Ville de Montréal Appellant v. Octane Stratégie inc., 2019 SCC 57

SUPREME COURT OF CANADA Citation: Montréal (City) v. Octane Stratégie inc., 2019 SCC 57, [2019] 4 S.C.R. 138 Appeals Heard: February 20, 2019 Judgment Rendered : November 22, 2019 Dockets: 38066, 38073 Between: Ville de Montréal Appellant and Octane Stratégie inc. Respondent - and - Union des municipalités du Québec and Ville de Laval Interveners And Between: Octane Stratégie inc. Appellant and Richard Thériault and Ville de Montréal Respondents Official English Translation

Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ. Joint Reasons for Judgment: (paras. 1 to 95) Wagner C.J. and Gascon J. (Abella, Karakatsanis, Rowe and Martin JJ. concurring) Joint Dissenting Reasons: (paras. 96 to 173) Côté and Brown JJ. (Moldaver J. concurring) m ontréal (city) v. octane Ville de Montréal Appellant v. Octane Stratégie inc. Respondent and Union des municipalités du Québec and Ville de Laval Interveners - and - Octane Stratégie inc. Appellant v. Richard Thériault and Ville de Montréal Respondents Indexed as: Montréal (City) v.

Octane Stratégie inc. 2019 SCC 57 File Nos.: 38066, 38073. 2019: February 20; 2019: November 22.

Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ. on appeal from the court of appeal for quebec Municipal law — Contracts — Restitution of prestations — Receipt of payment not due — Large-scale media event designed and produced within short period of time by public relations and communications firm and its subcontractor at request of municipality — Mandate granted to firm without rules of public order for awarding municipal contracts having been complied with and without grant of mandate having been approved by resolution of municipal council or by officer authorized by valid delegation of powers — Municipality refusing to pay firm’s invoice for subcontractor’s services — Whether rules on restitution of prestations set out in Civil Code of Québec apply under municipal law — Whether contract exists between municipality and firm — Whether restitution of prestations is necessary — Civil Code of Québec , arts. 1491, 1699.

In April 2007, the City’s director of transportation made use of the services of Octane, a public relations and communications firm, to create an event concept for the launch of the City’s transportation plan that was to take place on May 17, 2007. The launch was held on the scheduled date and was a success. Following the event, Octane sought payment for the costs incurred for the services provided by a subcontractor to produce and organize the event, but the City was slow to pay. In view of the City’s failure to act,

Octane finally sent it an invoice in October 2009. In May 2010, nearly three years after the launch was held, the invoice was still unpaid and Octane instituted an action against the City. The City countered by stating that it had in fact never authorized the mandate, which, for that matter, had not been granted as a result of the tendering process required by law. Octane therefore amended its pleading to add T, a member of the political staff of the mayor’s office, as a defendant, arguing that he had given it a mandate to produce the event and had assured it many times that the City would pay the costs incurred.

The Superior Court allowed Octane’s action against the City and dismissed the alternative claim against T. It was of the view that T had indeed given Octane a mandate but that the contract was null because it had been awarded in contravention of the rules of public order for awarding municipal contracts. However, it found that the rules on restitution of prestations set out in the Civil Code of Québec (“ C.C.Q. ”) apply in the municipal context, and it ordered restitution by equivalence for the services provided in the amount of $82,898.63.

The Court of Appeal dismissed the City’s appeal as well as Octane’s appeal against T, which it found to be moot. It upheld the Superior Court’s findings on the issue of the nullity of the contract between Octane and the City and on the application of the rules on restitution of prestations in the municipal context. Held (Moldaver, Côté and Brown JJ. dissenting) : The City’s appeal should be dismissed and Octane’s appeal is moot. Per Wagner C.J. and Abella, Karakatsanis, Gascon, Rowe and Martin JJ.: The rules on restitution of prestations set out in arts. 1699 to 1707 C.C.Q. apply in the municipal context.

The preliminary provision of the C.C.Q. states that the C.C.Q. is the foundation of all other laws that apply or rely on civil law concepts. By virtue of arts. 300 and 1376 C.C.Q. , this includes the laws that govern legal persons established in the public interest, such as municipalities. Since the rules on restitution of prestations are in the Book on Obligations, they apply to municipalities unless other special rules exclude their application.

