Lalonde et al. v. City of Montreal North, [1978] 1 SCR 672

Supreme Court of Canada

Lalonde et al. v. City of Montreal North, [1978] 1 S.C.R. 672

Date: 1977-09-30

J. Antonio Lalonde et al. (Plaintiffs) Appellants;

and

City of Montreal North (Defendant) Respondent.

1977: June 9 and 10; 1977: September 30.

Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon and Dickson JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC

Municipal law—Plans for purification plant—Professional fees—Resolution by Council—Approval of Municipal Commission—Intervention of Water Purification Board—Municipal Commission Act, R.S.Q. 1941, c. 207, ss. 24, 25 and 26—Water Purification Board Act, R.S.Q. 1941, c. 44A, enacted by 1960-61 (Que.), c. 16, ss. 14 and 16—Public Health Act, R.S.Q. 1941, c. 183, ss. 57, 59, 61 and 62.

On April 30, 1962, respondent requested by resolution the services of appellants to “prepare a complete report on the sewer system” in the city and “prepare a draft plan for water purification”. Since respondent refused to pay the bill after the plans and estimates had been submitted by appellants, the latter instituted an action in Superior Court and were awarded $135,450. The value of the professional services was not disputed, but the Court of Appeal reversed the judgment of first instance, basing itself on the decision which it had rendered in Gravel v. City of St. Léonard, [1973] C.A. 779, which was based solely on the absence of the approval of the Municipal Commission provided for under s. 25 of the Municipal Commission Act. The appeal brought against that decision was heard by this Court at the same time as the appeal at bar and dismissed. In addition to the reasons given in Gravel, appellants maintained that, in the case at bar, the City acted in order to comply with requests from the Water Purification Board.

Held (Laskin C.J. and Spence and Dickson JJ. dissenting): The appeal should be dismissed.

Per Martland, Judson, Richie and Pigeon JJ.: The reasons for dismissing the appeal in Gravel v. City of St. Léonard, [1978] 1 S.C.R. 660, apply in the appeal at bar: the particular facts of this case, which are also prior to the 1965 Act, disclose no reason to decide differently.

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To distinguish the appeal at bar from Gravel, it was said that it was in order to comply with repeated requests from the Water Purification Board that the City requested appellants to provide the professional services in question. The Board did in fact, write letters to the City pressuring it to have plans for a purification plant prepared. Even if it was difficult for the City to refuse to comply with the Board’s wishes since, otherwise, the Board refused to approve work which was necessary and urgent, it was not legally obliged to act under these pressures. The Board derives its powers from the Water Purification Board Act and the Public Health Act. Under the provisions of the latter, the preparation of plans for drainage work is regarded as an ordinary administrative act that would appear to come under the exception provided for under s. 25 of the Municipal Commission Act. These provisions were, however, prior to the 1935 amendment to the section which limited the contracting power of municipalities, even regarding ordinary administrative acts. For such acts to be spared the necessity of approval by the Municipal Commission, their costs would have to be paid entirely out of the budget of the year, which was not the case in the appeal before the Court. Moreover, the Water Purification Board never made a formal decision that, to be considered valid, would have required the approval of the Lieutenant-Governor in Council.

Since the contracting power of respondent is subject to restrictions of public order, it is necessary to consider whether the circumstances would otherwise come within the principle of unjust enrichment.

Per Laskin C.J. and Spence and Dickson JJ. dissenting: The question of whether the hiring of engineers is an agreement “affecting” the “credit” of respondent within the meaning of the second paragraph of s. 25 of the Municipal Commission Act, and therefore an act requiring prior approval of the Municipal Commission, is a question of fact. The key word in this paragraph is “credit”. The question is whether, in the particular circumstances, the credit of the municipality, its financial integrity, is committed by the agreement. The circumstances in the case at bar are entirely different from those in Gravel. The fees claimed in the case at bar are for the preparation of plans for a single specific project that respondent could have paid for out of its working capital. Since respondent’s credit was in no way affected in hiring appellants, the fact that the Municipal Commission did not approve the project does not bar recovery by appellants.

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The complex of legislation creating the Water Purification Board is the second reason why respondent fails. Appellants prepared the plans in response to request and pressure from the Board, then exercising powers conferred upon it by the Public Health Act. Under s. 61 of this Act, the Board has the power to order a municipality to prepare plans, and under s. 62, it is not bound to observe the formalities regarding loans. This section therefore excepts the commitment of appellants from s. 25. It is necessary to distinguish between the “powers” of the Board that allow it to make investigations and order the preparation of plans, as it did in the case at bar, and the “decisions” aimed at definite measures, such as undertaking the construction for which the plans were prepared: only the latter require the approval of the Lieutenant-Governor in Council.

