Supreme Court of Canada Recognizes No-Fault Liability Scheme in St. Lawrence Cement
St. Lawrence Cement operated a cement plant in Beauport, Québec between 1955 and 1997. Class action proceedings had been filed against the company in 1993 on behalf of a group of occupants and property owners residing in the neighbourhood of the cement plant, alleging that St. Lawrence Cement operated its plant in a faulty manner. The petitioners also maintained that the company had not honoured its obligation of good neighbourly conduct and claimed damages for the harm caused due to the dust, noise and odours emitted by the cement plant.
As discussed in an earlier edition, the Superior Court of Québec concluded that the cement plant was operated in accordance with the environmental standards in force. Nonetheless, the Superior Court found that the cement plant’s operations caused abnormal neighbourhood annoyances that were beyond the limits of tolerance. This situation would have given rise to a finding of civil liability against St. Lawrence Cement regardless of fault, on the basis of Article 976 of the Civil Code of Québec (C.C.Q.), which provides that:
Neighbours shall suffer the normal neighbourhood annoyances that are not beyond the limit of tolerance they owe each other, according to the nature or location of their land or local custom.
The trial judge ordered St. Lawrence Cement to pay damages to its neighbours to compensate them for the annoyances they had suffered.
This decision was overturned by the Québec Court of Appeal in 2006, when the Court of Appeal concluded that Article 976 C.C.Q. did not constitute a no-fault personal liability scheme. The Court of Appeal also held that a breach of the obligations of good neighbourliness could not serve as a basis for a class action, as the class action is a procedural vehicle limited to personal remedies.
The Supreme Court decision
On November 20, 2008, the Supreme Court of Canada unanimously reinstated the Superior Court judgment against St. Lawrence Cement for damages in favour of the neighbours of the former cement plant.
While reinstating the Superior Court’s finding that St. Lawrence Cement did not commit a fault with respect to the applicable statutory environmental standards, the Supreme Court affirmed the existence of a no-fault liability scheme based on the obligations of good neighbourliness set out in Article 976 C.C.Q.
An owner can incur personal liability when his conduct, without necessarily being at fault, causes abnormal or excessive annoyances for his neighbours.
The Supreme Court noted that "the acceptance of no-fault liability furthers environmental protection objectives" and "also reinforces the application of the ‘polluter pays’ principle."
The Supreme Court adopted a "liberal interpretation" of the concept of neighbourhood that would encompass all residents of the neighbourhood affected by the company’s operations, regardless of whether they are owners, lessees or occupants and whether they are immediate or more distant neighbours.
Finally, the Supreme Court affirmed that a breach of the obligations of good neighbourliness can serve as the basis of a class action. Recognizing the difficulty of a precise appraisal of the damages suffered due to environmental annoyances within the context of class actions, the Supreme Court approved the establishment of average damages based on zones determined by the court, including economic damages awarded to the owners to compensate for the extra painting work made necessary by the presence of cement dust.
McCarthy Tétrault Notes:
The Supreme Court recognized the existence of a no-fault liability scheme for neighbourhood disturbances, based on the abnormal or excessive character of the damages caused to an industry’s neighbours, even if a company complies with all applicable regulatory standards. This liability scheme focuses more on the consequences of the operations for the neighbours than on the company’s conduct. However, the court does not set any guidelines to define abnormal annoyances, but rather defers to the trial judge for an evaluation of the facts.
The no-fault liability scheme recognized by the Supreme Court introduces greater uncertainty regarding the potential liability of an otherwise compliant industrial activity. In practical terms, it will be for the trial judge to determine the circumstances in which civil damages may be awarded even if there is no breach of regulatory duties and no civil fault. This brings the civil law closer to the common law concept of nuisance.
This Supreme Court decision will have repercussions in environmental law and in class action matters. The St. Lawrence Cement ruling is likely to serve as a catalyst for lawsuits filed by citizens against industries due to the annoyances caused by their activities, but it remains to be seen whether this landmark case will have an impact outside Québec.
A longer version of this article was published as a McCarthy Tétrault Legal Update in December 2008.