Leblanc et al. v. Sœurs de l’Espérance et al., [1978] 2 SCR 818

Supreme Court of Canada

Leblanc et al. v. Sœurs de l’Espérance et al., [1978] 2 S.C.R. 818

Date: 1978-03-07

Fernand Leblanc and Guy Montpetit (Plaintiffs) Appellants;

and

Les Sœurs de l’Espérance, The Congregation of the Sisters of the Holy Family of Bordeaux in Canada and Hôpital Notre-Dame de l’Espérance (Defendants) Respondents.

1977: November 8; 1978: March 7.

Present: Martland, Pigeon, Dickson, Beetz and Pratte JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC

Prescription—Fees for professional services—Work not completed—Time at which the prescription begins to run—Civil Code, art. 2260(6)—Tariff of fee for Professional Engineers of the Province of Quebec, O.C. 891, 4/9/57, (1957) 89 O.G. 3475.

Respondents (the Hospital) retained the services of architects to prepare the design for an extension. The architects called on the services of appellants (the Engineers) for the preparation of the design for the electrical and mechanical work. The action concerns the professional services provided by the Engineers in the preparation of a project that was suspended in April 1961 before the work of the Engineers was completed. In 1965 the Engineers learned from the newspapers that they had been replaced by others. After submitting their account to the Hospital, which refused to pay it, they brought their action in August 1968. The Court of Appeal, reversing a judgment of the Superior Court, held that the action of the Engineers was prescribed, the prescription having begun to run in 1961, more than five years before service of the action. Hence the appeal to this Court.

Held: The appeal should be allowed.

Since the Engineers’ fee was calculated on the basis of a percentage of the estimated cost of the construction work, the trial judge was correct in likening their contract to a contract for work and in ruling that the prescription could not begin to run until the fee was due, that is either “on completion of the work or at the time it was suspended, after a decision clearly communicated” to the Engineers. In the case at bar, the work was not completed and the Engineers did not learn of the decision to suspend them until 1965, three years before service of the action. The defence based on prescription is therefore without merit. Neither is the time at which

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the prescription begins to run affected by the letter sent by the Engineers in February 1966, in which they request payment of their fee, which, they say, has been “owing for several years”. Fees may be owing without being due. Furthermore, the Tariff of fee for Professional Engineers of the Province of Quebec supports the interpretation of the trial judge concerning the time at which the Engineers’ fee became due. Under this tariff, when engineers’ fees are paid on a percentage basis, as in the case at bar, this percentage is calculated according to the value of the construction work, which is determined on the basis of the call for tenders. It follows that as long as the Engineers had not learned that there would be no tenders, or had not been informed that their contract had been terminated, it was impossible for them to require payment of their fee, since they could not determine its amount in accordance with the provisions of the tariff.

Lalonde v. La Ville de Mont-St-Hilaire, [1970] S.C. 568, referred to.

APPEAL from a decision of the Court of Appeal of Quebec reversing a judgment of the Superior Court. Appeal allowed.

Perrault Casgrain, Q.C., and J. Vincent O’Donnell, for the appellants.

Denise Chalifoux, for the respondents.

The judgment of the Court was delivered by

BEETZ J.—This is an appeal as of right, under the former s. 36 of the Supreme Court Act, against a decision of the Court of Appeal of Quebec reversing a judgment of the Superior Court condemning respondents to pay to appellants the sum of $28,000 with interest from the date of service and costs.

Appellants are consulting engineers who are regularly inscribed in the Register of the Professional Engineers of Quebec, and who practise their profession in partnership.

Les Sœurs de l’Espérance were the owners of the Notre-Dame de l’Espérance hospital. In 1960, they sold all their assets, including the hospital, to The Congregation of the Sisters of the Holy Family of Bordeaux in Canada, the Congregation assuming the obligations of Les Sœurs de l’Espér-

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ance. In 1965, the Congregation assigned its rights relative to the hospital to another corporation which was formed in 1963, the Hôpital Notre-Dame de l’Espérance, the latter assuming the obligations of the two others with respect to the hospital.

Appellants (the Engineers) claim from respondents (the Hospital) fees of $28,000 for the professional services that they rendered to the latter. The parties have agreed that, if the action succeeds, it will be for the amount of $28,000.

On or about January 19, 1952, the Hospital retained the services of the architects Duplessis, Labelle and Derome, to prepare the design for an extension. The contract, which was oral, did not include supervision of the work. The architects called on the services of the Engineers for the preparation of the design for the electrical and mechanical work, including the plumbing, heating, ventilating, air-conditioning, refrigeration and electrical systems.

