Verreault (J.E.) & Fils Ltée v. Attorney General (Quebec), [1977] 1 SCR 41

Supreme Court of Canada

Verreault (J.E.) & Fils Ltée v. Attorney General (Quebec), [1977] 1 S.C.R. 41

Date: 1975-03-26

J.E. Verreault & Fils Ltée Appellant;

and

Attorney General of the Province of Quebec Respondent.

1975: February 18; 1975: March 26.

Present: Laskin C.J. and Pigeon, Dickson, Beetz and de Grandpré JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC

Administrative law—Order in Council authorizing Minister to purchase land for home—Construction contract cancelled—Application of rules of mandate to Her Majesty and her representatives—Validity of contract—Damages—Social Welfare Department Act, 1958-59 (Que.), c. 27, s. 10—Act to facilitate the establishment of homes for the aged, 1958-59 (Que.), c. 6, ss. 1 and 2.

Pursuant to an Order in Council signed by the Lieutenant Governor of the Province of Quebec authorizing the Minister of Social Welfare to sign a contract for the purchase of a piece of land in view of the erection of a home for the aged, the Deputy Minister of Social Welfare signed an agreement with appellant on behalf of the Minister under which appellant was to build such a home. The contract provided that the contractor would receive the cost price plus five per cent for profit and operating expenses and two per cent for administrative expenses. Provincial elections were held and due to a change of policy, appellant received from the new provincial administration an order to stop work. The department paid for the work performed. In the Superior Court appellant obtained an award for profit lost and for damages to its reputation. On appeal the action was dismissed on the ground that the contract was null and void, since the Order in Council had authorized only the purchase of land, and not the construction. Hence the appeal to this Court.

Held: The appeal should be allowed.

Section 10 of the Act creating the Department of Social Welfare, like ss. 1 and 2 of the Act to facilitate the establishment of homes for the aged, is not in restrictive form. It is an enabling statute. It may have a restrictive effect only to the extent that, under general principles, a legislative authorization is required. This Act does not have the effect of excluding the application of a general principle.

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In the absence of any statutory restriction, a contract made by an agent of the Crown acting within the scope of his ostensible authority is a valid contract by the Crown. The Legislature had voted a budget which provided an amount under the heading of social welfare for capital expenditures on protection schools and other institutions. In fact, the contract was cancelled in order to give the job to another contractor on a lump sum basis. Appellant is therefore entitled to damages for cancellation of the contract.

As for the profit which it says that it lost, the assessment of the trial judge has not been shown to be in any way erroneous. On the other hand, the evidence presented does not justify compensation for damage to reputation and the sum awarded on this account by the trial judge should be struck out.

Alliance des Professeurs catholiques de Montréal v. Labour Relations Board, [1953] 2 S.C.R. 140; Liquidators of the Maritime Bank of Canada v. Receiver General of New Brunswick, [1892] A.C. 437; Province of Quebec v. Province of Ontario (1909), 42 S.C.R. 161; Jacques Cartier Bank v. The Queen (1895), 25 S.C.R. 84, referred to.

APPEAL from a decision of the Court of Appeal of the province of Quebec,[1] reversing a judgment of the Superior Court. Appeal allowed.

Jean-Claude Royer for the appellant.

Marc de Goumois for the respondent.

The judgment of the Court was delivered by

PIGEON J.—On June 7, 1960, an Order in Council was signed by the Lieutenant Governor of the Province of Quebec, authorizing the Minister of Social Welfare to sign a contract for the purchase of a piece of land at St-Damien in view of the erection of a home for the aged. On the same day the Deputy Minister of Social Welfare signed an agreement with appellant on behalf of the Minister, under which appellant was to build a home for the aged at St-Damien (the Foyer St-Bernard). This contract was not for a lump sum; it provided that the contractor would receive the cost price plus five per cent for profit and operating expenses and two per cent for administrative expenses.

