Ville de St. Jean v. Molleur

the Quebec statute, 40 Vict. Louis Molleur and others, now represented the defendants, were substituted as sole owners of the waterworks of St. John's in the place of "The Waterworks of St. John's," incorporated under R.S.C. charged with all the obligations and responsibilities of said company, and, the said Act, 40 Vict. the new proprietors were granted the exclusive right and privilege of placing pipes or water conduits under the streets and squares the Town of Saint John's (now the City of St. John's, the appellant), under certain other conditions and obligations in the last mentioned statute recited, and the monopoly created was, by section liable to forfeited in case of neglect refusal in the discharge of the obligations thereby imposed.

Held, that the contract existing between the parties, in virtue of the above recited statutes, was liable to rescission under the provisions of article the Civil of Lower Canada, upon default in the specific performance the defendants the obligations thereby imposed, and that, upon proof of default in the specific performance of any of the said obligations, the municipal corporation was entitled to maintain an action in its corporate capacity to have the exclusive right and privilege granted by the statute declared forfeited, surrendered and annulled.

The judgment appealed from (Q.R. K.B. deciding that the action would lie only for breach of obligations expressly clared to. involve forfeiture, was reversed, Davies J. dissenting. *PRESENT:-Girouard, Davies, Idington, Maclennan and Duff JJ. - APPEAL from the judgment of the Court of King's Bench, appeal side (1), affirming the judgment of the Superior Court, District of Iberville (Paradis J.), allowing a demurrer to the plaintiff's action with costs.

The plaintiff's action was for a declaration that the defendants had forfeited certain exclusive privileges in respect to the construction and operation a system of waterworks in the City of St. John's, Quebec, vested in them by virtue of an agreement under the Consolidated Statutes of Canada, 1859, ch. 65, and the Act 40 Vict. ch. 68 (Que.).

J.-Voici une cause qui nous a caus6 beaucoup d'embarras. Nous ne sommes qu'au debut de linstruction, et d6jh nous sommes en presence d'un dossier de cent pages d'impression.

La d6claration couvre vingt-quatre pages; les plaidoyers au fonds aussi vingt-quatre pages; et dix pages de d6fense en droit partielle. Puis viennent une r~ponse en droit partielle de la demanderesse et une autre an fond qui couvre vingt-quatre pages.

Il n'est pas surprenant que les parties aient fait des efforts pour en r~duire le volume par des proc~ds pr61iminaires.

Par le juge- . ment de la cour de premi~re instance, la d6fense en droit A toute l'action a 6 renvoybe, aussi bien que la rdponse partielle de la demanderesse, et l'inscription sur la defense en droit partielle de la d6fenderesse a t6 maintenue en- partie. Voilk pourquoi les deux parties ont interjet6 appel h la cour du bane du roi, qui a confirm6 le jugement de la cour inf6rieure. L'appel devant cette cour est seulement du jugement qui a maintenu la d6fense en droit partielle. Sans entrer dans les d6tails nombreux de cette cause, qu'il nous suffise de dire que l'action intent6e par 1'appellante est en ddchiance d'une franchise exclusive de construire et op6rer un aquedue dans la ville de St. Jean conc6d6e par 40 Vict. ch. 68, des statuts de Qu6bec.

Ce statut forme ce que 1'on est convenue d'appeler la charte de la compagnie et a toute la force d'un contrat entre elle et la ville de St. Jean, avec le monopole du service de I'eau que la municipalit6 ne pouvait octroyer sans l'autorisation de la 16gislature.

