Environmental Law for Business: Consultant Liability


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Environmental Law for Business: Consultant Liability

  1. 1. Environmental Law forBusiness:Consultant LiabilityyThursday, June 13, 2013
  2. 2. Obligations and Liabilities d hunder the Professional Engineers ActProfessional Engineers Act
  3. 3. professional dutyp ylegislationt tcontract
  4. 4. duty to public welfare is tparamount
  5. 5. Definition of professional engineering“safeguarding of life, health, property, safeguarding of life, health, property,economic interests, the public welfare or the environment”welfare or the environment
  6. 6. DisciplineActions taken against licence or C of A holders due to alleged issues of professional misconduct or incompetenceProsecuted within PEO (Discipline Hearing)Hearing)
  7. 7. Professional MisconductProfessional Misconduct• A practitioner is guilty of professional misconduct if:a. the practitioner has been found guilty of an offence that is relevant to their suitability to practiceb. the practitioner is guilty of professional misconduct as defined in the Regulations
  8. 8. • Section 72 of Regulation 941 defines actions andSection 72 of Regulation 941 defines actions and conduct that constitute professional misconduct Negligence Failure to act to correct or report a dangerous situation Failure to comply with applicable codes, standards, etc. Sealing a final document without having actually prepared or checked it Undertaking work outside your experience and training Undertaking work outside your experience and training  Failure to disclose a conflict of interest Permitting or assisting illegal practiceg g g p Harassment
  9. 9. IncompetenceIncompetence• Section 28(3) of the Acta. Serious lack of knowledge, skill or judgment, or disregard for the public welfare to an extent that demonstrates the person is unfit h ibili i fto carry out the responsibilities of a professional engineerb Ph i l t l diti di db. Physical or mental condition or disorder
  10. 10. PenaltiesPenalties• Section 28(4) of the Act gives the Discipline ( ) g pPanel powers to impose specific penalties if a practitioner is found guilty revoke or suspend a licence or C of A revoke or suspend a licence or C of A impose terms, conditions or limitations on a licence or C of A assign exams or a course of study assign exams or a course of study reprimand, admonish or counsel the licence holder impose fines / award costs order publication in summary or in detail, with or without names
  11. 11. Thank youBernard EnnisProfessional Engineers OntarioTel: 416‐840‐1079Tel: 416‐840‐1079bennis@peo.on.ca
  12. 12. Liability in Tort andLiability in Tort andContractGatlin SmeijersA i t G li L fl H d LLPAssociate, Gowling Lafleur Henderson LLP
  13. 13. Civil LiabilityTORT ClientTORT NegligenceClient3rd PartiesDuty of CareCONTRACT Breach of ContractLimitation of LiabilityClientPrivity of Contract
  14. 14. NegligenceForeseeability Expectationsl dAlternativesKnowledgeandControl
  15. 15. Ontario (MTO) v. CH2MServicePurpose was to determine:• Presence and extent of PHC contamination• Presence and location of USTUSTUSTServiceStationPresence and location of USTMethods:• Relied on map from former operatorMW1UST Relied on map from former operator• Completed soil vapour survey• Two boreholes and soil/groundwatersamplingUSTMW2UST Breaches of Standard:• Failed to consult Fire Insurance Plans• Borehole locations not based on vapoursurveysurvey• Failure to perform proper QA/QC
  16. 16. Contract
  17. 17. Simons v. Diagnostic Engineering“total liability, in theaggregate… shall notFacts• Oral contract to determine if house had mold problem• Engineer requested client to sign “Service Agreement”exceed the projectcosts, as invoiced to theclient..”g q g gprior to testing• Engineer erroneously told client that there was a moldproblem• Actual results showed no problemp• Client spent large sum of money needlesslyremediatingFindings of CourtNot Enforceable:•Sufficient notice of limitationFindings of Court• Consultant fell below standards requiredunder contract and was therefore in breachof the contract•Sufficient notice of limitationnot given•Not clear if specific breachwas covered by exclusion