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Elections were held on June 22, and on August 3 the following telegram was sent to appellant:

[TRANSLATION] DUE TO CHANGE OF POLICY BY NEW PROVINCIAL GOVERNMENT, HON. MINISTER OF SOCIAL WELFARE REQUESTS I NOTIFY YOU TO STOP WORK AT FOYER ST. BERNARD IMMEDIATELY STOP INSTRUCTIONS TO FOLLOW BY LETTER

ANDRÉ LANDRY ASSISTANT DEPUTY
MINISTER

On the same day a newspaper published a statement by the Minister declaring that he had given orders to cancel various contracts, including appellant’s, and that “public tenders” would immediately be called for, which was done on September 23. On November 7, appellant sent a letter through its solicitors to the Minister, requiring the latter to allow it to complete the contract or pay damages for its cancellation. Without ever giving written instructions, the department refused to permit completion of the work. However, it paid for the work performed, essentially the leasing of machinery, a total sum of $63,088.

In the Superior Court, Lacourcière J. allowed the claim. However, whereas appellant was claiming $158,062.33, he awarded $40,000 for profit lost and $5,000 for damages to reputation.

Both parties having appealed, the action was dismissed outright solely on the ground that, as the Order in Council of June 7 had authorized only the purchase of land, and not the construction, the contract was null and void. As to this Owen J. said:

In response to the Crown’s contention that there was no Order-in-Council authorizing or ratifying the contract R-1 as required by law 7-8 Eliz. II Ch. 6, Verreault urges that the contract was authorized by an Order-in-Council (R-15) passed in virtue of the provisions of sec. 10 of the law creating the Department of Social Welfare, 7-8 Eliz. II Ch. 27, which provides:

10. The Lieutenant-Governor in Council may authorize the Minister of Social Welfare, upon such conditions as he determines, to organize schools and other

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institutions administered by the Department of Social Welfare.

He may also authorize him to acquire, by agreement or expropriation, lands or immoveables necessary for such purposes.

The Order-in-Council (R-15) No. 971, dated the 7th June 1960, provides:

WITH RESPECT TO the purchase of land for the erection of homes for the aged:

IT IS HEREBY ORDERED, as proposed by the Hon. Minister of Social Welfare:

THAT he be authorized to sign, for and on behalf of the government of the Province of Quebec, the agreement necessary for purchase of a piece of land located at St-Damien, Bellechasse County, Que., in consideration of the nominal sum of $1.00, and for purposes of erecting a home for the aged; the said piece of land being owned by the Congrégation des Sœurs de Notre‑Dame du Perpétuel Secours, the mother house of which is at St‑Damien; the whole in accordance with the provisions of s. 10 of the Act creating the Department of Social Welfare, 7-8 Eliz. II, c. 27.

On the basis of the documents of which we have been referred, I am of the opinion that while the Minister was authorized to buy the land for the old people’s home he was not authorized to enter into a contract for the construction of the home. Consequently, I would hold that the purported contract R-1 was null and not binding on the Crown for want of authorization.

The Act first referred to, 1958-59 (Que.), c. 6, is entitled An Act to facilitate the establishment of homes for the aged. Section 1 reads as follows:

1. The Lieutenant-Governor in Council may appropriate a sum of fifteen million dollars for the establishment, construction and activities of homes for aged couples.

It will be seen that this is essentially an extra-budgetary authorization of expenditure, complemented by s. 4 which provides that the sums appropriated “shall be taken out of the consolidated revenue fund or of the funds derived from the Provincial Income Tax Act”. The balance is merely accessory to this authorization, in particular s. 2, the first paragraph of which reads:

2. For the purposes of this act, it may,

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a) erect, improve, furnish, maintain and administer or cause to be erected, improved, furnished, maintained or administered, such institutions in such places as it deems appropriate in the Province;…

These provisions certainly cannot be construed as legislation of general application making an Order in Council necessary for the construction of homes for the aged. On account of the words “for the purposes of this act”, the provisions of s. 2 are linked to those of s. 1, and this means that an Order in Council is required by s. 2 only if it is desired to take funds out of the $15 million referred to in s. 1. It follows, then, that this first Act has no bearing on the issue. The Order in Council of June 7, 1960 makes no reference to it, nor does the contract.

Accordingly, the situation is to be considered with regard to the second Act (1958-59 (Que.), c. 27), entitled An Act creating the Department of Social Welfare. Section 1 adds to the Revised Statutes, a new chapter entitled the Social Welfare Department Act, and s. 10 quoted by Owen J. is at the end of this chapter. It is appropriate to quote also s. 8, which reads as follows:

8. No deed, contract, document or writing shall be binding upon the department, nor may it be ascribed to the Minister, unless signed by him or by the Deputy Minister.