Par cette charte, la compagnie reprsent6e aujourd'hui par I'intimbe, en consid~ration de la concession de ce "droit et privil6ge exclusif," s'est engag~e a fournir A la ville de St. Jean et a ses habitants "une eau pure et saine," non-seulement pour les usages domestiques et leurs besoins en g~n6ral, mais aussi pour la protection contre les incendies; et A d6faut par elle de le faire, la charte d6cr~te qu'elle sera d6chue et priv6e "du privilige exclusif ci-dessus 6tabli." L'appelante allMgue que la compagnie n'a pas rempli cette obligation impos6e par la charte, et comme preuve, elle 6numbre plusieurs faits, conventions et arrangements intervenus pour arriver an r6sultat privu par la charte, qu'elle a tons violds, dit l'appelante; puis elle conclut i la dch6ance. Le savant juge en chef Taschereau, parairouard J. lant an nom de la cour, a rsum6 la situation entre les parties en quelques mots que voici:

Le tribunal premiare instance a fait reposer sa d6cision sur la distinction entre les obligations Mme. Rey, imposoes par la loi A peine dchdance ses droits, et celles dont le d6faut d'ex4cution ne devait avoir d'autres consdquences que celles pr6vues pour les cas ordinaires d'inex6cution d'obligations.

Nous croyons qu'il a raison.

Il aurait une autre distinction faire entre les devoirs obligations impos~s par le statut et ceux qui rdsultent de conventions particuli~res.

Il n'y a que la violation des premiers, et encore, comme je viens le dire, soulement dans les cas on elle prononc6e express6ment, que la d~ch6ance peut avoir lieu. L'inex6cution des autres obligations, toutes celles n6es conventions et celles impos~es par statut la ddchance n'est pas prononc6e, ne peuvent donner ouverture qu'au recours en dommages ordinaires.

Avec toute la d6f6rence possible, je ne puis accepter cette distinction, bien qu'elle ne soit pas importante pour d6cider le litige. Il me semble que s'il est un point bien 6tabli dans notre jurisprudence, c'est que, dans certains cas, l'inex6cution des obligations stipul6es dans des conventions pent emporter la r6solution du contrat, ce qui dans l'espce est la mime chose que la d6ch6ance d6cr6t6e par le statut, car dans les deux cas il faut que la revocation soit pronone6e en justice.

L'article 1065 du code civil se lit comme suit:

Toute obligation rend le ddbiteur passible dommages en contravention de sa part; dans les cas qui permettent, erdancier peut aussi demander 1'6x6cution l'obligation mome, I'autorisation la faire exdcuter aux d6pens du debiteur, ou resolution du contrat d'oil natt l'obligation; sauf les exceptions contenues dans et sans pr6judice A son recours pour les domniages-intCrots dans tous les cas.

Puis Particle 1066:

19os Le cr~ancier peut aussi, sans pr6judice des dommages-int6rAts, demander que qui a 6t6 fait en contravention A l'obligation soit d6truit, s'il y a lieu; et le tribunal peut ordonner que cela soit fait par ses officiers, ou autoriser la partie A le faire aux depens . l'autre.Girouard

.J. Pautre.

Je crois que ce principe fut appliqu6 dans une cause de Valiquette v. Archambault(1). A la page 54, 1'on trouve les consid6rants de ce jugement dont je d6tache le suivant:

Considrant que bien que Particle du Napoleon qui anonce que la condition rdsolutoire est toujours sous-entendue dans les contrats, pour le cas ot l'une des parties ne satisfera point A engagement, n'alt pas t6 reproduite en termes expris dans notre propre code civil, nos codificateurs ont pourvu au mime cas et exprimb principe dans Particle notre dit code civil, qui permet, mome en 1'absence la condition r6solutoire expresse, de demander la rdsolution du contrat d'otl nalt 1'obligation qui n'a pas 6t6 accomplie.

(Voir rapport des codificateurs, DeLorimier, Bibl. du civil, pp. et :

Consid6rant que les dits auteurs notre n'ont ddrog6 A principe et n'ont fait exception cette ragle g6ndrale, applicable A tous les contrats, que dans le cas vente d'immeubles.

