Cooling Towers and Asbestos: New Obligations for Owners, Tenants, Managers and Employers

June 1, 2014

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Over the last year and half, the legislator has addressed the building safety issues in order to ensure the safety of the occupants and visitors of these buildings, as well as the persons who may be exposed to hazards because of equipment attached to such buildings.

On March 18, 2013, the Regulation to improve building safety, which became Chapter VIII entitled “Buildings” of the Safety Code adopted under the Building Act came into force.

The “Buildings” chapter of the Safety Code (“SC”) provides for rules governing the maintenance of building façades and concrete multistorey garages, in addition to containing various fire safety rules which are slated to progressively come into force between March 18, 2013 and March 18, 2018.

Additional fire safety provisions are in force since March 18, 2014 for sleeping rooms covered by the SC (namely, some hotels, motels, multiple-unit residential buildings, condominiums complexes, retirement homes and healthcare facilities). The provisions in force since March 18, 2014 particularly govern smoke alarms, carbon monoxide alarms and emergency lighting.

The remainder of the provisions of the SC respecting fire safety will come into force on March 18, 2016 and March 18, 2018. These new provisions may involve significant modifications and costs for the owners of relevant buildings. The progressive coming into force of the provisions aims to allow the owners in question to prepare accordingly.

WATER COOLING TOWERS
On May 12, 2013, the Regulation to amend the Safety Code containing provisions pertaining to water cooling towers came into force. These provisions have also been integrated in the SC.

These provisions impose new obligations to owners of cooling towers, particularly the implementation of a preventative maintenance program developed by a professional, the maintenance of a register containing information pertaining to the towers and providing information to the Régie du bâtiment du Québec (“RBQ”). The coming into force of these provisions was further to the outbreak of Legionella during summer 2012. At the time, no regulatory framework was governing the maintenance of water cooling towers and no register was in existence to locate operating cooling towers.

The provisions which came into force in May 2012 were succinct. They consisted in six sections and contained no details as to the standards and methods to be complied with respecting the maintenance of water towers.

On May 28, 2014, an “update” of the Regulation to amend the Safety Code was published in the Gazette officielle du Québec. The new provisions will come into force on July 12, 2014. They specifically deal with the methods to be followed in maintaining cooling towers. They are, in a way, phase 2 of the provisions pertaining to water cooling towers maintenance. They contain additional specific measures concerning the procedure for maintaining water quality and the frequency of sampling. The most demanding provisions for tower owners relate to the obligation to have samples analyzed monthly by a laboratory which is accredited by the Centre d’expertise en analyse environnementale du Québec to determine their Legionella pneumophila concentration. The draft regulation announced that the new provisions would involve costs for enterprises which own the towers. The cost of an analysis by an accredited laboratory is approximately $250, for an annual cost of approximately $3,000.

Most of the measures covered by the new provisions were already included in the guide for the maintenance of water cooling towers published in May 2013, which was posted on the RBQ’s website. Since they are now included in the Regulation to amend the Safety Code published on May 28, 2014, they are henceforth compulsory.

Moreover, the new provisions specify that the owners of the towers are responsible for obtaining all the results of the analysis performed by the accredited laboratory. The owners of the towers must also make sure that the accredited laboratory sends to the RBQ all the results of the analysis performed within 30 days from the date the relevant sample was taken.

The new provisions also impose on owners the obligation to obtain the results of the accredited laboratory forthwith or the business day following the result of the analysis where a result indicates a Legionella pneumophila concentration equal to or greater than 10,000 CFU/L and where it is impossible to quantify the Legionella pneumophila concentration.

Lastly, the provisions provide for immediate measures to be taken by owners when the Legionella pneumophila concentration is 1,000,000 CFU/L or more, particularly the obligation to ensure that the RBQ and the public health director of the region where the water cooling tower facility is located receive the result from the accredited laboratory without delay.

The Building Act includes penalties and penal provisions for failure to comply with the measures applicable to cooling towers. It must be noted that the RBQ conducted over 1,900 inspections of water cooling towers since 2012 and that with the register it now has, it precisely knows where the cooling towers are. It is therefore essential to comply with the new measures to avoid sanctions.

