcher.

[16] Moreover, the City asserts, National has failed to mitigate its damages. Despite experiencing floods for decades, it has not retained an expert to provide an actual engineered solution to the problem. Rather, National claims millions of dollars in damages for costs to implement ineffective measures.

[17] Finally, the City submits, National is not entitled to the equitable relief of a permanent injunction as against the City, as it has failed to come before the Court with clean hands or establish a legal right for permanent injunctive relief. The City says that National has contravened the Municipal Act, prejudged the issues of this litigation, and effectively awarded itself damages by withholding its property taxes, which now amount to over $7.1 million in arrears.

[18] The City requests that this action be dismissed as against it with costs.

The position of AMD

[19] AMD submits that “the real culprits in this case are the City - and especially the City’s long period of apathy and refusal to bear any maintenance costs with respect to the Channel or its sediment - and the Harbour itself”. It says that AMD is not, and never has been, a sufficient or necessary cause of or contributor to any flooding. AMD’s position is that to the extent that natural forces are to blame, no tort has occurred at all.

[20] AMD denies that is has acted in any reprehensible, malicious, oppressive or high-handed manner, or shown any disregard (much less “wanton” or “contumelious” disregard) for National’s rights and interests, such that any punitive damages award (much less an historically unprecedented award) as against AMD would be appropriate.

[21] AMD’s position is that National is limited to claiming as against AMD on the basis of five floods only, i.e. those alleged to have occurred less than 2 years before AMD was added as a Defendant to National’s claim, in June 2018. These would be the floods on April 20, May 28 and July 20, 2017; October 27, 2019, and October 4, 2021 only.

[22] AMD requests that National’s claim against it be dismissed.

The position of the HPA

[23] The HPA points out that National, in its trial submissions, acknowledges that the evidence does not establish liability against HPA and has not sought relief as against HPA in its submissions. National has not pressed any argument or evidence to suggest that HPA is liable, nor have they made a request for injunctive relief against HPA. HPA disputes that it owns any portion of the Channel, and submits that it has done nothing to attract liability in either negligence, nuisance, or the rule in Rylands v. Fletcher.

[24] HPA requests that the action be dismissed as against it.

III. Issues

[25] The following legal issues are raised by this action:

1. Are the City and AMD liable for nuisance owing to their substantial and unreasonable interference with National’s use and enjoyment of its property?

2. Are the City and AMD liable for negligence owing to their breach of the accepted standard of practice for maintenance?

3. Does strict liability under the rule in Rylands v. Fletcher for non-natural use of their properties arise for the City and AMD for allowing the escape of stormwater and sewage onto the National property?

4. The need for a permanent and mandatory injunction prohibiting the City and AMD from causing further damage to the National property by undertaking remedial work as soon as practicably possible; and

5. The City and AMD’s liability for punitive damages.

[26] For the reasons explained below, I would answer all of these questions in the affirmative.

IV. The claim of the Plaintiff National Steel Car

[27] I will now set out the claim of National in more detail.

[28] The stormwater and sewage that enters the Channel during heavy storm events collected by the City in the Kenilworth CSO and discharged through the City’s twin box culvert at Location 1 is combined storm sewer overflow, which is untreated stormwater and sewage, contaminated with effluent, other pollutants and sediment collected in the Kenilworth CSO.

[29] Location 2 (defined below) is a cause of a bottleneck in the Channel. At this location, the Channel has been significantly narrowed, obstructed by H-beams, an abandoned rail crossing, a foot bridge, debris (such as garbage), vegetation, a haul road, and a box culvert that was measured as having up to 1.5 m of sediment obstructing it.

[30] Location 3 (defined below) is a cause of a bottleneck in the Channel for many of the same reasons as Location 2. It has a set of pre-cast culverts that are obstructed with sediment that restricts the free flow of stormwater collected in the City’s Kenilworth CSO that is directed by the City into its double box culvert at Location 1.

[31] Between Locations 2 and 3 is an 84-inch steel corrugated pipe (the “Pipe”), which also causes a bottleneck due to it being obstructed with sediment and other debris.

[32] Location 4 (defined below) is what should be the outlet of the drainage of stormwater from the Sediment Basin (defined below) to Hamilton Harbour. Location 4 is a further bottleneck in the Channel and was noted by all experts as the single greatest and most obvious example of the failure to maintain the Channel, and a significant contributing cause of the flooding of National’s property. The twin culverts at Location 4 are each 3 m in diameter and are meant to discharge the City’s stormwater and sewage collected from the City’s Kenilworth Avenue CSO into Hamilton Harbour. Photographs taken by National’s experts in December 2016 and October 2021 establish the culverts are completely submerged in sediment. The same culverts are 95% blocked by sediment. A remote-control underwater drone with the dimensions of 0.72 m long, 0.45 high and

0.40 m wide launched from the outlet of the pipes into Hamilton Harbour could not survey more than 4 m into the pipes due to blockage by sediment. These culverts are 60 m long from the outlet of the Sediment Basin to the outlet of the Harbour. 56 m or 93.33% of these pipes could not be surveyed by the drone due to sediment blocking these pipes. The drone also revealed the possible collapse to the crown of one of the pipes.

[33] For more than two decades, the City denied it owned any portion of the Channel when it knew as of October 2000 it owned no less than the entire portion of the Channel abutting the National property to a point northwest of National’s property, or 3,300 feet north of Burlington Street where it intersects with Kenilworth Avenue North. The majority of the Channel is situated on the Kenilworth Avenue North Road Allowance (the “Kenilworth Road Allowance), which, the parties agree, begins at Burlington Street and runs north along Kenilworth Avenue North. The travelled portion of Kenilworth Avenue North terminates at Location 1. The evidence establishes that the beginning of the Channel is within the Kenilworth Road Allowance, which ends either at a point 3,300 feet or 4,480 feet on its eastern boundary and 4,366 feet on its western boundary north of Burlington Street. The City denied it owned the Channel from its beginning at Location 1 to a point 3,300 feet north of Burlington Street (or more), which includes Locations 1, 2 and 3. The City has contested its ownership of the entire Kenilworth Road Allowance and the portion of the Channel therein since 2000, when National first complained of flooding.

[34] The City continued its denial of ownership throughout the prosecution of this action commenced in 2012 until four days prior to the commencement of trial. The City maintained this denial notwithstanding that it has known, definitively, that it is the owner of no less than the first 3,300 feet of the Kenilworth Road Allowance for over 23 years. In October 2000, the City received the McGuire Memo (defined below), an opinion from its chief surveyor confirming that it owned the first 3,300 feet of the Kenilworth Road Allowance. In February 2017, the City confirmed the opinion in the McGuire Memo with a Rule 53 expert report from Mr. Ron Kovacs confirming the City’s ownership of the first 3,300 feet of the road allowance. The Rule 53 opinion relied upon the same survey as the McGuire Memo 17 years earlier. Despite these opinions, the City continued to deny ownership in its pleading, including its Amended Statement of Defence, dated March 16, 2023, filed just before the commencement of trial and it refused to admit ownership of the Channel in response to a Request to Admit of the Plaintiff, delivered February 27, 2023.

[35] Despite knowing that it owned the portion of the Channel ending no less than 3,300 feet north of Burlington Street since October 2000, the City has not undertaken any maintenance of the Channel north of Location 1. It refused to maintain its portion of the Channel despite knowing that it was last maintained by AMD who undertook periodic dredging until 1994, and it having had access to the Channel through a pre-existing arrangement to access the Channel through AMD lands. The City, contrary to the only opinions it had on ownership, consistently maintained in its communications to National that either National or AMD owned or had responsibility to maintain the portion of the Channel within the first 3,300 feet north of Burlington Street that was flooding National’s property with the City’s combined stormwater and sewage. The City contended if this Channel was maintained (by AMD or National) that its stormwater and sewage would drain into Hamilton Harbour and the National property would be spared from flooding.

[36] AMD installed the culverts, H-beams, rail crossing, foot bridge, haul roads, and the Pipe at Locations 2 and 3 on the City’s property, without the City’s permission, and thereby obstructed the City’s Channel on the Kenilworth Road Allowance.

[37] The City has been aware that AMD installed the culverts, H-beams, rail crossing, foot bridge, haul roads, and the Pipe at Locations 2 and 3 on its property for decades (no later than July 2008 when its investigator reviewed the AMD property) and has taken no action to prevent this trespass or obstruction of the Channel.

[38] In advance of the trial the City decided, for the first time, to incorporate the portion of the Channel within 3,300 feet north of Burlington Street into its routine maintenance program for the maintenance of its watercourses, but did not advise the court or National of this change in position until National closed its case.

[39] The City’s draft 2022 Operations and Maintenance Protocol (defined below) warned of increased capital costs when routine maintenance was neglected. AMD owns and controls the Channel where the stormwater and sewage drain into the Sediment Basin at Location 4, where two pipes are intended to drain the stormwater and sewage into Hamilton Harbour. It has not undertaken any maintenance of the twin culverts at Location 4. While AMD contends it has dredged the Sediment Basin, AMD’s evidence was it only dredged to reduce the water level in the Sediment Basin to avoid flooding of its haul road to the west of the basin. The evidence establishes AMD has never cleared sediment from the culverts at Location 4. The progression of increased sediment and overgrowth in the Sediment Basin revealed in the photographs over the years contradicts AMD’s contention that it has a routine of ad hoc dredging. The electronic records produced a trial indicate AMD only dredged the Sediment Basin twice.

[40] AMD infilled the Channel to its current condition from its original condition as a natural watercourse in the nature of an inlet of Hamilton Harbour, known as Ogg’s Inlet. The City consented to HPA’s conveyance of the extension of the Kenilworth Road Allowance so that the Channel draining its stormwater and sewage no longer drained directly into Hamilton Harbour, but had to drain across lands owned by AMD. AMD’s infilling occurred gradually, but the substantial infilling occurred between the years 1972 and 1979 based on AMD’s 1972 infilling plan and aerial photography. The infilling of the Channel between 1974 and 1979 “channelized” it and significantly reduced the hydraulic capacity compared to its natural condition. If the Channel remained in its 1974 condition, given the infilling of Ogg’s inlet between 1974 and 1979, there would be no flooding.

[41] In addition to infilling the Channel, AMD constructed berms along the Channel where it borders its property. It has also raised the topographical elevation of its property and installed the two AMD Haul Roads (defined below) which provided AMD with flood protection and direct the City’s stormwater and sewage onto National’s property.

[42] National says that the causes of the flooding to National’s property are: (1) the City’s diversion and discharge of an enormous amount of stormwater and sewage from its Kenilworth CSO into the Kenilworth Ave Drainage Channel; (2) the failure by the City and AMD to undertake any usual, proactive, routine and preventative maintenance of the Channel, in general, and, in particular, to the infrastructure at Locations 2, 3 and 4; (3) AMD’s alteration of the Channel in a way that channelized it and reduced its hydraulic capacity; (4) AMD’s alteration of its property to increase its elevation and the construction of berms which directs the flood waters onto National’s property; and (5) the sedimentation deposited in the Channel, the vast majority of which comes from the City’s Kenilworth CSO, which has reduced the hydraulic flow of the Channel and caused the blockages at Locations 2, 3, and 4.

[43] National will continue to suffer damages from further floods if remedial work is not undertaken on the Channel and a flood protection barrier, such as a flood wall, is not installed. The flood protection barrier is required owing to the volume of stormwater and sewage diverted to Location 1 from the Kenilworth CSO, the channelization and reduction of the Channel by AMD, the degradation of the condition of the Channel owing to a lack of maintenance by the City and AMD, and AMD’s alteration of its land by raising its elevation and installing berms.

[44] These facts, National contends, establish the three distinct but related causes of action against the City of Hamilton and AMD entitling National to damages.

I. The City and AMD are liable in private nuisance. Their use of their properties has caused a substantial and unreasonable interference with National’s use of its property. Since no later than the year 2000, the City has discharged stormwater and sewage diverted from the Kenilworth CSO knowing it causes National flooding. In the case of AMD, it has altered its land and the Channel and thereby the flow of water, by channelizing Ogg’s Inlet, installing the culverts, pipes and Sediment Basin, and increasing the topographic elevation of its land. Whether framed in the law of negligence, which requires an owner or occupier to maintain their property in accordance with an accepted standard of practice or else be liable for damage caused by a failure to meet that duty, nuisance, which prohibits a substantial and unreasonable interference with a neighbour’s property, or the rule in Rylands v Fletcher, which provides for strict liability for the escape of dangerous substances arising from a non-natural use of property, at the heart of this action is the widely recognized general principle that one cannot disregard the maintenance requirements of your own property to the detriment of a neighbour. In addition, there is a widely recognized principle that a landowner, such as the City and AMD, may not alter the flow of water over one’s land in a manner that floods a downstream or upstream neighbour. National insists that AMD and the City have failed to meet their obligations to maintain their properties. AMD has altered the topographic elevation of its land and installing haul roads and berms, thereby creating flood protection for its property, while impeding and diverting the upstream flow of water to flood the National property.

II. The City and AMD are liable in negligence, National contends, for failing to meet the accepted standard of practice for the maintenance of their respective portions of the Channel. The lack of maintenance by both Defendants has caused flooding to National’s property. The City has a comprehensive protocol for the maintenance of watercourses, yet undertook no maintenance whatsoever to the Channel, even when it knew that a lack of maintenance was a cause of the flooding. AMD has no protocol for the maintenance of the Channel, despite historically maintaining the Channel prior to 1994; and

III. The City of Hamilton and AMD are strictly liable for the escape of stormwater and sewage from their properties arising from a non-natural use. This is the rule in Rylands v Fletcher.

[45] AMD and the City indicated in their opening statements that they would establish that lake levels in Hamilton Harbour were a cause of the flooding to National’s property. Yet none of the witnesses, including the Defendants own experts, gave that evidence. Rather, these witnesses confirmed National’s expert’s opinion that the lake levels have never caused the flooding of National’s property. The available historical lake levels data over 52 years clearly establish that the lake has never reached a level that could top the lowest point of the western limit of National’s property. The flood waters topping the Channel at the edge of National’s property, without exception, emanate from the City’s Kenilworth CSO where it is discharged through the City’s double box culvert at Location 1.

