environmental law for business: consultant liability

Environmental Law for Business:

Consultant Liabilityy

Thursday, June 13, 2013

Obligations and Liabilities d hunder the

Professional Engineers ActProfessional Engineers Act

professional dutyp y

legislation

t tcontract

duty to public welfare is tparamount

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

DisciplineActions taken against licence or C of A holders due to alleged issues of professional misconduct or incompetence

Prosecuted within PEO (Discipline Hearing)Hearing)

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 practice

b. the practitioner is guilty of professional misconduct as defined in the Regulations

• 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

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 engineer

b Ph i l t l diti di db. Physical or mental condition or disorder

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

Thank you

Bernard EnnisProfessional Engineers OntarioTel: 416‐840‐1079Tel: 416‐840‐[email protected]

Liability in Tort andLiability in Tort and Contract

Gatlin SmeijersA i t G li L fl H d LLPAssociate, Gowling Lafleur Henderson LLP

Civil Liability

TORT ClientTORT Negligence Client3rd Parties

Duty of Care

CONTRACT Breach of ContractLimitation of Liability

Client

Privity of Contract

Negligence

Foreseeability Expectations

l dAlternatives

Knowledge and

Control

Ontario (MTO) v. CH2M

Service

Purpose was to determine:• Presence and extent of PHC contamination • Presence and location of UST

UST

UST

Service Station

Presence and location of UST

Methods:• Relied on map from former operator

MW1

UST Relied on map from former operator• Completed soil vapour survey• Two boreholes and soil/groundwater

samplingUSTMW2

UST Breaches of Standard:• Failed to consult Fire Insurance Plans• Borehole locations not based on vapour

surveysurvey• Failure to perform proper QA/QC

Contract

Simons v. Diagnostic Engineering

“total liability, in the aggregate… shall not

Facts• Oral contract to determine if house had mold problem• Engineer requested client to sign “Service Agreement”

exceed the project costs, as invoiced to the

client..”

g q g gprior to testing

• Engineer erroneously told client that there was a mold problem

• Actual results showed no problemp• Client spent large sum of money needlessly

remediating

Findings of CourtNot Enforceable:•Sufficient notice of limitationFindings of Court

• Consultant fell below standards required under contract and was therefore in breach of the contract

•Sufficient notice of limitation not given•Not clear if specific breach was covered by exclusion

The Red Hand Rule

S l hi h I hSome clauses which I have seen would need to be printed in red ink on the face of the document with aon the face of the document with a red hand pointing to it before the notice could be held to be sufficient.

-Lord Denning (J Spurling Ltd v Bradshaw)

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Take Home Message

1. Always ensure expectations are well defined prior to commencing work

2. Provide a written rationale and disclosure of risks for any deviation from standard practicerisks for any deviation from standard practice

3. Draw specific and documented attention to the exclusion clauseattention to the exclusion clause

4. Exclusion clauses should be drafted to cover specific types of negligence or breach of contract –Do Not rely on boiler plateDo Not rely on boiler plate

Thank YouThank You

Gatlin SmeijersjToronto officeTel: 416-862-3511Email: gatlin smeijers@gowlings comEmail: [email protected]

montréal ottawa toronto hamilton waterloo region calgary vancouver beijing moscow london

An Overview of Environmental

Consultant’s Liability in yQuébec

Olivier TherrienPartner, Gowling Lafleur Henderson LLP

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 parties

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Civil Liability

• Contractual liability: • “ Every person has a duty to honour his contractual

ndertakings ” (art 1458 C C Q )undertakings.” (art. 1458 C.C.Q.)