  18. 18. The Red Hand RuleS l hi h I hSome clauses which I have seenwould need to be printed in red inkon the face of the document with aon the face of the document with ared hand pointing to it before thenotice could be held to besufficient.-Lord Denning (J Spurling Ltd v Bradshaw)18
  19. 19. Take Home Message1. Always ensure expectations are well definedprior to commencing work2. Provide a written rationale and disclosure ofrisks for any deviation from standard practicerisks for any deviation from standard practice3. Draw specific and documentedattention to the exclusion clauseattention to the exclusion clause4. Exclusion clauses should bedrafted to cover specific types ofnegligence or breach of contract –Do Not rely on boiler plateDo Not rely on boiler plate
  20. 20. Thank YouThank YouGatlin SmeijersjToronto officeTel: 416-862-3511Email: gatlin smeijers@gowlings comEmail: gatlin.smeijers@gowlings.commontréal  ottawa  toronto  hamilton  waterloo region  calgary  vancouver  beijing  moscow  london
  21. 21. An Overview ofEnvironmentalConsultant’s Liability inyQuébecOlivier TherrienPartner, Gowling Lafleur Henderson LLP
  22. 22. Introduction• Part I – Contractual liability• Overview of contractual liability (art. 1458 C.C.Q.)• The importance of having a written contract• The importance of having a written contract• Part II – Limitation or exclusion of liabilityThe nature of the clause• The nature of the clause• Cases where the clause was found null and of no effect• Part III - Extra-contractual liability• Overview of general principles (art. 1457 C.C.Q.)• Liability toward third party in Quebec law• The validity of a limiting liability clause against third parties22
  23. 23. Civil Liability• Contractual liability:• “ Every person has a duty to honour his contractualndertakings ” (art 1458 C C Q )undertakings.” (art. 1458 C.C.Q.)• The consultant is required to act prudently and diligentlyThe consultant must use all reasonable means so as to• The consultant must use all reasonable means so as toendeavor to achieve a certain result (obligation of meansversus obligation of result):• See Banque de développement du Canada v. ExpertsEnviroconseil inc. (Enviroconseil), 2006 QCCS 5244 (CanLII)• Under article 2100 C C Q the consultant is also bound to:• Under article 2100 C.C.Q., the consultant is also bound to:• Act in accordance with usual practice and “rules of art”• Perform the work in conformity with the contracty23
  24. 24. Contractual Liability• The scope of the contract and the EnvironmentalSite Assessment Phase I standard CSA-Z768-01Mandatory file studies (art 7 1 6) For example :• Mandatory file studies (art. 7.1.6). For example :Aerial HistoricalTitleSearchesPrior ESA–Phase I AerialPhotographsFireCityHistoricalUse ofpropertyActualDeedsCorporateSearchPhase IBusiness• Other requirements(examples):FireInsurancePlanCityDirectory(Lovell)RecordsSite visit(art. 7.2)OwnerOn siteGovmtAgencyInterviews24On-sitepersonnel
  25. 25. Contractural Liability• Penaranda c Dima 2011 QCCA 1948• Penaranda c. Dima 2011 QCCA 1948• Contract referred to CSA Z768• The Court found the consultant liable and held that:• The Court found the consultant liable and held that:• "S.C.P. has failed in its mandate by neglecting to fulfill itsobligation as provided in the CSA Z768. "• The consultant did not indicate the objective and scope of theenvironmental assessment work as prescribed by articles 5.2band 6.3 of the CSA standard• The Consultant did not proceed to an extensivesearch of title, instead he simply: “searched names ofi t ti i hi h h iservice stations or companies which may have givenrise to environmental risk in the past, in contraventionto articles 7.1.1, 7.1.5 and” of the CSAStandard25
