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Former Northstar directors, officers reach deal with Ontario over cleanup

When it was discovered the groundwater was contaminated by their plant in Cambridge, Ont., Northstar Aerospace went about remediating it. Unfortunately, they went into bankruptcy but work had to continue. Now the provincial Ministry of the Environment is looking to go after former directors of the company after the ministry was unable to secure more funding for the cleanup.

Fred Lum/The Globe and Mail

A group of former directors and officers of defunct Northstar Aerospace Inc. has reached a settlement with Ontario's Environment Ministry over a controversial order holding them personally responsible for a $15-million cleanup of a polluted parcel of company land.

The Environment Ministry said in a statement Monday that it had reached an agreement with the former directors that will see them provide $4.75-million to cover environmental remediation at the former Northstar site in Cambridge, Ont.

The settlement is only a fraction of the $15-million the ministry had originally been seeking, but will cover the long-term management of the remediation and monitoring programs under way around the polluted land. The Environment Ministry will oversee the cleanup process at the abandoned site.

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"This is the first time the ministry has held corporate directors of a publicly traded company personally responsible for an environmental clean-up after a company has gone bankrupt," the ministry said in a statement.

"All groundwater and air remediation work will continue uninterrupted and the ministry will make sure the community remains protected."

Northstar directors had appealed the original ministry ruling holding them liable for cleanup of the site, saying it flew in the face of legal principles that limit personal liability of individuals working for an incorporated company. The negotiated settlement was reached Monday on the day an appeal hearing in the case was scheduled to begin.

The company filed for bankruptcy protection in 2011 and its assets were sold, but there was no buyer for the Cambridge land and it was abandoned. Northstar found high levels of chromium and trichloroethylene (TCE) – a known carcinogen used in metal degreasers – in the air, soil and water around the site in 2004 and spent more than $20-million cleaning up the site before it went out of business.

Since detection, 461 houses around the property have received ongoing indoor air monitoring, and many still have machines in place to extract vapours.

The Institute of Corporate Directors, which represents 7,500 corporate directors in Canada, had submitted a third-party witness statement in the case, saying the ministry's payment order set a dangerous precedent that would make people reluctant to join boards of companies with industrial land.

ICD chief executive officer Stan Magidson said in an interview earlier in October that Ontario's Environment Protection Act can hold directors liable for pollution when they were negligent, but should not hold them liable for pollution "they did not cause and could not prevent."

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Many directors on the board joined long after the pollution occurred and while it was being cleaned up. The directors argued it wasn't even clear the pollution occurred after Northstar bought the land in 1986 and may have occurred years earlier.

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About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More


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