Ce jugement, il est vrai, a kt renvers6 par la cour de revision, mais sur un autre point: voir 8 id. 174. Dans une cause r6cemment dcidee et rapport6e dans le dernier num6ro des rapports judiciaires de la cour du banc du roi, Corporation of the Town of Graind'M re v. L'Hjydraulique de Grand'Mcre(2), la cour d'appel, comnpos6e de Taschereau J.C., Boss6, Blanchet, Lavergne et Cross JJ., a reconnu Pexistence d'une action comme celle-ci.

II ne s'agissait pas de contravention h des obligations imposdes par un statut, mais uniquement d'inexcution des obligations stipuldes par les parties. Le juge Cross, parlant an non de la cour, dit:

Q.R. K.B. (1) Q.R.

).

. La r6vocation ne fut pas prononce vu le consentement des parties qu'un d61ai de neuf mois soit accord6 au propri6taire de 1'aqueduc pour compl6ter ses travaux. Le juge Cross n'h6site pas h declarer que cet ordre de la cour n'est pas le meilleur rem~de. A la page 92 du rapport, il observe:

Le principe de l'article 1065 du code civil n'est pas particulier a la province de Qu6bec.

On le trouve aussi dans Particle 1184 du code Napoleon. Dans la note 4 A cet article, Gilbert sur Sirey nous donne 1historique de ce principe, aussi bien qu'une longue liste d'autoritis.

Reste une difficult6 qui a soulev6e pour la premibre fois devant nous.

L'appelante n'a pas demand6 par son action la r~siliation on la revocation des dits contrats et conventions. Elle va m~me plus loin; elle se reserve tout recours qu'elle pout avoir pour faire prononcer la r6siliation d'un de ces contrats, le march6 du ler. juin, 1892. Elle demande seulement que tons les privildges qui.appartiennent h 1'intimbe en vertu de I'acte de Qubbec, 40 Vict. ch. 68, soient d6clar6s d~chus, nuls et annull~s, et cela suffit dans mon humble opinion.

ne s'agit en effet que de la franchise exclusive conf6rde par le statut.

Nous croyons que tout ce qui se rattache h lex- 6cution des obligations de la charte pent et doit faire la matibre de 'enqute.

Citons un exemple, peut-6tre le plus favorable aux pr6tentions de lintimbe, celui de la compagnie "Singer," qui a & exlus par les tribunaux inf6rieurs. Elle n'est pas mentionn6e dans la charte, pas plus que les autres habitants qui, h l'origine de l'aqueduc, formaient la population de St. Jean, on y sont venus depuis on y viendiont pendant les quarante-six ans de lexercise de la franchise.

Ils sont tons .compris dans lobligation de fournir leau aux habitants de la ville, et, si c'est pour des fins industrielles, comme dans le cas de la "Singer," que la ville etait anxieuse d'avoir dans ses limites, les parties peuvent faire des arrangements pour mieux remplir Fobligation de la charte. Et puis, pendant ce long espace de temps, la ville se dveloppera, de nouvelles m6thodes d'op6rer un aqueduc, des am6liorations, en un mot, seront d6couvertes, peut-on raisonnablement refuser aux parties le pouvoir de les adopter, toujours afin de mieux atteindre le but de la charte(1).

Ce que la demanderesse a toujours demand6, ce fut le service d'un eau pure et saine pour les besoins de ses habitants, ce qu'elle a le droit d'avoir par la charte, et qu'elle n'a pu obtenir jusqu'a ce jour. Les conventions et les arrangements subsequents et leur violation de la part de Fintim6e ne sont que des d6tails, des exemples du refus on d~faut de la part de Fintim6e de remplir Pobligation g6ndrale impos6e par la charte de fournir leau. Je ne puis congevoir que Pon puisse rendre justice A la demanderesse sans lui permettre d'en faire la preuve. C'est tout ce qu'elle parait avoir en vue. Elle ne demande pas la confiscation on la destruction de Paqueduc de la d~fenderesse; il restera toujours sa proprift.

