Executive Summary: Key Legal and Evidentiary Issues

• Causal link and mitigation were central, with the court rejecting the municipality’s argument that 9128-4182 Québec inc. broke causality or failed to mitigate by seeking termination instead of paying for decontamination itself.
• The choice of remedy (résiliation rather than résolution/annulation) under an emphyteutic contract meant there was no restitution of prestations, barring recovery of past investments and replacement costs for improvements and equipment.
• Evidence on the valuation of the emphyteutic land was found deficient, as the expert failed to properly factor in the burdens and obligations attached to emphyteusis, so the claimed market value was rejected.
• Loss of future profits was proven on a probabilistic basis using discounted cash-flow evidence, but limited to the period up to the principal’s planned retirement and intended sale, ending the claim in 2028 rather than 2055.
• Contractual clauses and mandatory emphyteusis rules dictated that the docks (quais) were “Améliorations” to be surrendered without compensation, while only the boat lift (travel lift) could be recovered by 9128 under clause 9.1.
• Expert fees were only partly recoverable, with the court awarding Deloitte’s damages-quantification fees as costs, but refusing to shift the valuation experts’ fees tied to unsuccessful heads of claim.

Facts and procedural background

9128-4182 Québec inc. entered into an emphyteutic contract with the Municipalité de Papineauville to develop and operate a marina and campground on municipal land. The agreement, structured as an emphyteusis (a dismemberment of ownership), granted 9128 the utility and rights akin to a long-term holder, while the municipality remained the owner of the immovable. The term of the emphyteusis was 40 years, with a nominal price of one dollar per year, reflecting the public-interest character and long horizon of the development. As work began, 9128’s sole shareholder and director, Richard Dumouchel, discovered contamination of the soils on the site. The contamination affected the ability to complete the planned campground infrastructure and wastewater pumping facilities to comply with environmental standards. Papineauville refused to fully decontaminate the property at its own cost. 9128 then sued in hidden defects (vices cachés) under article 1728 of the Civil Code of Québec (C.c.Q.), seeking to unwind or compensate for the consequences of having committed to an emphyteutic development on contaminated land. In an earlier judgment on liability (9128-4182 Québec inc. c. Municipalité de Papineauville, 2024 QCCS 419), the Superior Court held that the contamination constituted a serious deficit of use and that Papineauville, not 9128, bore responsibility for the decontamination necessary to make the site compliant. The court terminated the emphyteutic contract by way of résiliation, not resolution or annulment, and confirmed 9128’s right to claim damages under article 1728 C.c.Q. The current decision addresses quantum only: what damages and related relief 9128 could recover following the liability finding.

Causation and mitigation of damages

Papineauville argued that 9128 had broken the chain of causation (novus actus interveniens) and failed to mitigate its loss. According to the municipality, 9128 should have applied for environmental authorization, funded the additional decontamination itself, and continued performing the contract. By instead ceasing performance and seeking termination, 9128 allegedly became the true cause of its loss. The judge rejected this position. Under article 1479 C.c.Q., the duty to mitigate applies only to the aggravation of damage, not to obliging a victim to prevent the initial prejudice or to repair the harmful situation at its own cost. Requiring 9128 to pay for further decontamination and regulatory steps would effectively shift a portion of the wrongdoer’s liability onto the victim. The earlier liability judgment had already assigned responsibility for bringing the land into environmental conformity to the municipality, not to 9128. On causation, the court held that 9128 did not commit a second, independent fault by asking for résiliation. The termination was a foreseeable and judicially sanctioned response to a contaminated, non-conforming site and to the municipality’s refusal to assume the costs of full remediation. The novus actus interveniens theory was therefore inapplicable; the contamination and municipal fault remained the immediate and direct causes of 9128’s loss.

Nature of the remedy: résiliation and restitution of prestations

A key legal axis in the quantum judgment is the distinction between résiliation, résolution, and annulment in Quebec civil law. Article 1728 C.c.Q. for hidden defects allows an aggrieved buyer to seek both restitution of the price and compensation for prejudice where the seller knew or could not ignore the defect. In the classic sale context, resolution or annulment extinguishes the contract retroactively, triggering restitution of prestations under articles 1699–1707 C.c.Q. The parties are returned, as far as possible, to their pre-contractual state, and “restitution of the price” is the counterpart to restitution of the property. Here, however, the underlying contract was an emphyteutic agreement, a contract of successive performance. Under article 1604 C.c.Q., such contracts are not “resolved” but rather “resiliated”, and article 1606 C.c.Q. provides that résiliation only terminates the contract for the future, without retroactive effect. The court emphasized that a resiliated contract does not disappear retroactively; past performances stand, and there is no automatic restitution of prestations delivered before termination. In its liability judgment, the court had expressly resiliated the emphyteusis. That choice of remedy meant there was no legal basis for 9128 to be put back as though the emphyteutic contract had never existed.