The fact that ss. 573 et seq. of the Cities and Towns Act (“ C.T.A. ”), which require certain rules to be followed when municipal contracts are awarded, are of public order and that their violation is sanctioned by the absolute nullity of the contract is not an express or even an implicit derogation from the rules on restitution of prestations. In the absence of clear, unequivocal legislative direction to this effect, the importance of the C.T.A. ’s public order provisions is not enough to exclude the application of the rules of the general law.

Since there is no such derogation, the principle remains the restoration of the parties to their previous positions, which must occur where a juridical act is annulled with retroactive effect. Restitution of prestations in the municipal context does not create a bypass. The rules on restitution of prestations give a judge the power to objectively determine the fair value of restitution in order to restore the parties to their previous positions, based on the evidence in the record and the circumstances of each case, where restitution cannot be made in kind.

Article 1699 para. 2 C.C.Q. provides that a court may, exceptionally, refuse the restitution of prestations or modify the scope or modalities of restitution where one party derives an undue advantage from it. T he legislature thus ensures that the remedy for a first inequity does not create a second one. O btaining a municipal contract in violation of the rules of public order for awarding such contracts does not necessarily constitute an undue advantage, and a court hearing such a case must not automatically refuse the restitution of prestations.

The appropriateness of tempering restitution under art. 1699 para. 2 C.C.Q. must be assessed on a case-by-case basis and not on the basis of automatic or pre-established rules. In the instant case, no contract came into existence between Octane and the City for the event production services. The mandate on which Octane’s action is based was never approved by a resolution of the City’s municipal council or by an officer authorized by a valid delegation of powers. The appearance of consent is not sufficient, nor can a municipality’s consent be inferred from its silence.

The rules for awarding municipal contracts require certain formalities to be observed in order to protect the public interest by favouring competition, but they do not exempt a municipality from having to pass a by-law or resolution to express its will to contract. If it does not do so, no contract will cross the threshold of legal existence and restitution cannot be grounded in the retroactive annulment of a juridical act in accordance with the doctrine of nullity.

In the case at bar, however, the conditions imposed by the rules on receipt of a payment not due are satisfied, with the result that the parties must still be restored to their previous positions under arts. 1491 and 1492 C.C.Q. Three conditions must be met to recover a payment not due under art. 1491 C.C.Q. : (1) there must be a payment, (2) the payment must have been made in the absence of a debt between the parties, and (3) the payment must have been made in error or to avoid injury.

Where these conditions are met, and subject to the exception set out in art. 1491 para. 2 C.C.Q. , restitution of payments not due is made according to the rules for the restitution of prestations laid down in arts. 1699 to 1707 C.C.Q. It is truly the receipt of something not due that grounds an obligation to restore the parties to their previous positions. An obligation to make restitution will arise only if the payment was made in error or under protest.

However, while error is what usually explains a payment made in the absence of debt, the possibility that a payer acted with full knowledge of the facts cannot be ruled out. The burden of proof rests on the person alleging a liberal intention. The provision of services can constitute payment within the meaning of art. 1553 C.C.Q. The payment of a sum of money is not all that can be characterized as a payment in Quebec civil law: art. 1553 C.C.Q. expressly provides that payment also means the performance of whatever forms the object of an obligation.

Payment may validly be made by a representative of the debtor of an obligation, such as the debtor’s mandatary or subcontractor, unless the nature or terms of the contract prevent such a delegation. In the instant case, it is clear that the subcontractor was acting on Octane’s behalf in producing the City’s event and that the City did not object to this. The provision of services to the City, that is, payment in the legal sense, therefore originated from Octane. This condition for recovering a payment not due is met. I t does not matter what Octane should or could have done to avoid making an error.

The purpose of restitution is not to sanction negligence or fault, but rather to restore the parties to their previous positions where it is shown that one of them received something without having a right to it. The only question is whether the provision of services by Octane resulted from an error and not from a liberal intention. Given the nature of the evidence in the record, it cannot be concluded that Octane had a liberal intention to provide services to the City in the absence of a debt.

