Supreme Court Decision

Supreme Court Decision has Major Implications for Canadian Industry

GLOBE-Net (November 24, 2008) - In a move that could have far reaching implications for Canadian industry, the Supreme Court of Canada has issued a decision that would require companies to compensate nearby neighbours for ’excessive annoyance’ even if they have complied with all applicable rules and regulations.

The unanimous judgment by the Court puts an end to a long-running battle between St. Lawrence Cement Company and people living near its plant in Beauport, Quebec.

A group of over 2,000 nearby residents initiated a class-action suit in 1993, alleging that the St. Lawrence Cement plant was spewing excessive amounts of residue on their homes, and that odours and noise associated with its operation was devaluing their properties. The company shut down the plant in 1997 after spending over $8 million between 1991 and 1995 to install new furnace scrubbers, and had appointed a director of environmental affairs to deal with the many complaints it was receiving.

The Supreme Court recognized that St. Lawrence Cement did not commit any fault in the performance of its activities. But it held that the company is still liable on the grounds that its activities caused ’abnormal or excessive annoyances to the neighbourhood.’

The Court referenced article 976 of the Quebec Civil Code (C.C.Q.), noting that no proof of faulty behaviour is required to establish the liability of an owner who caused excessive neighbourhood annoyances.

The Article sets a limit on property rights by providing that a landowner may not impose abnormal or excessive annoyances on its neighbours, but that limit depends on the results of an act committed by an owner, not on an owner’s conduct.

In effect, although the company followed the rules in place during this period and did all the right things as a good corporate citizen, it was still liable for the consequences of its operations.

As noted by the Quebec Business Council on the Environment, this scheme of no-fault liability regarding neighbourhood disturbances is consistent with the approaches taken in Canadian common law and in French civil law. "What is more, such a scheme is consistent with general policy considerations, such as the objective of environmental protection and the application of the polluter pay principle" noted justices Marie Deschamps and Louis LeBel in the unanimous decision.

As such, the implications of the St. Lawrence Cement decision will have relevance in all other provinces, and could motivate citizen groups to sue companies in their neighbourhoods that are causing ’excessive’ environmental annoyances.

"The result is that future environmental nuisance claims will be more easily proven under a no-fault regime, and polluters will have even more incentive to clean up their act to avoid being sued by their neighbours," said Will Amos, a lawyer for the University of Ottawa Ecojustice Environmental Law Clinic, who was quoted in a November 20, 2008 Canwest News Service.

Paul Cassidy, one of Canada’s leading experts on environmental issues (Blake, Cassels & Graydon LLP) noted to GLOBE-Net that "this decision highlights the increased liability risk in Canada posed by environmental class actions and is yet another clear message from the court that companies must employ a high level of environmental due diligence program in their operations."

At common law, nuisance is defined as unreasonable interference with the use of land. Whether the interference results from intentional, negligent or non-faulty conduct is of no consequence provided that the harm can be characterized as a nuisance. The interference must be intolerable to an ordinary person. This is assessed by considering factors such as the nature, severity and duration of the interference, the character of the neighbourhood, the sensitivity of the plaintiff’s use and the utility of the activity.

The Supreme Court decision upheld an earlier ruling of the Quebec Superior Court, which absolved St. Lawrence Cement of wrongdoing, but which nonetheless ordered the company to pay about $15 million in damages to the residents that had suffered excessive annoyance from its operations. A lower court decision had also found the company liable in the absence of fault, but limited the scope of class-action by restricting damages to homeowners, and excluding tenants and family members from claims. The Supreme Court rejected this.

In a November 20^th statement acknowledging the Supreme Court decision, St. Lawrence Cement said it was pleased the Court recognized the company committed no fault in operating the Beauport cement plant prior to its decommissioning in 1997.

However, the company noted "the implications of today’s confirmation by the Supreme Court of Canada that a no-fault liability regime does exist in the Province of Québec may have far reaching implications for Canadian industry. This precedent setting decision will require further review and detailed analysis, not only by SLC, but by all potentially impacted Canadian companies, in order to better understand our obligations consequent to this ruling."

The company notes community advisory boards are in place for its cement plants, and regular community open houses are held to demonstrate how its processes and technologies work. The company employs approximately 3,000 Canadians, generates annual revenues over $1.5 billion, and operates in more than 50 Canadian communities