Judgments

Decision Information

Decision Content

T-2803-76
Agence de Sécurité Générale Inc. (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Marceau J.—Quebec City, Novem- ber 21 and 22, 1979; Ottawa, January 17, 1980.
Crown Contracts Bids for contract included amounts for wages calculated on minimum wage at date of contract Contract altered on first increase in minimum wage to reflect plaintiff 's increased costs On second increase in minimum wage, defendant refused to alter contract, insisted that obliga tions did not exist beyond original contract and claimed reim bursement for overpayment Whether or not plaintiff en titled to increase in payments to reflect increased costs due to raises in minimum wage Quebec Civil Code, articles 1013, 1234.
Pursuant to a three-year contract signed in 1973, plaintiff undertook to provide parking services at the Quebec City airport. The bid submitted indicated an amount for fees and salaries calculated at the minimum wage in effect at that time. The contract was amended twice by complementary agree ments, the second amendment reflecting an increase in the cost of salaries brought about by a rise in the minimum wage. When a second increase in the minimum wage occurred, the Depart ment of Transport analyzed the terms of the contract, conclud ed that the plaintiff was not entitled to reimbursement of any wages beyond the amount contracted for and sought a reim bursement for overpayment. Plaintiff completed the contract, rather than exercising its option to rescind, arid brought this action claiming that subparagraph (iv) of paragraph (a) of clause 22 dealing with increases in "fringe benefits" included increases in the minimum wage.
Held, the action is dismissed. The phrase "fringe benefits" does not include increases in the minimum wage. "Fringe benefits" and "salary" definitely cannot be taken as referring to the same set of facts, whether in ordinary usage, legal language or the language of business. These concepts may be treated as on the same footing for certain purposes, as compo nent parts of a workman's pay, but this does not mean that they should be confused. The terms are not synonymous. It cannot be maintained that a contract must be interpreted to give effect to the mutual intent of the parties, and that it is the mutual intent that must prevail. An unequivocal clause of a contract cannot be interpreted in any other way than in its literal sense; this is a fundamental principle of interpretation that is clearly confirmed by article 1013 of the Civil Code. Further, the value of testimonial evidence seeking to contradict the terms of a validly made contract may be questioned. Finally, and most importantly, the evidence resting on the testimony of plaintiffs president is hardly conclusive. The plaintiff further argued that the contract in question gave rise to two complementary agree-
ments that were to give effect to increases in the minimum wage and those increases were paid without protest for over a year. The argument that the terms of the contract were thereby amended while it was being performed cannot be accepted because the premise, that the additional agreements were con cluded for this purpose or that the reimbursements were made without objection had to be interpreted in this way, cannot be assumed. The complementary agreements expressly confirmed that all the words of the contract continued to have full effect. Their sole purpose was to correct the figure given in the schedule for the minimum wage which the contractor was required to meet.
ACTION. COUNSEL:
G. Vaillancourt for plaintiff. Y. Brisson for defendant.
SOLICITORS:
Langlois, Drouin & Associés, Quebec City, for plaintiff.
Deputy Attorney General of Canada for defendant.
The following is the English version of the reasons for judgment rendered by
MARCEAU J.: Plaintiff is claiming from defend ant the sum of $20,800, which it says is the balance of remuneration to which it is entitled for services rendered in accordance with a contract. Defendant denies that she is indebted to plaintiff under the contract in question; she even contends that she paid it some $11,000 more than it was owed.' The difference is not a matter of figures, or of the manner in which the work was done. It is the exact scope of certain clauses of this contract which bound the parties, and hence the conditions in which it was to be performed, which is at issue. The problem is therefore essentially one of inter pretation, but one which must be presented and resolved on the basis of a series of facts which I shall discuss in some detail.
Defendant claimed reimbursement of the amount in a counterclaim which she attached to her defence, but which at the close of the hearing she discontinued, reserving her remedies.