The proposed extension consisted of three projects. The Engineers worked on preparation of the design for the first project from January 19, 1952 to August 1953, on the design for the second project from October 2, 1953 to December 10, 1954, and finally, on the design for the third project between the years 1960 and 1962. The action arises from the third project: the Engineers were paid for the first two.

The preparation of the design for the third project was temporarily suspended in or about April 1961, while awaiting a government decision concerning a grant intended to finance the extension. At that time, the Engineers’ work was well advanced, but according to the trial judge, it was not completed. It remained suspended until towards the end of 1965, when the architects and the Engineers learned from the newspapers that they had been replaced by others. They were not informed of their removal in any other way. The Engineers submitted their account to the Hospital, which refused to pay it. The action was brought in August 1968.

The first ground of defence put forward by the Hospital was the absence of a contract binding it

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to the Engineers: it contended that the contract was between the architects and the Engineers. This ground was rejected by the Superior Court and by the Court of Appeal, whose findings, in agreement on this point, were not disputed by the Hospital before this Court.

The second and most important ground of defence is the five-year extinctive prescription provided for by art. 2260(6) C.C. No one questions that it began to run from the time when the Engineers’ debt became due, but the Superior Court and the Court of Appeal did not agree in their determination of this time.

The Superior Court (Carignan J.) was of the opinion that the Engineers’ fee, which was calculated on the basis of a percentage of the estimated cost of the construction work and not on an hourly or daily basis, was the total price of services rendered during an indeterminate period. Carignan J. made the following statement with respect to the necessity of paying this fee:

[TRANSLATION] The mandate given to plaintiffs by defendants placed an obligation on the latter to pay plaintiffs’ fee, either:

(a) on completion of the work; or

(b) at the time it was suspended, after a decision clearly communicated to plaintiffs.

It is clear from the facts in evidence that the work was not completed.

It is clearly incumbent on the defence to prove the date of the final suspension communicated to plaintiffs; it had to show, by specific evidence, at what date its final decision to suspend the work was communicated to plaintiffs.

The defence did not give such evidence; moreover, it did not even cast doubt on the evidence of plaintiffs to the effect that they learned of the suspension of the work only by reading in the newspapers that other engineers had been chosen to continue the plans for the extensions. Needless to say, this date is squarely within the five (5) years preceding the institution of proceedings.

The Superior Court therefore decided that the second ground of defence was without merit, since the prescription had begun to run in 1965 at the earliest, three years before service of the action.

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The Court of Appeal (Owen, Turgeon and Lajoie JJ.A.) was of the opinion that the action of the Engineers was prescribed, the prescription having begun to run in 1961. The reasons for this conclusion can be found in the reasons of Owen J.A. and Turgeon J.A. only by interpretation: either the Court of Appeal held, contrary to the trial judge, that the design for the third project was completely finished in 1961, and that the Engineers’ fees were due at that time; or it decided implicitly that these fees became due progressively as the preparation of the design advanced. Lajoie J.A. added that documents originating with the Engineers in themselves justified the conclusion that their action was prescribed. Lajoie J.A. was doubtless referring to a letter dated February 25, 1966, sent to the Hospital by the Engineers, with their account of $28,000, in which the Engineers wrote that [TRANSLATION] “this fee has now been owing for several years”. In my opinion, this letter is not conclusive: fees may be owing without being due.

The trial judge did not err in finding that the Engineers’ work had not been completed: the evidence revealed that in 1961 the architects’ plans were 90 per cent completed, and the Engineers’, about 80 per cent. Guy Montpetit, the engineer, gave uncontradicted testimony that a month of work would have been required in order to complete the design and “go to tenders”.

Finally, in holding that the Engineers’ fees became due either when the work was completed or at the time when the Engineers learned that their services were no longer required, the trial judge in effect likened their contract to a contract for work, and I believe that this is correct. The design which the Engineers undertook to deliver, including the general plans for the electrical and mechanical work and the working drawings, were a specific piece of intellectual work which was the subject of the contract. As Mignault observes on the subject of contracts for services by estimate:

[TRANSLATION] More than his labour and industry, the worker pledges the work which is the subject of the

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contract, and for this reason the worker’s right to his salary is dependent upon delivery of the work which he undertakes. (Droit civil canadien, Vol. 7, at p. 401.)