[Gravel v. City of St. Léonard, [1973] C.A. 779, aff’d. [1978] 1 S.C.R. 660, followed; Ville de Sept-Îles v. Trépanier, [1962] Que. Q.B. 956, not followed; Cie Immobilière Viger v. L. Giguère Inc., [1977] 2 S.C.R. 67; Olivier v. Village of Wottonville, [1943] S.C.R. 118; Rolland v. La Caisse d’Économie N.-D. de Québec (1895), 24 S.C.R. 405; Montana v. Développements du Saguenay Ltée, [1977] 1 S.C.R. 32, referred to.]

APPEAL from a decision of the Court of Appeal of Quebec[1] reversing a judgment of the Superior Court. Appeal dismissed, Laskin C.J. and Spence and Dickson JJ. dissenting.

Bertrand Lacombe, for the appellants.

Alfred Tourigny, Q.C., and Roch St-Germain, Q.C., for the respondent.

The judgment of Laskin C.J. and Spence and Dickson JJ. was delivered by

DICKSON J. (dissenting)—This is an appeal from the judgment of the Quebec Court of Appeal allowing an appeal from the judgment of Desaulniers J. at trial. Mr. Justice Desaulniers held appellant consulting engineers entitled to succeed for $135,450 in an action brought on account arising out of engineering studies prepared by the consulting engineers. The Court of Appeal thought s. 25 of the Municipal Commission Act R.S.Q.

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1941, c. 207 a direct bar to appellants’ action, as the approval of the Municipal Commission, required by s. 25, had not been obtained. Section 25 of the Act and related sections which aid in the construction of s. 25 read as follows:

Division IV

Approval of Loans by the Commission

24. Subject to the provisions of the second paragraph of this section, every loan contracted by a municipality or every renewal of a loan contracted by a municipality must, in order to bind such municipality, be approved by the Commission.

The provisions of the preceding paragraph shall not apply to loans contracted under the Unemployment Aid Act, 1930, and the Unemployed Aid Act, 1931, nor to those temporary loans which the Commission may, by one or more regulations approved by the Lieutenant-Governor in Council, exclude from the application of the said provisions.

25. No promissory note given by a municipality, in payment of an account or other debt exceeding one hundred dollars, shall bind the municipality unless the issuing thereof shall have been approved by the Commission.

Every agreement whatsoever entered into by a municipality affecting its credit must, to bind such municipality, be approved by the Commission, except an agreement respecting ordinary administrative acts under which agreement the expenses incurred must be paid entirely out of the revenues of the then current year.

26. When a municipal corporation is concerned, the approval mentioned in section 24 or 25 is obtained upon application made by mere resolution and submitted to the Commission;

(a) After the loan by-law has been approved by the electors who are property‑owners, when such by-law is subject to such formality; or

(b) Immediately after the adoption of the procedure enacting the loan in other cases.

In the cases referred to in this section, the delays on proceedings shall cease to run from the date of the resolution applying for such approval until the date of the receipt by the municipal corporation of the decision of the Commission upon such application.

28. The application for approval must be forwarded to the secretary of the Commission together with the

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documents respecting the loan and with all other documents and information which the Commission may require.

30. The Commission shall, in conducting its investigation upon which its decision will be based relative to an application for the approval of a loan, take into consideration the objects of the proposed loan, the necessity or expediency of such loan and the financial standing of the municipality.

The narrow question in the appeal is really whether the hiring of a firm of consulting engineers is an “agreement” “affecting” the “credit” of the City of Montreal North within the meaning of the second paragraph of s. 25, and therefor an act requiring prior approval of the Municipal Commission as a condition of validity.

I would answer that question in the negative and allow the appeal for the reason that the hiring of the professional services of the appellant consulting engineers, in all the circumstances of this case, was not an “… agreement … affecting … credit …” within the meaning of s. 25 of the Municipal Commission Act.

I

Respondent submitted that the second paragraph of s. 25 is in very general language, capable of covering contracts with professionals. Additionally, respondent says that the paragraph, having been introduced subsequent to the enactment of s. 24, must add something to the meaning of that section. That is to say, s. 25 para. 2 must signify something other than a loan commitment; if the Court did not so hold, s. 25 would be devoid of meaning. I agree with these submissions. It does not inexorably follow, however, that the legislature intended that the engaging of a professional person would be regarded as an agreement affecting the credit of the municipality. There are many types of agreements affecting or engaging municipal credit, which are neither loan agreements nor professional hirings. One could offer as examples the purchase of a parcel of land or a major item of machinery or equipment on a deferred payment or instalment payment basis. Contracts of guarantee or surety equally engage credit.

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The clear purpose of the Municipal Commission Act, Division IV, is to protect the public interest against improvident acts of municipal officials. Division IV ensures scrutiny by independent authority before municipalities undertake financial commitments which may adversely affect their financial position. The “credit” of a municipality is its ability to borrow money in consequence of the favourable opinion held by lenders as to the solvency and probity of the municipality. An agreement affecting the credit of a municipality is one which produces an effect on the credit of the municipality in the sense of affecting solvency and the ability of the municipality to meet its financial obligations. Not every agreement entered into by a municipality will have that effect. Whether an agreement affects credit will depend upon all of the circumstances of the case including the nature and scope of the agreement, the magnitude of the commitment undertaken, and the financial position of the particular municipality undertaking that commitment. If, for example, a municipality retains a notary to advise upon a contract, or if it retains counsel to defend an action brought against the municipal body, the credit of the municipality, its ability to pay its debts, is unlikely to be affected in any way.