In June 1973 defendant, specifically her Minis ter of Transport, placed calls for tenders in the newspapers for the management and operation of her public parking area at the Quebec City air port. The Department wished to make a private concern responsible for providing the necessary manpower to keep the parking area in good condi tion, provide supervision and collect the necessary charges from users. Specifications were sent to those requesting them. The specifications stated that the contract would be for three years, begin ning on or about September 1, 1973. They gave all the terms and conditions of the contract to be awarded. They explained, inter alia, that the con tractor had to undertake to provide and pay the manpower necessary to keep the parking area operating eighteen hours a day, and Her Majesty for her part undertook to reimburse salaries in fact paid and to pay management fees. Bids made by persons concerned naturally had to cover the total annual cost represented by such salaries and fees. An information meeting would be held to answer possible questions from interested parties.
Plaintiff obtained the specifications. Its presi dent attended the information meeting; the follow ing day, he received by telegram, at the same time as other participants, certain clarifications regard ing questions raised the previous day and not fully answered; he even personally requested certain additional information from an employee of the Department. Plaintiff was definitely interested,. and submitted its bid. The bid which it presented indicated a total cost for three years of $77,608.92, $17,072.64 per annum in salaries and the rest in fees. It should at once be noted that the bid set salaries at the minimum wage then imposed by the Fair Wages and Hours of Labour Act, R.S.C. 1970, c. L-3, the provisions of which necessarily applied (sections 3 et seq. of the Act), and refer ence to which was made in a schedule attached to the specifications. This was the lowest offer and plaintiff was awarded the contract.
The contract was not in fact signed until December 19, 1973, a long time after operations commenced on November 1. However, it had been
authorized from the preceding August 29 (T.B. 72-1768 of August 29, 1973) and its terms were established. It of course restated, as it had to, the terms and conditions set out in the specifications, and further set out the information and figures relating to the bid which it was designed to con firm. Defendant's obligations were specified in clause 22. This contained two paragraphs. The first, (a), which was itself divided into four sub- paragraphs, dealt with salaries and wages; the second, (b), with management fees. The introduc tory portion of the clause, the initial paragraph of (a) and the first subparagraph, (i), are worth reading:
[TRANSLATION] 22. In consideration of the foregoing and of the observation and performance by the company of stipula tions, conditional clauses and conditions contained in this agreement and to be observed and performed by the company, Her Majesty, with respect to the charges and expenses incurred by the company in performing the said services and with relation to the total remuneration, shall pay the company the following sums of money.
(a) Real and reasonable expenses paid by the company to its employees, in salaries and wages, for performance of the said services, but not exceeding the annual amount for contractual years pursuant to this bid.
(i) A sum of salaries and wages not exceeding $17,072.64 for the contractual year beginning November 1, 1973 and ending on October 31, 1974.
A sum of salaries and wages not exceeding $17,072.64 for the contractual year beginning November 1, 1974 and ending on October 31, 1975.
A sum of salaries and wages not exceeding $17,072.64 for the contractual year beginning November 1, 1975 and ending on October 31, 1976.
At the time this contract was signed, giving effect, as noted above, to all aspects of the call for tenders and the bid, the parties were already aware that it would have to be altered somewhat. Even before operations commenced in November, the Department had thought of keeping the parking area open continuously, rather than only eighteen hours a day, and plaintiff had accepted the pro posal, provided of course that the figures of its bid and those in the contract were adjusted according ly. To do this, new authorization was needed from the Treasury Board, since a greater cost was involved. The formalities were completed on April 25, 1974, and on June 10, a complementary agree ment was signed which retroactively amended clause 22 of the contract, in particular altering the maximum annual amount payable for salaries and wages from $17,072.64 to $22,763.52.