(See also the judgment of Belanger J.—now of the Court of Appeal—in Lalonde v. La Ville de Mont-St-Hilaire[1], at pp. 569 and 570.)

According to the general principles governing bilateral contracts, a party who has not yet fulfilled his obligations under the contract cannot, in the absence of an agreement to the contrary, demand that the other party fulfil his. If we follow these principles, the trial judge was correct, in my opinion, in finding that the prescription had not begun to run before 1965.

During the hearing, this Court raised a point that does not appear to have been discussed before either the Superior Court or the Court of Appeal, perhaps because the amount of the fee claimed is not disputed. It concerns the effect of the “Tariff of fee for Professional Engineers of the Province of Quebec”, Order in Council Number 891 of September 4, 1957, Quebec Official Gazette, October 5, 1957, Vol. 89, No. 40, p. 3475, adopted in accordance with s. 4(2) of the Professional Engineers’ Act R.S.Q. 1941, c. 270.

The relevant provisions of the tariff are as follows:

Introduction

There are two main methods by which remuneration for consulting professional engineering services can be established. These are:

1. Payment on the basis of time extended plus reimbursement for defined expenses, hereinafter termed Time Basis, as stipulated in Section One.

2. Payment on the basis of a percentage of the Cost of Work plus reimbursement for defined expenses, hereinafter termed Percentage Basis, as stipulated in Section Two.

…

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SECTION ONE

Time Basis

The time basis is recommended for such projects as consultations, advisory services, establishing data and requirements for design, research, investigations, inspection of material or equipment, court cases and similar services.

SECTION TWO

Percentage Basis

The Percentage Basis is recommended for all projects where an accurate cost for construction and/or installation can be determined from the engineering services performed. The percentage fees stipulated in the Table of Minimum Percentage Fees embrace two main divisions but do not cover preliminary investigation to establish requirements for design. The divisions are: a) Design, and b) Supervision of Construction.

The following services are included in each:

a) Design:

i. analysis of data for design based on requirements established by the client;

ii. preparation of preliminary sketches and development of specification notes;

iii. preparation of working drawings and specifications; and

iv. a call for tenders.

Table of Minimum Percentage Fees

Percentage fees are stipulated for complete design and for supervision of construction as in a) and b) above in per cent of the Cost of Work involved.

Cost of Work	Percentage
…
…
$200,000 to $1,000,000	5.0
…
…

Design

For design only the minimum fee shall be seventy per cent of the foregoing tabulated percentage fee for mechanical and electrical design services for buildings, and sixty per cent for all other design services.

…

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GENERAL CONDITIONS OF AGREEMENT

The following provisions, terms and conditions shall apply hereto:

1. …

2. Cost of Work

a) The cost of work shall mean the total cost, to the owner of the project, of all expenses necessary to complete the work for which the engineer rendered professional services and/or for which he is responsible.

b) …

c) …

d) …

e) …

3. Payment of Engineers’ Fee

a) Where the fee is on a percentage basis, the fee due for design shall be based on the total value of the work for which the Engineer prepared plans and specifications, and of any work for which the Engineer is responsible which might be added after the Contract has been let. The portion of the percentage fee due for supervision shall be based on the cost of the work actually constructed or installed.

b) Where the fee is on a percentage basis and any part of the Engineering Services is completed but tenders for the work have not been called, and the Engineer’s fee is due, his fee shall be determined either upon his estimate of the value of the work, or on the Time Basis as may be agreed between the Engineer and the Client. If and when tenders are called and received, or the value of the work is ascertained, his fee shall be adjusted accordingly.

…

The Engineers expressly referred to this tariff in their statement, and fixed the account for their fees as follows:

[TRANSLATION]

(a) Estimated cost of the work	$1,000,000
(b) Applicable tariff, according to Order in Council 891, of September 4, 1957, for preparation of design (70% of the percentage provided for the preparation of design and supervision—70% of 5%)	3.5%
(c) Total fees for preparation of the design—(3.5% x $1,000,000)	35,000

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(d) Fees claimed for the completed part (80%) of the design (80% x $35,000)

28,000

The provisions of the tariff are important not only because they prescribe the “provisions, terms and conditions” of the Engineers’ contract; in my opinion, they are determining because they also prescribe, in an implicit but necessary manner, at what point the Engineers’ fees became due.