  26. 26. Contractual Liability• Contractual arrangements to exclude or limitcivil liability• The contract should be written and signed• Elements to include in the contract:A d t il d d i ti f th t f k d• A detailed description of the nature, scope of work andpurpose of the report• Any relevant factors which might limit the performance ofAny relevant factors which might limit the performance ofthe mandate should be included as well, such as budget,time constraint or agreed reduction of the scope of workLi it ti t i ti f li bilit ( t lid )• Limitation or restriction of liability (next slide)• Should be included not only in the report, but in thecontract as wellcontract as well26
  27. 27. Contractual Exclusion or Limitation of Liability• Art.1474 C.C.Q. (as interpreted by case law)Art.1474 C.C.Q. (as interpreted by case law)• A clause intended to limit or exclude contractualliability is valid, but subject to limitations:• The other party may be made aware of its existence at the timethe contract was createdThe party wishing to invoke the clause of limitation has the• The party wishing to invoke the clause of limitation has theburden to prove that the other party was aware of its existenceand consented• The clause has no effect when the professional has committed“gross negligence” or intentional fault• Courts have also refused to enforce limitation or exclusionCou ts a e a so e used to e o ce tat o o e c us oclauses when the breach relates to the “principal purpose ofthe contract”. (This requirement is still debatable)• Finally Courts have also relied on professional code of ethics• Finally, Courts have also relied on professional code of ethicsto refuse to enforce limitation clauses27
  28. 28. Limitations of LiabilityE l h th l f li it ti• Examples where the clause of limitation wasfound invalid:3979687 Canada Inc v Consultant LBDC Inc 2010 QCCS• 3979687 Canada Inc. v. Consultant LBDC Inc., 2010 QCCS905 (CanLII) (appeal settled out of Court):• A consultant wrongfully concluded that a site had beenremediated• The Court refused to apply limitation clauses and held that theconsultant committed gross negligenceconsultant committed gross negligence• Évaluations Val Beq Inc. v. Digico Réseau Global Inc. 2010QCCA 412• Among other things, the Court held that according to theapplicable code of professional conduct, the consultant couldnot exclude his liability28
  29. 29. Extra-contractual Liability• Quebec Civil Law:Quebec C a• Art.1457 C.C.Q. provides for "extra-contractual liability"which requires evidence of:1 Proof of fault (duty to act prudently and diligently)1. Proof of fault (duty to act prudently and diligently)2. Damages and3. Causation• Common Law Tort of Negligence:1. A Duty of Care is owed to Plaintiff2 St d d f C h ld h b b d b2. Standard of Care should have been observed byDefendant3. Breach of the Standard of Care by Defendant4. Causation5. Damages to the Plaintiff, which are not too remote29
  30. 30. Extra-contractual Liability• Beyond contractual agreements:• A professional is always subject to engage his extra-contractual liability toward third parties (Art 1457 C C Q )contractual liability toward third parties (Art. 1457 C.C.Q.)• Caisse populaire de Charlesbourg v. Michaud, 1990CanLII 3612 (QCCA)( )• Misleading third parties into believing that financialstatements have been verified• Crédit-bail Banque Royale Inc. v. Servicesprofessionnels Warnock Hersey ltée., J.E. 95-1760(C.S.):( )• An evaluating firm may be found liable for damagesagainst third parties caused by its fault30
  31. 31. Extra-contractual Liability• Limitation of liability against third parties• Art.1476 C.C.Q.:ʺA t b f ti l d li it hi• ʺA person may not by way of a notice exclude or limit hisobligation to make reparation in respect of third persons;such a notice may, however, constitute a warning of ad ʺdanger.ʺ• Since the exclusion has not been agreed upon suchlimitation can only have partial legal consequences. The lawy p g qconsiders that the clause is a warning to third parties• This could result in:An assumption of risks by the victim (complete defense)• An assumption of risks by the victim (complete defense)• Contributory negligence on the part of the victim31