All appeared in order; but it was at this point that difficulties commenced. On April 1, 1974 the minimum wage payable under the Fair Wages and Hours of Labour Act was raised from $1.90 to $2.20. Plaintiff automatically had to comply with this change, and the Department in any case required it to sign a complementary agreement replacing the schedule attached to the contract, which it will be recalled was based on the old rates. It then began paying its employees at the new rate and in its periodic reports claimed reim bursement in full of the salaries which had thus been increased. Its claims were met. A year later, on June 13, 1975, the federal minimum wage was again amended and this time was raised to $3.10. A new complementary agreement again amended the schedule. However, the claims made in accord ance with the new rates raised some doubts and led to a review of the situation, because it appeared that the amounts authorized would be insufficient. The Department's financial services undertook to analyze the payments, while the legal services scrutinized the terms of the contract. It was con cluded that plaintiff was not entitled to any reim bursement of wages beyond the- maximum amount provided for, regardless of increases which might have occurred in the federal minimum wage. It was accordingly required to reimburse the over- payments which had been made to it since the increase of April 1 in the preceding year, and in future to comply strictly with the obligations it had undertaken, onerous though these might have become. Plaintiff naturally protested, but rather than rescind its contract, as it was given the option of doing, it preferred to complete performance and reserve its remedies. In July 1976, it brought the action at bar.
Those are the facts of the case and the circum stances in which the issue arose. It only remains for me to discuss the respective positions of the parties.
Defendant's position is quite obvious. Like the officers of the Department at the time of their intervention in June 1975, she relies on the con tract, and apparently quite correctly. Clause 22, which I have reproduced in part above, stated unequivocally that expenses for salaries and wages
should not exceed the annual amounts provided for in the bid. It set limits, "ceilings", which were of course of the very essence of the contract and were necessary as the reason the Department wished to contract for three years, and for this purpose made calls for tenders, was clearly so that it could obtain a definite figure as to costs, and hence as to the annual wages payable for labour, which constitut ed the greater part of such costs.
Plaintiff did not dispute the initial impression left by reading the contract. However, it contended that a closer reading of the monetary clauses as a whole leads to the conclusion that the cost agreed upon could still be increased, in the event of an increase in the minimum wage imposed by the Act; in any case, this was the interpretation which it and officers of the Department gave to the conditions in the specifications; and anyway defendant agreed, after the contract had been signed, to raise the "ceilings" in accordance with the new applicable minimum wages. These are the three alternative arguments on which plaintiff based its action. Its success or failure must depend on their merits.
(a) Plaintiff contended, first, that a complete analysis of clause 22 leads necessarily to the con clusion that the agreed "ceilings" would in fact be raised, if the minimum wages imposed by the Act were increased. It relied on one of the subpara- graphs of paragraph (a) of clause 22, which reads as follows:
[TRANSLATION] If during the term of this agreement a statute is duly enacted requiring employees of the company to be paid fringe benefits in addition to those in effect at the date of this agreement, or if an amendment to the existing Act provides that the company shall make a greater contribution to the said fringe benefits, the Minister may increase the amounts agreed on in clause 22(a)(î), up to the amount of the additional cost.
Plaintiff argued that the phrase "fringe bene fits" included increases in the minimum wage, and to lend weight to its argument it cited decisions which it said had, for certain purposes, treated
"fringe benefits" and "salary" 2 as one and the same. In my view this argument is untenable. "Fringe benefits" and "salary" definitely cannot be taken as referring to the same set of facts, whether in ordinary usage, legal language or the language of business. It is understandable that these concepts may be treated as on the same footing for certain purposes, as component parts of a workman's pay, but this does not mean that they should be confused. The terms are not synony mous. The meaning which plaintiff seeks to attrib ute to clause 22(a)(iv) simply does not correspond to what it says. The interpretation which it sug gested is not possible.
(b) Plaintiff contended in its second argument that this nonetheless is the interpretation which it gave to the clause, and which an officer of the Department confirmed during the information meeting on the specifications, at which several clauses of the contract were discussed, and the following day at an interview requested by plain tiffs president. It maintained that a contract must be interpreted to give effect to the mutual intent of the parties, and that it is this mutual intent which must prevail.