V. SUMMARY OF THE FACTS ESTABLISHED FROM THE EVIDENCE

The Present State of the Kenilworth Avenue Drainage Channel

[46] The flooding of National’s property originates from the Kenilworth Avenue Drainage Channel that runs along the western limit of the National property. The National property has been periodically flooded by the stormwater and sewage diverted from the City’s Kenilworth Avenue CSO, into the Channel, topping the eastern banks of the Channel along National’s western property line. In the case of AMD, it altered its land, the City’s land (without permission) and the Channel in a manner that, in combination with its failure to undertake routine maintenance, made the Channel non-functional.

[47] The Channel abuts the western limit of National’s property occupying a 66-foot municipal road allowance and begins at the terminus of the travelled portion of Kenilworth Avenue North. It is fed by a municipal storm sewer that runs underneath Kenilworth Avenue North and empties through a massive double box culvert into the open Channel at Location 1. The Channel runs north beyond the northern limit of National’s property where it runs under two roads constructed by AMD crossing the Channel (the “two AMD Crossing Haul Roads”), then enters AMD’s property before it veers west into a sediment basin constructed by AMD (the “Sediment Basin”) and drains from the Sediment Basin through twin culverts installed by AMD under another haul road into a boat slip (the “AMD Boat Slip”) in Hamilton Harbour.

[48] The property to the west and north of National’s property is controlled by AMD. AMD’s property extends north of National’s property to Hamilton Harbour. The HPA is the authority responsible for Hamilton Harbour.

[49] Before the water in the Channel can drain into the AMD Boat Slip and Hamilton Harbour, it must pass through four sets of culverts. As noted, Location 1 features a double box culvert located at the terminus of Kenilworth Avenue North where the Channel originates on the western boundary of the National property. The second (Location 2) is a single box culvert just north of the northwestern boundary of the National property. It was installed by AMD to support one of the two AMD Crossing Haul Roads crossing the Channel. The two AMD Crossing Haul Roads in the map below are obscured by the overlay of the graphic of the course of the Channel. The third (Location 3) is a precast culvert running underneath the second of the two AMD Crossing Haul Roads. These two AMD Crossing Haul Roads (and the culverts) were installed through a trespass on the City’s road allowance. The fourth (Location 4) is a twin outlet culvert between the AMD Boat Slip and the Sediment Basin on AMD’s property.

[50] Stormwater from the Kenilworth CSO runs through the storm sewer system and exits into the Channel through the City’s double box culvert at Location 1. The City’s double box culvert was installed in and around 1922, more than a decade after National commenced its operations.

[51] The following photo and diagram depict the double-box culverts at Location #1:

[52] From Location 1, the Channel runs north on a 66-foot municipal road allowance (the “Kenilworth Road Allowance”), along the western border of National’s property and the eastern border of AMD’s property.

[53] From the northwestern limit of the National property, the Channel continues north within the Kenilworth Road Allowance where two sets of culverts are under the two AMD Haul Roads, all of which were constructed by AMD, on the City owned Kenilworth Road Allowance. The two AMD Haul Roads were installed by AMD between 1961 and 1972. Location 2 contains the first set of culverts running underneath the two AMD Haul Roads and is depicted below:

[54] Location 2 is north of the northwest boundary of the National property.

[55] Location 3 contains the second set of culverts running under the second of the two AMD Haul Roads and is depicted below:

[56] In addition to the two sets of culverts, between Location 2 and Location 3 is an 84-inch corrugated steel pipe, installed by AMD in and around 1985 (the “Pipe”). There is no evidence that the City granted AMD permission to construct and install the culverts at Locations 2 and 3, the two AMD Haul Roads or the Pipe at Locations 2 and 3, despite being on the City’s Kenilworth Road Allowance.

[57] From the northern limit of Location 3, the Channel runs north approximately 1,480 feet, before it veers to the west into the Sediment Basin and Location 4. On the westside of the Sediment Basin is a set of pipes/culverts that run underneath another AMD road. The pipes are intended to drain the water in the Channel from the Sediment Basin into the AMD Boat Slip in Hamilton Harbour. The Sediment Basin is depicted in the photograph below:

[58] The culverts at Location 4 at the western limit of the Sediment Basin are submerged, plugged with debris and one is partially collapsed. They cannot achieve their intended purpose. The photograph below depicts the submerged culverts at Location 4. There are no photographs in the order of the actual culverts at Location 4. They have been submerged for years.

[59] National, the City, AMD and the HPA have all operated in and around the Kenilworth Avenue Drainage Channel for decades. To understand how the Channel came to be in a state of such disrepair requires a historical overview of the development of the Channel, and the surrounding lands beginning in the early 20th century.

The Pre-1994 Historical Foundation: The Establishment of National, the Installation of the Double Box Culvert, the Infilling of Ogg’s Inlet by AMD

[60] In 1912 National Steel Car began its operations on the south shore of Hamilton Harbour manufacturing steel rail cars. At that time, National had no neighbours. The southern border of its property was largely the same as it is today at the intersection of Burlington Street and Kenilworth Avenue North in the City of Hamilton. To the east was undeveloped and open land. The northern boundary of National’s property was 3,300 feet north of Burlington Street, just slightly north of its current configuration. To the north of its northern boundary was Hamilton Harbour and Lake Ontario. To the west of National’s property was Ogg’s Inlet and Lot 3 west of the inlet.

[61] National’s property was first surveyed by a Crown surveyor in October 1791. National’s property was Lot 2 on the Crown survey of the Township of Barton. In 1916, National obtained a water lot north of Lot 2 (“NSC 1916 Water Lot”) by quit claim instrument number 19817. The NSC 1916 Water Lot extended north to the headline for Hamilton Harbour established in 1914.

[62] At that time, the City had not yet installed its double box culvert at Location 1. Neither AMD, nor its predecessor corporations existed. National was alone on the shore of Hamilton Harbour and was free to carry on its operations without interference from flooding by stormwater and sewage. In 1922, the City installed its double box culvert at Location 1. It is a large double box culvert with a cross-sectional area of 7.5 m2. The culvert has remained unchanged for over 100 years. When installed it directed the City’s combined stormwater and sewage collected from the City’s 311 ha Kenilworth CSO into Ogg’s Inlet where it would drain unobstructed into Hamilton Harbour.

[63] In 1945, AMD’s predecessor, Dominion Foundries, obtained ownership of Lot 3 and the Gage Water Lot north of Lot 3 from Canadian Pyrites Ltd. by way of instrument number 100815 NS.

[64] In 1947, the Government of Ontario passed an Order-in-Council confirming that title to the lands in the bay in Hamilton Harbour in front of the City were vested in the City.

[65] On April 1, 1948, the City transferred all lands under the bay to Hamilton Harbour Commissioners (now the Hamilton Port Authority) by instrument number NS143483 and authorized by City Bylaw 6205 (the "Bay Lands Transfer"). The conveyance exempted the conveyance of the Kenilworth Road Allowance as previously subject to a Crown grant, meaning the Kenilworth Road Allowance remained vested in the City.

[66] By 1950, the lands to the east of National were filled in, but there was no obvious development to Lot 2, despite Dominion Foundries’ ownership.

[67] On December 21, 1950, AMD’s predecessor, Dominion Foundries and Steel Limited, expanded its properties by obtaining from the Hamilton Harbour Commissioners the water lot north of the Gage Water Lot, to the northwest of National’s current property, by instrument number NS 180603. The water lot north of the Gage Water Lot was entirely under water in 1950. The City’s discharge of stormwater and sewage from the Kenilworth CSO through the City’s double box culvert at Location 1 was free to flow without obstruction into Hamilton Harbour.

[68] On July 24, 1957, the General Manager of the Hamilton Harbour Commission, Mr.

Morgan, wrote to the City’s solicitor Mr. Polson, enclosing survey M-1106, which establishes that the Kenilworth Road Allowance terminates 4,480 feet north of Burlington Street. Mr. Morgan noted that the Hamilton Harbour Commission required any deed for a water lot to include a proviso that their office approve any sale of such lands.

[69] On July 25, 1957, the City responded to Mr. Morgan noting it would prepare a draft deed for the conveyance of a water lot in accordance with Mr. Morgan’s instructions.

[70] On October 7, 1957, the Hamilton Harbour Commission, with the City’s concurrence, conveyed the extension of the Kenilworth Road Allowance to AMD’s predecessor, Dominion Foundries, at a location where its southern limit is 4,480 feet north of Burlington Street and its northern limit is Hamilton Bay by instrument number HL 25475. This closed off the drainage of the Channel directly to Hamilton Harbour, requiring it to be diverted to what was then the AMD’s predecessor’s water lot.

[71] In 1962, Dominion Foundries purchased National as a wholly owned subsidiary. Dominion Foundries/AMD had complete control over Lots 2, 3 and the water lots to the north.

[72] In 1972, Dominion Foundries, now Dofasco, AMD’s most immediate predecessor, prepared a plan to infill the water lots north of Lot 3 and to redevelop Lot 3 into the industrial space it is today.The plan details the installation of the culverts at Location 4, and identifies the terminus of the Kenilworth Road Allowance at the southern end of a semi-circle shaped ‘turning basin’ (referred to as the “Curve” in the reports of the real estate experts).

[73] Aerial photography from April 1974 establishes by that time the City’s combined stormwater and sewage collected in the City’s Kenilworth Ave CSO and discharged through the City’s double box culvert at Location 1 into the City’s portion of the Channel was still not obstructed and could drain freely into Hamilton Harbour, although it was draining into AMD’s water lot. AMD had now developed the water lot north of Lot 3, but the Channel could still drain the entirety of the City’s stormwater and sewage. While the Channel in its current condition was beginning to take shape, the water in the Channel would enter the turning basin.

[74] On July 30, 1974, National conveyed the 1916 NSC Water Lot, and the northerly portion of Lot 2 to Dofasco by instrument number 346105. The conveyance of the northerly portion of Lot 2 from National to Dofasco explains why the current northern limit of National’s property is less than 3,300 feet north of Burlington Street, while Lot 3 to the west has a northern limit of 3,300 feet north of Burlington Street. From this conveyance in 1974 to today, the lands in and around the Kenilworth Avenue Drainage Channel have had the same corporate owners.

[75] Following the 1974 conveyance from National to Dofasco, Dofasco undertook the final infilling of its properties as originally outlined in the 1972 plan for infilling.

[76] Between 1974, when National conveyed the northern section of Lot 2 and the 1916 NSC Water Lot Dofasco, and July 1979, AMD completed its channelization of the Kenilworth Avenue Drainage Channel and created the Sediment Basin and installed the culverts at Location 4, in keeping with its 1972 plan for infilling Lot 3 and its water lots. For the first time, the capacity of the Channel to drain the City’s stormwater and sewage was no longer unlimited.

[77] In 1985, AMD installed an 84-inch corrugated steel pipe between Location 2 and 3, which assumed a maximum lake level of approximately 75.59 masl (“meters above sea level”).

[78] Up until approximately 1994, AMD had a routine of annually dredging the Channel. In April 1993, it advised its subsidiary, National, that it would no longer dredge the Channel. AMD elected to stop dredging the Channel due to the cost of disposal of potentially contaminated sediment.

[79] In 1994, AMD sold its interest in National by sale of shares. National was thereafter owned by its new shareholder, controlled by Mr. Gregory Aziz.

[80] No later than 2000, National began to experience flooding from the Kenilworth Avenue Drainage Channel and began its pursuit of the City and AMD to maintain their properties to prevent further flooding.

The City and AMD Ignore National’s Consistent Efforts to Address the Flooding

[81] Around 1995, approximately 1 year after the sale of National to its current owner, National’s President and CEO, Mr. Aziz, spoke with CEO of AMD, Mr. Mayberry, who advised that AMD would stop dredging the Channel owing to the expense of disposing of the Channel.

[82] In 1998, National retained King Paving and Construction (“King Paving”) to install a flood berm on the western boundary of its property to protect against flooding from the Channel.

[83] In 2000, National began its campaign to have AMD and the City address the disrepair of their properties and the Channel, which was causing flooding and damage to the National property.

[84] In January 2000, National’s then lawyer, Mr. Shaker, wrote to AMD and requested AMD to maintain the Channel as it did historically, and advised AMD that it was required to do so further to the House of Lords’ decision in Sedleigh-Denfield v O’Callaghan, [1940] AC 880.

[85] By February 24, 2000 the City was aware of the flooding to National’s property caused by the lack of maintenance to the Channel following a phone call to City employee Mr. David Powers from National’s lawyer Mr. Shaker. On February 24, 2000, Mr. Powers sent an email to City staff inquiring about the status of the Channel.

[86] The City denied responsibility to maintain the watercourse to drain its stormwater and sewage on its property. On its examination for discovery, the City, through its representative Mr. Ehrenberg, admitted that the City’s position that maintenance was the responsibility of the adjacent land owner was not logical. Mr. Ehrenberg testified that he was unaware of any circumstances in which the City required an adjacent landowner to maintain the City’s property.

[87] On July 20, 2000, Mr. Shaker wrote to the City’s solicitor, Ms. Debbie Edwards, and indicated that City employee Mr. Kin Lau indicated that the City assumed ownership of the Kenilworth Road Allowance, its extension north and the Channel therein.

[88] In a letter of July 27, 2000, Ms. Edwards responded that the City did not assume ownership of the Channel. While Ms. Edwards does not provide any basis for her analysis, the record establishes that the City had, in its possession, surveys that establish the City’s ownership of the Kenilworth Road Allowance (and therefore the Channel within) 3,300 feet north of Burlington Street.

[89] In a letter of August 11, 2000, Ms. Edwards’s colleague, Assistant Corporate Counsel to the City, Mr. Peter Barkwell, continued the City’s denial of any responsibility over the Channel and denied the City’s ownership of the Channel.

[90] By October 17, 2000, there is no doubt the City was aware that it was the owner of, at least, the first 3,300 feet of the Kenilworth Road Allowance and the portion of the Channel therein north of Burlington Street. On October 17, 2000 the City’s Manager of the Survey and Mapping Department, Mr. Gord McGuire, provided a memorandum on the ownership of the Channel to Ms. Edwards (the “McGuire Memo”). The memorandum follows the historical conveyances of the subject properties in a similar way to both expert real estate opinions generated in this action, including a reference to the 1791 Crown survey of Barton Township, which definitively establishes that the Kenilworth Road Allowance is no less than 3,300 feet north of Burlington Street.

