Canada: Environmental Liabilities – Recent Quebec Case Law

Copyright 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Environmental Law, December 2008

FEDERAL COURT WILL NOTJUDGE FEDERAL CLIMATE CHANGE ACTION PLAN

The Federal Court recently dismissed three applications by the environmental group Friends of the Earth (FOE) for orders against the federal government and the federal environment minister in connection with implementation of the Kyoto Protocol. In each instance, FOE asked the court to order the government to fulfill its obligations under the Kyoto Protocol Implementation Act (2007) (KPIA). FOE maintained that the government had failed to adopt a plan and regulations under the KPIA that would allow it to honour its commitments under paragraph 3.1 of the Kyoto Protocol (greenhouse gas emissions reduced to 6% below 1990 levels by 2008-2012).

The court noted that the KPIA came to Parliament as a private member's bill (Bill C-288) and therefore does not and cannot authorize the expenditure of money. It observed that if the intent of the act was to ensure that the Government of Canada complied strictly with Canada's obligations under the Kyoto Protocol, "the approach taken was unduly cumbersome." It pointed to the repeated use of the words "shall ensure" and indicated that this is not the same as "shall", the word normally used to impose on the government an enforceable duty to act. The court also noted that while it can enforce the government's obligation to adopt a climate change plan, it cannot venture to assess the merits of such a plan without exceeding its jurisdiction. Given the act's many policy-laden, "non-justiciable" provisions (absence of objective legal criteria which can be applied and no facts to be determined which would allow a court to decide whether compliance had been achieved) and the fact the act requires annual reporting to Parliament, the court found that implementation of the KPIA is intended to be subject to political, rather than judicial, oversight.

PROVINCIAL ORDER TO CLEAN MUNICIPAL WASTE WATER: BENEFICIARIES PAY

The Superior Court of Quebec has dismissed an application brought by homeowners in Sept-Îles who claimed that the municipality was shifting to them the cost of an effluent clean-up order it had received from the Quebec environment ministry. The court confirmed that residents are not subject to complying with the provincial order. However, they are directly responsible for complying with Quebec's 1981 Regulation respecting waste water disposal systems for isolated dwellings (the Regulation), whose enforcement has been delegated to Quebec municipalities by government decree. That is so even if, as in this case, the municipality only announced that it would begin enforcing the Regulation after it received the provincial clean-up order in 2002.

In 2002, in the face of growing concerns regarding groundwater and surface water quality at the eastern end of the Town of Sept-Îles, the Quebec environment minister ordered the town to extend its drinking water system into the area and to table a clean-up plan for the part of the sector that is not connected to the municipal sewer system. The town prepared a plan that included inspecting all the septic systems in the area and requiring residents to bring systems into compliance with the Regulation. A majority of residents whose systems had been inspected and found to be deficient signed undertakings which stated that the town would take no enforcement action against them under the Regulation provided their septic systems were upgraded by a certain date. Others refused to sign an undertaking and applied for a declaration from the Superior Court that the order issued by the Quebec environment minister and the clean-up plan tabled by the municipality did not bind them. Those who had signed undertakings joined in the action and asked to have the undertakings declared invalid. In turn, the municipality applied for an injunction to force the homeowners to comply with the Regulation. The injunction was granted. The citizen's application was dismissed.

It is noteworthy that the municipality had received federal and provincial funding to extend its sewer system into part of the sector, known as the Beaches. Residents of the other part of the sector, where population density is too low to be eligible for federal and provincial infrastructure subsidies, were forced to upgrade their septic systems so that the municipality could comply with the provincial clean-up order. Reminding the plaintiffs that the prohibition against polluting applies to everyone, the court noted that residents of the Beaches, whose dwellings had recently been connected to the sewer system, have to pay a special tax to offset part of the project costs.

Enforcing the Regulation against owners of homes in outlying areas is one of the conditions imposed by Quebec on municipalities that wish to access federal-provincial infrastructure funding to upgrade their wastewater treatment systems. We can therefore expect more disputes of this kind as home and cottage owners around the province are notified that non-compliance with the Regulation is no longer an option, and that they will have to pay for the upgrades themselves.

