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Article

Contaminated Sites: Starting Point of the Prescriptive Period for an Action in Damages

Date

April 20, 2011

AUTHOR(s)

Michel Gagné
Jérémie-Nicolas Moisan
Chantal C. Tremblay


In civil liability cases, prescription is a serious argument for the defence that is always worth exploring. The difficulty a defendant usually comes up against, however, is determining the starting point for computing the prescriptive period. According to a recent Superior Court ruling in Investissements Intergem inc. c. Ultramar Canada inc.1, the prescriptive period may be running even if a plaintiff does not know the exact extent of an injury.

Facts of the case

The plaintiff Investissements Intergem inc. (Intergem) brought an action for latent defects against defendant Ultramar Canada inc. (Ultramar), claiming $247,137.87 for damages resulting from contamination of a site acquired in 1986. Intergem purchased the property from Ultramar, which had bought it from Gulf a few months earlier. The contaminated site was located in an industrial and commercial zone bordering the Outremont railroad yard and subject to the C criteria of the Soil Protection and Rehabilitation of Contaminated Sites Policy (Ministère du Développement durable, de l’Environnement et des Parcs) (Policy). At the time of purchase, the building was vacant but Intergem knew that it had been used to store automotive parts and accessories and also that it had been owned by Gulf and Ultramar, both of which sell and distribute petroleum products. Intergem was, however, not aware of any activity related to the storage, sale or distribution of petroleum products on the site.

In summer 1999 Intergem decided to remove a tank that had not been used since a heating system was converted from oil to natural gas in 1997. In his July 1999 report the consultant hired by Intergem reported the presence of hydrocarbon contamination above the limit allowed under the Policy’s C criteria. Despite this report, Intergem did not consider it necessary to investigate the environmental problem further or to inform Ultramar of this discovery. Finally in August 2002, since it wanted to sell the building, Intergem hired a consultant to do the rehabilitation work that had been suggested in 1999. Seeing the amount of rehabilitation work required, Intergem finally informed Ultramar verbally of the situation and followed up with a written notice on September 18, 2002. Ultramar disclaimed any liability related to the site contamination. The work continued until March 2004. A report confirming that the soil complied with the applicable environmental regulations was finally issued on May 11, 2004.

Intergem brought an action against Ultramar on December 14, 2004. Ultramar contested it, arguing among other things that it was prescribed since the plaintiff had known of the contamination since 1999. For its part, Intergem claimed that it wasn’t until 2002 that the injury became really apparent, when it discovered how much work was required to be done. The main issue in dispute was thus whether Intergem’s action was prescribed or not.

Ruling

Intergem’s suit was dismissed by Justice Geneviève Marcotte, who ruled that it was prescribed. After reviewing the general principles applicable to prescription in the Civil Code of Québec, Justice Marcotte stressed the importance of distinguishing between knowing that an injury exists and knowing the extent of the injury. It is not necessary to know the full extent of the injury for the prescriptive period to begin to run: [unofficial translation]

(41) Both doctrine and jurisprudence recognize that extinctive prescription begins to run as soon as there is knowledge of the injury, even if the actual extent of the damages is not known at the time. They also distinguish between an injury that appears gradually and an injury the extent of which the victim is unaware of.

(42) In Axa Assurances c. Coopérative Fédérée du Québec, the Superior Court ruled on the starting point of the prescriptive period in an action for latent defects resulting from site contamination. It noted the distinction between the injury stemming from contamination of the property and the resulting damages, as shown in the following extract:

[88] At the start of the proceedings, the Coopérative brought a motion to dismiss by reason of prescription of the extra-contractual subsidiary action on which the Court had reserved judgement.

[89] In its argument, the Coopérative again raised the prescription of the action. It maintained that the right of action arises when there is fault and injury and a causal connection between the two.