Beyond the measures that may be imposed by the RBQ (including a remedial notice and obtaining an order enjoining compliance with the Act and fixing a time limit for doing so), the RBQ may also order the shutdown of the cooling towers. Owners who refuse to comply with the Act and orders are liable to penalties ranging from $3,000 to $15,000. In the case of renewed breaches, the amount of the penalties may be multiplied by 10.

ASBESTOS
On June 6, 2013, the Regulation to amend the Regulation respecting occupational health and safety and the Safety Code for the construction industry came into force. Most of the provisions of this Regulation are now integrated in Division IX.I of the Regulation respecting occupational health and safety entitled “Provisions on the safe management of asbestos”.

This Regulation requires that all buildings built before February 15, 1990 be inspected to locate asbestos flocking and all buildings built before February 20, 1999 be inspected to locate heat insulating material containing asbestos. The first inspections to be made under the Regulations must be carried out no later than June 6, 2015. Thereafter, employers must verify every other year the asbestos flocking and insulating material containing asbestos, except if they are entirely enclosed in a permanent structure resistant to fibres and access to flocking and heat insulating material is only possible by a destructive operation of the structure.

It is important to note that it is the employer’s responsibility to locate flocking and heat insulating material in respect of any building under the employer’s authority. The employer may obviously be the owner of the building but ownership is not necessary. The employer can be, for instance, the tenant or manager of the building, as long as the building is under his authority.

The Regulation imposes other obligations on employers, including that of setting up and maintaining a register which must contain information concerning flocking and heat insulating materials. The result of the inspections conducted by the employer must also be entered in the register. The employer is required to make this register available to employees and their representatives who work in his establishment.

The method for analysing samples and the frequency of inspections are also covered. The Regulation also provides for various measures to be taken in the event flocking and heat insulating materials are located. Under this Regulation, it is presumed that all flocking and heat insulating materials contain asbestos and only an analysis may demonstrate the contrary.

The Regulation also requires any employer undertaking work that may generate dust by a direct or indirect action on or inside a building to check for the presence of asbestos in the materials and products likely to contain some. It must be noted that where asbestos is detected in materials and products, the employer must repair or remove them taking into account the degradation and dispersal factors.

Once again, if these provisions necessarily apply to an owner carrying out work on his building, the Regulation may also apply to a tenant, manager or contractor having the authority to carry out work on a building, who will then be required to assume the resulting expenses.

CONCLUSION
The new provisions pertaining to water cooling towers and asbestos will have a financial impact for owners of towers and, in the case of asbestos, for many employers, whether they are owners, tenants, managers or contractors. One can well imagine that the new Regulation concerning asbestos will have an impact on the negotiation and drafting of construction contracts, property management agreements and commercial leases since the parties will want to allocate the risks and specify the responsibilities of each party as to compliance with the Regulation.

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Written by

Marie-Claude Cantin
Partner, Lawyer

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December 5, 2022

Construction: An unwarranted contestation may be considered an abuse of procedure