Ce qu'elle demande c'est la d-ch6ance de la franchise exclusive que lui conf~re non pas les dites conventions, mais le statut, 40 Vict. ~li ch. 68, afin de lui permettre, ainsi qu'elle l1affirme dans sa d6claration, de construire elle-mime un aque- J. due municipal. Les parties les out consenties simplement pour donner plus d'efficacit6 et de precision a ses dispositions.

La demanderesse all1gue que la d6fenderesse a abus6 d'une manitre grossibre pendant un grand nombre d'annies de tons les pouvoirs qu'elle Jui a conf~rds et cela nonobstant plusieurs plaintes et protestations.

Nous croyons qu'il est dans 1'intrct de la justice que Penquite se fasse sur tous ces faits et conventions afin de mieux appr6cier la conduite des parties.

L'appel doit en cons6quence 6tre accord6 avec d&pens devant cette cour et la cour d'appel, et la d~fense en droit partielle renvoye avec d6pens.

(dissenting).-For the reasons given by Chief Justice Taschereau in the Court of King's Bench of Quebec, I am of opinion that the appeal should be dismissed.

J.-The determination of this appeal must depend on whether or not the relationship created between the appellant and respondent's corporate predecessor, created by virtue of chapter 65 of the Consolidated Statutes of Canada, 1859, was of a contractual character, and so within the resolutive provision of article 1065 of the Civil Code of Quebec. The method of incorporation provided by the said Act is that at least five persons shall set forth the purpose for which they desire incorporation; that is for the purpose of furnishing a supply of gas or water both, for the village, town or city named, wherein it is proposed to operate, and upon the required declaration being filled up, with the details specified in the said Act and acknowledged before the mayor or chief magistrate of the city, town or village named, he shall J. grant a certificate of these facts.

Thereupon the people so promoting petition the council of the said village, town or city to pass a bylaw, granting authority to them as a company, to lay down pipes for the conveyance of gas or water both, under the streets, squares and other public places of such city, town or village.

When all these formalities, of which the requisite details appear in the first three sections of the Act, have been complied with, and the by-law has been passed and registered as required, the petitioners and all others joining them, as stock-holders forming the company thereby established, shall be a body corporate with the style and title mentioned in such declaration.

The whole purpose of this statute is that any town or city may avail itself of the means thus furnished, of obtaining wholly or in part by means of private enterprise, a supply of gas or water or both for the corporate municipality and its inhabitants.

It becomes the business of the municipal council on the presentation of such a petition to make the best bargain it can on behalf of those it represents. Sometimes the bargain takes on an express form of contract beyond what appears in the bydaw. In other cases as here the mere passing of the by-law and the documentary material prescribed by the statute and upon which the by-law was passed are combined with the .legal implications arising therefrom alone relied on to determine the respective rights of the parties concerned. The question is thus raised here of what is implied in this proceeding and this franchise-granting by-law. is quite clear that on the one side there is granted that which the municipal council had full power to grant or to withhold.

No power could interfere with the exercise of the council's will. It might have imposed such conditions as it saw fit.

It might have refused the prayer of the petitioners absolutely without its reason for so refusing being open to question by anybody but the constituent body electing the council.

What lies at the bottom of the proceeding if it is not that of a contractual character?

The company undertakes that it will supply that which it is incorporated to supply, and that the duty which has by the grant and acceptance thereof been cast upon the company accepting such a grant shall be discharged. The obligation is only what the law implies, yet its nature is contractual for it is expressly founded upon the mutual consent of the parties and nothing else. In effect the municipal council exchanges the uses of its streets and squares, and right to open the same, in return for the implied promise to give the needed supply of gas or water as the case may be.

Is there not in this transaction the very essence reciprocal obligation of a contractual character? On the part of the village, town or city there is an obligation that for the agreed period, up to fifty years or less, as may be agreed upon, the franchise given shall be enjoyed.