[90] The fault alleged by Axa was committed during the installation in 1976 and no later than May 18, 1982 when the equipment was removed from the Pavages Chenail property. The injury was the contamination of the Pavages Chenail soil and the water table. The decontamination costs were the damages to remedy the injury suffered. (…)

[96] Furthermore, Axa could not invoke the doctrine of progressive damages because a distinction had to be made between the "injury" and "damages." Injury is the harm caused to another person’s rights while damages are the monetary compensation for the injury suffered. The Coopérative reasoned that the prescriptive period began when the victim knew that it had suffered a definite injury and not when it was able to assess the injury. (…)

[107] Continental explained that Pavages Chenail’s action against the Coopérative stemmed from the finding that there was infringement of the dutyspecified in the Act. The other aspect was a practical aspect concerning the amount, such as often comes up in claims for personal injuries where the extent of the real injury is not known.

[108] The Court was convinced by the arguments presented by the Coopérative and Continental and concluded that the subsidiary action was prescribed.2

Justice Marcotte therefore found that Intergem’s action was prescribed since, from the summer of 1999, it had had all the information it needed to conclude that contamination existed. The 1999 report noted contaminated soil in various places and recommended its removal. From 1999 on, Intergem could not be unaware of the injury:

(…) Its ignorance of the exact extent of the work does not enable it to claim that the injury only became really apparent in 2002 or to invoke the impossibility to act in order to suspend the prescription.

In the Court’s opinion, since the injury appeared in July 1999, Intergem’s action initiated in December 2004 is prescribed and must be dismissed.3

Comments

This ruling confirms that a plaintiff’s knowledge of an injury establishes the starting point for computing the prescriptive period, even if the actual extent of the damages may not be known. This is particularly important in site contamination cases where it may be necessary to get additional appraisals to pinpoint, for example, the area of contamination and type of contaminants involved. According to the principles in this case, a plaintiff could have difficulty justifying a delayed action on the grounds that it needed to investigate an environmental problem that it knew about.

Nevertheless, the issue of extinctive prescription is generally very contentious since the starting point for computing the prescriptive period may also depend on the type of damages suffered by a party. In environmental cases, the question thus arises of knowing if one is dealing with a gradual or progressive appearance of an injury or, alternatively, a continuous and uninterrupted appearance of an injury. This question was examined by the Court of Appeal in the Foyer du Sport inc. c. Coop Fédérée4 ruling as follows:

In the first case, prescription begins to run on the day when the injury appears for the first time. In the second case, however, authors Baudouin and Deslauriers state that since "it concerns […] the same injury which, rather than appearing at one and the same time, is perpetuated, usually because the fault of the one causing it also extends over time," the prescription begins to run each day, with each wrongful act.5

While the trial court had allowed a motion to dismiss on the grounds that the action was prescribed, the Court of Appeal deemed that the case should be heard since it thought "that the issue of the continuous or periodic dissemination of hydrocarbons, which has an impact on the nature of the injury (gradual or continuous) and consequently also on the starting point of prescription, warrants being argued in depth."6 Even if the outcome of this case is still not known, the Court of Appeal’s position indicates that the starting point of the prescriptive period related to a contamination problem whose source has not dried up may still be an issue that could be argued on the basis of the facts of each case.

Finally, although Justice Marcotte found that Intergem’s action was prescribed, she also pointed out that Intergem had not presented expert evidence regarding the origin of the contamination, merely arguing that it had not engaged in any activity likely to be the cause of the contamination since 1986. In its defence, Ultramar had raised the possibility of contamination by migration from the neighbouring site, the Outremont railroad yard. Justice Marcotte noted that Intergem had not met its burden of proof that the contamination had existed at the time of purchase and failed to present sufficient evidence in response to Ultramar’s hypothesis. In this regard, Justice Marcotte’s position is similar to that of the Court of Appeal‘s recent ruling in Michaud c. Équipements ESF inc.7, namely that in environmental cases expert evidence is usually necessary in order for the plaintiff to meet its burden of proof.


1 2011 QCCS 1571

2 Id., s. 41 and 42.

3 Id., s. 51 and 52.

4 2008 QCCA 381

5 Id., s. 15.

6 Id., s. 17.

7 2010 QCCA 2350

Expertise