Can it be concluded from these provisions that, under the laws in force on June 7, 1960, the Minister of Social Welfare could not award a contract for a building intended for use as a home for the aged without an authorization from the Lieutenant Governor in Council? I think not. Firstly, it must be borne in mind that s. 10 is not in restrictive form. Like c. 6, it is an enabling statute. It may have a restrictive effect only to the extent that, under general principles, a legislative authorization is required. Such is the case for expropriation: the right to expropriate is exceptional, and it accordingly exists only by virtue of an express provision.

With regard to the organization of social welfare institutions, the situation is different because an affirmative enactment of limited application

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does not, as a rule, have the effect of excluding the application of a general principle. In Alliance des Professeurs catholiques de Montréal v. Labour Relations Board[2], Rinfret C.J. said, at p. 153:

[TRANSLATION] And Maxwell deals (p. 467) with the objection that an express provision for a particular case does not necessarily imply that the generally applicable rule is to be taken as excluded from some other case on which the statute has remained silent. In summarizing the precedents on this point he gives the following opinion (p. 467):

Provisions sometimes found in statutes enacting imperfectly or for particular cases only that which was already and more widely the law have occasionally furnished ground for the contention that an intention to alter the general law was to be inferred from the partial or limited enactment; resting on the maxim Expressio unius est exclusio alterius. But that maxim is inapplicable in such cases.

It is therefore necessary to consider whether, in the absence of any statutory restriction, a minister is capable of contracting in the name of the government. Counsel for the respondent quoted the following passage from Mr. René Dussault’s recent book, Traité de Droit administratif canadien et québécois (p. 888):

[TRANSLATION]… an agent who seeks to enter into a contract on behalf of the government must be specifically empowered to do so: the law which is the source of the government’s powers also establishes the boundaries beyond which it may not venture. As was pointed out by Thurlow J., in the Exchequer Court of Canada (Walsh Advertising Co. Ltd. v. R. [1962] Ex. C.R. 115, 123-124):

It appears to be established as a general proposition that a minister of the Crown has no authority, to enter into contracts on behalf of the Crown unless he has been authorized by a statute or by order-in-council so to do.

With respect, I feel that the correct principle is stated in the following passages from Griffith and Street, Principles of Administrative Law (3rd ed., 1963, pp. 269-271):

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The United States is not liable on a contract made by its agent unless he has express statutory authority to make it or there is an appropriation adequate to its fulfilment. In England, on the other hand, the ordinary principles of agency apply to public officers. They are not required to have express authority in order to bind their principals, and they are not themselves liable on contracts unless they have contracted personally.

…It is usually stated that Crown contracts are invalid if Parliament has not made an express appropriation for the purposes of the contract. This is a misreading of the authorities, as an Australian decision has recognised. It rests chiefly on an obiter dictum of one judge in Churchward v. Reg., (1865, 1 Q.B. 173, p. 209 per Shee J.), which has been considerably modified by several decisions in this century in which Viscount Haldane played a prominent part. It is submitted that the law is as follows: a contract made by an agent of the Crown acting within the scope of his ostensible authority is a valid contract by the Crown; in the absence of a Parliamentary appropriation either expressly or impliedly referable to the contract, it is unenforceable.

It must also be remembered that under s. 9 of the British North America Act executive authority is vested in the Queen, and, as Lord Watson put it in Liquidators of the Maritime Bank of Canada v. Receiver General of New Brunswick[3], at p. 443:

…a Lieutenant-Governor, when appointed, is as much the representative of Her Majesty for all purposes of provincial government as the Governor-General himself is for all purposes of Dominion government.

Her Majesty is clearly a physical person, and I know of no principle on the basis of which the general rules of mandate, including those of apparent mandate, would not be applicable to her. In this respect the position of ministers and other officers of the government is fundamentally different from that of municipal employees. In our system municipalities are the creatures of statute, and the ultra vires doctrine must accordingly be applied in its full rigor. I make this observation as Mr. Dussault cites in a note appended to the above quoted passage, several cases on municipal or school law.