• The consultant is required to act prudently and diligently

The consultant must use all reasonable means so as to• The consultant must use all reasonable means so as to endeavor to achieve a certain result (obligation of means versus obligation of result):

• See Banque de développement du Canada v. Experts Enviroconseil 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 contracty

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Contractual Liability

• The scope of the contract and the Environmental Site Assessment Phase I standard CSA-Z768-01

Mandatory file studies (art 7 1 6) For example :• Mandatory file studies (art. 7.1.6). For example :

Aerial Historical

TitleSearches

Prior ESA –Phase I Aerial

Photographs

FireCity

HistoricalUse of

propertyActualDeeds

CorporateSearch

Phase I

Business

• Other requirements(examples):

FireInsurance

Plan

City Directory (Lovell)

Records

Site visit(art. 7.2)Owner

On site

GovmtAgency

Interviews

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On-site personnel

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 its

obligation as provided in the CSA Z768. "

• The consultant did not indicate the objective and scope of the environmental assessment work as prescribed by articles 5.2b and 6.3 of the CSA standard

• The Consultant did not proceed to an extensive search of title, instead he simply: “searched names of

i t ti i hi h h iservice stations or companies which may have given rise to environmental risk in the past, in contravention to articles 7.1.1, 7.1.5 and 7.1.6.3” of the CSA Standard

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Contractual Liability

• Contractual arrangements to exclude or limit civil 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 and purpose of the report

• Any relevant factors which might limit the performance ofAny relevant factors which might limit the performance of the mandate should be included as well, such as budget, time constraint or agreed reduction of the scope of work

Li 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 the

contract as wellcontract as well

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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 contractual liability is valid, but subject to limitations:• The other party may be made aware of its existence at the time

the contract was created

The party wishing to invoke the clause of limitation has the• The party wishing to invoke the clause of limitation has the burden to prove that the other party was aware of its existence and consented

• The clause has no effect when the professional has committed “gross negligence” or intentional fault

• Courts have also refused to enforce limitation or exclusion Cou 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 of the 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 ethics to refuse to enforce limitation clauses

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Limitations of Liability

E l h th l f li it ti• Examples where the clause of limitation was found invalid:

3979687 Canada Inc v Consultant LBDC Inc 2010 QCCS• 3979687 Canada Inc. v. Consultant LBDC Inc., 2010 QCCS 905 (CanLII) (appeal settled out of Court):• A consultant wrongfully concluded that a site had been

remediated

• The Court refused to apply limitation clauses and held that the consultant committed gross negligenceconsultant committed gross negligence

• Évaluations Val Beq Inc. v. Digico Réseau Global Inc. 2010 QCCA 412• Among other things, the Court held that according to the

applicable code of professional conduct, the consultant could not exclude his liability

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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 by

Defendant 3. Breach of the Standard of Care by Defendant4. Causation5. Damages to the Plaintiff, which are not too remote

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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, 1990 CanLII 3612 (QCCA) ( )

• Misleading third parties into believing that financial statements have been verified

• Crédit-bail Banque Royale Inc. v. Services professionnels Warnock Hersey ltée., J.E. 95-1760 (C.S.):( )

• An evaluating firm may be found liable for damages against third parties caused by its fault

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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 his obligation to make reparation in respect of third persons; such a notice may, however, constitute a warning of a d ʺdanger.ʺ

• Since the exclusion has not been agreed upon such limitation can only have partial legal consequences. The law y 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 victim

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Thank YouThank You

Olivier TherrienMontreal OfficeTel: 514-392-9412oliver therrien@gowlings [email protected]


Consultant Liability:Consultant Liability:Compliance Risks

Mark MadrasPartner, Gowling Lafleur Henderson LLP

Compliance Risks

• False information or misleading information

• Non-compliant work or design

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False or Misleading Information

• Certifications

Communications with officials• Communications with officials

• R v Ronald Carter and Quinte-Eco Consultants

• R v Sinclair’s Landing Inc., James Clarkson Sinclair, Bruce A. Brown and Bruce A Brown Associates Limited

• R v Peermohamed

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Operations

• Is the environmental consultant liable for the environmental compliance of its work or design?environmental compliance of its work or design?

