Canada: A Summary Of Canadian Natural Resources Limited v. Wood Group Mustang (Canada) Inc., 2018

Last Updated: December 13 2018
Article by Jeffrey E. Sharpe, Andrew F. Sunter and Robert Martz

Areas of Law: Torts; Negligence; Pipeline; Environmental Damage; Apportionment of Fault

~The apportionment of liability between joint tortfeasors is a mixed question of fact and law and so long as the law is correctly stated it should not be disturbed on appeal unless it reflects palpable and overriding error~

The Appellant, Canadian Natural Resources Limited ("CNRL") built a buried 32 km emulsion pipeline between its Primrose East Plant and its Wolf Lake Plant. The pipeline was intended to carry an extra-hot mixture of bitumen, hot water, and steam. The pipeline had a life expectancy of 30 years, but failed after three months of operations due to flawed design and operation error. The Appellant retained the Respondent, IMV Projects Inc., to provide engineering advice on design and construction, while Shaw Pipe supplied the pipe system and Flint Field Services installed it. The Appellant sued all three of the other companies, ultimately settling with Shaw and Flint. The evidence showed that all four companies were in some respects negligent. This was also the finding of the trial judge after a three-month trial in which the Respondent was the sole defendant, and her conclusion on that point disclosed no reviewable error. The judge found that the pipeline failed after the Appellant sent emulsion through it at higher temperatures than it was designed to bear over a ten-day period. The heat of the emulsion caused the pipeline's insulation to crack. Water was then able to seep from the surrounding ground through the cracks to reach the pipeline metal, instantly vapourizing. The heated metal then shifted, causing a risk of breaking and leakage of bitumen. The resulting water vapour further degraded the insulation, and this cycle repeated until the pipeline was unusable. The judge found that the Appellant had neither advised its operators as to the maximum temperatures at which the line could safely operate, nor provided them with guidance on actions to take in an emergency. She concluded that the Respondent had failed to take into account the maximum temperatures that the pipe's insulation could bear during the design process. She found that Shaw should have been aware of the critical importance of the insulation layer remaining watertight and should have so advised the parties. She further found that Shaw materially misrepresented the insulation to be good to 140°C. Finally, she found that Flint failed to follow specifications designed to ensure stability in the installation of the pipeline. The judge allocated 50% responsibility to the Appellant, 20% to the Respondent, 25% to Shaw, and 5% to Flint. The apportionment of responsibility gave rise to these appeals.

APPELLATE DECISION

The appeal was allowed in part. The apportionment of liability between joint tortfeasors is a mixed question of fact and law and so long as the law is correctly stated it should not be disturbed on appeal unless it reflects palpable and overriding error. The same test applies to findings on causation. The Appellant submitted that the over-temperature event accelerated damage inherent in the background vulnerabilities of the pipeline. There was ample evidence that the pipeline was beginning to fail before the blowout, and it was obvious that water had penetrated the outer waterproof jacket even under normal operating conditions. All of this evidence, and the inconsistent findings arising from it, demonstrated a palpable and overriding error in the trial judge's conclusion that the pipeline was not "stewing" or a "crumbling skull". This bore directly on the apportionment of fault to Shaw and the Respondent. In the majority's view, the Respondent's acts of negligence in how it carried out its engineering work on the pipeline project lay at the very core of its duty to its client and reflected a significant degree of fault. Both Shaw and the Respondent should have been or become aware of the vulnerability of the system to water penetration, and both had a responsibility to ensure that the system chosen by their client was reasonably fit for its intended purpose. The majority reapportioned responsibility so that the Appellant was 25% at fault, the Respondent 35%, Shaw 35%, and Flint 5%. The Respondent cross-appealed the ruling of the trial judge that certain documents were not admissible in evidence as "documents in possession" under an exception to the hearsay rule. It argued that if these documents had been properly admitted for the truth of their contents, they would demonstrate that Shaw was more at fault than was found at trial. The majority held that the trial judge did not err in refusing to admit the documents.

Bielby JA dissented in part. She would have dismissed the appeal in its entirety, as she found that the majority's revised apportionment had no more logical merit than that of the trial judge. The trial judge heard months of evidence, and the relative blameworthiness of each of the parties in relation to the other was best assessed by the trial judge. There was no palpable and overriding error in the apportionment of fault.

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Originally published by Take Five, OnPoint Legal Research .

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