The testimony of Octane’s representatives confirms that they did in fact believe they had an obligation to provide services for the production of the event and that they had no intention of providing those services for free. Octane would not have provided the services in question if it had known that its obligation to the City did not exist in law. In the absence of any liberal intention by Octane or any other cause that could justify its provision of the services to the City for free, it must be

concluded that the services were provided as a result of an error, as required by art. 1491 C.C.Q. Restitution for the services provided by Octane for the production of the City’s event must be made by equivalence in accordance with art. 1700 C.C.Q . The trial judge’s findings concerning the good quality and fair market value of the services provided, the benefit the City derived from them and the fact that the event lived up to expectations were not challenged by the City.

Since the City has not proved that full restitution would accord an undue advantage to Octane, restitution by equivalence for the services provided corresponds to the cost of producing the event, $82,898.63. Octane’s action against the City is not prescribed.

Section 586 C.T.A. does not apply in this case. According to the wording of that section, the six-month prescriptive period applies only to an action, suit or claim for damages. In the case of recovery of a payment not due, the basis for restitution is that there never existed an obligation to perform a prestation. The parties are restored to their previous positions, but this remedy cannot be characterized as damages. The authorities recognize that an action to recover a payment not due is subject to the general law period of three years provided for in art. 2925 C.C.Q .

As for Octane’s appeal against T, the dismissal of the City’s appeal makes it unnecessary to decide the issue raised by Octane’s appeal with regard to T’s personal liability. This appeal is therefore moot. Per Moldaver, Côté and Brown JJ. (dissenting): The City’s appeal should be allowed and Octane’s appeal should be dismissed.

Article 1385 para. 1 C.C.Q. states that “[a] contract is formed by the sole exchange of consents between persons having capacity to contract, unless, in addition, the law requires a particular form to be respected as a necessary condition of its formation”. Sections 573 et seq. of the C.T.A. provide in this regard that certain formalities must be observed in the awarding of municipal contracts. These provisions set out imperative standards of public order, the violation of which is sanctioned by absolute nullity.

A services contract with a value of $82,898.63 must be awarded after a call for tenders by written invitation in accordance with the C.T.A . A contract entered into in violation of these rules, if it is in fact formed, may be absolutely null in addition to giving rise to the penalties provided for by the C.T.A .

Article 1422 C.C.Q. , which sets out the effect of nullity, expressly creates an obligation to make restitution. According to art. 1699 para. 1 C.C.Q. , restitution takes place “where” (“ chaque fois ” (each time) in the French version) a juridical act is annulled with retroactive effect. R ecent judgments of the Court of Appeal confirm that it is possible to order the restitution of prestations where a municipal contract is annulled . However, the annulment of a contract presupposes the existence of the contract . In the present case, the contract on which Octane’s claim is based is quite simply non-existent.

In civil law, the existence of a contract is conditional on the manifestation of a will to be bound by contract (arts. 1378 para. 1, 1385 para. 1 and 1386 C.C.Q. ). Where, objectively speaking, the manifestation of such a will is absent (where there is no offer to contract or where such an offer is refused or not accepted), there is no contract. By-laws and resolutions are the legal vehicles by which a municipality expresses its will. A municipality may, through a by-law passed by its council, delegate to an officer the power to incur obligations on its behalf.

However, since only one professional services firm was solicited, no officer of the City had a delegation of powers authorizing him or her to enter into a contract with a value exceeding $25,000. As a result, no duly authorized officer could have incurred an obligation in the amount of $82,898.63 on the City’s behalf. T was not invested with any delegation of powers authorizing him to make contracts on the City’s behalf, since he was a member of the political staff of the mayor’s office, not a municipal officer or employee.

The non-application in the municipal context of the doctrine of apparent mandate codified at art. 2163 C.C.Q. is a general principle or rule of public law that prevails over the civil law rules, because those rules are merely suppletive in nature in this area (art. 300 C.C.Q. ). It is a control measure enacted in the interest of the public to ensure sound administration and transparency. It is very firmly established that persons wishing to enter into a contract with a municipality must at their peril ascertain that the particular person dealt with is acting pursuant to due authority.