In the decision in 9058-4004 Québec inc. c. 9337-9907 Québec inc.1 rendered on October 21, 2022, the court granted compensation to a subcontractor for its extrajudicial fees further to a general contractor’s unfounded contestation of its claim as part of a hypothecary action. The facts In May 2019, Portes de garage Citadelle Ltée (“Citadelle”) and general contractor 9337-9907 Québec inc. (“AllConstructions”) concluded a contract for the provision of services and materials needed to install unloading docks in a building under construction. On May 16, 2019, notice of the contract was given to the building owner, 9058-4004 Québec inc. (“Transport Pouliot”). The first two phases of Citadelle’s work were completed between June and August 2019. In late September 2019, AllConstructions allegedly vacated the worksite after a dispute with Transport Pouliot. The third phase of Citadelle’s work was completed in October 2019. On November 25, 2019, Citadelle sent a statement of account to AllConstructions and registered a legal hypothec on the building two days later. On December 23, 2019, after registering a prior notice of the exercise of a hypothecary right, AllConstructions brought a hypothecary action against Transport Pouliot in the Superior Court, claiming the sums it was owed. For its part, Citadelle brought a hypothecary action against the owner, Transport Pouliot, and instituted legal proceedings against AllConstructions in April 2020. It is important to note that during the proceedings, AllConstructions admitted that it had received payment from Transport Pouliot for the sums invoiced by Citadelle. To justify its refusal to pay its subcontractor Citadelle, AllConstructions argued summarily that the services and materials provided were inadequate and did not meet standards. Despite its weak position and the lack of compelling evidence, AllConstructions maintained its argument. Citadelle had no choice but to pursue its legal proceedings and apply to have AllConstructions’ action declared abusive in order to recover its extrajudicial fees. AllConstructions’ abuse of procedure Citadelle claimed that AllConstructions’ defence was unfounded, frivolous and intended to delay. AllConstructions only had testimonial evidence to support its allegations, and it failed to file any expert opinions or exhibits. The contract did not contain a “pay when paid” clause, and AllConstructions admitted in the proceedings that it had received payment from Transport Pouliot for the sums invoiced by Citadelle. AllConstructions claimed that it had serious arguments to make in response to the application to have its action declared abusive. It stated that the work performed by Citadelle was inadequate and that the materials and services provided were not up to standards. It maintained its position, despite the fact that it had vacated the worksite a month before Citadelle’s work was completed and, therefore, could not have verified the actual quality of the work performed. In March 2022, AllConstructions ultimately abandoned its contestation of Citadelle’s claim a few days before the trial and nearly a year and a half after the proceedings began. The judge allowed Citadelle’s application to have AllConstructions’ action declared abusive. AllConstructions’ defence was unfounded, frivolous and intended to delay. It had no solid factual or legal basis. The allegation that Citadelle failed to comply with standards in the performance of its contract is mere speculation, as AllConstructions left the worksite in September 2019. Citadelle incurred unnecessary extrajudicial fees as a result of AllConstructions’ unfounded contestation of its claim. The judge awarded Citadelle a sum of $9,000.00 as compensation for the legal fees that it had paid. What it means A general contractor that cannot justify a deduction from its subcontractor’s claims after the work is completed but does so anyway risks having its contestation declared abusive. Jurisprudence has established that abuse of procedure may consist of légèreté blâmable [blameworthy conduct]2 or témérité [recklessness] resulting from allegations that do not stand up to careful analysis or are exaggerated beyond the scope of the dispute between the parties.3 A manifestly unfounded action is a civil fault that may be subject to legal proceedings and sanctions in accordance with article 51 of the Code of Civil Procedure.4 A party that considers itself the victim of abusive proceedings may, in addition to applying to have the proceedings declared abusive, claim the reimbursement of reasonable legal fees it has paid.5 This is precisely what Citadelle did and what it obtained. AllConstructions irresponsibly managed its dispute with its subcontractor. It made arguments based only on unverified assumptions, even though the evidence set out in the application was relatively solid and complete. As a victim of abuse of procedure, Citadelle was granted a reimbursement of its legal fees in addition to the sums that it was owed by AllConstructions. Court file No. 760-22-011912-204 Royal Lepage commercial inc. c. 109650 Canada ltd., 2007 QCCA 915 El-Hachem c. Décary, 2012 QCCA 2071 2741-8854 Québec inc. c. Restaurant King Ouest, 2018 QCCA 1807 (CanLII) Only extrajudicial fees deemed reasonable are reimbursed in full. The factors considered in establishing a total reasonable amount are summarized in paragraph 32 of the case at hand and are cited from Groupe Van Houtte inc. c. Développements industriels et commerciaux de Montréal inc., 2010 QCCA 1970, and Iris Le Groupe visuel (1990) inc. c. 9105-1862 Québec inc., 2021 QCCA 1208

