SNC-Lavalin inc. c. Deguise: The Decision on the Leading Case: The Facts, The Parties, The Legal Issues

On April 6, the Quebec Court of Appeal released its decision on the appeal of the notorious judgment in the “pyrrhotite case”. Numerous issues were raised in that 371-page decision.

This newsletter will provide brief information on the key facts, the parties involved and the legal issues. Further newsletters will discuss questions that we feel important to raise.

The Facts, The Parties, The Proceedings

The “pyrrhotite case” is the story of numerous building owners [the “plaintiffs”] in the Trois-Rivières area who claimed that pyrrhotite in the aggregate incorporated into the concrete used in the foundations of their buildings caused progressive degradation.

These foundations had been laid between 2003 and 2008. These claims (880 lawsuits) are part of the first wave of claims that were divided into 69 Court files. A second and a third wave are presently pending before the Courts.

Sixty-eight of the 69 judgments rendered by the Superior Court were appealed. The 769 appeals were joined and led to the Court of Appeal’s decision. Many other decisions were rendered in various files to address special issues: those will not be raised in this article.

While some plaintiffs sued the individuals from whom they acquired their properties [the “sellers”], some, including self-builders, sued their general contractors and/or the form workers that poured the foundations [the “contractors”]. In all cases, the supplier of the aggregates, Carrière B & B [“B&B”], along with Construction Yvan Boisvert inc. [”CYB”] or Béton Laurentide inc. [“BL”], the [“concrete suppliers”] that delivered the concrete, were also sued.

Also sued for negligence were the geologist, who had approved the use of the aggregates, and his employer SNC-Lavalin [“SNC”].

Finally, all defendants’ liability insurers were involved in the litigation.

Problems with pyrrhotite in concrete had started with the operation of a quarry by a company called Maskimo during the 1990s. Aggregates from that quarry were used in foundations from 1996 to 1998. When concrete degradation appeared, some 30 lawsuits were filed against Maskimo. As a result, the concrete suppliers knew that there were problems with the aggregates.

In 2003, the concrete suppliers began using aggregated from B&B’s quarry, located nearby.

Afterwards, the geologist analyzed B&B’s aggregate, concluding that the stone was not reactive, that its percentage of pyrite seemed normal and that it could be used without reservation.

The geologist was then retained as an expert witness in the litigation involving Maskimo. It is significant that the judge in these cases had come to the conclusion that Maskimo’s problems had been “definitely notorious” in the Trois-Rivières area as of the fall of 2003.

Requested by B&B to analyse more samples, the geologist concluded that the aggregates contained iron sulfide, but that there was no risk that using them would cause a reaction. Accordingly, B&B continued to operate its quarry in 2004.

In September, 2005, the geologist performed a third analysis of the aggregates, concluding that the low contents of sulphate did not prevent its use. Subsequently, during the same year, other experts analyzed the granulates and came to different conclusions. Finally, in November 2007, the geologist admitted that the aggregates should not be used.

Consequently, BL ceased using B&B’s aggregate. B&B’s decision to suspend the production of aggregates in November 2006 was a temporary one at it wanted to sell its accumulated stock. B&B did not resume production thereafter. CYB, however, continued to sell concrete containing B&B’s aggregates until 2008, with the very last pour having taken place on May 5, 2008.

Issues on Appeal

Before the Court of Appeal, all issues from the various appeals were joined. The Court then had to address these questions:

• The liability of B&B, the concrete suppliers, the contractors, the geologist and his employer SNC; more specifically:
  • The application of art 2118 C.C.Q.
  • The defences under art 2119 C.C.Q.
  • Warranty of quality of the contractors-form workers under art 1728 C.C.Q.
  • The vendor’s liability for the defective concrete
  • The geologist’s professional and extracontractual liability
• The division of liability between condemned parties
• Assessing the damages
• Insurers’ arguments on coverage, including:
  • The nullity of the policy
  • The fact that the damages claimed did not result from an “occurrence” under the policies
  • Amounts payable were limited under Prior Insurance and Non-Cumulation of Liability clauses
  • The “insured product” and “pyrite” exclusion clauses
  • Damages caused by the oxidation of the pyrrhotite in the aggregates did not occur from the moment the concrete was poured
  • Other issues related to the geologist’s liability insurance.

The hearings before the Court of Appeal lasted eight weeks during the 2017–2018 term, while the hearings before the Superior Court had lasted 68 days, during which 168 witnesses were heard.