The tariff sets out the four categories of services which the engineer is called on to provide when he is employed only to prepare the design, which is the case for the Engineers. The fourth category deals with the stage of the “call for tenders”. There is no doubt that this stage was not reached in the case at bar. The trial judge was thus undoubtedly correct in holding that the Engineers had not completed the work for which they had been employed. Moreover, in the absence of a stipulation to the contrary, the Engineers could not normally require payment of their fees before the stage of the call for tenders was reached, because they had not provided all the services which, according to the tariff, are included in a contract for the preparation of a design.

With respect to the other provisions of the tariff quoted above, I understand them as follows. The minimum fee to which a consulting engineer is entitled for preparation of a design alone, not counting the supervision of the construction work, is seventy per cent or sixty per cent (depending on whether it is for electrical and mechanical work or other work) of the percentage fixed by the tariff for construction work of a given cost. The cost of the construction work which is to be used as a basis for the calculations is neither the estimated cost arrived at before the construction work is started, nor the real cost of the work “actually constructed or installed”; it is the cost of the construction work in accordance with the tenders, and, although it is not necessary to so decide, it is probably the cost of the work which is determined by the “adjudication of the contract of construction”.

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In my opinion, these are the only conclusions which can be drawn from s. 3 of the part of the tariff entitled “General conditions of agreement”. Paragraph (b) of this provision deals with the case in which only part of the design has been completed, and the fee for the engineer’s services is due before the call for tenders. In this case, the fees can be calculated on the basis of the estimated cost of the construction work. However, this is a provisional calculation, and is subject to adjustment. The remainder of the provision suggests this: the cost of the construction work which is to be the basis of the calculation remains, in this case as in the other cases, the one which can be determined “if and when tenders are called and received”.

On the other hand, when the engineer is employed to supervise the work, the cost of the work which is used as the basis for the calculation for this portion of his fee is the cost of the construction work “actually constructed or installed”, and not the cost of work according to the tenders. This is what is provided for in para. (a) of s. 3 of the “General conditions of agreement”.

It follows that in the absence of a stipulation to the contrary, the part of a consulting engineer’s fee which is in payment for the preparation of the design is not due before tenders have been called and received and the basis for the calculation of the fee for which the tariff provides can be determined. With respect to the portion of the percentage fee due for the supervision of work, it will be due, for the same reason, after completion of the construction work, when it is possible to ascertain the cost of the work “actually constructed or installed”. Before these points, the engineer lacks an indispensable part of the calculation of the minimum fee which the law requires him to charge.

Since there is agreement between the parties in the case at bar as to the amount of the Engineers’ claim, this Court is not called upon to decide what the tariff prescribes on this subject when there has not been a call for tenders, nor whether the amount claimed is in accordance with the tariff. However, one thing is certain: as long as the Engineers had not learned that there would be no tenders on the design which they had prepared, or

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further, as long as they had not been informed that their contract had been terminated, it was impossible for them to require payment of their fee, since they could not determine its amount in accordance with the provisions of the tariff.

According to the uncontradicted evidence of the Engineers, which was accepted by the trial judge, it was in 1965 that the Engineers learned that the Hospital had terminated their contract, and that there would be no tenders on the design which they had prepared. The tariff thus confirms the result at which the trial judge arrived by following general principles: the prescription did not begin to run before 1965.

The Hospital also pleaded, with respect to prescription, that the Engineers’ contract came to an end in 1961, when the plans were submitted to the government, and they relied on s. 3 of the Hospitals Act, R.S.Q. 1964, c. 164, in force at the relevant time because it reproduces the Hospitals Act, S.Q. 1962, c. 44, s. 3:

No person shall establish, convert, enlarge or cease to operate a hospital without the authorization of the Lieutenant-Governor in Council.

The establishing of a hospital includes the acquisition or utilization of lands or buildings and new construction or conversion.

I do not agree with this submission. The need for an authorization from the Lieutenant‑Governor in Council does not imply that the design is terminated. It might be different if there had been a definite refusal which could be brought to the attention of the Engineers, but there was no evidence of such a refusal. On the contrary, according to the uncontradicted statement of the administrator of the Hospital, testifying on behalf of the latter, the Hospital still hoped that government authorization would be granted in the end.

The appeal should be allowed, the decision of the Court of Appeal set aside, and the judgment of the Superior Court restored, with costs in this Court as in the Court of Appeal.

Appeal allowed with costs.

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Solicitors for the appellants: Lavery, Johnston, O’Donnell, Clark, Carrière, Mason & Associates, Montreal.

Solicitors for the respondents: Chapados, Chevalier & Gaul, Montreal