Claim for replacement cost of improvements and past expenditures

Against this legal background, 9128 sought almost $1.9 million as the “replacement cost” of improvements and equipment it had installed on the site, together with a wide range of transaction-related expenses: notarial fees, transfer duties, taxes, surveyors, engineers, and insurance premiums. The company argued it would never have entered into the emphyteutic contract if it had known of the contamination, and therefore its entire outlay constituted compensable prejudice. The judge characterized this head of claim as, in substance, a demand for restitution of prestations. Because the contract had been resiliated and not resolved or annulled, such restitution was not available: there was no retroactive unwinding of the contract and no automatic right to recoup all investments. The court further observed that 9128 was not seeking the actual amounts it had spent on the improvements (about $709,898), but rather a higher replacement value of $1,892,800. Much of the work had been performed by Défi construction, a company presided over by Dumouchel, without charging administration and profit margins, and Dumouchel had contributed substantial unbilled time. Those “lost” margins and labour belonged to Défi construction and Dumouchel personally, neither of whom was a plaintiff; 9128 could not indirectly recover their losses by claiming a theoretical replacement cost. The evidence also showed that 9128 had generated revenues during the life of the contract, thanks to the very improvements and expenditures in question. When those revenues were netted against the proven investments, the municipality’s expert calculated an actual net loss of only about $130,000 as of December 31, 2023. Ultimately, the court resolved this conflict by holding that 9128 could not claim both repayment of its past investments and a separate award for future lost profits. The improvements and expenditures were the necessary capital outlays to generate the profits it was already claiming as lost. Awarding both would overcompensate 9128 and produce an unjust enrichment at Papineauville’s expense. On that basis, the entire claim for replacement cost and associated contract-execution expenses was rejected, although the court noted that even if it had been accepted, the loss would have been capped at approximately $130,000 rather than the much higher replacement figure.

Claim for the market value of the emphyteutic land

A second major claim sought $1,015,000 as the “market value” of the land subject to the emphyteusis. Dumouchel testified that his long-term plan was to complete the improvements, operate the marina and campground until age 70, and then sell the site. The court first clarified a fundamental point of property law: 9128, as emphyteote, was never the owner of the land. Emphyteusis is a dismemberment of ownership: the municipality retained title, while 9128 held a real right of use and improvement, together with the obligation to return the immovable and its improvements at the end of the term. Any sale by 9128 could therefore transfer only the emphyteutic right, not full ownership, and the buyer would assume the burdens of the emphyteusis, including the obligation to surrender the improved property at the end of the term without compensation. The plaintiff’s appraiser, Jean Richard, opined that the land could nonetheless be sold at full market value, focusing mainly on the 40-year term, the nominal rent of one dollar per year, and the profit potential of a campground. The judge found his opinion unreliable. Richard had not quantified the future investments a buyer would be required to make to maintain and repair the improvements, nor had he analysed how the requirement to return the land and improvements, free of charges, at the end of the term would affect resale value as time passed. He also failed to address whether the extensive obligations embedded in the emphyteutic contract would shrink the pool of potential purchasers or depress the price. On this evidence, the court held that 9128 had not discharged its burden of showing that it would probably have been able to assign its emphyteutic rights at the claimed market value. The claim for the land’s market value was therefore dismissed.

Future loss of profit and temporal limits

The most significant head of damages concerned loss of future profits. 9128 argued that, but for the contamination, it would have operated the marina and campground profitably for the entire remaining life of the emphyteusis, up to 2055. Both parties retained damage-quantification experts, who used a discounted cash-flow (DCF) methodology to estimate the profits 9128 would likely have generated absent the contamination. This method, widely accepted in Quebec jurisprudence for business-interruption and contract-loss claims, requires detailed assumptions about past results, occupancy levels, pricing, operating expenses, capital expenditures, and an appropriate discount rate reflecting risks and capital costs. Here, the experts largely agreed on the factual and financial assumptions, diverging mainly on the risk premium applied to 9128, which produced a 1% difference in their discount rates. The court preferred the slightly higher rate proposed by Papineauville’s expert, considering it better aligned with the fact that inflation had not been applied to capital investment projections. On the core question of entitlement, the judge concluded that 9128 had met its burden to establish a probable future loss of profit. Without the contamination, the company would more likely than not have completed the planned construction and successfully exploited the marina and campground as a commercial venture. However, the court did not accept the full temporal horizon claimed. Dumouchel’s own evidence showed that he intended to stay personally involved in the project only until age 70, in 2028, at which point he expected to sell—either to Papineauville or a third party—and treat the proceeds as his “pension fund”. He had no concrete succession plan for 9128 beyond his retirement. While 9128 argued that the company has a distinct legal personality and might have continued trading beyond Dumouchel’s exit, the judge treated him as the alter ego of the corporation and gave weight to his clear and repeated statements about planning to sell the site around 2028. The plaintiff also claimed, in parallel, the market value of the land, premised on exactly that future sale, which reinforced the view that continuous operation to 2055 was speculative. Given this evidentiary record, the court held that lost profits could only be awarded for the period up to 2028. It further noted that Papineauville had not demonstrated any concrete opportunities or realistic means for 9128 to mitigate its loss before that date, especially in light of Dumouchel’s looming retirement. Quantification based on the selected discount rate yielded a net present value for the lost profit stream to 2028 of $1,728,000. That amount was awarded, with legal interest and the additional indemnity running from December 31, 2023, the valuation date closest to the effective termination of the contract.