[91] The McGuire Memo concludes that the City has “no interests in that [sic] lands north of the Kenilworth” [Road Allowance]. As noted below, the expert evidence, undisputed surveys, and land titles establish that the Kenilworth Road allowance ends 4,400 feet north of Burlington.

[92] Nonetheless, regardless of the determination as to where the Kenilworth Road Allowance ends and its extension begins, it is clear that the City knew and understood that it owned the Channel no less than 3,300 feet north of Burlington Street and, therefore, owned the Channel to the north of Locations 2 and 3.

[93] Despite the City’s knowledge of its ownership, it continued to deny responsibility for the maintenance of its own property and continued to deny ownership of the property. It did so to avoid the expense of maintaining the natural water course on its property to drain its stormwater and sewage, which would include the cost of disposing of the dredged material. Discussions during the October 24, 2000 meeting between the parties and the Mayor are confirmed in a letter from Mr. Shaker to the Mayor dated January 4, 2001. Mr. Shaker confirmed, among other things, that the City took the position that “it had no obligation to dredge the ditch” (despite its internal documentation establishing it owned the entire portion of the Channel abutting National’s property), and that the City agreed to undertake an analysis of the sediment in the Channel.

[94] On October 25, 2000, the very next day following the meeting with the Mayor where the City indicated it would undertake the sampling of the sediment in the Channel, City employee Mr. Gohier sent an internal City email about the sampling of the material and recommended against it.

[95] No one from the City ever shared its decision not to sample the sediment in the Channel with National. Contrary to Mr. Gohier’s email, there is no evidence that National has ever “handled” the dredged material or had it tested.

[96] Under cross-examination concerning Mr. Gohier’s October 25, 2000 email, the City’s representative Mr. Ehrenberg admitted:

• the City likely had the capacity to test the sediment;

• the City never undertook the testing of the sediment or any dredging;

• the email establishes that the City (1) knew AMD would not dredge or maintain the Channel, (2) that the City would not dredge or maintain the Channel; and (3) that the City “knew the functionality of the channel was at risk going forward without Dofasco [AMD] or the City maintaining the channel, given the decision of both entities, not to dredge”; and

• that the City understood that its decision not to test the sediment, remove the sediment or maintain the Channel would create a risk of flooding to National in the spring of 2001.

[97] The next reference to the testing of sediment in the Channel is found in a May 7, 2001 email amongst City staff, including its counsel Ms. Edwards. Ms. Edwards received an email from City employee Ms. Maureen Wilson who indicated that the Ministry of Environment was seeking to test the Channel. Ms. Edwards responded on May 8, 2001 by claiming that the City cannot give the Ministry of Environment permission to test the sediment in the Channel because it “is not on City lands”, although the City was “very interested in the results”.

[98] In a responding email of May 21, 2001, City staffer Ms. Jeff McIntyre indicated that Environment Canada’s involvement raises the potential of causing the matter to “move more quickly than we would like”, that the issue has “many tentacles” and asks: “Where do we stand on defining property of the channel and the sediments.”

[99] National continued to follow up with the City and AMD in an attempt to incite action and the maintenance of the Channel. No action was taken as a result of the October 2000 meeting with the City’s Mayor.

[100] City engineers noted the following:

• Assuming 700m of dredging at a depth 0.5 m, the limits that “match the traditional limits of Dofasco’s dredging” attracts a cost of $600,000 assuming the “excavated material is considered registerable, hazardous”;

• The City is prepared to “take samples of the channel to analyse for depth and composition, however, [it] needs permission to enter upon Dofasco’s lands and [it] thinks both [AMD and National] should share the cost of the investigation”.

[101] The City’s analysis on the cost of the dredging was never shared with National. There is no explanation or rationale provided as to why National would share in the cost of the investigation of the City’s property.

[102] National’s property flooded on July 26, 2005 and August 19, 2005. On August 30, 2005, National’s lawyer wrote to the City’s Mayor to complain about the lack of maintenance by the City and notes that the City “has for the last four years been made aware of the potential of more serious flooding of National Steel Car lands and were specifically advised further flooding was likely causing damage and probable plant shutdowns”.

[103] On September 13, 2005, the City’s lawyer responded to Mr. Shaker. Again, contrary to the opinion in the October 2000 McGuire Memo, the City’s lawyer, Mr. Barkwell, denied the City’s ownership of the Channel.

[104] Once again the City undertook no maintenance to the Channel within the 3,300 feet north of Burlington Street, despite the clear evidence that National was beginning to suffer more and increasingly severe floods.

[105] In 2006, the City introduced By-Law 06-026, which prohibited the obstruction of a watercourse and gave the City the authority to compel the removal of any obstruction. No action was taken by either the City to maintain the watercourse on its property or to require AMD to remove the obstructions it created in the watercourse on the City’s property (Locations 2 and 3) or on AMD’s property (the Sediment Basin and the pipes out letting into the Harbour at Location 4). By the end of the summer of 2008, National flooded three times.

[106] National suffered no less than 24 floods from the date of the McGuire Memo establishing the City’s ownership of the portion of the Channel abutting National’s property to the delivery of the Plaintiff’s trial submissions in the present matter. Many of the floods had a significant impact on the operations of National.

[107] The City did not undertake any maintenance of the watercourse on its property during that 23-year period. It has made no effort to remove the obstructions to the drainage of the watercourse on its or AMD’s property. It has not only failed to enforce its municipal by-law which prohibits the obstructing of a watercourse, it opposed National’s effort to have AMD clear the obstructions of the watercourse on both the City and AMD properties when it opposed National’s motion for interlocutory injunctive relief.

[108] Both the City and AMD have consistently refused to maintain the watercourse on their properties. They did so knowing it would cause National continual damage. They avoided their obligations to maintain their properties to avoid the expense of disposing of the contaminated material in the Channel.

Efforts to Mitigate the Severity of the Flooding

[109] National has tried to ameliorate the harm from the ongoing flooding from the Channel. In 1998, it installed an earthen berm along the western border of the National property to repel the flood waters. In 2001, it installed a step curb to support the berm and to provide further flood protection.In 2008, it reinstalled that curb and increased its height to between 2 and 3 feet depending on the ground elevation.

[110] In 2014, National installed a flood abatement pumping system. Prior to that time, National had used a gravity drain system which collected all the stormwater on the National property and drained it into the Channel. In 2014, the hydraulic connections between the Channel and the National property were closed.Two large cisterns were installed at the western edge of the National storm sewer system with pumps that actively pump the stormwater over the banks of the Channel when the water hits a certain height.

[111] The pumping system has been effective in reducing the severity of floods on the National property. While Mr. Scheckenberger raised the concern about the design of the heights of the pipes outletting from the flood abatement system into the Channel, his report did not reference the installation of backflow prevention valves that prevent the backup of water into the pumping system.

[112] In 2015 National hired Mr. George Thomas who recommended National reach out to Hamilton Conservation Authority (“HCA”) to obtain approvals for remedial work. In an email dated January 4, 2016 copied to the City, the HCA advised that the City had to be involved as owner of the Channel. The City refused to be involved and never responded and this route to a resolution was frustrated.

[113] National’s frustration reached a point where it instructed counsel to threaten the Defendants that it would proceed with building a flood wall, but this threat was met with continued inaction. National received legal advice that without HCA approval and given the prospect of a lawsuit due to potential harm to AMD, National could not proceed with the wall absent approvals.

[114] The final mitigation effort National seeks to implement to prevent further flooding to the Channel is a flood prevention wall, as designed by King Paving, for which an award of damages is sought in this proceeding. This is reviewed further below concerning options for remediating the Channel.

The Expert Evidence on the Cause of the Flooding

[115] There is considerable agreement on the cause of the flooding to National’s property amongst the expert engineers. They agree:

I. A cause of the flooding is the discharge of combined sewer outflow collected by the City in its Kenilworth CSO and discharged into the Channel though the City’s double box culvert at Location 1. Lake levels are not a cause of the flooding. There is no flooding without the City’s diversion of its combined stormwater and sewage from the Kenilworth CSO. Lake levels may only reduce the storage capacity of the Channel. Lake water has never flooded National’s property as the lowest point on the National property of 76.65 masl is higher than the highest ever lake level ever recorded in 51 years of data of 75.8 masl. The mean lake level over that period is 74.66 masl.

II. A cause of the flooding are the obstructions at Location 2 and 3, being the partially clogged culverts, the partially clogged Pipe, the H-beams, rail crossing at Location 2, reduced Channel width, built up vegetation and sediment, and the near complete obstruction of the culverts at Location 4. These obstructions reduce the hydraulic capacity of the Channel allowing for water to top the banks of the Channel at the lowest point – National’s property;

III. The significant cause of the obstructions in the culverts and the Pipe at Locations 2, 3 and 4 is the deposition of sediment largely from the City’s Kenilworth CSO;

IV. A cause of the flooding is the channelization of the Channel by AMD’s infilling activities; and

V. A cause of the flooding to National’s property is the build-up of the elevation of the AMD lands ringing the Channel, which act as a natural flood protection barrier for the AMD lands and directs the flood waters onto National’s property.

[116] Finally with respect to remediation and prevention of flooding, the experts largely agree:

a. The Channel needs ongoing proactive preventative maintenance in keeping with the maintenance protocols required by the accepted standard of practice for stormwater management for both municipalities and private landowners, which includes, at a minimum, the cleaning out of obstructions in the Channel and the culvert;

b. The Channel needs to be dredged (although one expert, Mr. Scheckenberger, disagrees); and

c. That National needs some form of flood protection barrier. The expert for National has proposed a concrete wall of 1.5 to above 2 metres in height. The experts for the City have proposed a wall of 1.5 metres in height. The evidence of King Paving’s, Mr. Vic Kooistra and Mr. John Hutter, establish that the cost to build a wall between 1.5 m and 2 m is effectively the same.

[117] Below is a summary of the evidence at trial on each of the various causes of the flooding.

Cause I. The City’s Stormwater Collected and Diverted from the City’s Kenilworth

CSO Directed into the City’s Double Box Culvert at Location 1 Causes the Flooding

[118] Without the 11.7 million liters per hour of stormwater and sewage discharged from the City’s double box culvert and collected from the City’s Kenilworth CSO during storms, the Channel does not flood. This is first and definitively established with reference to the lowest spill point on the National property of 76.65 masl and the highest ever recorded lake level of 75.8 masl. Since the lake levels have never exceeded the lowest spill point on National’s property, it follows why all experts agree that the lake levels have never flooded the National property.

[119] All of the experts for the Defendants agreed with the proposition that the National property has not and cannot flood due to lake levels. The essential cause of the flooding to National’s property is the City’s diversion of water collected from its Kenilworth CSO and discharged through the City’s double-box culvert at Location 1 into a Channel that lacks capacity to drain into the Harbour due to the lack of maintenance by the City and AMD.

[120] Mr. Scheckenberger described the functioning (or non-functioning) of the Channel as akin to a bathtub. Adopting this analogy, the lake levels in Hamilton Harbour represent water in the tub when the tap is off. If the water in the bathtub cannot rise in elevation above the elevation of the top of the bathtub, then the bathtub will not overflow. To flood the bathtub in this scenario requires the introduction of water from the tap.

[121] Similarly, if the lake levels in Hamilton Harbour fill the Channel to the same elevation, but have never in history exceeded the lowest spill point on the National property, which represents the top of the bathtub in the analogy, then the lake levels cannot flood National’s property. The flooding to the National property requires, as a precipitating cause, the redirection of the City’s combined stormwater and sewage before the Channel through the City’s double box culvert at Location 1, i.e. ‘the tap is opened’ to fill the Channel to the point of flooding.

[122] In his report, Mr. Thomas noted the stormwater from the City was the main contributor to the flooding. His evidence was not effectively challenged on cross-examination. He opined:

The main contributor of stormwater, and the corresponding sediments within the discharge channel is attributed to the City of Hamilton stormwater system which outlets to the drainage channel at the Double-Box Culvert (Location No. 1).

[123] The simple analysis that one needs to ‘open the tap’ or the “basic statement” that without a pipe there is no flow to make the Channel flood is consistent with (1) the flooding of the Channel “when lake level’s been low”;(2) that there was no flooding when the lake level was at its highest ever recorded; (3) that the elevation of National’s property exceeds the highest lake level ever recorded in history; and (4) there is no evidence of flooding when water is not discharged from Location 1.

[124] Without the redirection of 11.7 million liters per hour of combined stormwater and sewage by the City through the City’s double box culvert at Location 1 and collected from the City’s Kenilworth CSO, the National property does not flood. The City has known for years that when it ‘opens the tap’ to shed stormwater and sewage from the Kenilworth CSO, as it consistently has over an extended period of time, that the stormwater and sewage will top the banks of the Channel and flood National’s property.

Cause II. The Obstructions in the Channel Cause the Flooding

[125] An equally obvious conclusion shared by all of the experts is that the obstructions in the Channel cause the flooding. The Channel is severely obstructed. There are multiple choke points all of which result in the reduced hydraulic performance of the Channel, such that it cannot perform as intended to drain the stormwater and sewage into Hamilton Harbour and consequently floods National’s property.

[126] Mr. Enter notes in his report what every expert agreed with, writing “it is our preliminary observation that the significant cause of the flooding is the blockage of the twin outlet culverts under the ArcelorMittal Dofasco haul road”.

[127] Mr. Scheckenberger, Mr. Senior and Mr. Walker under cross-examination all agreed with the opinions of Messrs. Enter and Thomas that Location 4 was causing the flooding to National.

[128] Mr. Thomas notes in his reports:

a. There was up to 1.5 m of sediment at Location 2 when inspected on October 21, 2021;

b. There was up to 0.4 m of sediment at Location 3 when inspected on October 21, 2021;

c. The culverts at Location 4 were completely submerged when inspected on October 21, 2021. They were estimated to be 95% blocked;

d. The significant cause of the flooding can be attributed to the blockage due to the presence of sediment of the twin outlet culverts (Location No. 4) which lead to the Hamilton Harbour Discharge Area;

e. Based on the field measurements collected on October 21, 2021, the presence of sediment build-up is also evident at all three upstream culverts (Locations No. 1, 2 and 3). This buildup causes restriction in stormwater flow which in turn is a contributing factor in the flooding of the NSC property; and

f. Based on a review of survey information, that the Channel is “blocked and water is not free-flowing, even when Lake Ontario water levels are below average”.

