On November 20, 2008, the Supreme Court of Canada rendered a judgment in St. Lawrence Cement Inc. v. Barrette.1 As this is the first time the Supreme Court has ruled on an environmental class action originating in Québec, this was one of the most eagerly awaited and important decisions in environmental law in the province.
Reminder of the facts and previous judgments
St. Lawrence Cement operated a cement plant in Beauport 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, in particular, that St. Lawrence Cement was operating 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 suffered due to the dust, noise and odours emitted by the cement plant.
In a judgment rendered on May 9, 2003,2 Justice Dutil of the Superior Court had concluded that there was an absence of fault on the part of St. Lawrence Cement. According to Justice Dutil, the cement plant was operating in accordance with the environmental standards in force, in particular with respect to maintenance of its dust-collection system. Nonetheless, the cement plant’s operations caused abnormal neighbourhood annoyances that were beyond the limits of tolerance. According to Justice Dutil, this finding was sufficient to impose civil liability on St. Lawrence Cement regardless of any 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."
Justice Dutil ordered St. Lawrence Cement to pay damages to its neighbours to compensate them for the annoyances that they had suffered.
However, Justice Dutil’s decision was overturned by the Québec Court of Appeal in a unanimous judgment rendered on October 31, 2006.3 In a ruling written by Justice Pelletier, the Court of Appeal affirmed that Article 976 C.C.Q. does not constitute a no-fault personal liability regime. Instead, this provision creates [TRANSLATION] "a passive, universal, reciprocal and real obligation to respect property rights resulting from neighbourliness." The mere presence of abnormal annoyances does not constitute a fault and does not result in an owner’s personal liability to its neighbours.
Moreover, the Court of Appeal stated that a breach of the obligations of good neighbourly conduct could not serve as a basis for a class action. Indeed, while neighbourhood obligations attach to the land, class actions are, "by definition," a procedural vehicle limited to personal remedies.
The Court of Appeal held that St. Lawrence Cement committed a fault by omitting to [TRANSLATION] "ensure that its [antipollution] equipment was in good working order at all times and was functioning optimally during production hours," in violation of Section 12 of the Regulation respecting the Application of the Environment Quality Act.4 According to the Court of Appeal, this section imposes a very high standard on industries, similar to an obligation of result. The Court of Appeal thus upheld the judgment against St. Lawrence Cement on the basis of fault and somewhat reduced the amount of damages awarded by the Superior Court.
The Supreme Court decision
In a unanimous decision rendered by Justices LeBel and Deschamps, the Supreme Court of Canada fully reinstated the Superior Court judgment against St. Lawrence Cement for damages in favour of the neighbours of the former cement plant.
The Supreme Court first stated that in Québec civil law, the violation of a statutory standard ? particularly in zoning and environmental matters ? does not constitute civil fault. Such an offence will only be considered a fault if there has been negligence or carelessness in the specific circumstances of each disputed act or conduct pursuant to the general rules of civil liability set out in Article 1457 C.C.Q. This standard of conduct corresponds to an obligation of means, not of result. The Supreme Court reinstated the Superior Court decision to the effect that St. Lawrence Cement did not commit a fault with regard to Section 12 of the Regulation respecting the Application of the Environment Quality Act.
The Supreme Court affirmed the existence of a no-fault liability regime based on the obligations of good neighbourliness set forth in Article 976 C.C.Q. An owner can incur personal liability when his conduct, without necessarily being faulty, causes abnormal or excessive annoyances to his neighbours. Beyond the legal arguments justifying this conclusion, the 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 notion of neighbourhood, while recognizing that "a certain geographic proximity between the annoyance and its source" is required. According to the Supreme Court, Article 976 C.C.Q. can be invoked by all residents of the neighbourhood affected by the company’s activities, regardless of whether they are owners, lessees or occupants, or whether they are immediate or more distant neighbours.
Finally, the Supreme Court rejected the position supported by the Québec Court of Appeal, and affirmed that a breach of the obligations of good neighbourliness can serve as the basis of a class action. Recognizing the difficulty of 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, even for economic losses awarded to compensate for painting expenses made necessary by the presence of cement dust.
The Supreme Court recognized the existence of a no-fault liability regime for neighbourhood disturbances, based on the abnormal or excessive character of the damages caused to an industry’s neighbours, even if the company complies with all applicable regulatory standards. This liability regime focuses more on the consequences of the activities for the neighbours than on the company’s conduct. The Court does not set guidelines or criteria to define abnormal annoyances and it defers to the trial judge’s discretion for an appreciation of the facts.
This introduces greater uncertainty as to the adverse economic consequences to which an otherwise compliant industrial activity can give rise. In practical terms, the trial judge will appreciate the circumstances in which civil damages may be awarded even if there is no breach of regulatory duties and no civil fault. This brings civil law closer to the common law concept of nuisance.
Common law cases could serve as useful guidance to determine the abnormal and unacceptable character of impacts. Courts should still look upon applicable regulatory standards as a strong indicator to set the threshold beyond which annoyances give rise to civil damages.
This Supreme Court decision will have important repercussions in environmental law and class action matters in Québec and will likely serve as a catalyst for citizens’ suits against industries. It remains to be seen whether this landmark case will have an impact beyond Québec boundaries. This decision also underscores the importance of measuring environmental performance from the community’s point of view and of deliberately creating effective communication links with the community.