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Oil Spill Liability
Published in the February 2010 issue of Litigation Notes - View Article
Ultramar is found liable for the negligence of its subcontractor on the basis that its duty to its customer was “non-delegable”.
The Supreme Court of Nova Scotia recently considered liability for an oil spill at Park Place I, a Ramada hotel and office building in Dartmouth, Nova Scotia. Ultramar Ltd. had been delivering oil to Park Place I since 1990 and since 1997 or 1998 had subcontracted the delivery services to G&S Haulage (“G&S”).
The boiler room at Park Place I contained two 2,000 gallon oil tanks. In May of 2006 the principal of G&S, Mr. Greek, attended at Park Place I to make an oil delivery. He was accompanied by his wife, who was driving the truck. Both Mr. Greek and his wife possessed all required certificates relating to the transportation and delivery of dangerous goods. They were also familiar with the Professional Drivers Manual published by the Canadian Petroleum Products Institute.
On the day in question, it was Mr. Greek who was carrying out the filling operations, while his wife remained in the truck. He testified that the tanks at Park Place I were equipped with overflow whistles and that he knew that the tank should only be filled while the whistle could be heard. Once the whistle stops sounding, the tanks are full and delivery should cease. The whistles on the tanks at Park Place I were tested after the incident and found to be working and the Court concluded that they were working at the time that the delivery was made.
At one point during the delivery, Mr. Greek had to stop pumping so that the truck could be moved to enable a resident to get her car out of the parking lot. After the delivery resumed, it had to be stopped a second time because one of the reservoirs on the truck ran dry and the tanks had to be switched. During this process, Mr. Greek returned to the truck but his wife testified that no oil was going through the meter at this time.
For whatever reason, the tanks overflowed, resulting in four inches of fuel oil in the boiler room. The Court found that this must have been inattention on the part of Mr. Greek and that he must have been away from the fill pipe at some point during the delivery, with the result that he did not hear the whistle stop. There was evidence that at some time prior to this delivery the boilers at Park Place I had been changed such that they could be operated by either oil or natural gas. It may have been that they had been operating on natural gas and that the oil tanks were already full when G&S arrived to make its delivery. Nevertheless, the Court concluded that if this had been the case, then the whistle would never have sounded at all and no delivery should have been made.
Park Place I sued both G&S and Ultramar. As against G&S the action was in negligence and in nuisance pursuant to the rule in Rylands v. Fletcher. The Court found that Rylands v. Fletcher did not apply in the circumstances, because the Plaintiff had consented to the dangerous substance being brought on its lands. In negligence, however, the Court found that G&S owed a duty of care to Park Place I and that it had breached this duty of care as a result of the inattention of Mr. Greek.
As against Ultramar, the claim was in both contract and negligence and Ultramar was found liable on both bases. The Court found that it was an implied term of the contract between Ultramar and Park Place I that Ultramar would deliver fuel oil “…safely, in a manner which would not allow the fuel oil to escape from the fuel oil tanks to which it was delivered”.
In negligence, Ultramar argued that it was not liable for the negligence of its independent contractor because it had hired a skilled and experienced contractor and had satisfied itself that Mr. & Mrs. Greek had the necessary skill, training and certificates to safely deliver fuel oil. The Court reviewed the law relating to the liability of an employer for the acts of an independent contractor. The general rule at common law is that a person who employs an independent contractor will not be liable for loss flowing from the contractor’s negligence. There are, however, certain exceptions to this rule, in circumstances where a duty is owed which is “non-delegable”. One of the situations which gives rise to a non-delegable duty is the subcontracting of work which by its very nature is likely to cause damage to others. The Court found that “…the transportation and delivery of fuel oil is an inherently dangerous activity” and that “…it is foreseeable if a fuel oil delivery person delivers oil in such a manner that the oil overflowed the oil tank and escaped into a tank room, it would cause damage to the property owner”. Consequently, it found that Ultramar owed a non-delegable duty to Park Place I and was therefore liable in negligence.
However, it was also found that oil had leaked out of the tank room through an expansion joint and that the construction of the tank room was not in accordance with building code requirements that it be liquid-tight. Consequently, Park Place I was found contributorily negligent. The damages claimed for the clean up of the spill were $309,000. The Court found that $40,000 of that amount would have been incurred whether the tank room had been liquid-tight or not. That amount was therefore deducted from the total, leaving damages of $268,000. That remaining amount was apportioned 70% against the Defendants and 30% against the Plaintiff.
Park Place Centre Ltd. v. Ultramar Ltd., 2010 NSSC 39 (CanLII)