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October 12, 2022

Sales without legal warranty at the buyers’ risk: Clarity is key

On July 15, 2022, Justice François Lebel of the Court of Québec rendered a decision1 confirming that, in the case of the sale of immovable property, a clear and unambiguous exclusion clause, whereby the warranty is waived at the buyer’s risk, results in a break in the chain of title preventing the buyer from taking any legal action under such warranty against the seller and previous sellers. Justice Lebel thus declared the originating application against the defendants Marshall and Bergeron inadmissible and dismissed the call in warranty. This decision is consistent with the recent decision of the Court of Appeal of Quebec in Blais,2 rendered in May 2022, which clarified the state of the law on the consequence of waiving a legal warranty where successive sales are involved. The facts In March 2009, the defendant Bergeron sold an income property (hereinafter the “Property”) to the defendants, the Marshalls, with a legal warranty of quality. In May 2012, the Marshalls in turn sold the Property to the defendants Hamel and Drouin, still with a legal warranty of quality. In December 2016, the defendants Hamel and Drouin resold the Property to the plaintiff, but this time [translation] “without legal warranty of quality, at the buyer’s risk, but with warranty of ownership”. In the fall of 2020, the plaintiff had work done to repair the drain tile system. It was at that point that it discovered the presence of petroleum hydrocarbons in the soil under the Property’s foundation, rendering the soil unsuitable for residential use. According to an expert report, the alleged contamination stemmed from a heating oil tank once located in a shed behind the Property. The tank was apparently removed before the sale in December 2016. The plaintiff was seeking a reduction in the sale price and to have the defendants Hamel and Drouin, as well as the two previous sellers, the defendants Marshall and Bergeron, held solidarily liable. The plaintiff referred to the warranty of quality provided for in articles 1726 and following of the Civil Code of Québec (C.C.Q.) and the warranty against public law restrictions provided for in article 1725 C.C.Q. The plaintiff also claimed to be the victim of fraud on the part of the defendants Hamel and Drouin. After being called in warranty by the defendants Hamel and Drouin, the Marshalls moved to dismiss the substantive claim and the action in warranty. They claimed that the sale of the Property between the defendants Drouin and Hamel and the plaintiff was made at the buyer’s risk and that such a clause in a subsequent deed of sale irrevocably breaks the chain of title, thereby preventing the plaintiff from taking any legal action against the seller and previous sellers. 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In Blais, the Court of Appeal confirmed that an unambiguous warranty exclusion clause results in a break in the chain of title. Such a clause prevents the buyer of an immovable from taking legal action directly against the former owners who sold the immovable with a legal warranty. Given the decision in Blais, it is now clear that such a clause waiving the legal warranty closes the door to any direct recourse against a seller’s predecessors, even if such predecessors sold the immovable with a legal warranty.4 In these circumstances, a buyer who acquires an immovable at their own risk will be deprived of their right to take legal action directly against the previous sellers, insofar as the warranty exclusion clause in the deed of sale is clear and unambiguous. In this case, Justice Lebel considered that the wording of the warranty exclusion clause in the deed of sale, which was binding on the plaintiff, was clear and unambiguous, and that a sale at the buyer’s “risk” excludes both the warranty of quality and the warranty of ownership, which covers the public law restrictions of article 1725 C.C.Q. Justice Lebel indicated that there was a break in the chain of title resulting from the sale at the buyer’s risk and that the plaintiff could not claim that it was still entitled to take legal action directly against any sellers other than the defendants Hamel and Drouin. He therefore ruled in favour of the defendants Marshall and Bergeron and declared the originating application against them inadmissible. Key takeaways A warranty exclusion clause in a deed of sale will only be deemed valid if it is clear and unambiguous. The mention that a sale is made “at the buyer’s risk” completely eliminates the warranty of quality provided for in article 1726 C.C.Q. and the warranty of ownership provided for in article 1725 C.C.Q. A deed of sale containing a valid warranty exclusion clause AND a mention that the sale is made “at the buyer’s risk” precludes any recourse by the buyer against the seller, but also against previous sellers. With the current state of the Quebec real estate market, the decision in Hamel, which ties in with the Court of Appeal’s teachings in Blais, certainly clarifies how case law established in recent years should be applied, in particular as concerns the effect of a warranty exclusion clause on successive sales. The members of our Litigation and Dispute Resolution group are available to advise you and answer your questions. 9348-4376 Québec inc. c. Hamel, 2022 QCCQ 5217 Blais c. Laforce, 2022 QCCA 858. General Motors Products of Canada Ltd v. Kravitz, [1979] 1 S.C.R. 790 Supra note 1, paras. 6 and 8.