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What is now to be said of the other cases cited directly or indirectly? On examination it appears that in most instances the opinion expressed on this point was merely given obiter, and not as the basis for the conclusion. This is true, inter alia, of the following passage from the reasons of Anglin J. in Province of Quebec v. Province of Ontario[4], at p. 200:

Moreover, apart entirely from the provisions of these statutes, executive acts in matters of such importance must be authorized by order in council. Todd’s Parliamentary Government (2 ed.), Vol. II, p. 673. In these matters acts of representatives of the Crown not so authorized—even acts of individual ministers—will not bind the Government. Reg. v. Lavery in 1896 (Q.R. 5 Q.B. 310) at page 322; Reg. v. Waterous Engine Works Co. in 1893 (Q.R. 3 Q.B. 222), at pages 235-6-7; see, too, Jacques Cartier Bank v. The Queen (25 Can. S.C.R. 84), at page 92.

Here is what Todd actually wrote in the page cited:

Inasmuch as the monarch of the United Kingdom can only act through privy councillors, or upon their advice, it follows that all the higher and more formal acts of administration must proceed from the authority of the sovereign in council, and their performance be directed by orders issued by the sovereign at a meeting of the Privy Council specially convened for the purpose.

No precise rule or definition can be made to discriminate between those political acts of the crown which may be performed upon the advice of particular ministers, and those which are properly exercised only ‘in council’. The distinction depends partly on usage, and partly, in certain cases, upon the wording of Acts of Parliament. It may be assumed, however, that acts of the most general operation and importance, such as the issue of new regulations for the organization or government of the civil service, or affecting the administration of the army or navy, should be authorised in council, while prerogatives affecting individuals, such as appointments to office, or the grant of pardons, are performed upon the advice of particular ministers.

It is quite clear that the learned author was there dealing with distinctions resting on usages and conventions, not with legal limitations, apart from limitations following from Acts of Parliament. As is well known, under the British system, which basically applies in Canada, important rules of

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government are nothing more than usages, devoid of any legal sanction.

With regard to the decision of this Court in Jacques Cartier Bank v. The Queen[5], the fact that the letter of credit was conditional, and consequently non-negotiable, was of itself conclusive, so that there was no need to rely on the absence of an Order in Council to support the conclusion.

Turning again to the Walsh Advertising case, it must be noted that the judgment was rendered after the coming into force of the Financial Administration Act, R.S.C. 1952, c. 116. In this kind of code on the subject of government contracts, restrictive provisions were to be found which had to be applied, without it being really necessary to have resort to general principles. As counsel for the appellant pointed out at the hearing of the instant case, it was not until 1961 that the Quebec Legislature enacted similar provisions (1960-61 (Que.), c. 38).

Finally, it should be noted that when the contract was awarded to appellant the Legislature had, by Appropriation Act No. 3, 1959-1960, voted a budget for the financial year ending March 31, 1961. Under the heading of social welfare, there was the following item:

Capital Expenditures

Protection schools and other institutions                                                                 $4,000,000

Respondent did not allege that this amount was not available. In fact, the contract was cancelled, not for lack of funds, but in order to give the job to another contractor on a lump sum basis.

I therefore conclude that the contract awarded to appellant was not void, and that it is entitled to damages for its cancellation. For this it claims all the profit which it says that it lost. However, after examining all the evidence, including appellant’s financial statements, the trial judge assessed the damages at $40,000. In my opinion, this assessment has not been shown to be in any way errone-

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ous. In particular, the trial judge was justified in refusing to assume that, if appellant had carried out the substantial contract in question, it would still have been able to complete all the other work done by it, from which it obtained substantial profits.

On the other hand, it does not appear to me that the evidence presented in this case justified compensation for damage to reputation. The documents in the record show that, when he announced the cancellation of the contract, the Minister stated clearly that he was doing so only in order to let all contracts by public tender instead of on a percentage basis. This did not reflect upon appellant. In some circumstances, the mere fact of cancellation may seriously reflect upon the contractor, but that is not the case here. Accordingly, without in any way deciding whether such damages are recoverable as a rule, I would strike out the sum of $5,000 awarded on this account by the trial judge.

On the whole, I would allow the appeal, set aside the judgment of the Court of Appeal and restore the judgment of the Superior Court, but I would reduce the amount thereof to $40,000 with interest from the service of the writ and costs throughout.

Appeal allowed with costs.

Solicitors for the appellant: Gagné, Trotier, Letarte, Larue & Royer, Quebec.

Solicitors for the respondent: De Goumois, L’Heureux & Gingras, Quebec.