This second argument is no more acceptable than the first. To begin with, an unequivocal clause of a contract cannot be interpreted in any other way than in its literal sense; this is a funda mental principle of interpretation and one which the article of the Quebec Civil Code referred to by counsel for the plaintiff, article 1013, in fact clear ly confirms. Secondly, referring once again to the Civil Code and to the rules of evidence which it enacts (article 1234), the value of testimonial evi dence seeking to contradict the terms of a validly made contract may be questioned. Finally, and most importantly, the evidence is hardly conclu sive, as it rests on the testimony of plaintiffs president, who told the Court that, based on the statements allegedly made before him by an offi cer of the Department, he understood that the clause relating to fringe benefits covered increases in the minimum wage. Quite apart from the fact
2 It cited: C.P.R. Co. v. Fumagalli (1963) 38 D.L.R. (2d) 110; Regina v. Fuller, Ex parte Earles and McKee (1968) 70 D.L.R. (2d) 108; Re Whonnock Lumber Co. Ltd. and Minister of Finance (1970) 12 D.L.R. (3d) 298; Menhennet v. Schoen- holz (1971) 20 D.L.R. (3d) 395; Balla v. Corporate-Plan Leasing Ltd. (1973) 35 D.L.R. (3d) 360.
that the officer in question has no recollection of having discussed the clause, I do not see how an exchange like that referred to, at the time it took place and especially with a junior employee, could provide evidence of an intent on the part of defendant at variance with that stated in the contract.
(c) The third argument put forward by plaintiff is undoubtedly more attractive than the first two. The contract in question is one which gave rise to two complementary agreements, the purpose of which was specifically to give effect to increases in the minimum wage, and the increased wages were paid without protest for more than a year. How ever, in order to conclude, as plaintiff's argument suggests, that the terms of the contract were there by amended while it was being performed, it would have to be assumed that the additional agreements were concluded for this purpose or that the reim bursements made without objection had to be interpreted in this way. In my opinion it is not possible to conclude this. The complementary agreements expressly confirmed in as many words that all the clauses of the contract continued to have full effect. Their sole purpose was clearly to correct the figure given in the schedule for the minimum wage which the contractor was required to meet. Furthermore, they were to be anticipated, because the schedule attached to the specifications and to the initial contract (like the two which subsequently replaced it) contained the following statement:
[TRANSLATION] The contractor shall note:
(a) that during the course of this contract the wage rates set forth in the schedule may be revised in accordance with section 2(e) of the conditions of work,
Furthermore, the fact the Department's account ing services, in day-to-day operations, accepted bimonthly invoices as submitted, definitely does not in itself constitute evidence of agreement by defendant to amend the contract and waive the rights resulting therefrom. It is true that the Department's officers assumed that the increase could give rise to the claims made, but if the rights of parties contracting with the government were to be determined on the basis of the reactions, opin ions and actions of all the employees of its depart ments, the sound administration of public funds would become very difficult indeed. In short, this
third argument appears to be as unacceptable as the first two.
In my opinion, in law defendant's position is beyond challenge. There was a contract; its terms are clear and were subsequently amended either expressly or by implication. The terms and condi tions which it contains, onerous though they may be, are still "the law of the parties". Plaintiff was not entitled to claim reimbursement of labour costs beyond the maximum annual amounts provided for. Its action is without foundation.
However, I will make one final observation. If ever there were a case submitted for my consider ation in which the law as I interpreted it did not appear to fully satisfy the requirements of equity, this is such a case. It certainly must be admitted that plaintiff acted incautiously; it should have foreseen—as anyone bidding on a service contract to cover a certain period of time must necessarily do—the eventualities that are likely to arise, and take action to protect itself adequately. It must undoubtedly also be admitted that observance of the principle that a contract is binding, regardless of eventualities that may arise after it has been concluded, is crucial in a system of public tenders. However, the fact remains that in the case at bar, the actions of employees of the Department can hardly be described as having been very cautious, and it is apparent that the situation which under mined plaintiff's predictions was one which result ed from a decision by defendant herself. I think that these factors should be considered before proceeding further with the claim for reimburse ment set forth by the now withdrawn counter claim.
At all events, the action at bar is without foun dation and will be dismissed.
 You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.