[129] Adopting the bathtub analogy again, the obstructions in the Channel, particularly the obstruction at Location 4 where the culverts were noted to be between 90% and 95% blocked, acts like a plug in a bathtub preventing the flow of water directed by the City through its double-box culvert at Location 1 from discharging into Hamilton Harbour. There is no chance for the City’s stormwater and sewage collected from the City’s Kenilworth CSO and discharged into the Channel through the City’s double-box culvert at Location 1 to drain into the Harbour when the Channel is ‘plugged’ as it is at Location 4 and aggravated by the obstructions at Locations 2, 3 and the Pipe in between.

[130] The discharge by the City of its stormwater and sewage is a necessary cause of the flooding to National’s property, but so is the obstruction of the Channel.

Cause III. The Sediment Load in the Channel is the Cause of the Obstructions at Locations 2, 3, 4 and the Pipe and Originates from the City’s Kenilworth CSO and Causes Flooding

[131] The sedimentation that fills the Channel and the Sediment Basin, clogging the culverts and the Pipe at Locations 2, 3 and 4 predominantly originates from the City’s Kenilworth CSO.

[132] Only Mr. Enter and Mr. Thomas address this in their expert reports. Their evidence was not successfully challenged or contradicted.

[133] Mr. Enter opines:

It is probable that sediment from the City of Hamilton upstream stormwater drainage area and natural, ongoing erosion within the channel has been deposited within the basin upstream of the twin culverts, plugging them and has caused severe flow restriction to the outlet.

[134] Mr. Thomas reaches the same conclusion, writing:

The main contributor of stormwater, and the corresponding sediments within the discharge channel is attributed to the City of Hamilton stormwater system which outlets to the drainage channel.

[135] It stands to reason that the City would be the source of the vast majority of the sediment restricting the flow of the Channel given the Kenilworth CSO is 311 ha, far larger than the National property or the portion of the AMD lands that abut the Channel.

[136] Mr. Walker agreed on cross-examination with the opinions of Mr. Enter and Mr. Thomas on the source of the sediment.

[137] The assertion of counsel for the City in its opening statement that the no “action or inaction of the City can be reasonably attributed as a cause of the flooding” is contrary to the preponderance of expert evidence. The City has been discharging huge volumes of sediment mixed in with its combined stormwater and sewage collected from its Kenilworth CSO and discharged into the Channel through the City’s double-box culvert. The City does so knowing that its sediment was likely contaminated and hazardous, that its portion of the Channel had not been maintained and that the Channel was not functioning such that the water discharged from Location 1 would not flow into Hamilton Harbour, but rather would flood National’s property. The deposition of sediment from the City’s Kenilworth CSO would not be a cause of the flooding to National’s property, if the City and AMD had met the accepted standard of practice for the maintenance of the Channel, or the City had enforced its by-law to require AMD to remove obstructions to the drainage of its stormwater at Locations 2, 3 and 4 and the Pipe.

Cause IV. The Channelization of Ogg’s Inlet and Installation of the Culverts is a Cause of the Flooding

[138] The channelization of the Channel is a cause of the flooding. If the Channel’s footprint had not been reduced from what it was at Ogg’s Inlet as it existed in 1934, or even as late as before the infilling undertaken by AMD between 1974 and 1979, then the stormwater and sewage discharged from the City’s double-box culvert would flow freely into the Harbour as it once did into Ogg’s Inlet when Location 1 was installed.

[139] The only evidence is that AMD infilled the Channel into its current state. There is no evidence that National infilled its lands in a manner that restricted the flow of water from the City’s double box culvert into Hamilton Harbour.

[140] The evidence establishes that the infilling that caused the channelization of the Channel resulting in the flooding of National’s property is the infilling undertaken by AMD.

Cause V. AMD’s Increase to the Elevation of Its Lands is a Cause of the Flooding

[141] AMD’s increase of the elevation of its lands through the construction of berms, haul roads or otherwise is a cause of the flooding by directing the City’s combined stormwater and sewage discharging from its double box culvert at Location 1 onto National’s property.

[142] Adopting the analogy of the bathtub, AMD has raised the rim of the “bathtub”/Channel on its lands. As a result, when the City turns on the ‘tap’ at Location 1 by directing the City’s stormwater and sewage collected in the City’s Kenilworth CSO into the Channel, the water tops the rim of the “bathtub”/Channel onto National’s property because it is the lowest point of the rim due to AMD’s increase in the elevation of its lands rimming the Channel and the Sediment Basin. Lot 2 and 3 were at the same elevation before infilling. It is clear the water lots were filled into a similar elevation as the existing Lots 2 and 3, given that AMD created berms rimming the Channel and Sediment Basin on the west, north and east side of the Channel north of Lots 2 and 3, and the east side of Lot 3 opposite National. Mr. Aziz gave evidence that in 1994 when he acquired National, AMD and National’s properties were at the same or similar elevation. AMD has created the point of relief on National’s property by its infilling of lands, the installation of haul roads, berms and raising the elevation of its property. The evidence from the City’s Chief Planner, Mr. Robichaud, establishes that AMD did so without any by-law approval and without notice to the City. Mr. Robichaud confirmed that as of 1979 AMD was subject to site plan approval.While the majority of the infilling of the water lots by AMD was not subject to site plan approval, the installation of the berms along the banks of the Channel were subject to site plan approval, which was not sought by AMD nor granted by the City. Nor did AMD seek and obtain the required approval from the Hamilton Conservation Authority.

The Accepted Standard of Practice for the Maintenance of the Channel

[143] The evidence is undisputed that the City and AMD failed to meet the accepted standard of practice for the maintenance of the Channel, and but for the failure to meet this standard, National would not suffer the majority of the floods that have occurred and otherwise the severity of the flooding would have been significantly reduced such that it is likely no damage would occur.

[144] Messrs. Thomas, Scheckenberger and Walker addressed the accepted standard of practice for the maintenance of the Channel. Mr. Scheckenberger’s evidence concerned the municipal standard, while Mr. Thomas and Mr. Walker opined on the standards for a municipality and a private landowner. In either case, the standard is the same and the evidence on point consistent.

[145] Mr. Thomas opined that both the City and AMD failed to meet the accepted standard of practice for the maintenance of the Channel, largely for the same reasons.

[146] Mr. Walker agreed with Mr. Thomas that the City failed to meet the accepted standard of practice for maintenance of the Channel.

[147] In a responding report, Mr. Scheckenberger also agrees with Mr. Thomas’ opinion on the accepted standard of practice.

[148] The Operations and Maintenance protocols from 2009 (the “2009 OM”) and the draft from 2022 (the “draft 2022 OM”), referred to by Mr. Scheckenberger identify the following maintenance practices for municipal stormwater assets, none of which was undertaken on the Channel:

• removal of debris jams;

• removal of fallen trees;

• identify significant slope destabilization;

• identify blockage of City channel;

• identify significant overgrowth impeding conveyance of the drain

• hydraulic structure deficiencies, including collapsed culverts;

• clean out and identify significant sedimentation;

• identify obstructions to flow, including structures;

• repair infrastructure; and

• culvert replacement.

[149] Mr. Thomas notes that these maintenance practices summarized above are consistent with what has been standard practice for a municipality since the 1970s and 1980s.

[150] These maintenance practices are also consistent with municipal by-law 06-026, which can inform the accepted standard of practice. The by-law provides:

13. (1) No person shall obstruct, allow the obstruction of or maintain any obstruction in any open or closed drainage facility or natural watercourse. (2) The City may by a notice in writing, require the Owner of the lands or any other person, obstructing or allowing the obstruction of or maintaining the obstruction of any drainage facility or natural watercourse, to do within a specified time all such work as the City determines is necessary to remove the obstruction as specified in the said notice.

[151] The City has taken no steps to enforce its by-law, nor has it attempted to clear the obstructions in the watercourse on its own property.

[152] No witness has any explanation for the City’s refusal to maintain the Channel. The evidence is clear that no maintenance north of Location 1 has been conducted by the City, even after its admission that it owns no less than the Channel from Location 1 to a point 3,300 feet north of Burlington Street, nor since the McGuire Memo informing the City of its ownership of the portion of the Channel from Location 1 to a point 3,300 feet north of Burlington Street. The City has clearly failed to meet the accepted standard of practice for the maintenance of its portion of the Channel, which has resulted in the deplorable condition of the Channel, causing the flooding to the National property.

[153] The same analysis on the identified breaches of the accepted standard of practice applies to AMD.

[154] There can be no doubt that the failure to undertake routine, usual, proactive, preventative maintenance of the Channel as required by the accepted standard of practice for both municipal and private land owners for decades has resulted in the Channel being in a state of complete disrepair, thereby reducing the hydraulic capacity of the Channel and causing it to flood when the enormous amount of combined stormwater and sewage is redirected by the City from its Kenilworth CSO through the City’s double box culvert at Location 1 and ultimately escapes onto National’s lands.

The Expert Evidence on Rehabilitating the Channel and to Prevent Flooding of National’s Property

[155] As noted above, the experts agree on the causes of the flooding to National’s property from the Channel. The experts also agree on the accepted standard of practice for the maintenance of the Channel. There is substantial, but not universal, agreement on what needs to be done to prevent further flooding to the National property:

a. all experts agree that the obstructions in the Channel must be removed;

b. all experts, but Mr. Scheckenberger, agree that the Channel should be dredged; and

c. all experts agree that National requires a flood prevention barrier, such as a wall that is at least 1.5 m in height.

[156] It took until February 2023 for the City’s engineering expert Mr. Scheckenberger, originally retained in 2017, to suggest a class environmental review was necessary, or that an ecologist was needed. It was not until National brought its motion for injunctive relief in October 2022 that the City claimed it needed to consult First Nations’ communities on the maintenance of the Channel. Yet, the City has not produced any evidence that there is a (1) a desire on behalf of the First Nations to consult on the issue, or (2) an obligation on the City to consult with those communities, especially in the circumstances of ‘proactive’, ‘preventative’ maintenance consistent with the City’s OM protocol.

[157] There is little doubt that AMD and the City have refused to undertake the required maintenance of their property because of the expense of doing so. It is a widely understood principle that ignoring maintenance responsibilities will, usually, only increase the costs of maintenance going forward.

The Modelling of the Channel Establishes the Need to Clean the Channel of Obstructions, Dredging the Channel to its Refusal Limit and Build a Flood Protection Barrier

[158] Experts for the City and AMD prepared modelling of the Channel, which establishes the need to remove the obstructions from the Channel, dredge the Channel to its hard bottom or refusal limit, and construct a flood prevention barrier, such as a flood wall, of 1.5 m in height at a minimum. The experts agree that the 3D modelling prepared by the City’s experts is superior to the 2D modelling prepared by AMD’s experts. Regardless, the conclusions of the modelling are consistent.

[159] The 3D modeling by the City’s expert, WSP, concludes that there would be no flooding to the National property from a 1 in 2-year storm if the Channel is maintained and dredged to its “hard bottom” or “refusal limit” as determined by a topographical survey. Furthermore, the 3D modelling establishes that if the Channel is maintained, dredged to its “refusal limit” and the culverts are appropriately sized and graded, the flooding from a 1 in 5-year storm event would be minor.

[160] The modelling also establishes that National requires a flood protection barrier of 1.5 m in height, such as the King Paving flood wall design, so as to ensure National does not flood in a 1, 2, 5, 10, or 25-year storm. In other words, if National has a flood wall of 1.5 m in height, the City can continue to collect and divert 11.7 million L of stormwater and sewage per hour from its Kenilworth CSO into its double box culvert at Location 1 and the ongoing nuisance and damage to National’s property is avoided.

[161] Finally, the modelling establishes and all experts agree that a flood protection barrier is required. The experts for AMD and the City did not evaluate what type of barrier is required, although WSP’s modelling found that a flood barrier of at least 1.5 m is required. National’s expert, Mr. Thomas, opined on the various options for the height of a flood barrier and that a flood wall is the only feasible option given the space limitations along the western boundary of the National property. The WSP model establishes that if a flood wall, such as the design by King Paving, is installed on National’s property, the property will no longer flood.

The Expert Evidence on the Ownership of the Drainage Channel

[162] Given the City’s admission that it owns no less than the portion of the Channel within 3,300 feet north of Burlington Street, which includes Locations 1, 2 and 3, and AMD’s admission it is in control of the Sediment Basin and Location 4, the expert debate as to whether the City’s property in fact extends 4,480 feet north of Burlington Street to the ‘Curve’, which took up much time at trial, is largely irrelevant to establishing liability against either Defendant.

[163] The facts concerning ownership as established by the evidence include:

i. Land Titles establishes that the City owns the Kenilworth Road Allowance which terminates 4,480 feet north of Burlington Street and this would have been clear since October 2010 from a search of Land Titles;

ii. The City did not apply under Land Titles to contest it being the registered owner of the 4,480 foot Kenilworth Road Allowance;

iii. The City does not charge the HPA property tax for the portion of the Channel it allegedly owns. In fact, MPAC mapping establishes that the City treats the entire 4,480-foot road allowance as municipal property; and,

iv. Surveys in the City’s possession and relied upon by their own expert establish that the City’s Kenilworth Road Allowance extends 4,480 feet north of Burlington Street and the witnesses agree that a surveyor is under a legal obligation to be accurate as to where a road allowance begins and ends.

National Sustained Damages Caused by the Flooding

[164] The evidence that National suffered damages due to the flooding is clear. Mr. Vince De Luca, National’s Chief Financial Officer, provided the majority of the evidence with respect to National’s claim for damages.

[165] The evidence at trial revealed that National’s claim for damages should be reduced by $2,203.91 to reflect the cost of the installation of a light standard not related to the flooding. As a result, National’s claim for damages is reasonably established in the sum of $5,287,325.58 as follows:

• $1,256,750.05 for flooding damage, being the original claim of $1,258,953.96, less $2,203.91 for the light standard;

• $1,657,541.05 for flood abatement measures including the flood abatement pumping system and necessary abatement measures to the Flintkote building;

• $26,139.12 for past electricity costs for the flood abatement pumping system (an average cost of $3,267.39 per year for approximately 8 years from 2014);

• $2,300,845 for the flood wall construction and design; and

• $46,050.36 for the future cost of the electricity to operate the flood abatement pumping system for 25 years at a 5% discount rate.