UNAUTHORIZED WASTE DISPOSAL: MUNICIPALITY LIABLE FOR DAMAGES

In a decision that is currently under appeal, the Superior Court of Quebec has awarded damages to landowners whose properties continued to be used for municipal waste disposal purposes after the municipality's lease expired (and before the properties were expropriated).

Part of the municipal waste disposal site ran alongside private properties and encroached on them. The municipality leased the lands it encroached on. Around the year 2000, the leases were nearing expiry but the owners refused the municipality's offers to purchase and declined to negotiate new leases. After the leases expired, the municipality continued to dispose of waste on the private properties for about two years, after which the properties were expropriated. The Superior Court held that the owners are entitled to compensation for the moral and material damage they have suffered by reason of the unauthorized occupation of their land during the period between the expiry of the leases and the date the expropriation took effect. The court rejected the municipality's claim that the owners are entitled only to indemnification (basically, rent), rather than damages (compensation for loss of the use of their properties and distress caused by the disdainful/secretive attitude of municipal employees). It underscored that the right of property is a right protected by the Quebec Charter of Human Rights and Freedoms. Further, the court calculated the compensation to which the owners are entitled on the basis of profits made by the municipality (price charged per ton of waste disposed of minus operating costs) rather than the value assigned to the properties during the expropriation process.

SOIL DECONTAMINATION DOES NOTENTITLE THE SERVICE PROVIDER TOALEGAL HYPOTHEC

In September 2008, the Superior Court of Quebec granted a real estate developer's motion to cancel a legal hypothec for construction (akin to a construction lien) that an environmental services firm had registered against the developer's lands. After studying articles 900 and 902 of the Civil Code of Québec (defining immovables) and articles 2726 and 2728 concerning construction hypothecs, the court held that no legal hypothec for construction existed in this case because of the absence of a connection between the service rendered (offsite soil remediation) and the construction of the immovable. The court acknowledged that the removal and offsite treatment of the soil added value to the immovable. Indeed, no development project could have gone forward had the soils remained in place. However, the contaminated soil, once remediated, was not returned to the site, as this is prohibited under applicable environmental rules. Because the soil was not returned to the immovable, the legal hypothec was not created.

Assessing and remediating contaminated sites prior to reuse has been the law in Quebec since 2003. Legislative change may eventually be needed to protect those who make compliance possible by taking delivery of, and decontaminating, the soils from Quebec's legacy sites.

HIDDEN DEFECTS: HOME BUILTON OLD LANDFILL

In June 2008, the Superior Court of Quebec granted an action concerning hidden defects and canceled the 2004 sale of a home built on a site used in the 1950s and '60s to burn and bury domestic waste. Under the Environment Quality Act (Quebec) (EQA), no one may carry on construction work on a former landfill without an authorization from the Ministry of Sustainable Development, Environment and Parks. The 2004 sellers (who did not know about the landfill) and the previous (2001) sellers (who did know about it but did not obtain an EQA authorization) were held solidarily (jointly and severally) liable for the reimbursement of the purchase price. The 2001 sellers were also held liable for damages claimed by the plaintiffs, and for reimbursing all expenses incurred by the 2004 sellers in connection with the lawsuit. Under the Civil Code of Québec, a plaintiff must establish that it would not have purchased the home or would have paid a lower price, had it known about the defect. It is not necessary to prove that the seller knew about the defect and, in this case, the 2001 sellers did not. The plaintiffs established that the site contained contaminants in concentrations above those that apply to residential immovables, and that the cost of replacing waste on the property with clean soil was almost equal to the C$160,000 purchase price of the home. The court accepted the plaintiffs' testimony that the defect – which prevented them from allowing their child to play outside – was serious enough to warrant cancelling the sale.

This decision is a reminder that liability for latent defects exists regardless of whether a seller is in good faith – in other words, even if the seller is unaware of the defect. Given the large number of former dumps and landfills in and around cities and towns in Quebec, investors should proceed with caution when assessing vacant land for development purposes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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