Better Late Than Never? Court of Appeal Rules on Extending Limitation Periods in Contaminated Site Litigation

On February 6, 2019, the Alberta Court of Appeal released its decision in Brookfield Residential (Alberta) LP (Carma Developers LP) v Imperial Oil Limited, 2019 ABCA 35 (“Brookfield”). The Court of Appeal upheld the Court of King’s Bench decision where the Chambers Judge denied an application by the Plaintiff, Brookfield Residential, to extend the limitation period as permitted under section 218 of the Environmental Protection and Enhancement Act(“EPEA”). Instead, the Chambers Judge granted Imperial Oil’s application for summary dismissal, ending the action against it. In doing so, the Court of Appeal rejected a legal test for applying EPEA section 218 developed in another recent King’s Bench decision, Lakeview Village Professional Centre Corporation v Suncor Energy Inc, 2016 ABQB 288 (“Lakeview Village”), and clarified the law on this unique provision.

Brookfield Residential owns a parcel of land in south Edmonton that it intended to develop for residential purposes. In 2010, environmental testing revealed that the land was contaminated.  In 2012, Brookfield Residential brought an action against Imperial Oil and others alleging that the contamination resulted from an oil well Imperial Oil drilled on the property in 1949. Imperial Oil applied for summary dismissal on the basis that the limitation period had expired. Brookfield Residential brought a cross-application to extend the limitations period under section EPEA section 218.

Limitation periods in contaminated site litigation are subject to unique legislation. The typical timeframes for commencing an action provided for under Limitations Act do not necessarily apply.  In most cases, a party has 2 years to commence an action from when they discovered, or ought to have discovered, the circumstances giving rise to the claim, or no later than 10 years from when the wrongful act was committed in any event. EPEA section 218 gives the court discretion to extend these limitation periods in certain circumstances.

Factors the court must consider in an application under EPEA section 218 include: (1) when the contamination (adverse effect) occurred, (2) whether the plaintiff exercised due diligence in discovering the contamination, (3) prejudice to the defendant’s ability to maintain a defence, and (4) any other criteria the court considers to be relevant. Application of this provision is fact-specific and the court has discretion in how to apply it.

In its analysis, the Court of Appeal discussed the need to balance competing policy objectives found in environmental legislation, such as EPEA, against those that form the basis for limitation periods, as found in Alberta’s Limitations Act. The Court of Appeal found that EPEA reflects the objectives of “polluter pays”, and recognizes that contamination may be difficult to detect in some circumstances, where strict application of limitation periods may be unreasonable or unfair. However, those objectives need to be balanced against the rationale for limitation periods, for example, that defendants be protected from “ancient obligations”, disputes should be resolved while evidence is still available and witnesses’ memories are still fresh, and claimants ought to act in a timely manner.

Ultimately, the Court of Appeal upheld the Chambers Judge’s finding that Imperial Oil was sufficiently prejudiced in maintaining a defence that and accordingly, the limitation period should not be extended. Despite the finding that Brookfield Residential was duly diligent in discovering the contamination, the actions complained of occurred some 50 or 60 years prior to the claim being filed, and the prejudice to the defendant was the determinative factor. On that basis, Brookfield Residential’s application to extend the limitation period was denied, and the action against Imperial Oil was dismissed. The Court of Appeal found that the Chambers Judge considered the relevant factors, made no palpable and overriding error and accordingly, his discretionary decision in relation to EPEA section 218 should not be disturbed.

The Court of Appeal also took the opportunity to comment on another King’s Bench decision, Lakeview Village, and clarified the process for EPEA section 218 applications. The Chambers Judge in Lakeview Village created a test for determining if an application for extending the limitation period could appropriately be decided in a pre-trial application, or if it should be a matter for trial. However, the Court of Appeal in Brookfield rejected that approach, finding that it is inconsistent with the wording and intent of EPEA section 218. Rather, a motion to extend the limitation period should be decided in a pre-trial application, and deferring a section 218 application to trial defeats the whole purpose of the provision. The Court of Appeal expressly stated that the Lakeview Village approach should not be followed, and section 218 applications should be decided prior to trial.

The Court of Appeal’s decision in Brookfield is significant as it highlights the importance of prejudice to the defendant when considering limitation issues, and furthers the trend in Canada to resolve litigation in pre-trial summary applications, where appropriate. Additionally, the Brookfield decision clarifies the process for applications under EPEA section 218, which were subject to some uncertainty following the Lakeview Village decision in 2016.

For more information on how the Brookfielddecision may affect you, please contact Sean Parker, Gavin Fitch, Q.C., or any other member of our Energy, Environmental & Regulatory Practice Group.