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CONTRACT - Who has authority to bind municipality - Validity

Friday, November 22, 2019 @ 1:03 PM  


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Appeal from a judgment of the Quebec Court of Appeal affirming a decision granting Octane Stratégie inc.’s (Octane) action against the City of Montreal (the City). The Court was called upon to determine whether the principles of Quebec civil law concerning the formation of contracts and the restitution of prestations applied under municipal law. Octane was a public relations and communications firm. In April 2007, the City’s director of transportation made use of its services to create an event concept for the launch of the City’s transportation plan that was to take place the following month. After a meeting at which several key players in the City’s administration, including the respondent Thériault, discussed their high expectations for the project, Octane developed a concept with the help of a specialized firm whose services it retained for the production of the event. The launch was held on the scheduled date and was a success. Octane repeatedly sought payment for the costs incurred for its subcontractor’s services, but the City was slow to pay. Octane finally sent an invoice for those expenses in October 2009. In May 2010, nearly three years after the event was held, Octane instituted an action against the City because the invoice was still unpaid. The City countered by stating, for the first time, that it had in fact never authorized the mandate, which had not been granted as a result of the tendering process required by law. Octane therefore amended its pleading to add Thériault as a defendant. Octane argued that, at the initial meeting, Thériault had given Octane a mandate to produce the event for the City and had assured Octane many times that the City would pay the costs incurred. The trial judge allowed Octane’s action, concluding that Thériault had indeed given Octane a mandate but that the contract was null because it had been awarded in contravention of the rules for awarding municipal contracts, which were of public order. However, he rejected the City’s argument that the restitution of prestations does not apply in the municipal context because of the imperative rules set out in the Cities and Towns Act (C.T.A.). He therefore ordered restitution by equivalence for the services provided, and determined that the fair value of those services was the cost of producing the event, $82,898. The City appealed that award, and Octane filed an appeal against Thériault. The Court of Appeal dismissed both appeals. The Court of Appeal affirmed that the C.T.A. did not derogate from the rules on restitution of prestations and held that even if the parties were not bound by a contract, it was nonetheless necessary to restore them to their previous positions under the rules on receipt of a payment not due.

HELD: Appeal dismissed. The rules on restitution of prestations applied in the municipal context. The general law applied to municipalities unless the legislature derogated from it. Neither the C.C.Q. nor the C.T.A. provided for such a derogation. In the absence of clear, unequivocal legislative direction to that effect, the importance of the C.T.A.’s public order provisions did not exclude the application of the rules of the general law. No contract came into existence between the City and Octane for the event production services and restitution therefore could not be grounded in the retroactive annulment of a juridical act in accordance with the doctrine of nullity. Nonetheless, the conditions imposed by the rules on receipt of a payment not due were satisfied, with the result that the parties still had to be restored to their previous positions under arts. 1491 and 1492 C.C.Q. Octane provided services for the production of the City’s launch event even though, in law, no agreement had been entered into because the City had not passed a resolution or by law to bind itself by contract. As a result, the obligation that Octane believed it was performing did not exist. Liberal intention, however, is not presumed, and the City’s arguments did not support a conclusion that Octane had a purely liberal intention. Octane was entitled to recovery for the services provided. By benefiting from services that it received entirely for free without any right, the City would be enriched at the expense of Octane, which would suffer a corresponding loss. The six month prescriptive period of 586 C.T.A. applied only to an action, suit or claim for damages. In the present case, the parties were restored to their previous positions, but this remedy could not be characterized as damages. The action was therefore not prescribed.

Montréal (Ville) v. Octane Stratégie inc., [2019] S.C.J. No. 57, Supreme Court of Canada, R. Wagner C.J. and R.S. Abella, M.J. Moldaver, A. Karakatsanis, C. Gascon, S. Côté, R. Brown, M. Rowe and S.L. Martin JJ., November 22, 2019. Digest No. TLD-November182019012-SCC