• R v Gemtec

• R v Brown

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Compliance Lessons

• Risk of “knowing better”

Ri k f i l idi• Risk of commitment to results overriding inconvenient facts

• Risk of being an instrument of client and forfeiting independent judgement

37

Thank YouThank You

Mark L. MadrasToronto officeTel: 416-862-4296Email: mark madras@gowlings comEmail: [email protected]


Environmental Law for Business Seminar:Seminar:

Consultant Liability

Gowling Lafleur Henderson LLPg1 First Canadian PlaceJune 13, 2013

Carl 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 GO

39

History of Environmental Insurance

• Historically covered under General Liability (occurence).y y ( )

• Pollution first excluded in the US (1970s) and then Canada (early 1980s).

• Exclusion was the industry‘s response to RCRA (US –1976) and increased Public Awareness (Love Canal, Times Beach)


Environmental

• Covers: Bodily Injury, Property Damage and Remediation y j y y garising from Pollution.

• Fixed Site Policy: covers Pollution at/migrating from defined property(ies).

• Consultant/Contractor: covers Pollution arising from defined Services.


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.


Environmental - Exclusions

• Contractor/Consultant Policy:y• Faulty Work• Intentional and Dishonest Acts• Known Circumstances• Known Circumstances• Products• Worker‘s Compensation• Contractual Liability


Errors and Omissions - Cover

• Architect / Engineer Policyg y• PROFESSIONAL LOSS

•Monetary judgement, award or settlement of compensatory damages;compensatory damages;

•Fines/penalties (where allowable by law);•Legal Expense associated with above

• MITIGATION EXPENSE•Reasonable and necessary costs and expenses y pto prevent further harm, injury or damage to persons or property.


WRITTEN ON A CLAIMS-MADE BASIS ONLY

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


* Policy will respond to Insured‘s interest in JV/Co-Venture.

Claims

Analysis of >6,500 claims from 2003 to present, reveals ythat Claims happen for one of two reasons:

• Technical: Error and/or omission of a technical nature.

• Non-technical: Breakdown in project or practice management processes.

Note: All claims arise from a technical E&O; however, in many cases non-technical issues greatly exacerbate the magnitude of Claim.


Claims

Technical Risk Drivers:

• Structural, Geotechnical and Survey Professional Services are most prone to Professional (E&O) Claims.

• Interestingly, the revenues Professionals derive from these Services appear to be disproportional to risk (i.e., highest exposure is often billed at lowest rate).


Claims

Non-Technical Risk Drivers:

• Communication, Project Team Capabilities, Client Selection and Contract Terms are each a major driving force in Claims (>90% by cost or file count).

• Communication is the most significant at 39%.


Claims

• Negotiation/Contract Clauses (9%)g ( )

• Contract not in place prior to commencement of workwork.

• Unclear Scope of Work• No formal evaluation and delegation/assignment of

Project Risks/LiabilitiesProject Risks/Liabilities.• No contingency found built into contract.

Most often disputes arise re: payment associated with Professional Services. Professional initiates claim re: collection of fees and Client inturn initiates


claim alleging E&O.

Claims

• Client Selection (15%)( )

• Client in poor financial condition [How often do you review your clients financial statements?]review your clients financial statements?]

• Client has history of claims/litigation.• Client is inexperienced with respect to work being

performed by Professional (i e first largeperformed by Professional (i.e., first large remediation project at a Client‘s site).

• Client consistently late in paying fees.

Most often disputes arise when Client‘s expectations are not reasonable/inline with Professional‘s.


Claims

• Project Team Capabilities (31%)j ( )

• Inexperienced Design staff (i.e., junior engineers undertaking Phase I ESAs designing RAPs)undertaking Phase I ESAs, designing RAPs).

• Inexperienced field supervisors or project managers.Project outside of firms normal project type or• Project outside of firms normal project type or territory (i.e., unfamiliar with local practices, regulations).P j t t d t thi• Project team spread to thin.


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 potential

disputes site issues etcdisputes, site issues, etc.• Scope of services not clearly defined/explained to

Client.

Communication is key in almost 40% of Claims!


y %

Questions?


Thank you

Carl SpensieriXL Insurance Company LimitedXL Insurance Company LimitedTel: [email protected]


environmental law for business: consultant liability

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exclusion clauses

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exclusion clauseattention

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h i hsome clauses