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On September 18, 2019, the Minister Responsible for Government Administration and Chair of the Conseil du trésor introduced Bill 37, An Act mainly to establish the Centre d’acquisitions gouvernementales et Infrastructures technologiques Québec1 As its name suggests, this bill is intended to implement the restructuring of government procurement announced in the 2019–2020 budget2. If the bill is passed, the Centre de services partagés du Québec (CSPQ), as well as some other procurement organizations, will be replaced by two bodies: the Centre d’acquisitions gouvernementales will be the organization responsible for meeting the government’s general procurement needs, and Infrastructures technologiques Québec will handle its digital procurement. In 2017–2018, information technology contracts accounted for 17% of public body contracts3. Some administrative functions of the CSPQ would also be transferred to the Agence du revenu du Québec and the Conseil du trésor. Bill 37 also makes a number of amendments to the Act respecting contracting by public bodies, CQLR c. C-65.1, and its regulations, two of which are noteworthy. It is planned that, as of April 1, 2020, information relating to contracts involving an expenditure of more than $10,000, whether reached by mutual agreement or following a call for tenders, will have to be published in the electronic tendering system. The current limit is $25,0004. The bill also provides that, as of the date its assent (currently scheduled for the end of 2019), the imposition of a penalty for a final reassessment under the general anti-avoidance rule regarding an abusive tax avoidance transaction5 on the part of a company or related person will be recorded in the Register of Enterprises Ineligible for Public Contracts for five years. Such penalties will also be considered by the Autorité des marchés publics in its decision to authorize a contract with a public body. A 60-day transitional period is provided for in Bill 37, during which a taxpayer may make a late preventive disclosure to the Minister of Revenue6 by filing the form Mandatory or preventive disclosure of tax planning (TP-1079.DI-V). However, this type of disclosure will not be accepted if an audit by the Agence du revenu du Québec or the Canada Revenue Agency is already ongoing with respect to such a transaction. This measure is part of the current fight against aggressive tax planning7. Quebec (National Assembly), Bill 37, An Act mainly to establish the Centre d’acquisitionsgouvernementales and Infrastructures technologiques Québec, 42nd Legislature, 1st Session. Quebec (Conseil du trésor), 2019–2020 Budget Plan (Quebec, Off. Publ., March 2019), p. H.61. Québec (Conseil du trésor), Statistiques sur les contrats des organismes publics 2017–2018 (Québec, Direction de la reddition de comptes et du soutien à l’encadrement des contrats publics, March 2019), p. 1. Sections 22 and 23 of the Act respecting contracting by public bodies, CQLR c. C-65.1; sections 39 and 39.2 of the Regulation respecting supply contracts of public bodies, CQLR c. C-65.1, r. 2; sections 52 and 52.2 of the Regulation respecting service contracts of public bodies, CQLR c. C-65.1, r. 4; sections 42 and 42.2 of the Regulation respecting construction contracts of public bodies, CQLR c. C-65.1, r. 5; sections 73 and 75 of the Regulation respecting contracting by public bodies in the field of information technologies, CQLR c. C-65.1, r. 5.1. Sections 1079.13.1 and 1079.13.2 of the Taxation Act, CQLR c. I-3. Section 1079.8.7.1 of the Taxation Act, CQLR c. I-3. See, in particular, Quebec (Conseil du trésor), 2019–2020 Budget Plan (Quebec, Off. Publ., March 2019), p. D.81.

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November 28, 2018

Cannabis legalization | Lessors : what steps should you take?