In French, s. 25 refers to a “convention consentie par une municipalité engageant son crédit”. Petit Littré defines “engager” as “mettre en gage, obliger, lier, promettre”. Petit Robert gives this example: “engager les capitaux dans une affaire”. In either language the key word is “credit” and the question is whether, in the particular circumstances, the credit of the municipality, its financial integrity, is committed or pledged by the agreement. The sense of the phrase means more than the making of a contract.

The exception contained in the second paragraph of s. 25 must not be overlooked. It excludes from s. 25 an agreement respecting ordinary administrative acts under which agreement the expenses incurred must be paid entirely out of the revenues of the then current year. This exception presumably covers routine current commitments

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such as an order for office supplies. It would be wrong in my view to give undue emphasis to the exception. One cannot deduce from the exception that every other contract is a contract affecting credit and therefore requires compliance with s. 25 procedures. Whether credit is or is not affected is the key question and it is a question of fact. If the agreement does not affect credit that is the end of the enquiry. If the agreement does affect credit, the applicability of the exception must be considered.

Consider as an example the hiring of a lawyer to defend an action brought against a sizeable and wealthy municipality. The litigation may extend over a period of three of four years. Legal fees may amount to thousands of dollars. The fact that the hiring does not fall within the exception, as the expenses incurred would not be paid out of the revenues of the then current year, is not determinative of the question whether credit is affected. On the facts of the example, it strains credulity to suggest that the answer is affirmative and therefore requires prior Municipal Commission approval.

On one view, it can no doubt be said that any agreement which may obligate a municipality to pay money at some future date is an agreement affecting the credit of the municipality but in my opinion that is not the proper manner in which to construe s. 25. I am not satisfied that every hiring of professional services will fall within Division IV of the Municipal Commission Act. I think the following considerations relevant: (i) Division IV is entitled “approval of loans by the Commission”. In content the Division is concerned almost exclusively with loans. Sections 24, 26, 28 and 30 speak only of loans; (ii) the only mechanics provided for obtaining approval from the Commission, those detailed in ss. 26, 28, 30, are inappropriate for dealing with approval of the hiring of professional persons; (iii) section 26 refers to “the approval mentioned in section 24 or 25”. Such approval is obtained upon application submitted to the Commission after the “loan by-law” has been approved by the electors who are property owners, when

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such by-law is subject to such formality; in other cases, immediately after the adoption of “the procedure enacting the loan”. Thus the agreement referred to in the second paragraph of s. 25, if not a loan agreement, must be analogous thereto.

Did the employment of the appellant consulting engineers affect the credit of the City of Montreal North? As I have said, that is a question of fact. The engineers were retained, in circumstances which will be discussed later, to prepare a report on the sewer system of the City and a draft plan for water purification and sewage treatment plant. The City agreed to pay the engineers in accordance with the tariff of professional fees provided by the Corporation of Engineers of Quebec. During the term of the contract the fees amounted to $135,450. I can find nothing in the evidence from which one could conclude that the credit of the City of Montreal North would have been, or was in any manner affected by the action of the City in retaining the appellants. The following extract from the cross-examination of Roland Filion, mayor of the City, attesting to the strong financial position of the City, leads to the opposite conclusion:

[TRANSLATION] Cross-examination by Mr. Tourigny

Q. Mr. Filion, when you passed Resolution P-l, did you have enough funds in the municipality’s budget to pay the amount you knew you would have to pay the engineers?

A. Well, if you don’t mind, sir, I believe that Mr. Bergeron’s written brief could answer that question better than I could. I know we always had a general fund that we could use for some expenditures, but whether at the time we had exactly the amount needed set aside for this purpose, I could not say for sure.

Q. Did you always have enough in the general fund to pay accounts of, say, one hundred and thirty-five thousand or one hundred and fifty thousand dollars?

A. I am sure we did.

Q. You had that much money, even though it was not provided for in the budget?

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A. Yes, I am sure we did. Montreal North’s financial situation has always been very good.

The reasons of this Court in Gravel v. City of St. Léonard[2] are being delivered contemporaneously with those in the present appeal. The circumstances in the Gravel case are entirely different from those in the case at bar. In Gravel the action was founded upon two resolutions. The first engaged Mr. Gravel to make a preliminary study comprising the precise sites of buildings, streets, etc. as well as a survey of the level of streets and other possible locations for the site of a sewer and waterworks system. The second resolution engaged Mr. Gravel to prepare plans of the sewers and waterworks system, paving and sidewalks within the City of St. Léonard. It was an immense task. The magnitude of the financial implications arising from the agreement is demonstrated by the amount of the professional fees incurred, namely $696,617.17. Mr. Gravel prepared plans and estimates for work that had not actually been started having an estimated cost of $27,207,934.41.

