Extending Discretion: Balancing the Limitations Act and Environmental Remediation Claims

March 26, 2024

Written By Laura Gill, Scott Bower, Julia Schatz, Ciara Mackey, Sarah Gilbert and Dayo Ogunyemi

The ability to extend a limitation period for an environmental claim is subject to considerable judicial discretion, the Court of Appeal of Alberta recently held in Paramount Resources Ltd v Grey Owl Engineering Ltd, 2024 ABCA 60 [Paramount]. Section 218 of Alberta's Environmental Protection and Enhancement Act, RSA 2000, c E-12 (EPEA) gives a judge discretion to extend a limitation period "where the basis for the proceeding is an alleged adverse effect resulting from the alleged release of a substance into the environment".  However, no extension was granted in the case of a claim for remediation costs against other alleged contributors to a pipeline spill.

Lower Court Rejects Claim as Out of Time

In a May 2022 decision, reviewed in our earlier post, Alberta Court Declines to Extend Limitation Period for Contamination Claim, the Court of King's Bench found that Section 218 of EPEA could not save a claim brought by a pipeline owner against an engineering firm whose allegedly negligent construction work in 2004 contributed to a spill that occurred in 2018. The pipeline owner undertook work to clean up the spill and sought to recover $20 million in clean-up and remediation costs from the engineering firm and against a regulatory consultant who had filed the pipeline application paperwork.

The pipeline owner appealed the decision on the grounds that its claim should have been characterized as one for contribution under sections 3(3)(e) and 3(1.1) of the Limitations Act and under the Tort-Feasors Act, RSA 2000, c T-5. A claim for contribution would have arisen only once the pipeline owner incurred liability in relation to the remediation of the spill (2018) rather than when the allegedly negligent work was performed (in 2004). And in the event an extension of the limitation period was needed, the pipeline owner argued that the chambers judge erred in refusing to apply section 218 of the EPEA.

The Appeal Court's Ruling in Paramount

The Court of Appeal dismissed the first ground of appeal, holding that the pipeline owner’s claim fell outside the purview of section 3(3)(e) of the Limitations Act in relation to common law contribution. The companies from whom contribution was sought would never have been subject to an order under EPEA on the facts of this case and, therefore, the claim by the pipeline owner was not for "contribution". Further, the Court found that the pipeline owner could not rely on the Tort-Feasors Act because the amounts claimed arose from its obligations under EPEA, not in tort. As a result, the Tort-Feasors Act did not apply and the pipeline owner had no recourse under either sections 3(1.1) or 3(3)(e) of the Limitations Act.

The Court of Appeal left open the possibility that a pipeline owner might seek contribution from the other parties in response to a claim from the Crown or a neighbouring landowner for damages allegedly suffered because of a spill, but not where remediation work was undertaken pursuant to statute. Notably, the pipeline owner undertook the remediation work on a voluntary basis and had not been subject to a regulatory order.

The Court of Appeal also dismissed the second ground of appeal under section 218 of EPEA. The Court recognized that section 218 grants judges discretionary power to extend a limitation period “where the basis for the proceeding is an alleged adverse effect resulting from the alleged release of a substance into the environment” upon consideration of the factors outlined in section 218(3), including "when the alleged adverse effect occurred, whether it ought to have been discovered by the claimant had the claimant exercised due diligence, potential prejudice to the defendant", and any other criteria deemed relevant by the court.

In an earlier decision, the Court of Appeal held that a decision to extend a limitation period under section 218 must balance the competing policy objectives of the Limitations Act and the EPEA. While the Limitations Act ensures that actions are commenced within set periods, the policy objectives of EPEA emphasize the “polluter pays” principle and avoiding unfairness that might arise in applying the discoverability principle given the challenge of detecting environmental harm.

The Court of Appeal disagreed that the chambers judge had treated section 218 as confined to cases where no party has paid for the environmental damages or where pollution goes undetected for many years, such as in this case. As confirmed by the Court, it would be an error to restrict the application of section 218 to only cases where a claim is made by one responsible party against another or where emissions are detected promptly, because section 218 “does not create categories of permitted and unpermitted claims for which an extension can (or cannot) be granted.” Rather, section 218 is a highly discretionary remedy that permits a judge to consider the factors listed in section 218(3) as well as any other criteria relevant to the case. The Court also remarked that having the ability to pay to remediate environmental damage and bearing some responsibility to remediate (such as the pipeline owner in this case) does not preclude that party from seeking to extend a limitation period under section 218.

Here, the Court of Appeal was satisfied that the chambers judge considered the appropriate factors under section 218 and committed no reversible error in balancing the objectives of the Limitations Act and the EPEA, ultimately barring the claim.

Takeaways

Paramount confirms that extending a limitations period under section 218 of the EPEA is exceptional and highly discretionary. Generally, an extension is unlikely to be available to parties responsible for remediation costs under the EPEA who later seek to recover those costs through a civil claim in negligence against third parties who may have contributed to the contamination. As clarified in Paramount however, there are no clear categories of “permitted” and “unpermitted” claims under section 218. The Court must consider each claim on its own facts and in light of the objectives of the Limitations Act and the EPEA to decide whether a limitations period should be extended. With relatively little case law under section 218, uncertainty about applicable limitations periods and liability for environmental remediation claims will likely persist.

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