Does municipal law or the rules on gifts govern liability for property transferred by a municipality to a resident free-of-charge?

by Veronika Kiryanova
Lawyer 

Cities and municipalities routinely provide services and goods (e.g., compost, wood chips, landfill, earth) to its residents, free of charge. What happens when the goods are defective in quality?

What are the legal rules that apply in such circumstances and, more importantly, as regards liability for latent defects. The good news for cities and municipalities is that they may have a defense in addition to those available under municipal law.

The Municipal Powers Act and the Municipal Aid Prohibition Act establish the legislative framework governing the financial assistance that cities and municipalities can provide to residents and non-profit bodies. However, when cities and municipalities give away items free of charge, the rules governing gifts will apply.

The Superior Court decision in Garneau c. Ville de Victoriaville[1] handed down in October 2022 concerned a gift of landfill that ended up as a lawsuit for contaminated soil.[2]

Pierrette Garneau asked for and was given earth free-of-charge for the purpose of levelling uneven ground on vacant land owned by her. When she tried to sell the land, she discovered that the ground was contaminated. As the sale did not proceed, Ms. Garneau sued the Town of Victoriaville an asked the court to order that the Town rehabilitate the land, and alternatively, that it pay her damages assessed at $86,931.25.  Justice Nicole Tremblay held that Ms. Garneau had failed to discharge her burden of proof regarding the contamination of her land, but had she done so the Town could nevertheless have avoided liability under the rules governing gift, which are set out in articles 1806 and following of the Civil Code of Québec (“CCQ”).

Thus, when a city or municipality transfers ownership of property by gratuitous title to another person, it will not be liable for any latent defects in the property transferred unless the damage affects that person’s physical integrity, and the city or municipality was aware of the defect and failed to disclose it at the time of the gift[3].

Therefore, cities and municipalities can take comfort in the fact that they are not always liable for items they give away, because a gift implies [translation:] “an intention to impoverish oneself without receiving anything in return, other than the expectation of the recipient’s gratitude“.[4]