Where a contract is non-existent, there can be no restitution of prestations as a consequence of the annulment of an invalid contract (arts. 1422 and 1699 C.C.Q. ). In the case at bar, there is no juridical act that can be annulled with retroactive effect. Any obligation to make restitution must rather be justified on a different basis.

W hile recent jurisprudence of the Court of Appeal confirms that it is possible to order the restitution of prestations where a municipal contract is annulled, it is silent on whether it is possible to order the restitution of prestations on the basis of receipt of a payment not due where a party claims to have provided services to a municipality in reliance on a contract it believes it entered into but that turns out not to exist at all.

In civil law, the three conditions for bringing an action to recover a payment not due are: (1) the existence of a payment made by the payer to the payee, (2) the absence of a debt between the parties, and (3) an error by the payer. These three conditions must be interpreted cautiously, if not restrictively, and where they are met, art. 1491 para. 1 C.C.Q. expressly creates an obligation to make restitution, subject to the exception set out in art. 1491 para. 2 C.C.Q .

Article 1492 C.C.Q. then requires “[r]estitution of payments not due” to be made according to the rules for the restitution of prestations codified at arts. 1699 to 1707 C.C.Q. In principle, the payer bears the burden of establishing that the conditions for bringing an action to recover a payment not due are met. The payer must first prove the existence of a payment and the absence of a debt. An error by the payer is then presumed to be the most likely explanation for a payment that in itself is inexplicable. The payee must then prove that there was no error by the payer.

In the present case, services were provided to the City, which constitutes payment within the meaning of art. 1553 C.C.Q. However, the evidence does not clearly show that the services received by the City were provided by the subcontractor on Octane’s behalf. Any ambiguity in this regard that was not resolved at trial stems from the fact that Octane was not relying on receipt of a payment not due as a basis for its claim. It is therefore not advisable for the Court now to dispose of the City’s appeal on the basis of that mechanism. However, since Octane’s claim must be dismissed in any event, the

interpretation of the evidence that is most favourable to it with respect to the condition requiring the existence of a payment will be adopted. As for the absence of a debt between the parties, it stems from the non-existence of a contract between Octane and the City for the services rendered by the subcontractor. An error, which may be of fact or of law, is an essential condition for an action to recover a payment not due.

Article 1554 para. 1 C.C.Q. is not a distinct source of the obligation to make restitution: rather, that provision must be read together with art. 1491

para. 1 C.C.Q. In principle, the payee can show the absence of an error by the payer by proving that the payer made the paymentknowing that he or she was not bound to do so. In such circumstances, the payment will be treated as a liberality and an action to recovera payment not due will be dismissed.

The payee can prove the absence of an error by the payer by showing: (1) that the payer made thepayment knowing that he or she was not bound to do so (i.e., absence of error as such), or (2) that the payer made the payment with thetrue intention of providing a gratuitous benefit or making an informal gift to the payee, or that another cause excluding the possibility oferror provides legal justification for the payment. Here, the evidence shows clearly that Octane did not pay the City in error at the time ofpayment, May 17, 2007, the date on which the services were provided to the City.

Octane knew at the time of payment that it had no contract with the City for the services provided by the subcontractor. Thetestimony of a senior partner at Octane in 2007 shows that he believed the mandate could not exceed the limit for proceeding byagreement, that is, $25,000, and that he was aware that the limit was relevant not only because it was the highest threshold for a contractto be awarded without a call for tenders, but also because it was the highest threshold for a contract to be granted by an officer on theCity’s behalf.

Octane knew at the time the transportation plan was launched that no duly authorized officer could lawfully grant acontract with such a value on the City’s behalf, that no resolution had been passed by the City’s municipal council to award Octane acontract for its subcontractor’s services and that no framework agreement between Octane and the City was in effect.

Moreover, Octaneknew at the time of payment that the City could not grant it a valid contract at a later date for the services provided by the subcontractor.Although the City’s executive committee did indeed have the power to grant a contract with a value of up to $100,000, the contract couldnot have been valid, because it was too late to issue an invitation to tender or to make a public call for tenders given that the event hadalready taken place.