Further contrast between the Gravel case and the present case can be seen from the observations of Mr. Justice Deschênes, as he then was, writing in the Court of Appeal in Gravel. He said:

[TRANSLATION] In 1957-58, the period which concerns us, appellant had a population of approximately 2,000, about 600 of whom were property owners.

In 1957, the municipal assessment was set at $2,092,-436.00 and, in 1958, at $2,338,000.00 (page 954).

Exhibit D-4 (Volume 10, page 606) shows that appellant’s budget for these two years was as follows:

Year	Income	Expenditure	Surplus or deficit
1957	$  48,684.14	$  45,666.94	$3,017.20 (surplus)
1958	127,713.74	132,088.09	4,374.35 (deficit)

One could not but conclude on these figures that when the City of St. Léonard retained Mr. Gravel to perform professional services the credit of the City of St. Léonard was indeed affected.

In delivering judgment in the Court of Appeal of Quebec in the Gravel case, Mr. Justice Mont-

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gomery drew a distinction between “an agreement authorizing an engineer to prepare, for a fee, plans for every form of public work that he may consider desirable to be carried out some day” into which category I would put the Gravel case and a resolution authorizing the preparation of plans for a single specific project only. Mr. Justice Montgomery placed the Trépanier case (Ville de Sept-Îles v. Trépanier[3]) into that category, and I would regard the present appellants as similarly placed. In my opinion, the credit of the City of Montreal North was not affected in hiring the appellants. Therefore, s. 25 of the Municipal Commission Act cannot bar recovery to an action brought on the contract in the present case.

II

There is a second reason why respondent fails. That is because a complex of legislation creating the Water Purification Board specifically creates an exception to s. 25.

The Water Purification Board is a statutory body established by 1960-61 (Que.), c. 16. By s. 14 of the Act it is provided that the Board shall exercise, with respect to sewers and installations for the treatment of sewage, the powers conferred upon the Minister of Health and the Public Service Board by s. 57 to 70 of the Quebec Public Health Act. Those powers are broad general powers relating to the approval of drainage plans and the ordering of corrective measures for satisfactory water distribution or drainage systems. Pursuant to those powers the Board wrote the respondent City on April 18, 1962. Certain plans totalling $570,000 for the replacement of sewers were approved. The President of the Board went on to recommend that the City prepared a comprehensive plan for the purification of water used in its territory. This paragraph followed:

[TRANSLATION] In this regard, the Board requests that the City of Montreal North give it written assurance by means of a Board resolution that a professional engineer

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has been retained to study the general plans for the sewage system for the purification project, and to prepare plans for a complete domestic waste water treatment plant for its territory.

Following this request appellants were engaged by resolution of April 30, 1962 for these purposes:

[TRANSLATION] 1. prepare a complete report on the sewer system in the City of Montreal North, including effluent sewers and secondary sewers;

2. prepare a draft plan for water purification in the City of Montreal North and plans for a plant for complete treatment of domestic sewage within the City.

the whole in accordance with the tariff of professional fees provided by the Corporation of Engineers of Quebec.

The approval of further sewage works for a total of $12,700 was given by letter of October 31, 1962. This paragraph was therein contained:

[TRANSLATION] We would also like to receive assurance that a monthly report on the preparation of the preliminary general plans for the treatment of waste water and the pre-assessment of the treatment plant itself will be sent to us.

Could you please also inform us of the date of the submission of the said plans to the Board.

Appellants received a copy of this letter. They wrote to the City offering to make a report of their work to date in order that the City could reply to the Board’s request. Appellants noted that, in their opinion, it was ill-advised to incur considerable expense in preparation of plans for such a system.

A further letter from the Board was sent to the City on July 10, 1963. The Board requested assurance by resolution that preliminary plans for a purification factory would be shortly forthcoming. This is an extract from the letter:

[TRANSLATION] On April 30, 1962, the Municipal Board by resolution retained the services of the consulting engineers Lalonde, Girouard & Letendre to prepare, inter alia, plans for a water purification project for the City of Montreal North and plans for a complete domestic waste water treatment plant for its territory.

The Board has on several occasions, namely, on September 13, October 25 and 31, 1962, and May 17, 1963,

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requested that it be informed of the approximate date of the submission of the plans and report, and that it be sent a monthly progress report on the study and the preparation of plans for the purification project.

The Board notes with regret that the City of Montreal North has not yet answered its repeated requests and that it has not received a report in fourteen months.

In the circumstances, the Board requests an assurance by resolution that the general plans for the City as well as the preliminary plans for the purification plant will be submitted within a reasonable period of time. (Please specify date).

Further, this resolution should also confirm that a monthly progress report will be sent to the Board.

That letter was referred to appellants. No further action was taken. Accordingly, the Board applied pressure. It delayed approving certain other sewage plans. It made clear to the City in a letter of August 22, 1963 that approval of these plans would depend on compliance with the request of July 10, 1963. The letter was as follows:

[TRANSLATION] The Board has studied the project submitted on July 18, 1963 by Mr. Michel Castonguay, City Engineer, concerning the addition of sewers on various streets of the City.