Subject to many restrictions, the possession and production of cannabis were legalized in Canada following the coming into force of the Cannabis Act1 (the “Cannabis Act”) on October 17, 2018. In this context, a guide for employers was previously published by our team in Employment and Labour. To consult it, click here. Beyond the area of employment, the entire legislation concerning cannabis legalization in Canada affects the business community, including cannabis producers, lessors of residential or commercial buildings, associations of co-owners, financial institutions and others. The cultivation, production and use of cannabis raise a number of serious questions arising from real estate law and public law. Residential Leasing For lessors, certain legal considerations regarding the use of cannabis in residential rental properties require specific actions in the short term. What are they? On June 12, 2018, the Quebec government adopted the Cannabis Regulation Act2 (hereinafter referred to as the “Act”) to complement the Cannabis Act. Section 107 of the Act states the following: 107. A lessor may, until 15 January 2019, modify the conditions of the lease of a dwelling by adding a prohibition against smoking cannabis. [Our emphasis] To that end, the lessor must give the tenant a notice of modification describing the prohibition against smoking cannabis applicable to the use of the leased premises. The tenant may refuse the modification for medical reasons. The tenant must do so by informing the lessor of the refusal within 30 days after receiving the notice of modification. In such a case, the lessor may apply to the Régie du logement, within 30 days after receiving the notice of refusal, for a ruling on the modification of the lease. In the absence of a refusal, the prohibition is deemed entered in the lease 30 days after the tenant received the notice of modification. In light of this provision, any lessor may take the necessary measures to prohibit the use of cannabis on the leased premises of residential rental properties before January 15, 2019. More specifically, what steps must lessors, who wish to assert their right to modify a lease unilaterally, take before January 15, 2019, under section 107 of the Act? 1. Draft a clause amending the lease. Lessors must first draft an amendment clause for the leases that they wish to amend to include the prohibition against smoking cannabis on leased premises, including, without limitation, balconies. The amendment clause need not extend the prohibition against smoking cannabis to common areas such as halls and lobbies, given that such a prohibition is already provided for under section 12, paragraph 8 of the Act. 2. Send a notice of modification to the tenants. Once this amendment clause is drafted, lessor must send a written notice of modification to all tenants, to the address indicated in the lease, before January 15, 2019. The notice of modification should include the following: Name and surname of the tenant or tenants concerned; Section 107 of the Act (full text); The exact text of the modification to the lease; and The lessor’s signature and the date on which they have signed the notice of modification. Although no specific requirement in this regard is provided for in either the Act or the Civil Code of Québec, it is recommended that lessors indicate the consequences that tenants face if they fail to comply with the prohibition against smoking cannabis in the notice of modification. These consequences may include the resiliation of the lease in a case where the other tenants’ right to the peaceable enjoyment of the premises has been violated3. 3. Use an appropriate delivery method The lessor will have to choose a means of transmission that will ensure that the notice of change is transmitted AND received before January 15, 2019, and that physical and enforceable proof of receipt by the tenant is kept. The most appropriate means of transmitting the notice of change may vary depending on the circumstances and the means of communication agreed upon between the lessor and their tenant and/or used by them in the past. The methods of transmission provided for in the Code of Civil Procedure include, among other things, delivery by the bailiff, sending by registered mail, personal delivery and sending by technological means. In any event, the lessor must ensure that they choose the method of transmission that provides the most convincing evidence that the tenant has received the notice. When will the amendment clause come into effect? In the absence of a refusal by the tenant (the tenant may, for medical reasons, refuse the modification proposed by the lessor under section 107 of the Act), and following a 30-day period from the receipt of said notice, the prohibition against smoking on leased premises will be deemed to have been entered in the lease. What happens if a lessor fails to assert their right to unilaterally modify a lease under section 107 of the Act before January 15, 2019? Any lessor who does not send the notice of amendment before January 15, 2019 will have to wait until the expiry of the current lease and will be subject to the general provisions of the Civil Code of Québec for the amendment of a residential lease, unless an agreement is reached with the tenant. Commercial Leasing Are lessors of commercial rental properties, like lessors of residential rental properties, required to take a particular action before a given date? Lessors of commercial rental properties cannot benefit from the right to modify leases unilaterally set out in section 107 of the Act. However, paragraph 17 of section 12 of the Act provides that smoking is prohibited in enclosed spaces that are open to the public, such as office buildings and shopping centres. Moreover, it is possible for the owners of commercial buildings to consider an amendment to the rules and regulations of the buildings in order to prohibit the use of cannabis on leased premises as well as in common areas. In this regard, lessors of commercial buildings would be well advised to immediately adopt a policy in line with the policy adopted regarding the use of tobacco on leased premises and in common areas, if appropriate. Cannabis Act, S.C. 2018, c. 16 Cannabis Regulation Act, CQLR, c. C-5.3 Chartier v. Chassé, 2018 QCCQ 2823

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