[166] The sum of $2,940,430.22 is claimed for special damages being the past costs sustained due to flooding and for damages sustained to effect flood abatement measures, while the sum of $2,300,845 is the quoted price to construct the flood wall necessary to protect National from further damage. King Paving has undertaken to construct the flood wall for its quoted price if construction begins by the end of 2023 (despite the quote being outdated).

[167] The claim for past pecuniary damages in the sum of $2,940,430.22 is comprised of $1,094,470.81 for material, labour and clean-up costs arising from specific flood events, $1,657,541.05 for materials and labour to implement flood abatement systems, including the flood abatement pumping system, $26,139.12 for past electricity costs, and $162,279.24 for the cost of salary laboured employees assisting with flood clean-up efforts. Included in that calculation is $114,164.65 for the value of hourly employee benefits.

[168] Of the claim for past pecuniary damages in the sum of $2,940,430.22, the sum of $2,304,643.33 is claimed for third party costs, supported by associated third party invoices, all admitted into evidence for the proof of the truth as business records. The invoices concern repairs to property, equipment or inventory, or preventative measures to reduce the damage caused by flooding. They are calculated based upon shop orders created to track flood costs.

[169] The claim in the sum of $332,204.88 for hourly employees is supported by internal accounting documentation from National. Each employee that worked on flood clean-up was tasked with tracking their time. The supporting accounting documentation for hours charged was admitted into evidence. The rates charged by those employees is set by the collective bargaining agreement.The claim in the sum of $114,164.65 for the value of hourly employee benefits is based upon a calculation that their total benefits equal 47% of their hourly rates.

[170] Finally, the claim in the sum of $162,279.24 for the value of salaried employee time is based upon time recordings from these employees and their salaries. This calculation is a business record.

[171] The Defendants argue that the claim for the value of hourly employee benefits and salaried employees is not compensable. This is not sound in law since the Defendants are obliged to compensate for the foreseeable and reasonable costs to mitigate and clean up the National property.

[172] The Defendants are liable for reasonable market rates for the value of the clean-up work and there was no cross-examination or evidence to suggest these internal cost of clean-up were in excess of market rates (if third parties were hired). For instance, the value of benefits per hour was similar to the upwards of 40% King Paving charged as a “labour burden” to its customers for the costs of benefits paid to King Paving labourers in addition to the hourly rate King Paving charged its customers for its labourers. Hiring third parties was not the preferred option as much of the clean-up work required a working knowledge of the plant and plant operations. In addition, third parties, like King Paving, will necessarily charge more than a mere labour rate to achieve a profit. King Paving charged a market rate of 35% for overhead and profit. Using National’s employees meant that the clean-up could proceed without delay as staff were on site, or by protocol immediately available.

[173] In the circumstances of the evidence establishing that National loses the “value-add” of these employees’ work when they are tasked with cleaning up the flooding, and no evidence adduced by the Defendants that National’s claims are in excess of market, National should be awarded these amounts claimed for damages for the time its employees undertook cleanup activities.

VI. LAW AND ANALYSIS

[174] The following legal issues are raised by this action:

A. Are the City and AMD liable for nuisance owing to their substantial and unreasonable interference with National’s use and enjoyment of its property;

B. The City and AMD’s liability for negligence owing to their breach of the accepted standard of practice;

C. The City and AMD’s strict liability under the rule in Rylands v Fletcher as their non-natural use of their properties allowed the escape of stormwater and sewage onto the National property;

D. The need for a permanent and mandatory injunction prohibiting the City and AMD from causing further damage to the National property by undertaking remedial work as soon as practicably possible; and

E. The City and AMD’s liability for punitive damages.

The City and AMD are Liable in Private Nuisance

[175] The City and AMD are liable for National’s past and future damages for nuisance. The tort of private nuisance consists of an interference with the plaintiff’s use or enjoyment of land that is both: a) substantial and b) unreasonable. In Antrim Truck Centre v. Ontario, 2013 SCC 13, the leading case on private nuisance, the Supreme Court of Canada explained the two-part test as follows at para. 19:

The elements of a claim in private nuisance have often been expressed in terms of a two- part test of this nature: to support a claim in private nuisance the interference with the owner’s use or enjoyment of land must be both substantial and unreasonable. A substantial interference with property is one that is non-trivial. Where this threshold is met, the inquiry proceeds to the reasonableness analysis, which is concerned with whether the non-trivial interference was also unreasonable in all of the circumstances.

[176] In addition to a substantial and unreasonable interference, the plaintiff must also prove a causal link between the nuisance and the damage.

[177] The evidence establishes all three elements. The flooding to National’s property is clearly both a substantial and unreasonable interference with National’s use and enjoyment of its property. When flooding occurs, manufacturing operations cease, inventory is damaged, and equipment is soaked. Most of its employees are sent home without pay. Enormous volumes of water cascade over the banks of the Channel filling the National property with flood waters higher than an ankle. The remaining hourly working employees are tasked with cleaning up the stormwater and sewage discharged through the City’s double box culvert at Location 1 collected and diverted from the City’s Kenilworth CSO.

[178] A substantial interference with land is one that is non-trivial and amounts to more than a slight annoyance or trifling interference.

[179] Interference with land that substantially alters the nature of the plaintiff’s property or interferes to a significant extent with the actual use being made of the property are certainly sufficient to meet this test. As discussed below, courts have in numerous cases found flooding and property damage to constitute substantial interferences.

[180] The second step in the nuisance analysis is determining whether the interference is unreasonable. This requires the court to balance the gravity of the harm experienced by the plaintiff against the utility of the defendant’s conduct in all of the circumstances. The courts will consider various factors, including the severity and duration of the interference, the character of the area, the utility of the defendant's conduct, and the sensitivity of the plaintiff: Antrim, at para. 40. The distinction ultimately is between “interferences that constitute the ‘give and take’ expected of everyone and … interferences that impose a disproportionate burden on individuals”: Antrim, para. 39.

[181] In this case, the interference is entirely disproportionate. For decades the City and AMD have avoided their obligations to maintain the watercourse on their properties in keeping with the accepted standard of practice. They did so to avoid the high costs of maintenance. There is no utility to their conduct. This unfair benefit to the City and AMD has resulted in National suffering significant and ongoing damages.

[182] The court’s reasonableness inquiry focuses on the effect of the defendant’s conduct on the property rights of the plaintiff, not the nature of the conduct itself. The plaintiff is not required to prove that the defendant was faulty, careless, or acted intentionally (although all of these criteria are met here). That said, if the defendants’ conduct is careless, this is a relevant factor in determining that the interference was unreasonable: Antrim, at para. 29.

[183] When the interference has caused physical harm to the plaintiff’s property (as opposed to intangible injuries), the interference is clearly unreasonable.

[184] In determining whether the interference is “unreasonable,” the social utility of the impugned action, where it involves some important public purpose, may be a factor in whether nuisance is established. But in cases where the plaintiff has suffered physical or material damage to their property, the utility of the defendant’s conduct, no matter how important, will not defeat the plaintiff’s claim of unreasonable interference.

[185] There are numerous cases where courts have held that flooding constitutes a substantial and unreasonable interference, thereby giving rise to actionable nuisance.

[186] In Martin v. Middlesex (Municipality) (1913), 23 O.W.R. 974, 4 O.W.N. 682 (Ont. Sup. Ct. -H.C.D.), a natural watercourse was altered by the construction of a road, and as a result the watercourse was no longer able to drain causing flooding to the claimant’s land. The court found liability in nuisance. Since the defendants altered the watercourse, “[t]hey were required under these circumstances to take the very greatest precaution,” and even if they altered the watercourse in good faith, the defectiveness of this alteration rendered them liable in nuisance.

[187] In Rideau Falls Generating Partnership v. Ottawa (City), 1999 CanLII 2132 (ON CA) at para. 7, the court held that by controlling water levels of the Rideau River to protect upstream residents, the defendant caused floods to plaintiff’s electrical generating station. While the defendant did not act unreasonably for the good of the upstream owners, the plaintiff needed to be compensated for damages suffered in consequence of the defendant’s program which was designed to protect others.

[188] In Ivall v. Aguiar, 2007 CanLII 17379 (ON SC), 86 O.R. (3d) 111 (S.C.J.), the parties were neighbouring property owners with a natural stream that flowed through both properties. The defendant altered the topography of their property creating a large pond on their property and replacing the natural watercourse of the stream with piping. The piping was too small to properly drain the pond and as a result, during heavy rains the level of the pond would rise and flood onto the plaintiff’s land. This caused sediment and sewage to be brought into the plaintiffs’ residential water system. The Court found the defendants liable in nuisance, negligence, and under the rule of Rylands v. Fletcher.

[189] In Weenen v. Biadi, 2015 ONSC 6832 (aff’d 2017 ONCA 533), the parties were neighbouring property owners. Historically, surface water drained over the defendant’s property and onto the plaintiff’s land, rendering parts of it damp, but not flooded. After purchasing the property, the defendant began adding truckloads of earth to his lands, and did so for years, despite the plaintiff voicing concerns. This forced substantially more surface water onto the plaintiff’s property and flooded his property for significant periods of time over a number of years. Later, the defendant improperly constructed a swale, which further exacerbated flooding on the plaintiff’s land. He also refused to maintain the culvert, which prevented drainage off of the plaintiff’s land and resulted in additional flooding.

[190] The court found the defendant liable in nuisance, negligence, and under the rule of Rylands v Fletcher, and also awarded punitive damages.

[191] The courts have also held property owners liable in nuisance where the alteration of the grade of their property or other changes caused flooding.

[192] In Meyer v. McLennan, 2005 CanLII 39858 (ON CA), 143 A.C.W.S. (3d) 581, aff’g McLennan v. Meyer, 2004 CanLII 9885, a creek flowed from the plaintiff’s property to the defendant’s property and emptied into a river. The defendant dammed up the creek on his side of the property line, causing flooding on the plaintiff’s property. The trial judge found, and the Court of Appeal affirmed, the defendant property owner was liable for the flooding.

[193] In Stone v. Tkachyk, 2020 ABQB 24, the plaintiff experienced repeated flooding of a basement at the same time the defendants’ neighbours, renovated their home, yard, and shed. The court found that the defendants’ renovations were a but-for cause of the water incursions, as a new shed foundation was causing water to back up and travel onto the plaintiff’s property. Only a portion of that water was actually originating on the defendants’ property; much was originating from upstream properties. Nevertheless, the defendants were found liable in nuisance, Grosse J. noting at para. 75:

I have not been pointed to any authority for the proposition that one neighbour can be liable to another in nuisance only if the water in question falls originally on the Defendant’s property. In fact, there are numerous examples of liability based on the Defendant gathering, or altering the flow of, water that originated elsewhere …

[194] Courts have held property owners liable in nuisance for failing to maintain a drainage ditch.

[195] In Harnden v. Sheridan Nurseries Ltd. (1993), 63 A.C.W.S. (3d) 556 (O.C.J. (Gen. Div.)) the defendant owned the property neighbouring the plaintiffs’ lands on which there was a large ditch. A blockage of snow and ice in the ditch during an unusually warm winter day led to a flood onto the plaintiffs’ property and into their basement. The court found that the flooding was caused by the defendant’s failure to maintain the ditch. While the action was allowed on the basis of negligence, the Court also held that the defendant had created an actionable nuisance by failing to maintain the ditch, writing at para. 40: “I have no difficulty in finding that the flood in this case was a major interference with the use of the plaintiffs’ land and therefore a nuisance.”

[196] In Kooting v. Saskatchewan (Rural Municipality), 2006 MBQB 297, the defendants owned property located north of the plaintiffs’ land. A small watercourse ran through the defendants’ lands to the plaintiffs’ lands and ultimately to the Little Saskatchewan River. On the defendants’ lands, the watercourse rain through four concrete culverts located underneath an abandoned railway crossing. The defendants had never maintained the culverts over the many decades of owning the property. The culverts typically operated properly but on the days in question the culverts became clogged, and the water spilled up over the crossing and flooded the plaintiff’s land. The court held that the flooding was caused by the culverts being partially or completely obstructed and found the defendants liable in both negligence and nuisance.

[197] Courts have held municipalities liable in nuisance where their drainage activities cause a discharge of water into a watercourse that subsequently floods.

[198] In Rudd v. Arnprior (Town) (1921), 18 O.W.N. 411 (Ont. Sup. Ct. – H.C.D.), the town was liable for collecting surface water from the surrounding neighbourhood and failing to provide adequate means for preventing overflowing of this water onto the lands of the respondent. The town could not thereby escape liability by arguing that the interference was reasonable, as it failed to ensure adequate drainage was in place for the water it was collecting and diverting. This directly applies to the City’s failure to ensure that the enormous volume of water collected in the City’s Kenilworth CSO and directed through the City’s double box culvert at Location 1 is able to adequately drain into the Harbour.

[199] In Johnson et al. v. The Town of Dundas, 1945 CanLII 85 (ON SC), [1945] O.R. 670 (H.C.J.), the defendant municipality was found liable in nuisance where the waters of an open ditch or creek overflowed and caused damage to the plaintiff’s property which was located alongside the creek. Citing an older case, the Court noted that:

Cities and towns have no greater right than individuals to collect in artificial channels upon their streets and highways mere surface-water, distributed in rain and snow over large districts, and precipitate it upon the premises of private owners.

[200] The Court found the flooding was caused both by the extra diversion of drainage water by the municipality and the municipality’s failure to maintain the creek/ditch through dredging. While the court found that flooding would have occurred regardless of the municipal actions because of irregularly high levels of rainfall, the Town was nevertheless found liable for the extra flooding that occurred on the plaintiff’s property as a result of the municipality’s conduct.

[201] In Peace Portal Properties Ltd. v. Surrey (District) (1989), 14 A.C.W.S. (3d) 410 (S.C.) at para. 9, var’d 1990 CanLII 835, 70 D.L.R. (4th) 525 (B.C.C.A.), the plaintiff owned a golf course with a creek running through it. While the creek began as a gently meandering stream, the extent and frequency of flooding increased over time to the point that the golf course was flooded three or four times per year. The plaintiff repaired and relocated the flume through which the creek runs and sought damages in nuisance for the costs, together with consequential damages. The trial judge held the defendant municipality liable in nuisance because the damage was caused by the increased peak volumes and velocity of drainage water coming down the creek from the municipality’s drainage works. In so finding, Spencer J. at para. 11 cited authority providing:

… an upper riparian owner may collect water and divert it into a natural waterway to the detriment of a downstream neighbour provided that he does not cause the flow to exceed the natural capacity of the watercourse. To cause that capacity to be exceeded is unreasonable.