Unfortunately, the Board notes with regret that the City of Montreal North has still not answered its letter of July 10, 1963 requesting an assurance by resolution that it would be sent the general plans for the City and the preliminary plans for the purification plant within a reasonable period of time. (Please specify date).

Further, this resolution should also confirm that a monthly progress report will be sent to the Board.

This letter was written following repeated requests from the Board concerning the date the plans were to be submitted, as well as monthly reports.

In consequence, the Board requests that the City send it:

—A resolution as requested in its letter of July 10, 1963;

—A report of the studies completed to date on purification of the City’s water.

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When the Board receives these documents, it will be pleased to consider approving your project.

Yours truly,

Gustave Prévost
President
Water Purification Board

This letter was forwarded by the City to the appellants. Appellants replied to the City with a lengthy report on August 19, which report was in turn forwarded by the City to the Board. The Board wrote to the City on September 19, 1963, recognizing the difficulties of the City in complying with its earlier request. The Board agreed to approve the two suspended projects if the City, by resolutions, agreed as follows:

[TRANSLATION] (a) The City of Montreal North undertakes to pay its pro rata contribution as established by the Board to the City of Montreal’s regional purification plant if its territory is served by it;

(b) the City of Montreal North shall submit to the Board the preliminary plans for a purification plant to serve its territory, if it is not included in the Montreal regional project; it shall submit them not later than six (6) months after the official date of the exclusion from the regional project;

(c) a monthly report on the progress made in the study and the preparation of the plans shall be submitted to the Board;

(d) the necessary work on the purification project shall commence as soon as the City has obtained all of the approvals required by the Law in so far as the Municipality’s finances permit…

The City complied. Resolutions were passed October 3, 1963, included in which was a statement that appellants were charged with “la préparation des plans en vue de l’épuration des eaux usées de tout son territoire”.

The City passed a further resolution on January 12, 1965. It required appellants to produce by January 19 a complete report of its work to date. The report was produced.

On January 26, 1965, the City by resolution ordered:

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[TRANSLATION] That the report by engineers Lalonde, Girouard & Letendre concerning the water purification project be left in suspense.

What emerges from the foregoing recital of facts is that the Board’s request very quickly became prodding and from thence became pressuring. It is pressure tantamount to an order, backed by interference in the City’s affairs so as to enforce compliance. The position is, therefore, that appellant engineers were engaged by the City at the order of the Board.

I have said that the Board by statute has a mandatory direction to exercise the powers of the Minister of Health and the Public Service Board conferred under s. 57 to 70 of the Public Health Act. It also has the authority to make decisions. Provision for the exercise of powers and the making of decisions is made in s. 14 of the Water Purification Board Act, 1960-61 (Que.), c. 16, which reads:

14. The Board shall exercise, with respect to sewers and installations for the treatment of sewage, the powers conferred upon the Minister of Health and the Public Service Board by sections 57 to 70 of the Quebec Public Health Act (chap. 183).

The decisions of the Board shall not be subject to appeal under section 68 of the said act, but shall come into force only with the approval by the Lieutenant-Governor in Council. (Emphasis added.)

The “decisions” of the Board relate primarily to directing a municipality to construct or to alter purification works and require the approval of the Lieutenant Governor in Council. Thus, under s. 65 of the Public Health Act the Board may direct the doing away with the causes of pollution, under s. 66 the Board may direct the installation of purification works or devices, and under s. 67 the Board may direct the alteration of an existing purification plant.

The “powers” of the Board relate principally to the conducting of investigations and the reviewing of plans. Thus, at ss. 65-7, the Minister may conduct an investigation, at s. 59 he may approve plans prepared by a graduate engineer.

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It will be seen from the foregoing that the powers of the Board are really acts which may be done preparatory to the taking of a decision to execute. The legislation comtemplates a highly specialized administrative tribunal engaging in all evaluations necessary to be done to the construction of major projects. It may decide to direct such construction, but the final decision to go ahead, in order to have force, requires executive approval.

Two routes exist for the commencement of purification works. The municipality may initiate such works, or the Board may initiate them. If the municipality initiates them, the plans must be approved by the Board; control of expenditure is achieved through scrutiny by the Quebec Municipal Commission as required by s. 24 of the Municipal Commission Act. If the Board initiates the works, it has the power to make investigations and order the preparation of plans under s. 61 (i.e. after investigation, the Board “may order what is necessary to be done”). Section 62 provides that an order to carry on any work under s. 61 will be excepted from the formalities, including those of the Municipal Commission Act, otherwise necessary. It reads:

62. Any municipality ordered to carry on any work under section 61, is authorized, in order to comply with the orders of the Public Service Board, to take the necessary amount from its general funds not otherwise appropriated, and, if necessary, to borrow the said amount, without being bound to observe the formalities regarding loans required by the laws by which it is governed, and without affecting its borrowing power.