If that be not so then the council could repeal its by-law at any moment it saw fit, as it is usually implied by law that the power to enact a by-law carries with it the right to repeal, unless in such case as this, . that there is an implied obligation that once passed it shall stand unrepealed, so long as the conditions on which it was passed are observed.

On the other hand there are implied obligations that the corporations thus created and enfranchised shall observe and discharge the functions for which it was created.

I admit that there may be, by virtue of its creation, obligations resting upon a corporate creation without being of such a contractual character as seems necessary to bring them Within the operation of article 1065.

It may also be that in English law, apart from special legislation, there is no effectual remedy either in such a case, or in such a case as this of a contractual nature, save by such means as will imply action or assent to action by the attorney-general.

But article 1065 of the Civil Code is a provision that seems to me to render the interference of the attorney-general unnecessary, if we find the relationship in question contractual.

It is with an eye to the application of this article 1065 C.C. that I have dwelt upon the nature of the legal relations arising out of such a petition and such a by-law thereupon and the acceptance of the concession thereby given the respondents' predecessor in title.

We must seek for the solution determining whether or not the relation in question is of a contractual character in the application of the general principles of law.

There is no Quebec or Ontario decision on this statute as to the nature of the relationship created by the incorporation.

Probably the question of the legal quality of the J. relationship arising between an incorporating power and the corporation it creates and the corporators has never been so exhaustively examined elsewhere as in the case of the Trustees of Dartmough College v. Woodward(1), in the Supreme Court of the United States.

There it was found that there was a contract existing as the result of incorporation.

The college had been incorporated in the days when what became later the State of New Hampshire belonged to the British Crown and the attempted interference of that state occurred long after that state had become subject to the constitution of the United States and was thereby prohibited from enacting any "law impairing the obligation of contract."

Chief Justice Marshall in his judgment says, at page 643:

The decision is not a binding authority upon us, but the opinion thus expressed is that of one whose authority is of the highest and his opinion in this regard has stood the strain for nearly ninety years. It has been accepted generally and acted upon in the cases cited to us of other American authorities as a correct exposition of the law on the subject. If, even without going so far as that opinion goes, we look at the substance of what necessarily takes place under the consolidated statute, ch. 65, and already referred to, we find much less difficulty than arose in that case in holding that the relationship created between the appellant and the company in Idington question was of a contractual character.

Then in 1874, during and pursuant to such relationship and statute, a bargain was made between the corporate company and the appellants for a service of supply of water.

This for reasons not quite clear and of no concern here was followed by 40 Vict. ch. 68, which substituted one Louis Molleur, the younger, as proprietor of all the property privileges and franchises of the company and charged him with all its obligations.

See section 1 of that Act which is as follows:

The only addition Molleur got to this company's franchise was that it became exclusive instead of subject to competition.

Instead of being freed, as a result of this exclusive right, from the obligations of the company the more obvious I should say would be the legal implication and for his continuing bound.

The obligation always existed to supply water.

That was the consideration for the franchise.

When that supply ceased there arose the liability to have the contract I have found dissolved, and as a consequence the franchise declared forfeit.

was not every slip or accident that might give rise to such a result. It was as against the wilful and persistent disregard of the proper observation of its obligations to the power that created it that this right J. of rescission existed in law for the protection of the municipal corporation and those it represented during the existence of the company and the same remedy was the appropriate one that bound Molleur upon assuming the company's obligations.

An additional right was furnished by section 3, as against Molleur, who became substituted for the company, but apparently -confined so far as that section operated, to a forfeiture only of the exclusive privilege created by this Act.

I think this was a wise precaution, though perhaps not necessary.

Its existence in no way limited the original rights* of those concerned when and if the charter became forfeited, to have it so judicially declared under article 1065 C.C.