  32. 32. Thank YouThank YouOlivier TherrienMontreal OfficeTel: 514-392-9412oliver therrien@gowlings comoliver.therrien@gowlings.commontréal  ottawa  toronto  hamilton  waterloo region  calgary  vancouver  beijing  moscow  london
  33. 33. Consultant Liability:Consultant Liability:Compliance RisksMark MadrasPartner, Gowling Lafleur Henderson LLP
  34. 34. Compliance Risks• False information or misleading information• Non-compliant work or design34
  35. 35. False or Misleading Information• CertificationsCommunications with officials• Communications with officials• R v Ronald Carter and Quinte-Eco Consultants• R v Sinclair’s Landing Inc., James ClarksonSinclair, Bruce A. Brown and Bruce A BrownAssociates Limited• R v Peermohamed35
  36. 36. Operations• Is the environmental consultant liable for theenvironmental compliance of its work or design?environmental compliance of its work or design?• R v Gemtec• R v Brown36
  37. 37. Compliance Lessons• Risk of “knowing better”Ri k f i l idi• Risk of commitment to results overridinginconvenient facts• Risk of being an instrument of client and forfeitingindependent judgement37
  38. 38. Thank YouThank YouMark L. MadrasToronto officeTel: 416-862-4296Email: mark madras@gowlings comEmail: mark.madras@gowlings.commontréal  ottawa  toronto  hamilton  waterloo region  calgary  vancouver  beijing  moscow  london
  39. 39. Environmental Law for BusinessSeminar:Seminar:Consultant LiabilityGowling Lafleur Henderson LLPg1 First Canadian PlaceJune 13, 2013Carl Spensieri, P. Eng.© 2013, XL Group plc companies. All rights reserved.Carl Spensieri, P. Eng.VP & Env. Branch Manager, XL Insurance Company Limited MAKE YOUR WORLD GO39
  40. 40. Agenda• Environmental Insurance• Errors and Omissions InsuranceClaims• Claims• Questions© 2013, XL Group plc companies. All rights reserved. 40
  41. 41. History of Environmental Insurance• Historically covered under General Liability (occurence).y y ( )• Pollution first excluded in the US (1970s) and thenCanada (early 1980s).• Exclusion was the industry‘s response to RCRA (US –1976) and increased Public Awareness (Love Canal,Times Beach)© 2013, XL Group plc companies. All rights reserved. 41
  42. 42. Environmental• Covers: Bodily Injury, Property Damage and Remediationy j y y garising from Pollution.• Fixed Site Policy: covers Pollution at/migrating from definedproperty(ies).• Consultant/Contractor: covers Pollution arising from definedServices.© 2013, XL Group plc companies. All rights reserved. 42
  43. 43. Environmental - Cover• Contractor/Consultant Policy:y• JOB SITE/CONTRACTING SERVICE• OWNED LOCATION• EMERGENCY EXPENSE• EMERGENCY EXPENSE• Non-Owned Disposal Site (NODS)• Transportation• Fines/Penalties: Civil/Administrative; and Punative(where allowable by law).• Cover extends to Directors & Officers• Offered on a Blanket or Project Specific basis.• Offered on Claims-Made and Occurence basis.© 2013, XL Group plc companies. All rights reserved. 43
  44. 44. Environmental - Exclusions• Contractor/Consultant Policy:y• Faulty Work• Intentional and Dishonest Acts• Known Circumstances• Known Circumstances• Products• Worker‘s Compensation• Contractual Liability© 2013, XL Group plc companies. All rights reserved. 44
  45. 45. Errors and Omissions - Cover• Architect / Engineer Policyg y• PROFESSIONAL LOSS•Monetary judgement, award or settlement ofcompensatory damages;compensatory damages;•Fines/penalties (where allowable by law);•Legal Expense associated with above• MITIGATION EXPENSE•Reasonable and necessary costs and expensesy pto prevent further harm, injury or damage topersons or property.© 2013, XL Group plc companies. All rights reserved. 45WRITTEN ON A CLAIMS-MADE BASIS ONLY
  46. 46. Errors and Omissions - Exclusions• Architect / Engineer Policyg y• Employer Liability• Warranty and Guaranty• Fiduciary Liability• Fiduciary Liability• Intentional and Dishonest Acts• Joint Venture or Co-Venture*• Known Circumstances• Claims from Related Entities• Workers Compensation• Workers Compensation© 2013, XL Group plc companies. All rights reserved. 46* Policy will respond to Insured‘s interest in JV/Co-Venture.