The power to order what is necessary to be done, formerly divided between the Minister of Health and the Public Service Board, is in virtue of s. 14 of the Water Purification Board Act concentrated wholly in the Purification Board. That is the source of authority exercised by the Board in ordering the City to prepare preliminary plans for a treatment plant pursuant to which appellant engineers were engaged. Section 62, therefore, is activated and, assuming s. 25 formalities would have otherwise been required, excepts the transaction from s. 25.

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It is hard to see that the direction to prepare plans is a “decision” of the Board and thereby requires Cabinet approval. The word “decision” as used in such a statute as the Water Purification Board Act refers to those decisions upon which final action, not merely tentative or preliminary action, is to be taken. Purely ministerial acts are not within the term. The direction given by the Board in the case at bar was wholly preparatory to construction. It was in line with the investigative powers the Board exercises as a specialized administrative body under the Act. If and when a direction was given to commence construction, the approval of the Lieutenant-Governor would have had to be sought.

The contract between appellants and respondent therefore stands unimpeded by a requirement for s. 25 formalities. On this view it becomes unnecessary to reach the question of whether, assuming the contract fell by failure to comply with formalities of public order, an action in de in rem verso could succeed.

I would allow the appeal, set aside the order of the Quebec Court of Appeal and restore the order of Mr. Justice Desaulniers with costs throughout.

The judgment of Martland, Judson, Ritchie and Pigeon JJ. was delivered by

PIGEON J.—This appeal is against a decision of the Court of Appeal of Quebec, which reversed the judgment of the Superior Court condemning the City of Montreal North (“the City”) to pay to plaintiffs, appellants in this Court, the sum of $135,450 for professional services.

These services were requested in a letter from the mayor of the City to the appellants on May 1, 1962, sending them a copy of a resolution passed the day before, in the following terms:

[TRANSLATION) That Lalonde, Girouard & Letendre, consulting engineers, be retained to

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1. prepare a complete report on the sewer system in the City of Montreal North, including effluent sewers and secondary sewers;

2. prepare a draft plan for water purification in the City of Montreal North and plans for a plant for complete treatment of domestic sewage within the City.

the whole in accordance with the tariff of professional fees provided by the Corporation of Engineers of Quebec.

The report and plans requested were duly prepared and sent to the City, and on January 26, 1965 the Municipal Council passed the following resolution.

[TRANSLATION] That the report of the engineers Lalonde, Girouard & Letendre on the subject of water purification be held in abeyance.

In the face of the refusal to pay the bill which followed this decision, appellants instituted an action which was maintained by the Superior Court, the value of the professional services not being disputed.

The Court of Appeal reversed the judgment of first instance, basing itself essentially on the decision which it had rendered in Gravel v. City of St. Léonard[4], a decision based solely on s. 25 of the Municipal Commission Act, R.S.Q. 1941, c. 207. The appeal brought against that decision was heard at the same time as the appeal at bar, and is being dismissed for reasons which it would be superfluous to repeat.

Can one find, in the particular facts of this case, some reason to decide differently? I do not think so. Here also, the facts are prior to the 1965 Act. Appellants were even retained prior to the Trépanier decision, which is dated September 25, 1962, so that they have no basis for arguing that they contracted with the City on the strength of that decision. When they contracted, the case was before the Court of Appeal.

It was said that it was in order to comply with repeated requests from the Water Purification Board that the City requested appellants to provide the professional services in question. However,

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there is no order or decision of the Water Purification Board on record. All that was produced was a number of letters addressed to the City and signed by the chairman. The only one written prior to the resolution of April 30 is dated April 18, 1962. The first paragraph acknowledges receipt of the plans for a main sewer project for $570,000, and then one reads:

[TRANSLATION] In accordance with the authority conferred on the water Purification Board of the province of Quebec by c. 44A of the Revised Statutes, 1941, enacted by c. 16 of the Statutes of Quebec 1960-61, 9-10 Eliz. II, the Board approves the execution of the work as described in the plans submitted to it.

May we remind you that in our letter of October 10, 1961 (reference to your file P. 61‑191), the Board recommended that you begin immediately preparing a comprehensive project for purifying sewage in your territory. We have received no news to date concerning this study.

The Board therefore requests from the City of Montreal North a written assurance, by resolution of Council, that a professional engineer has been retained to study the overall plan of the sewer network and to prepare plans for a plant for complete treatment of domestic sewage within its territory.

If the City decides that it is more economical to associate with other neighbouring municipalities such as St-Léonard de Port-Maurice and the City of Montreal on a joint treatment project, it must not hesitate to submit to the Board such suggestions as it considers appropriate.