Use of docks and boat lift: rent and repossession

Post-termination, Papineauville continued to use the docks and the restored boat lift (travel lift) that 9128 had installed. 9128 claimed a rental value for that use, and in the alternative sought to recover the physical assets. The court approached these claims primarily through the lens of the emphyteutic contract and the Civil Code rules governing emphyteusis. First, there was no contractual clause providing for any rent or usage fee payable to 9128 in the event the municipality continued using the installations after termination. The court held that it could not judicially create such an obligation in the absence of an agreement between the parties. The claim for a notional post-résiliation rent was therefore rejected. Second, the judge distinguished between the docks and the boat lift for purposes of repossession. The emphyteutic contract defined “Améliorations” as constructions, works, or plantings that the emphyteote was required to make as part of the project. Clause 5.2.3 explicitly obliged 9128 to replace the existing 40 docks and add 59 more. Under article 1210 C.c.Q., which is of public order, the emphyteote must return the immovable at the end of the emphyteusis together with the constructions, works, and plantings provided for in the constitutive act, and the parties’ clauses 5.2.7 and 5.9 mirrored that obligation by requiring 9128 to deliver all “Améliorations” without compensation, free of encumbrances. The court therefore held that the docks were part of the non-removable improvements: 9128 had to leave them with the municipality at the end of the emphyteusis (including upon résiliation) and could not reclaim them. 9128 relied on clause 9.1 of the contract to argue that it could remove both the docks and certain equipment at the end of the term. Clause 9.1, however, distinguished between the immovable and “Améliorations”, on one hand, and separate equipment, fixed installations, and building fit-outs that the emphyteote could remove, on the other. The court interpreted this clause as applying only to the latter category and noted that any broader reading that allowed removal of the contractually mandated improvements would conflict with article 1210 C.c.Q. and undermine the very structure of emphyteusis. On this interpretation, clause 9.1 did not authorize removal of the docks. The boat lift stood on a different footing: it was not an “Amélioration” imposed by the contract but rather an item of equipment used in the marina’s operation. The court held that it fell within the class of removable equipment referenced in clause 9.1. Accordingly, while 9128 could not charge rent for Papineauville’s interim use of these assets, it was granted the right to recover the travel lift, with a 90-day window from the judgment date to do so.

Expert fees and allocation of costs

Finally, 9128 sought to have all of its expert costs taxed as judicial costs. The court drew a line between experts whose work underpinned successful claims and those whose opinions supported heads of claim that were rejected. The Deloitte juricomputing and damage-quantification mandates were central to the accepted loss-of-profit analysis, even though the court did not adopt every assumption advanced by 9128’s expert. By contrast, the appraisal work of Jean Richard on the land’s market value and the equipment valuation performed by Benoit Larue related to claims that were entirely dismissed—the market value of the land, the replacement cost of improvements, and the rental value of the docks and boat lift. In light of this mixed outcome, the court ordered Papineauville to pay only Deloitte’s fees as part of the costs, in the amount of $92,642.31, rejecting the recovery of the other experts’ charges.

Overall outcome and financial consequences

In the result, the Superior Court partially granted 9128-4182 Québec inc.’s action against the Municipalité de Papineauville. The court rejected the municipality’s arguments on causation and mitigation, refused restitution-type claims for past investments and for the land’s alleged market value, and denied any rent or repossession rights over the docks. It did, however, accept the core future-profit claim in a more limited time frame and confirmed 9128’s right to recover the boat lift, while also shifting the Deloitte expert-damages costs to the municipality. The net effect is that the plaintiff emerges as the successful party on the most substantial financial issue, with Papineauville condemned to pay $1,728,000 in damages for future lost profits plus $92,642.31 for Deloitte’s expert fees (a total principal sum of $1,820,642.31), together with legal interest and the additional indemnity on the damages from December 31, 2023, in addition to allowing 9128 to retake the boat lift within 90 days of the judgment.