While Octane was undoubtedly not acting with a liberal intention, since it was at least hoping to be paid, the fact that therewas no liberal intention does not necessarily mean that the payment was made in error. Octane did not pay in error, because it in factknew at the time of payment that no contract had been formed between it and the City for the services rendered by the subcontractor.Absence of error by Octane cannot be equated with fault, which is not relevant for the purposes of restitution. The conditions forbringing an action to recover a payment not due are not met.

Octane’s action to recover a payment not due must therefore be dismissedand the City’s appeal allowed. Octane’s appeal against the City and T should be dismissed.

Article 2158 C.C.Q., which concerns the personal liability of amandatary who exceeds his or her powers, cannot apply in the particular circumstances of this case, because the onus was on Octane toensure that the proper procedure would be followed in entering into the contract, that is, to ensure: (1) that the person with whom Octanewas dealing was authorized to act on behalf of the municipality, (2) that the City and its employees were acting within their powers, and(3) that all legal requirements for the formation or awarding of the contract were met. Octane cannot shift the onus which rested on it toT.

Furthermore, even if T had committed a fault for which he could be extracontractually liable when he gave Octane an assurance that itwould be paid, he would not have caused the injury suffered by Octane. There is no causation, because it seems that Octane (1) made afirst payment to the subcontractor, (2) entered into a contract with the subcontractor and (3) provided the services to the City before Tgave it any kind of assurance. Cases Cited By Wagner C.J. and Gascon J. Referred to: Doré v. Verdun (City), (SCC), [1997] 2 S.C.R. 862; Prud’homme v.

Prud’homme, 2002 SCC85, [2002] 4 S.C.R. 663; Autobus Dufresne inc. v. Réseau de transport métropolitain, 2017 QCCS 5812; Construction Irebec inc. v.Montréal (Ville de), 2015 QCCS 4303; Centre de téléphone mobile (Québec) inc. v. Marieville (Ville de), 2006 QCCS 1179, [2006]AZ-50359395; Ville de Saguenay v. Construction Unibec inc., 2019 QCCA 38; Québec (Ville) v. GM Développement inc., 2017 QCCA385, 72 M.P.L.R. (5th) 203; Lacroix & Fils ltée v. Carleton-sur-Mer (Ville), 2014 QCCA 1345, 27 M.P.L.R. (5th) 10; Montréal (Villede) v.

St-Pierre (Succession de), 2008 QCCA 2329, [2009] R.J.Q. 54; Habitations de la Rive-Nord inc. v. Repentigny (Ville), ; Rouleau v. Canada (Procureur général), 2016 QCCS 4887; Langevin v. Mercier, 2010 QCCA 1763; Boucher v.Développements Terriglobe inc., (QC CA), [2001] R.D.I. 213; Fortier v. Compagnie d’arrimage de Québec ltée,2014 QCCS 1984; Hakim v. Guse, 2013 QCCS 1020; 9112-2648 Québec inc. v. Cauchon et associés inc., ; Marcottev. Longueuil (City), 2009 SCC 43, [2009] 3 S.C.R. 65; Amex Bank of Canada v. Adams, 2014 SCC 56, [2014] 2 S.C.R. 787; Fortin v.Chrétien, 2001 SCC 45, [2001] 2 S.C.R. 500; Air Canada v.

City of Dorval, (SCC), [1985] 1 S.C.R. 861; Silver’sGarage Ltd. v. Town of Bridgewater, (SCC), [1971] S.C.R. 577; Poulin De Courval v. Poliquin, 2018 QCCA 1534;Amar v. Dollard-des-Ormeaux (Ville), 2014 QCCA 76, 18 M.P.L.R. (5th) 277; Belœil (Ville de) v. Gestion Gabriel Borduas inc., 2014QCCA 238; 9129-6111 Québec inc. v. Longueuil (Ville), 2010 QCCA 2265, 21 Admin L.R. (5th) 320; Cité de St-Romuald d’Etchemin v.S.A.F. Construction inc., [1974] C.A. 411; Bourque v. Hull (Cité) (1920), 30 B.R. 221; Verreault (J.E.) & Fils Ltée v.