A letter from the mayor of the City addressed to the chairman of the Board on May 1, 1962 enclosing a copy of the resolution of April 30 shows that in order to put pressure on the municipality, the Board had postponed approval of another project. Part of it reads as follows:

[TRANSLATION] …In view of these steps taken by the Municipal Council, which will no doubt satisfy the Board, I would be much obliged if you would give your approval, without further delay, to the other project for new sewers and waterworks that was submitted to you. …

The chairman of the Board subsequently wrote various letters to the City urging it to have the

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required plans prepared promptly and submit them to him. A letter from the chairman dated August 22, 1963 indicates that approval of another project was being withheld pending a new resolution and a report on the studies carried out so far. The following is an extract from a letter dated September 19, 1963:

…

[TRANSLATION] In view of the recent annexation of the town of Rivière-des-Prairies by the City of Montreal, and the incomplete studies by the City for the choice of a site for the purification plant for part of the north shore of Montreal Island, and for the municipalities that will be integrated into this project, we understand that it is impossible for your Municipality to determine the exact date on which the preliminary plans for a purification plant will be submitted.

The Board is thus in favour of granting its approval for the two (2) projects currently in abeyance as soon as it receives from your Municipality a resolution containing the following undertakings:

(a) the City of Montreal North undertakes to pay its pro rata contribution as established by the Board to the City of Montreal’s regional purification plant if its territory is served by it;

(b) the city of Montreal North shall submit to the Board the preliminary plans for a purification plant to serve its territory, if it is not included in the Montreal regional project; it shall submit them not later than six (6) months after the official date of its exclusion from the regional project;

(c) a monthly report on the progress made in the study and the preparation of the plans shall be submitted to the Board;

(d) the necessary work on the purification project shall commence as soon as the City has obtained all the approvals required by the Law in so far as the Municipality’s finances permit.

On October 3, 1963, the City adopted a resolution corresponding in substance to the wording set out by the Board. By another resolution adopted on the same day it authorized appellants to [TRANSLATION] “have prepared, for purposes of judicial approval, a plan showing the lands required for the purification plant …” The resolution of January 26, 1965 shows that the City did then decide not to submit to the Board the plans prepared by appellants, which were not quite complete. Appellants did eventually complete them,

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but on this account the trial judge reduced their claim from $150,660 to $135,450. Appellants acquiesced in this reduction by not lodging a cross appeal.

The work for which the plans were prepared was not carried out, since, as shown by evidence adduced at the trial, the authorities subsequently opted for a regional treatment plant to be built by the City of Montreal east of the City of Montreal North. Since the layout of the trunk sewers depended on the location of the plant, no part of the plans prepared by appellants for a treatment plant in Montreal North could be used. The work done by appellants was therefore used only to satisfy the chairman of the Water Purification Board.

It is not clear that the chairman intended to oblige the City to have all the work done by appellants carried out. The latter prepared complete plans, sufficient for a call for tenders both for a sewage treatment plant and the related trunk sewers. However, in his letter of April 18, 1962 the chairman of the Board said [TRANSLATION] “to study the overall plan of the sewer network” and “to prepare plans for a plant”. His letter of September 19 indicates that for the moment he required only studies. He was asking that the City undertake to submit “the preliminary plans for a purification plant … six months after the official date of its exclusion from the regional project”. This six-month period was obviously provided to make it possible to prepare the preliminary plans for the plant, which implies that the chairman of the Board intended to require only studies until the choice between a local and a regional plant had been made.

It therefore cannot be said that the City was obliged by the Water Purification Board to have all the work done by appellants carried out. On the other hand it must be admitted that, even if the procedure employed by the chairman of the Board was of dubious legality, it was difficult for the City to refuse to comply with his wishes. The Board was in effect refusing to approve work which the City considered necessary and urgent. Such approval was indispensable under the Water Purification

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Board Act, R.S.Q. 1941, c. 44A, enacted by 1960-61 (Que.), c. 16, s. 14 of which reads as follows:

14. The Board shall exercise, with respect to sewers and installations for the treatment of sewage, the powers conferred upon the Minister of Health and the Public Service Board by sections 57 to 70 of the Quebec Public Health Act (chap. 183).

The decisions of the Board shall not be subject to appeal under section 68 of the said act, but shall come into force only with the approval by the Lieutenant-Governor in Council.

Of the provisions of the Public Health Act above referred to, the following specially require consideration:

57. No municipality shall take or allow any steps to be taken, and no corporation, company or person shall take any steps to carry out public or private drainage works or the installation of any plant for the treatement of sewage, before submitting the plans and specifications, prepared by a graduate engineer, to the Minister, and obtaining his approval…

59. No municipal by-law relating to the construction of waterworks, a filter, or any other plant for the treatment of water, to a sewage system or any plant for the treatment of sewage, shall be submitted for the approval of the ratepayers, in case such approval is required, before the plans and specifications of the works referred to in such by-law, prepared by a graduate engineer, have been approved by the Minister.