  47. 47. ClaimsAnalysis of >6,500 claims from 2003 to present, revealsythat Claims happen for one of two reasons:• Technical: Error and/or omission of a technical nature.• Non-technical: Breakdown in project or practicemanagement processes.Note: All claims arise from a technical E&O; however, in many cases non-technical issues greatly exacerbatethe magnitude of Claim.© 2013, XL Group plc companies. All rights reserved. 47
  48. 48. ClaimsTechnical Risk Drivers:• Structural, Geotechnical and Survey Professional Servicesare most prone to Professional (E&O) Claims.• Interestingly, the revenues Professionals derive from theseServices appear to be disproportional to risk (i.e., highestexposure is often billed at lowest rate).© 2013, XL Group plc companies. All rights reserved. 48
  49. 49. ClaimsNon-Technical Risk Drivers:• Communication, Project Team Capabilities, Client Selectionand Contract Terms are each a major driving force in Claims(>90% by cost or file count).• Communication is the most significant at 39%.© 2013, XL Group plc companies. All rights reserved. 49
  50. 50. Claims• Negotiation/Contract Clauses (9%)g ( )• Contract not in place prior to commencement ofworkwork.• Unclear Scope of Work• No formal evaluation and delegation/assignment ofProject Risks/LiabilitiesProject Risks/Liabilities.• No contingency found built into contract.Most often disputes arise re: payment associatedwith Professional Services. Professional initiatesclaim re: collection of fees and Client inturn initiates© 2013, XL Group plc companies. All rights reserved. 50claim alleging E&O.
  51. 51. Claims• Client Selection (15%)( )• Client in poor financial condition [How often do youreview your clients financial statements?]review your clients financial statements?]• Client has history of claims/litigation.• Client is inexperienced with respect to work beingperformed by Professional (i e first largeperformed by Professional (i.e., first largeremediation project at a Client‘s site).• Client consistently late in paying fees.Most often disputes arise when Client‘s expectationsare not reasonable/inline with Professional‘s.© 2013, XL Group plc companies. All rights reserved. 51
  52. 52. Claims• Project Team Capabilities (31%)j ( )• Inexperienced Design staff (i.e., junior engineersundertaking Phase I ESAs designing RAPs)undertaking Phase I ESAs, designing RAPs).• Inexperienced field supervisors or projectmanagers.Project outside of firms normal project type or• Project outside of firms normal project type orterritory (i.e., unfamiliar with local practices,regulations).P j t t d t thi• Project team spread to thin.© 2013, XL Group plc companies. All rights reserved. 52
  53. 53. Claims• Communication (39%)( )• Lack of procedures to identify conflicts, E&O.• Lack of documentation re: change of scope• Lack of documentation re: change of scope,budget, timelines.• Lack of regular client meeting to discuss potentialdisputes site issues etcdisputes, site issues, etc.• Scope of services not clearly defined/explained toClient.Communication is key in almost 40% of Claims!© 2013, XL Group plc companies. All rights reserved. 53y %
  54. 54. Questions?© 2013, XL Group plc companies. All rights reserved. 54
  55. 55. Thank youCarl SpensieriXL Insurance Company LimitedXL Insurance Company LimitedTel: 416-623-8826carl.spensieri@xlgroup.com© 2013, XL Group plc companies. All rights reserved. 55