[202] These cases support National’s contention that the City and AMD are liable in nuisance. AMD is liable for, among other things, its complete failure to maintain the Channel, altering the Channel with the installation of the two AMD Haul Roads, the culverts at Locations 2, 3, and 4, the Sediment Basin at Location 4, the Pipe between Locations 2 and 3, all of which have resulted in the reduction of the hydraulic capacity of the Channel. The increase in its topographical elevation, and the creation of berms along the banks of the Channel and the Sediment Basin, have also contributed to flooding of National’s property.

[203] Similarly, these cases apply to the City, which has consistently and knowingly directed enormous volumes of stormwater and sewage into an unmaintained and obstructed watercourse knowing that the water could not drain into the Harbour and consistently failed to take any steps to remediate its property to prevent the ongoing substantial and unreasonable interference with National’s property or require AMD to remove its obstructions of the drainage of the City’s stormwater and sewage. Without the diversion of 11.7 million liters of contaminated water per hour from the Kenilworth CSO, National does not suffer the unreasonable interference with its right to use its property when that water tops the banks of the City owned portion of the Channel.

[204] In its opening statement, the City claimed that its ownership of the Channel (whether the first 3,300 feet or the first 4,480 feet) is not determinative of its liability in nuisance. This is based on a misstatement of the law and the facts. Ownership equates to liability for nuisance with notice. This statement of law was adopted by Ryan Bell J. in Sorbam Investments Ltd v Litwack, 2021 ONSC 5226, who held,

“An owner of land who was not responsible for the creation of the nuisance may be liable if they continue the nuisance; that is, with knowledge of the nuisance, the landowner fails to take steps to put an end to the situation involving the nuisance”.

[205] This principle was first enunciated by the House of Lords in Sedleigh-Denfield v. O’Callaghan. As early as January 25, 2000, counsel for National, Mr. Ed Shaker, corresponded with AMD’s counsel about AMD’s liability given the law in Sedleigh.

[206] Ownership equates to liability when there is notice. This is a complete answer to the City’s defence. It has had notice of the nuisance caused by its property since at least the year 2000. It has known that it was the owner of at least the first 3,300 feet of the Channel, which includes Locations 2 and 3, since, at least, October 2000. By their own admission, the City and AMD have done nothing in response to the ongoing substantial and unreasonable interference with National’s use of its property. They are liable in nuisance.

The Nuisance of the City and AMD Caused National’s Damages

[207] It is clear that both the City and AMD caused the nuisance to National’s property. There is no distinct test for causation in nuisance cases. The courts have applied the “but for” test of causation developed in negligence law: Weenen v. Biadi, 2015 ONSC 6832 at para. 14.

[208] National relies on the material contribution test for causation to establish liability for negligence given the multiple tortfeasors, each of which are sufficient causes to National’s damages.

[209] In the context of a nuisance claim, the plaintiff must show on a balance of probabilities that “but for” the defendant’s act, the plaintiff’s injury would not have occurred: Clements v. Clements, 2012 SCC 32 at para. 8.

[210] This does not mean that the defendant’s conduct must be the only cause. More than one act and more than one defendant can meet the “but for” test in any given case: otherwise, a plaintiff who suffers a nuisance from two tortfeasors could never establish liability.

[211] As the Court held in Walker v. McKinnon Industries Ltd., 1949 CanLII 105 (ON SC), [1949] 4 D.L.R. 739 at 767 (Ont. H.C.J.), aff’d [1950] D.L.R. 159 (Ont. C.A.), affd 1951 CanLII 308 (UK JCPC), [1951] 3 D.L.R. 577 (J.C.P.C. (Ont.)), if one party’s conduct helps to bring about a nuisance, no exoneration will be given to that party even if the conduct of others was also required to create the nuisance:

Even if others are in some degree polluting the air, that is no defence if the defendant contributes to the pollution so that the plaintiff is materially injured. It is no defence even if the act of the defendant would not amount to a nuisance were it not for others acting independently of it doing the same thing at the same time …

[212] Where two or more parties jointly create or continue a nuisance, each of them is liable in nuisance. While the negligence ‘but for’ test is focused on whether the defendant’s fault caused the loss, in nuisance, the question is whether, but for the defendant’s use of their land, the plaintiff would not have suffered the flooding. In this case, this is abundantly clear. If the City does not discharge 11.7 million liters per hour of contaminated stormwater and sewage collected from its Kenilworth CSO and diverted into the double box culvert at Location 1, knowing that it can never reach the Harbour, National does not flood. If the City and AMD take usual, proactive and preventative maintenance steps, National does not flood. If AMD does not substantially alter its lands and channelize the water course reducing the Channel’s hydraulic capacity and directing flood waters onto the National property, National does not flood. The use of their respective lands has clearly caused the ongoing substantial and unreasonable interference with National’s property.

The City and AMD are Both Liable for National’s Damages Caused by Their Breaches of the Accepted Standard of Practice for Stormwater Management

[213] The City and AMD have failed to meet the accepted standard of practice for maintenance of a watercourse to drain stormwater and sewage. But for this failure, National would not have suffered the damages claimed. In addition, the evidence establishes that both Defendants’ failures to meet the accepted standard of practice for the maintenance of this storm watercourse have materially contributed to National’s damages. National’s claim against the City and AMD for negligence is premised on the straightforward proposition set out in Walker v. McKinnon Industries Ltd., 1949 CanLII 105 (ON SC), [1949] 4 D.L.R. 739 at 767 (Ont. H.C.J.), aff’d [1950] D.L.R. 159 (Ont. C.A.), affd 1951 CanLII 308 (UK JCPC), [1951] 3 D.L.R. 577 (J.C.P.C. (Ont.)):

Generally, the owner of an asset should be responsible for its maintenance.

[214] In this proceeding, AMD did not deny control over its portion of the Channel (although it did in correspondence in the year 2000), and the City acknowledged its ownership of the first 3,300 feet north of Burlington Street and the portion of the Channel therein just before trial, notwithstanding the February 2017 expert report it obtained that confirmed the opinion in the October 2000 McGuire Memo that the City owned, at least, 3,300 feet north of Burlington Street. Yet no maintenance of their assets was undertaken. Eight floods occurred following the delivery of the City’s s. 53 real estate report.

[215] AMD’s own witness, Mr. Jovic, testified AMD saw no need to maintain the Sediment Basin, even when it was completely filled with sediment. Two 9-metre-tall culverts at Location 4 were completely submerged in polluted sediment making the flow of water from the Channel into the harbour a mere ‘trickle’, especially compared to the 11.7 million L per hour surging out of Location 1. AMD employees inspected the Sediment Basin and the culverts at Location 4 (even though they were not visible) six times per day, yet did not undertake any maintenance to clear the blockage. AMD’s own expert, along with the City’s expert and National’s expert, agree that the failure to undertake routine proactive preventative maintenance is a significant cause of the flooding.

[216] In the midst of the trial after the conclusion of National’s case, the City finally agreed to maintain the portion of the Channel within the 3,300 feet north of Burlington Street. Yet still, no maintenance was undertaken, despite the obvious proposition that the City and AMD as owners are responsible for maintenance.

Causation: The Negligence of the City and AMD Are Both Sufficient Causes of the Flooding to National’s Property – The Material Contribution Test Applies

[217] The standard test for causation in negligence requires the plaintiff to establish on a balance of probabilities that “but for” the defendant’s negligence, the injury or damage would not have occurred. Under the “but for” test, the defendant’s wrong need not be the sole cause of the loss, as long as it is a necessary cause.

[218] The material contribution test asks whether a particular defendant’s breach of the standard of care made a “material contribution to the risk” that at least some of the plaintiff’s injury would transpire.

[219] In Clements – the leading case on causation involving multiple tortfeasors – the Supreme Court of Canada explained that the material contribution test applies where the “but for” test is unworkable because the harm could have been or was caused by one or more negligent wrongdoers. The test will apply where two conditions are met:

a. The plaintiff has established on a balance of probabilities that its loss would not have occurred “but for” the negligence of two or more tortfeasors, each possibly in fact responsible for the loss; and

b. The plaintiff, through no fault of its own, is unable to show that any one of the possible tortfeasors in fact was the necessary or “but for” cause of its injury, because each can point to one another as the possible “but for” cause, defeating a finding of causation on a balance of probabilities against any one defendant.

[220] Thus, the material contribution applies where the identity of the wrongdoer is masked by the fact that the harm could have been caused by any of them. The Court in Clements explained at para. 39:

What then are the cases referring to when they say that it must be “impossible” to prove “but for” causation as a precondition to a material contribution to risk approach? … Typically, there are a number of tortfeasors. All are at fault, and one or more has in fact caused the plaintiff’s injury. The plaintiff would not have been injured “but for” their negligence, viewed globally. However, because each can point the finger at the other, it is impossible for the plaintiff to show on a balance of probabilities that any one of them in fact caused her injury.

[221] Since it would be contrary to the goal of tort law to allow defendants to escape liability by pointing the finger at another wrongdoer and thereby making causation impossible to prove, courts can hold such defendants liable on the basis that they materially contributed to the risk of injury. The basis for the exception is that requiring “but for” causation “would offend basic notions of fairness and justice.”

[222] In these circumstances, applying the material contribution test meets the underlying goals of the law of negligence. Compensation for harm is achieved and fairness is satisfied, since “each defendant failed to act with the care necessary to avoid potentially causing the plaintiff’s loss, and each may well have in fact caused the plaintiff’s loss.” The goal of deterrence is also furthered because “potential tortfeasors will know that they cannot escape liability by pointing the finger at others”: Resurfice Corp. v. Hanke, 2007 SCC 7 at para. 25.

[223] In Cook v. Lewis, 1951 CanLII 26 (SCC), [1951] S.C.R. 830 three men were out hunting. Two fired their guns at roughly the same time. The third was shot. It was impossible to tell which of the two bullets hit the plaintiff. The Court in Clements suggested that the material contribution test would have been appropriate because globally, both wrongdoers were a but-for cause, but individually, each could point the finger at another.

[224] The present case is not merely analogous to the foregoing decisions; the evidence here establishes an even stronger case for application of the material contribution test.

[225] National has demonstrated not only that its loss would not have occurred “but for” the collective negligence of the City and AMD, but also that the negligence of either the City or AMD would have, even in the absence of the other wrongdoer’s negligence, caused the flooding damage. This is a case of multiple sufficient causes where two tortfeasors cause indivisible harm and the act of either one would have been sufficient to produce the loss. Both Defendants have failed to meet the accepted standard of practice causing flooding to National.

[226] Accordingly, this is a case in which the material contribution test should be applied in place of the “but for” test of causation. In these circumstances, the goals of tort law and the underlying theory of corrective justice require that the City and AMD not be permitted to escape liability by pointing the finger at one another, particularly in circumstances where both defendants were sufficient causes of the loss.

The Rule in Rylands v Fletcher Imposes Strict Liability of the City and AMD

[227] The rule from Rylands v. Fletcher, (1866), L.R. 1 Ex. 265 (Exch.) imposes strict liability on a person who brings something on their land which subsequently escapes and causes damage to a neighbour.

[228] In the case of Rylands itself, the escape of water from the defendant’s reservoir caused the plaintiff’s coal mine to flood. Under the law as it was at the time, the torts of negligence, nuisance, and trespass were unavailable. Instead, Justice Blackburn, speaking for the Court of the Exchequer Chamber, imposed liability on the defendant, reasoning that strict liability was appropriate for the “escape” of things brought onto land that were “likely to do mischief” such as “beasts, or water, or filth, or stenches”:

… the person who for his own purposes brings on his lands and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril, and, if he does not do so, he is prima facie answerable for all the damage which is the natural consequence of his escape.

[229] In Smith v. Inco Ltd., 2011 ONCA 628., at para. 68, the leading Canadian case on this issue, the Court of Appeal for Ontario affirmed that the rule in Rylands continues to impose strict liability for damage caused to a plaintiff’s property by the escape of a substance “likely to cause mischief.” The Court set out four prerequisites to the operation of the strict liability rule:

A. The defendant made a “non-natural” or “special” use of his land;

B. The defendant brought onto his land something that was likely to do mischief if it escaped;

C. The substance in question in fact escaped; and

D. Damage was caused to the plaintiff’s property as a result of the escape.

National has established all four elements on the evidence in this case.

The City and AMD made a Non-Natural or “Special” Use of Their Lands

[230] The first requirement of the rule in Rylands is that the defendant made a “non-natural” or “special” use of its land. The concept of “non-natural” use was first mentioned in Lord Cairns’ concurring decision in Rylands. As an example of non-natural use, Lord Cairns referred to the accumulation of quantities of water which would not have occurred naturally on the lands. Over the next 150 years, the meaning of “non-natural” would evolve.

[231] In Rickards v. Lothian, [1913] A.C. 263, the House of Lords indicated that “non-natural” meant a use that brought increased danger and was not for the general benefit of the community.

[232] In Tock v. St. John’s (City) Metropolitan Area Board, 1989 CanLII 15 (SCC), [1989] 2 S.C.R. 1181, at p. 1189, La Forest J. affirmed this “definitive statement” and noted that non-natural use was a flexible concept “that is capable of adjustment to the changing patterns of social existence.” On the facts of Tock, the plaintiff’s home was flooded by an obstructed storm sewer. The trial judge had found that the defendant had not been negligent in the construction, maintenance, or operation of the storm sewer. Justice La Forest concluded:

In summary, if … the touchstone for the application of the rule in Rylands v. Fletcher is to be damage occurring from a user inappropriate to the place where it is maintained … I would hold that the rule cannot be invoked where a municipality or regional authority, acting under the warrant of statute and pursuant to a planning decision taken in good faith, constructs and operates a sewer and storm drain system in a given locality.

[233] This case is unique and distinct from Tock as there was no planning decision, or good faith on the party of the City. The manner of the City’s use of the Channel is negligent and prevents the City from establishing that it makes a ‘natural use’ of the Channel.

[234] In Smith, the Court of Appeal clarified that to decide whether a use is a non-natural one, the court must have regard to the place where the use is made, the time when the use is made, and – most important for the present case – the manner of the use.