61. Whenever, after investigation, it is established by the Minister:

…

3. That the drainage and water distribution works of any municipality have become insufficient for the protection of the public or of property, or for purposes of public health and well-being,—the Minister, one or more of such municipalities, or any interested elector who is the owner of real estate may apply to the Public Service Board, which, after investigation and after consulting the Minister, may order what is necessary to be done, … determine the nature of the works to be executed, whether new constructions, alterations, improvements, extensions or connections, order their execution, fix the delay and the manner of their execution, give all necessary orders, …

62. Any municipality ordered to carry on any work under section 61, is authorized, in order to comply with the orders of the Public Service Board, to take the necessary amount from its general funds not otherwise

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appropriated, and, if necessary, to borrow the said amount, without being bound to observe the formalities regarding loans required by the laws by which it is governed, and without affecting its borrowing power.

It can be seen that by the provisions cited above the Board was given two principal powers: the power to approve all plans for work in connection with municipal sewers and the power to order the execution of such work. The record before the Court shows that the chairman of the Board intended to compel the City to put an end to the discharge of untreated sewage into Rivière-des-Prairies. For this purpose either a plant designed to serve only the City of Montreal North or a larger installation designed to serve several municipalities could be contemplated. Rather than undertaking hearings that would result in an order, the chairman decided to exert pressure on the municipality by making use of his right to refuse to approve plans for municipal work. The municipal council accordingly decided to have the plans for a treatment plant and trunk sewer system prepared. While allowing preparation of these plans to continue, the council was nevertheless considering the possibility of opting for a regional plant, and this is in fact what was done after the matter had been held in abeyance for some time.

What must we conclude from all this? It should first be noted that the provisions of the Public Health Act, which were enacted prior to those of the Municipal Commission Act, clearly look upon the preparation of plans for drainage work as an ordinary administrative act. Section 59 prohibits the submission for approval by the ratepayers of a by-law relating to the construction of a sewage system unless the work plans, “prepared by a graduate engineer, have been approved by the Minister”. There was no question of a formal procedure for authorizing the preparation of the plans.

In 1932, when the Municipal Commission Act was enacted, it dealt only with the approval of loans, but in 1935 the legislature enacted the second paragraph of s. 25, which generally requires the approval of the Commission for every

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agreement affecting the credit of a municipality “except an agreement respecting ordinary administrative acts under which agreement the expenses incurred must be paid entirely out of the revenues of the then current year”. This requirement was imposed on pain of nullity, since the text reads: “must, to bind such municipality”. By this express provision the legislature has thus limited the contracting power of municipalities, even regarding “ordinary administrative acts”. For such acts to be spared the necessity of approval by the Municipal Commission, their costs must be paid entirely out of the budget for the year. The trial judge found that although the City was in a good financial position, payment of the fees owing to the appellants had not been provided for in the current budget and there were no revenues available for that purpose.

It does not seem to me that the provisions of the Water Purification Board Act can be relied upon by appellants as against s. 25 of the Municipal Commission Act. The only relevant provision is in the last paragraph of s. 16:

Any municipal corporation, by whatever law governed, may, for the carrying out of works designed to remedy the pollution of water, approved or ordered by the Board, contract a loan by by-law requiring no other approval than that of the Minister of Municipal Affairs and the Quebec Municipal Commission.

Clearly this provision, which applies only to the execution of work, does not dispense with the approval of the Municipal Commission. The documents produced show that the Water Purification Board exerted pressure on the City, but it never made a formal decision, directing the City to have the plans in question prepared, that could be considered an “order” within the meaning of para. 3 of s. 61 of the Public Health Act. As for s. 14 of the Water Purification Board Act, it requires the approval of the Lieutenant-Governor in Council, and nothing indicates that this approval was obtained. I do not see how an act of the Board could be an “order” without being a “decision”, an expression which seems to me to be as general as

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possible, and the scope of which is not limited by anything in the context to suggest the possibility of a distinction.

Thus it must be said that all the record discloses is that the City entered into the contract in order to comply with the wishes of the Board, without the latter ever having issued an order, a decision, and, even this, would not have relieved the City from having to obtain the approval of the Municipal Commission. If the City had provided in its budget for payment out of its current revenues of the fees owed to appellants, then its contract with them would have been perfectly valid. However, as the trial judge noted, such was not the case.

The law must, then, be applied in its full rigour without having to consider whether the circumstances would come within the principle of unjust enrichment, which would be applicable in justice to private individuals and companies (Cie Immobilière Viger v. L. Giguère Inc.[5]). The City is, with respect to its power to contract, subject to restrictions of public order which the performance of the contract cannot eliminate (Olivier v. Village of Wottonville[6]). This is not a case in which it might be asked whether, despite the nullity of the contract, the City could find itself bound to return a profitable thing which it has received, such as a sum of money: Rolland v. La Caisse d’Économie N.-D. de Québec[7], Montana v. Développements du Saguenay Ltée[8].

The appeal must be dismissed with costs.

Appeal dismissed with costs, LASKIN C.J. and SPENCE and DICKSON JJ. dissenting.

Solicitors for the appellants: Martineau, Walker, Allison, Beaulieu, MacKell & Clermont, Montreal.

Solicitor for the respondent: Alfred Tourigny, Montreal.