Executive Summary: Key Legal and Evidentiary Issues

• The case concerned a contractual dispute over a settlement agreement related to non-conforming backfill work on private land.

• Appellants argued that an expert's finding of non-compliance triggered the respondent’s obligation to perform corrective work under clause 10 of the agreement.

• The respondent contended that no work was required, since the expert concluded any remediation would cause environmental harm and the city accepted the status quo.

• The Court analyzed whether the trial judge erred by applying clause 9 instead of clause 10 of the transaction.

• It found the judge's interpretation—prioritizing environmental context and the municipality’s position—was reasonable and legally supportable.

• The appeal was dismissed, confirming that no further work or compensation was owed for site restoration under the settled claim.

Facts of the case

In 9167-5637 Québec inc. v. Excavation M. Toulouse inc., 2025 QCCA 448, the dispute arose out of environmental remediation issues linked to a highway extension project in Sherbrooke, Québec. In 2014, 9167-5637 Québec inc. and its principal, Jean-Claude Goyer (the appellants), allowed Excavation M. Toulouse inc. (the respondent) to deposit excavation fill (remblai) from highway construction on their land, under the condition that the work would comply with all required authorizations and environmental regulations.

In 2019, the City of Sherbrooke issued a formal notice, stating that the work had significantly exceeded the authorized volume of fill and encroached on protected wetlands and watercourses. In response, the appellants sued for $1.55 million, including compensation for land restoration, loss of property value, and moral damages.

In 2022, the parties entered into a settlement agreement (transaction) regarding the first claim—site restoration. The agreement tied the resolution of that issue to the findings of an environmental expert, Ghislain Houde. If Houde’s findings showed compliance, the appellants would abandon the $500,000 site remediation claim. If his findings revealed non-compliance, the respondent would be obligated to perform corrective work, as long as the City and a second expert corroborated the findings.

Expert findings and lower court decision

Mr. Houde’s expert report concluded that the fill work was indeed non-compliant with the original environmental authorization. However, he did not recommend corrective work, explaining that doing so might worsen the environmental condition. The appellants’ expert, Patrick Hardy, agreed with this conclusion, and the City accepted the findings, formally regularizing the condition of the site and choosing not to demand corrective measures.

Despite the confirmed non-compliance, the respondent refused to conduct remedial work, arguing that none was required due to the expert’s recommendation and the City’s position. The trial judge agreed and applied clause 9 of the settlement agreement, which required the appellants to abandon their claim if the City accepted the condition of the land—even if the fill work had been excessive.

The judge interpreted the purpose of the agreement as focusing on the City’s approval, not on whether the site could support future development. Since the City accepted the expert report and waived any requirement for remediation, the judge held that the condition for the appellants' withdrawal of the claim was met.

Appeal and Court of Appeal’s analysis

The appellants argued on appeal that the expert’s finding of non-compliance should have triggered clause 10 of the settlement, obligating the respondent to perform corrective work regardless of any subsequent recommendations. They asserted the trial judge committed a reviewable error by failing to enforce the contractual terms strictly.

The Quebec Court of Appeal rejected these arguments. It found that the trial judge’s interpretation of the contract was reasonable and consistent with its overall purpose—to resolve the issue based on whether the City demanded compliance, not merely on technical non-conformity. The Court noted that enforcing corrective work contrary to expert recommendations and municipal acceptance would undermine environmental and contractual intent.

Even if the trial judge had mistakenly referenced clause 9 instead of clause 10, the outcome would remain the same: no corrective work was required, and the restoration claim became moot.

Conclusion

The Court of Appeal dismissed the appeal and upheld the trial judgment. It confirmed that when the City accepted the non-conforming fill work without requiring remediation, the respondent had no further obligations under the settlement. The appellants were ordered to abandon their $500,000 claim for site restoration, and costs were awarded to the respondent. The remaining claims for land value loss and moral damages remain pending.