Companies, not the government authorities have to shoulder the cost of complying with environmental orders.

In 1985, the Provincial government of Ontario granted an indemnity to Reed Limited and Great Lakes Forest Products Limited, the former owners of Dryden Mills (a paper and pulp mill) and their successors and assigns. The Indemnity covered all the previous pollution claims including mercury pollution. Over time, the ownership of the mill constantly changed from one company to another.

When after twenty six years the Ministry of Environment and Change issued an order to Resolute (the corporate successor of Great Lakes) and Weyerhaeuser (who owned the property for some time) for the maintenance of the mercury waste disposal site at Dryden Mills. Both Resolute and Weyerhaeuser in response, filed for an action with the Superior Court seeking a declaration that according to the terms of the Indemnity, Ontario had to compensate them for acting according to the order of the Ministry. The motion judge held that both the parties were entitled to compensation from the government of Ontario who appealed against this order.

At the Court of Appeal, the majority agreed with the decision of the motion judge but stated that Resolute could not claim indemnity and asked the lower court to determine if Weyerhaeuser could claim it. Subsequently, when the case was heard in the Supreme Court, the following decision was arrived it:

According to the majority judgment, it was held that they both had to cover costs of complying with the order of the Ministry. The bench felt that the motion judge had committed an error in interpreting the facts and thus they could change the decision made by him. They stated that if the contract was read in the context of two indemnities given by Ontario in 1979 and 1982, it was clear that it referred to new pollution claims only. Since there were no recent leaks, the pollution was not recent and that the Indemnity only covered ‘new’ pollution. Moreover, the agreement was not made to cover claims between the government and the companies, it was meant to cover claims by third parties only. Finally, Ontario’s appeal was allowed and a summary judgment was granted in its favour, with costs throughout. The appeals of Resolute and Weyerhaeuser were thereby dismissed.