It is not the contracts or breaches of contracts the respondent or his predecessor may have undertaken, but the breaches of such contracts as all or either may have entered into by virtue of this franchise and pursuant to duties arising thereunder, or refusal to make and observe reasonable contracts, that might work a forfeiture of the franchise transferred to respondent's predecessors always subject,, however, to forfeiture. Each and every one of such broken contracts are good ground of complaint under this original compact on which the respondents' rights rest. In violating any such contract the company or its successor or successors violated the obligations they were under and persistence therein caused it to fall within the meaning and range of this original power of forfeiture.

Even if, as alleged, the appellant had given notice of an abandonment of any such special contract, if it should turn out that the abandonment arose from a persistent course of misconduct on Molleur's or respondents' part, setting the appellant and its legal rights and demands at defiance, such abandonment could not be set up as an excuse for such a course of conduct on his part or relieve him from the possible forfeiture this misconduct had wrought.

The appellant could not be expected to go on forever paying for nothing. The termination of payments and consequent rescission of that contract did not obliterate the rights to forfeit that had accrued by reason of such default.

The same is true in regard to the wilful violation of contracts it was his duty under the franchise to have entered into with any of the inhabitants whom the appellant represents.

The respondents question such right or duty representation.

At a very early stage (1854) in the history municipal institutions of such a type as is now common in Canada the right of a municipal corporation through its council to represent the people residing within the municipality in relation to public property and public rights and especially rights of the inhabitants acquired by and through the action of the corporation was challenged in the case of Town of Guelph v. The Canada Co. (1).

It was there decided that the question of theldedication to the public of a public square having been accepted by the public could be raised by a suit of the corporation claiming so to represent the public within the municipality.

The learned Chancellor Blake, who so held, sup- J. ported his judgment by a reference to American authority rested on an English case. There can be no doubt that wherever the municipal legislation empowers the establishment of waterworks by the municipal council and also empowers such a means of doing it as chapter 65 of the Consolidated Statutes of Canada, 1859, affords, that the public interests are properly represented by the municipal corporation having such a matter as water supply or other service confided to its charge, in all that may be necessary to be done for the protection of the property of the corporate body and generally speaking of the inhabitants concerned.

It does not follow that for purposes of recovering private damages it can do so.

Nor does it follow that the individual inhabitants can assert a right of action for damages suffered by reason of the failure of one contracting with the city to furnish hydrants, etc., to discharge his duty in that regard. See Cunningham v. Furniss

I do not desire to say more as to that subject as these pleadings shew an action is now pending at the suit of an inhabitant and I have neither investigated the subject nor formed an opinion upon the law as it stands in Quebec..

I merely desire to point out some of the difficulties that may exist in recovering damages and thus render it more necessary to assert the right to rescission if it exist.

The result in Johnston v. Consumers' Gas Co. of Toronto(1), and consequent need of Ontario legislation, as in 63 Vict. ch. 35, would be impossible in Que- . bec if my view of the relationship between the two corporations being of a contractual nature be correct, for the case falls then within article 1065 of the Civil Code.

The need and purpose of the further contract was merely to define specifically the mode agreed upon for the company discharging its main duty towards the municipality or the inhabitants respectively; that is to supply water.

In default of such specification having been agreed upon the extent of the obligation inherent in the original contract would be measured by what under all the circumstances would be found reasonable.

The condition of things might be such that the extent to which that would reach might be very limited indeed.

For example, it could not be supposed that the original obligation would extend beyond what the authorized corporate capital of the company reasonably applied could produce.

If, however, the company formed such a contract as it did, in 1874, then the measure so adopted should define the binding limits unless and until conditions changed.

There is set forth quite enough in relation to that contract alone as well as many other material allegations all of which the demurrer admits to entitle the plaintiff to the judgment prayed for, and I see no good purpose to be served in face of such admission by postponing for evidence to be taken.

Doing so VIIT-Eonly adds to expense and unjustifiable delay.

I think, on the whole, that the appeal should be allowed with costs.

and JJ. agreed with Girouard J.

Appeal allowed with costs.