[235] Courts have found municipal operations to be a “non-natural” use of land where the manner of use was negligent or where there was a less risky alternative available to the municipality.This would equally apply to private landowners like AMD.

[236] In Lawrysyn v. Kipling (Town),(1964) 1964 CanLII 399 (SK QB), 48 D.L.R.(2d) 660 (S.K.Q.B.), a sewage lagoon overflowed and flooded the plaintiff’s marshlands with effluent. The Town argued that the use of property as a sewage lagoon should be considered a natural use because lagoons were a practical method of disposing of sewage in a community and their use was widespread. While the court accepted the principle in general, it held that the notion of public good had no application on the facts of this case, since the Town had failed to place the lagoon near a river or creek that could take away the effluent. While the construction of a lagoon near a river or creek may be a natural use, it was clear that the establishment of one beside a frequently cropped marsh was not.

[237] In Gertsen v. Metropolitan Toronto (Municipality), (1974) 1973 CanLII 606 (ON SC), 2 OR (2d) 1, (H.C.J.), Metro Toronto entered into an agreement with York to dispose of garbage in one of York’s residential ravines. In exchange, Metro would assist with developing the ravine into a park with laneways. The buried garbage generated methane gas which escaped into residents’ backyards and injured the plaintiff in an explosion. The defendants were aware of the gas problem for a number of years before the explosion. In defending the Rylands claim, the municipalities argued that the placement of garbage in the ravine was a natural use of the lands and for the public good. The court rejected this argument, finding that the disposal of garbage in the ravine was a benefit only to Metro. There was no benefit to the owners and occupiers of the surrounding land.

[238] The manner in which the City mismanaged the Channel was non-natural. It brought increased danger to others for no public benefit. The Channel was not treated by the City as a watercourse integral and necessary to its system of stormwater and sewage drainage. For no good reason, all City maintenance activities undertaken by the City stopped at Location 1, when the southern limit of the Channel was not and could not be the ultimate destination for the stormwater and sewage. The stormwater and sewage collected and diverted from the Kenilworth CSO was intended to drain into the Channel to reach its ultimate destination – the Hamilton Harbour. Accordingly, while the water escaped from the City’s property (the Kenilworth Road Allowance), it escaped from its unmaintained watercourse, not a drainage facility. Unlike the storm sewer in Tock and the refinery in Smith, the Channel was being operated or not maintained in a negligent manner. The City failed to manage the Channel in a manner that was ordinary, usual, and which did not create risks beyond those incidental to any drainage channel. Its own representative Mr. Ehrenberg agreed that the City did not follow its usual and best practice for the maintenance of the Channel.

[239] This case is analogous to Lawrysyn and Gertsen, where the defendants had less risky choices available to them to carry out sewage treatment and garbage disposal, but instead chose to carry out those activities in a manner that created risk to the plaintiffs.

[240] Similarly, AMD clearly has made non-natural use of its land. It installed culverts, haul roads, pipes, bridges, rails, the Sediment Basin and other obstructions and berms, which have the effect of holding stormwater and sewage on its property with no reasonable plan or protocol to ensure that the water flows into the Harbour. Instead, AMD’s non-natural use of its land redirects the stormwater and sewage to escape onto the property of its upstream neighbour. There is no utility to the manner in which AMD has failed to design or maintain the watercourse on its property. It is strictly liable for the consequences of the escape of the dangerous flood waters from its non-natural use of its lands.

A. The City and AMD Brought onto Their Land Something Likely to do

Mischief on Escape

[241] The second requirement of a Rylands claim is that the defendant brought onto its land something likely to do mischief on escape. Where water is brought onto land as a non-natural use, Rylands will apply if the water escapes and causes damage to the plaintiff. Liability under Rylands has been imposed where water was collected at a dam,(Kelley v. C.N.R., 1950 CanLII 241 (BC CA), [1950] 1 W.W.R. 744 (BCCA)), a dyke (Latta v. Kelly, [1925] 1 D.L.R. 116 (N.S.S.C.)), a roadway,(Verbrugge v. Port Alberni (City) (1964), 48 D.L.R. (2d) 63 (B.C.S.C.).) or in a reservoir, as in Rylands itself.

[242] Rylands was also applied in Ivall v. Aguiar, 2007 CanLII 32909 (ON SC), [2007] 157 A.C.W.S. (3d) 857. The trial judge cited the following statement from Greenock Corp. v. Caledonian R. Co, which is on all fours with what AMD has done in this case by altering the Channel:

It is the duty of any one who interferes with the course of a stream to see that the works which he substitutes for the channel provided by nature are adequate to carry off the water brought down even by extraordinary rainfall, and if damage results from the deficiency of the substitute which he has provided for the natural channel he will be liable.

[243] In addition to water, sewage is another traditional Rylands substance, being one of the four substances — “beasts, or water, or filth, or stenches” — mentioned by Justice Blackburn in the case itself. In Ballard v. Tomlinson (1885), 29 Ch.D. 115 (C.A.), the court held that the defendant was liable because "if a man who chooses to put filth on his own land he must take care not to let it escape on to his neighbour's land."

[244] Accordingly, water and sewage are two substances that the courts have accepted are likely to do mischief on escape, establishing the second element of the Rylands test.

B. ​ There were Escapes onto National’s Property

[245] There must be an escape from property under the control of the defendant to a place outside of his or her control to meet the requirements of the Rule in Rylands.

[246] Escape is not limited to single isolated escapes (like the collapsing reservoir in Rylands).

[247] Undoubtedly, there were multiple escapes from the City’s and AMD’s properties (the Channel) onto National’s property in this case.

C. National Suffered Damages due to the Escapes

[248] The evidence establishes that National’s property has been repeatedly damaged as a result of the flooding of the Channel.

[249] The City and AMD have made non-natural use of their properties in a manner that has allowed the escape of dangerous stormwater and sewage onto National’s properties for decades. National has suffered damages as a result. These Defendants are, therefore, strictly liable.

The Imposition of a Mandatory Permanent Injunction

[250] National seeks a permanent and mandatory injunction against the City and AMD requiring the following in the sequence noted as soon as reasonably practical taking into account the requirements to obtain all necessary permits and approvals:

a. firstly, that the City and AMD immediately undertake the usual, proactive preventative maintenance of the Channel in keeping with the accepted standard of practice including:

i. remove any and all obstructions from the culverts and pipes at Locations 2, 3 and 4;

ii. dredge the Sediment Basin to its refusal limit to remove all sediment and obstructions, including the sediment blocking the culverts at Location 4; and

iii. the one-time dredging of the Channel to its natural depth or refusal limit as defined in the ANA survey and removal of all other obstructions.

b. secondly, that AMD task its engineers to design (with an engineer’s stamp) a protocol for the remediation of the Channel on its property and Locations 2 and 3 to prevent flooding to National’s property whether by increasing the size of any and all culverts, pipes and/or varying their elevation or increasing the size and/or depth of the Sediment Basin and/or width of the Channel or otherwise;

c. thirdly, AMD undertake the work required by the remediation required by the design to be prepared pursuant to b above;

d. fourthly, that both parties task their engineers with designing (with an engineer’s stamp) an annual maintenance protocol for their respective portions of the remediated Channel so as to ensure National does not flood;

e. fifthly, both parties undertake the work as required in the annual maintenance protocol when the remediation specified in b above is complete; and

f. sixthly, that AMD be required to remove all berms immediately adjacent to/rimming the Channel and Sediment Basin and reduce the elevation of the banks of the Channel and Sediment Basin on its property to restore the lands to its original elevation so its lands do not prevent stormwater and sewage flowing from and topping the banks of the Channel from entering its lands, and it be restrained after such remediation of its elevations from increasing the elevation of its lands in any manner that could prevent the flow of stormwater and sewage from the Channel topping its banks onto its lands.

[251] The imposition of a permanent injunction requires this court to find the City and/or AMD liable to National in either nuisance, negligence or pursuant to the Rule in Rylands. Upon establishing such liability, the court determines whether an injunction is an appropriate remedy. A mandatory injunction requires the defendant to act positively.

[252] The proposed injunction is largely permanent and mandatory as it seeks to compel the City and AMD as set out above to undertake immediate maintenance to eliminate floods in 1 in 2-year storms, then remediation, and then ongoing maintenance of the Channel to prevent the Channel from flooding National in the future.

[253] In determining whether it is appropriate to order a permanent injunction, modern jurisprudence has considered a number of factors including:

(i) whether an enforceable right and a threat/violation of that right exists;

National has established the City and AMD are liable in negligence, nuisance and pursuant to the Rule in Rylands.

(ii) whether the applicant will suffer demonstrable harm;

All experts agree that National will continue to sustain damages from further flooding if the necessary remediation of the Channel is not undertaken.

(iii) the hardship that would be caused to the defendant if a permanent injunction was granted compared to the hardship that would be caused to a plaintiff if he/she had to resort only to an award of damages: Cadbury Schweppes Inc. v. FBI Foods Ltd. 1999 CanLII 705 (SCC), [1999] 1 S.C.R. 142.

The Defendants will not suffer any hardship in having to meet an accepted standard of practice for the maintenance of their properties and undertake remediation necessitated by their failure to maintain the Channel, and in the case of AMD its alterations, of the Channel. The relief sought for remediation and maintenance is required so National avoids the hardship of continual flooding the Defendants have caused by their breach of legal duties to their neighbour. The City has a pre-existing protocol for the maintenance of the Channel. AMD is a sophisticated enterprise with vast resources that is more than capable of ensuring the stormwater and sewage in the Channel drains into the Harbour. As to the requirement that AMD remediate the Channel so it functions as intended, there can be no doubt that when it infilled its property it had the duty to do so in a manner that would not obstruct the drainage of stormwater and sewage into Hamilton Harbour. National will, no doubt, suffer continued harm without immediate maintenance, then remediation, then ongoing maintenance of the kind sought.

(iv) the conduct of the parties;

National has gone to great lengths to mitigate its damages and has consistently pursued the City and AMD to remediate and maintain the watercourse on their properties for 23 years. Meanwhile, the conduct of the City and AMD make clear that this Channel will not be remediated or maintained without a court order.

(v) the effectiveness of an injunction;

The expert testimony makes clear that the proposed injunction will be effective. Floods during 1 in 2-year storms will no longer occur if the immediate maintenance sought on this injunction is granted and complied with. In addition, the severity of flooding from 1 in 5-year storms will be greatly reduced, likely eliminating significant damage sustained by National. Finally, when the remediation is completed and ongoing maintenance undertaken as sought on this injunction, National will no longer be flooded by the stormwater and sewage draining into the Channel at Location 1 whatever the storm severity, as would had been the case if Ogg’s Inlet was not infilled by AMD.

[254] Without an injunction there is no doubt that National will continue to sustain damages from further floods. Workers will be sent home and others tasked with cleaning up stormwater and sewage in dangerous conditions.

[255] While National meets the requirement for a permanent and mandatory injunction set out above, there is a much older line of jurisprudence that seeks to “zealously” protect the rights of riparian landowners, like National, and provides that National is entitled to an injunction absent some special circumstances, which do not apply.

[256] Here, National does not seek such an extreme remedy of prohibiting the City from allowing the discharge of stormwater and sewage into the Channel. Rather, National merely seeks an order compelling AMD to remediate the Channel so it functions as it did before the diversion of the Channel over its water lot and its infilling of that water lot and, in the case of both the City and AMD, comply with the accepted standard of practice for ongoing maintenance recognized by their own experts. The flooding of National’s property constitutes an infringement on property rights that the court will “zealously” guard. National should not have to undertake another decades-long fight to recover damages caused by further floods owing to the same causes given that the City and AMD have failed to meet the accepted standard of practice.

Should National be Awarded Punitive Damages

[257] A court may award punitive damages where the conduct of the defendant is so "malicious, oppressive and high-handed that it offends the court′s sense of decency”: Whiten v. Pilot Insurance Co., 2002 SCC 18 at para. 36.

[258] National submits the behaviour of AMD and the City warrant the court’s censure with an award of punitive damages.

[259] To obtain an award of punitive damages, a plaintiff must meet two basic requirements.

[260] First, that the defendant’s conduct was reprehensible in the sense that it was “malicious, oppressive and high-handed” and a “marked departure from ordinary standards of decent behaviour”. National says that the City and AMD were dragged to trial in this matter. They made no substantive admissions. The City denied ownership of the entire Channel in its pleading and up until the beginning of trial despite receiving the McGuire Memo in October 2000 and a Rule 53 expert report in February 2017 establishing its ownership of no less than 3,300 feet of the Kenilworth Road Allowance. Both Defendants still refuse to maintain their properties even after acknowledging ownership or control. They have completely abrogated their responsibilities as property owners, knowing that the employees of National will have to clean up the mess caused by the flooding.

[261] Second, punitive damages are awarded when they are rationally required to punish the defendant and to meet the objectives of retribution, deterrence, and denunciation when added to an award for compensatory damages: Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419 at para. 79; Whiten 2002 SCC 18 at paras. 36, 94.

[262] The City and AMD knew the cost of dredging the Channel and disposing of the dredged material. Avoiding these costs caused them to intentionally disregard what they knew were their legal duties to their neighbour. They made this decision knowing that National would flood as a result. They quite literally saved money at the expense of National who suffered damages. To limit the award of damages to National’s claim for compensatory damages sends a message to the like-minded that the reckless disregard of National’s rights by the City and AMD is a financial risk worth taking. These damages should not be susceptible to being regarded as merely the cost of a licence to continue the tortious conduct unabated.

[263] For decades National has been flooded by the City’s stormwater and sewage surging from the watercourse on the City’s property.

[264] In response, in 2009, Mr. Aziz decided to withhold payment of National’s municipal taxes. He did so and continues to do so. (National says that it has paid the substantive amount owing, but the City disputes this. The City says that National still owes penalties and interest).

[265] In Whiten, the leading case on punitive damages, the Supreme Court awarded $1 million punitive damages as a result of the high-handed tactics employed by the insurer following its unjustified refusal to pay the insured′s claim. Adjusted for inflation the award for punitive damages in 2023 dollars is approximately $1.55 million. Justice Binnie, writing for the Court, set out a number of relevant factors for the court to consider, including:

a. The degree of misconduct;

b. The amount of harm caused;

c. The availability of other remedies;

d. The quantification of compensatory damages; and

e. The adequacy of compensatory damages.

[266] Punitive damages have been awarded in cases involving damage to land, particularly where a defendant consciously and persistently disregarded a neighbour’s property rights for a lengthy period of time.

[267] In Weenen v. Biadi, 2015 ONSC 6832, aff’d 2017 ONCA 533., the parties were neighbouring property owners. After purchasing his property, the defendant added truckloads of earth, improperly constructed a swale, and refused to maintain the culvert, all of which contributed to the flooding of a significant portion of the plaintiff’s land for substantial periods of time over many years. The flooding rendered much of the plaintiff’s land unusable and caused damage to his buildings. Justice Salmers concluded a punitive damages award was justified, citing the following factors:

i. The plaintiff had complained almost immediately to the defendant that the dumping was causing flooding on the plaintiff’s land, but the defendant “laughed it off” and continued to add fill.

ii. When the municipality required the defendant to build a swale to mitigate the flooding, the defendant built an inadequate one, which actually increased the flooding.

iii. The plaintiff told the defendant about the importance of the culvert under the defendant’s driveway for drainage, but the defendant never maintained it and refused to let the plaintiff clear it.

iv. The plaintiff had, for over a decade, requested that the defendant remedy the situation, and the defendant did nothing more than some sporadic cleaning of the culvert.

v. The defendant likely enjoyed financial gains as a result of his conduct, including making his property more attractive for farming and development.

[268] The court found “without hesitation” that the defendant’s misconduct had been high- handed, malicious, arbitrary, and highly reprehensible. Justice Salmers was not satisfied that the other awards for damages ($265,000 plus mandatory orders) would adequately achieve the necessary objectives of retribution, deterrence and denunciation and awarded $125,000 in punitive damages. Importantly, the parties in Weenen were residential homeowners, not a multi-billion dollar company and one of the largest municipalities in the country. National asserts that to require both Defendants to pay no more than compensatory damages renders the award a mere licence, or cost of business, to outrageously disregard the legal rights of another, particularly so in the context where it would take great resources to pursue the remedy to establish the right to compensation.

[269] In Midwest Properties Ltd. v. Thordarson, 2015 ONCA 819, rev’g 2013 ONSC 775., the parties owned neighbouring industrial properties. The defendant had stored large volumes of petrochemicals on its land for several decades, contaminating the soil and groundwater. For over 10 years, the defendant was in almost constant breach of regulatory orders. The plaintiff brought an action in nuisance and negligence, which was dismissed at trial. On appeal, the Court of Appeal allowed the action under the Environmental Protection Act, awarding over $1.3 million in damages, and found that negligence and nuisance were also established. The Court of Appeal also awarded punitive damages against the defendants on the following bases:

i. There was a long history of non-compliance with environmental orders;

ii. The defendant showed utter indifference to the environmental condition of its property and surrounding areas;

iii. The defendant’s decades-long misconduct was “clearly driven by profit”; the defendant’s director testified that he did not comply with regulations because he could not find an economical way of doing so; and

iv. Even though the defendant knew, over a decade prior, that there was a small cost to remediate the contamination, it not only refused to spend that modest sum, it allowed the contamination to increase exponentially.

[270] Similar facts have been established on the evidence of this case. The facts of this case show that the defendants’ high-handed, malicious, arbitrary, or highly reprehensible conduct deserves a message of retribution, deterrence, and denunciation.

[271] The governing rule when it comes to quantum of punitive damages is proportionality. In considering the quantum of punitive damages in Whiten, the Supreme Court noted:

The more reprehensible the conduct, the higher the rational limits to the potential award. The need for denunciation is aggravated where, as in this case, the conduct is persisted in over a lengthy period of time (two years to trial) without any rational justification, and despite the defendant′s awareness of the hardship it knew it was inflicting (indeed, the respondent anticipated that the greater the hardship to the appellant, the lower the settlement she would ultimately be forced to accept).

[272] The current high-water mark for an award of punitive damages is $1.5 million awarded against an insurer in Baker v. Blue Cross, 2023 ONSC 1891, in which the plaintiff was awarded over $1 million in compensatory damages. In Baker, the insurer denied long-term disability benefits for a period of less than 10 years.

[273] On appeal, in Baker v. Blue Cross Life Insurance Company of Canada, 2023 ONCA 842, at para. 32, Hourigan J.A. stated that “punitive damages are designed to punish wrongful conduct, to denounce that misconduct, and to act as a deterrent for future misconduct.” And, at para. 34, he declared that “deterrence is impossible unless the punishment is meaningful.” At para. 36, he said that “put simply, a modest punitive damages award becomes a nominal cost of operating in a way that wrongly and systematically denies policy holders their legal right”, citing Whiten at para 72.

[274] Punitive damages are only to be awarded in exceptional circumstances, to address the objectives of retribution, deterrence and denunciation. They should only be imposed if there has been high-handed, malicious, arbitrary, or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour.

[275] I find that both the City and AMD have engaged in such conduct in this case. The evidence shows that both the City and AMD were cavalier and have demonstrated reckless indifference to their duty towards National to act in good faith. In the case of the City, it engaged in a deliberate strategy to not acknowledge its ownership of a portion of the Channel, and the responsibilities that flowed from that.

[276] However, two wrongs don’t make a right. Mr. Aziz was wrong to instruct National to withhold its taxes from the City of Hamilton. This was an illegal act of petulance that detracts from National’s case, and provides some justification for the City’s position that National does not have clean hands.

[277] National suggests that its conduct in seeking to leverage the City by not paying taxes is irrelevant to the question of punitive damages, citing the passage at para. 69 in Honda Canada Inc. v. Keays, 2008 SCC, that “this stems from the important principle that courts, when allocating punitive damages, must focus on the defendant’s misconduct, not on the plaintiff’s loss (Whiten, at para. 73)”. I do not agree that this is the appropriate interpretation of this comment in Keays. Given that this is an equitable remedy, I do not understand the Supreme Court of Canada to be saying that the Plaintiff’s conduct (as opposed to its loss) is irrelevant in equitable terms to the calculus involved in the assessment of punitive damages.

[278] The Plaintiff asserts that this question has already been decided by Ramsay J. in his decision in 2022 on the interim injunction application, 2022 ONSC 6742. I do not agree. Justice Ramsay opined at para. 16 that the tax dispute “has nothing to do with the alleged torts” (that is, of negligence, nuisance or strict liability). That is not what is at issue in the present consideration of punitive damages, which is a distinct issue which arises only after the determination of liability in torts has been made, and which as an equitable remedy does engage concerns about “clean hands.”

[279] I do agree with the Plaintiff’s submission that the question of National’s tax arrears is not relevant to the consideration in regard to AMD, and should not bear on the determination of the quantum regarding AMD.

[280] Punitive damages are designed to punish wrongful conduct, to denounce that conduct, and to act as a deterrent for future misconduct. Deterrence is impossible unless the punishment is meaningful. The quantum of an award of punitive damages must be the product of reason and rationality, in punishing the defendant’s misconduct. As noted by Hourigan J.A., a too modest punitive damages award risks becoming a nominal cost of operating in a way that wrongly and systematically denies the injured party their legal rights. I would also add, however, that in appropriate circumstances the conduct of the injured party should also be taken into account in the determination of an appropriate quantum.

[281] In this case, the Plaintiff’s conduct in withholding its taxes flouted the law, and injured not just the City of Hamilton as a corporate entity, but all of the citizens of Hamilton. This must be taken into account in determining the appropriate quantum of punitive damages. National is a sophisticated litigant and was aware of the proper channel of appeal regarding its property taxes- the Assessment Review Board. National has appealed its property tax assessments a total of 37 times dating back to 1998.

[282] The rationality test applies to whether an award of punitive damages should be made and to the issue of its quantum.

[283] Accordingly, I consider that punitive damages are appropriate in this case. AMD shall pay punitive damages of $500,000. The City shall pay punitive damages of $400,000, the lesser amount being in recognition of National’s own misconduct in withholding taxes in an attempt to leverage and punish the City.

VII. Conclusion

[284] The Plaintiff has been largely successful in its case. Both the City and AMD are jointly liable to National in nuisance, in negligence and in strict liability for allowing the escape of dangerous substances pursuant to the Rule in Rylands v. Fletcher.

[285] The City has for decades refused to maintain the Channel, despite confirming by October 2000 what it corporately knew in 1957: that it owned no less than the first 3,300 feet of the Kenilworth Road Allowance. It was implored regularly by National to remediate the Channel and enforce its own By-Law, but refused to do so. The City was fully aware that AMD trespassed over its property and obstructed the Channel. It has now decided to incorporate a portion of the Channel into its routine maintenance program for its watercourses, but did not reveal this decision until after the close of National’s case. It benefited financially from its refusal to spend money maintaining the Channel. It did not comply with the accepted standard of practice for maintaining the Channel.

[286] Many of the same deficits apply to the conduct of AMD. It has refused to remediate the Channel at Locations 2 and 3, and at the Sediment Pond Location 4 that it clearly is responsible for. “But for” causation has been made out as against AMD as well as against the City.

[287] Both the City and AMD have done little to address National’s concerns or prevent further damage to National’s property.

[288] It is apparent that the blockages in the Channel are a prime factor in causing the recurring flooding. While there are problems all along its length, the restriction in flow at Location 4 is the most significant impediment to the proper and efficient functioning of the drainage function of the Channel.

[289] I agree with the position of National that lake levels do not cause National’s property to flood. Lake levels do no more than reduce the freeboard in the Channel, i.e., reduce its storage capacity. Lake levels are a factor in the capacity of the Channel, but are not a causal factor. It is the City’s discharge at Location 1, and the various blockages in the Channel, that are the prime causal factors.

[290] I agree with the position expressed by National in reply that the City is not a riparian owner, and is not discharging the surface water accumulating on “its lands.” The collection of stormwater and sewage in the Kenilworth CSO and its discharge into the Channel is not within the rights of an upper riparian owner.

[291] AMD advances a limitation defence seeking to limit their exposure to damages sustained by National and caused by the flooding from the Channel. I agree with National’s position that the City has a valid claim against AMD for its third-party claim, such that AMD will be, in effect, jointly and severally liable to National for all damages claimed and sustained.

[292] The grant of an injunction is a proper remedy for a violation of a right, and is a prima facie right regardless of whether damages can be said to be an adequate remedy. It is apparent that neither AMD nor the City will take the necessary preventative action to prevent the recurrence of flooding without a mandatory injunction. Accordingly, one will be granted requiring both the City and AMD to identify and implement a plan to remediate the drainage issues in the channel. I have not, however, been satisfied that National has substantiated its request for an injunction requiring AMD to reduce the height of the berm that it has constructed on its side of the Channel. This request is unreasonably disproportionate, not substantiated by the evidence at trial, and would be transparently punitive towards AMD. Its potential deleterious effects have not been identified or addressed by the evidence.

[293] Punitive damages are appropriate in this case, but the amount of $1.6 million against each of the Defendants AMD and the City is disproportionate, and must be leavened by recognition of National’s own misconduct in withholding its taxes with regards to the City. In equitable terms, National does not come to this trial with entirely clean hands in this regard.

[294] National, in their final submissions at trial, acknowledge that the evidence does not establish liability against HPA and have not sought relief as against HPA in their submissions.

[295] HPA is not the owner of any portion of the Channel. Even if HPA did own the disputed strip along the Channel, it has done nothing to attract liability in either negligence, nuisance, or the Rule in Rylands v Fletcher.

[296] The Action will be dismissed as against HPA.

VIII. Order

[297] The Court Orders that:

1. The action is dismissed as against HPA;

2. The Defendants AMD and the City are each liable in nuisance, negligence and strict liability.

3. Damages are fixed at $5,287,325.28. The City and AMD are each 50% liable for this amount;

4. There shall be a permanent and mandatory injunction against the City and AMD requiring the following in the sequence noted as soon as reasonably practical taking into account the requirements to obtain all necessary permits and approvals:

a. firstly, that the City and AMD immediately undertake the proactive preventative maintenance of the Channel in keeping with the accepted standard of practice including:

i. remove any and all obstructions from the culverts and pipes at Locations 2, 3 and 4;

ii. dredge the Sediment Basin to its refusal limit to remove all sediment and obstructions, including the sediment blocking the culverts at Location 4; and

iii. the one-time dredging of the Channel to its natural depth or refusal limit as defined in the ANA survey and removal of all other obstructions.

b. secondly, that AMD task its engineers to design (with an engineer’s stamp) a protocol for the remediation of the Channel on its property and Locations 2 and 3 to prevent flooding to National’s property whether by increasing the size of any and all culverts, pipes and/or varying their elevation or increasing the size and/or depth of the Sediment Basin and/or width of the Channel or otherwise;

c. thirdly, AMD undertake the work required by the remediation required by the design to be prepared pursuant to item b above;

d. fourthly, that both AMD and the City task their engineers with designing (with an engineer’s stamp) an annual maintenance protocol for their respective portions of the remediated Channel so as to ensure National does not flood; and

e. fifthly, both parties undertake the work as required in the annual maintenance protocol when the remediation specified in b above is complete.

5. In addition to the damages set out above, AMD shall pay punitive damages of $500,000. The City shall pay punitive damages of $400,000.

6. The parties are encouraged to agree upon appropriate costs. If the parties are not able to agree on costs, they may make brief written submissions to me (maximum five pages double-spaced, plus a bill of costs) by email to my judicial assistant at mona.goodwin@ontario.ca and to Kitchener.SCJJA@ontario.ca. The Plaintiff National may have 14 days from the release of this decision to provide its submissions, with a copy to the other three parties; the City, AMD and HPA a further 14 days to respond; and the Plaintiff a further 7 days for a reply, if any. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves. If I have not received any response or reply submissions within the specified timeframes after the Plaintiff’s initial submissions, I will consider that the parties do not wish to make any further submissions, and will decide on the basis of the material that I have received.

[298] I wish to thank all the counsel involved in this case for their patience, their professional conduct of the trial, and for their excellent written and oral submissions.

M.R. Gibson J.

Date: July 24, 2024

COURT FILE NO.: 12-36015 (Hamilton)

DATE: 2024/07/24

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

NATIONAL STEEL CAR LIMITED

Plaintiff

– and –

THE CORPORATION OF THE CITY

OF HAMILTON, ARCELORMITTAL

DOFASCO INC. and HAMILTON

PORT AUTHORITY

Defendants

REASONS FOR DECISION

M.R. Gibson J.

Released: July 24, 2024