Attorney Generalof the Province of Quebec, (SCC), [1977] 1 S.C.R. 41; Immeubles Beaurom ltée v. Montréal (Ville de), 2007 QCCA41, [2007] R.D.I. 26; Aylmer (Ville) v. 174736 Canada inc., ; Banque de Nouvelle-Écosse (Banque Scotia) v. Ville deDrummondville, 2018 QCCS 5053; Quebec (Agence du revenu) v. Services Environnementaux AES inc., 2013 SCC 65, [2013] 3 S.C.R.838; 2736-4694 Québec inc. v. Carleton — St-Omer (Ville de), 2006 QCCS 4726, aff’d 2007 QCCA 1789; Threlfall v. CarletonUniversity, 2019 SCC 50, [2019] 3 S.C.R. xxx; Willmor Discount Corp. v.

Vaudreuil (City), (SCC), [1994] 2 S.C.R.210; 9112-4511 Québec inc. v. Agence de développement de réseaux locaux de services de santé et de services sociaux de Laval, 2008QCCA 848; C.J. v. Parizeau Popovici, 2011 QCCS 2005; Pearl v. Investissements Contempra Ltée, [1995] R.J.Q. 2697; Roux v.Cordeau, [1981] R.P. 29; Garage W. Martin Ltée v. Labrie, [1957] C.S. 175; Green Line Investor Services Inc. v. Quin, ; Confédération, compagnie d’assurance-vie v. Lareau-Lacroix, ; Société canadienne de sel ltée v. Dubord, 2012QCCS 1994; Beaudry v. Cité de Beauharnois, [1962] B.R. 738; Pacific National Investments Ltd. v.

Victoria (City), 2000 SCC 64,[2000] 2 S.C.R. 919; Tremblay v. 2543-7443 Québec inc., ; Steckmar Corp. v. Consultants Zenda ltée, ; Young v. Young, (SCC), [1993] 4 S.C.R. 3; Mackin v. New Brunswick (Minister of Finance), 2002 SCC 13,[2002] 1 S.C.R. 405; British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371; Finney v.Barreau du Québec, 2004 SCC 36, [2004] 2 S.C.R. 17; Richard v. Time Inc., 2012 SCC 8, [2012] 1 S.C.R. 265; Schachter v. Canada, (SCC), [1992] 2 S.C.R. 679. By Côté and Brown JJ. (dissenting)

Amex Bank of Canada v. Adams, 2014 SCC 56, [2014] 2 S.C.R. 787; Montréal (Ville de) v. St-Pierre (Succession de), 2008QCCA 2329, [2009] R.J.Q. 54; Community Enterprises Ltd. v. Acton Vale (Ville), [1970] C.A. 747; Construction Hydrex inc. v. Havre St-Pierre (Corporation municipale de), [1980] C.S. 1038; Jourdain v. Ville de Grand-Mère, [1983] J.Q. no 360; Boisvert v. Baie-du-Febvre (Municipalité de), [1992] J.Q. no 2574; Repentigny (Ville) v. Les Habitations de la Rive-Nord inc., ;Lacroix & Fils ltée v. Carleton-sur-Mer (Ville), 2014 QCCA 1345, 27 M.P.L.R. (5th) 10; Pacific National Investments Ltd. v.

Victoria(City), 2004 SCC 75, [2004] 3 S.C.R. 575; Québec (Ville) v. GM Développement inc., 2017 QCCA 385, 72 M.P.L.R. (5th) 203; AlimentsBreton (Canada) inc. v. Oracle Corporation Canada inc., 2015 QCCA 336; Air Canada v. City of Dorval, (SCC),[1985] 1 S.C.R. 861; Silver’s Garage Ltd. v. Town of Bridgewater, (SCC), [1971] S.C.R. 577; Poulin De Courval v.Poliquin, 2018 QCCA 1534; Habitations Germat inc. v. Ville de Rosemère, 2017 QCCA 1294; Amar v. Dollard-des-Ormeaux (Ville),2014 QCCA 76, 18 M.P.L.R. (5th) 277; Beloeil (Ville de) v.

Gestion Gabriel Borduas inc., 2014 QCCA 238; 9129-6111 Québec inc. v.Longueuil (Ville), 2010 QCCA 2265, 21 Admin. L.R. (5th) 320; Lévesque v. Carignan (Corp. de la ville de), [1998] AZ-98026278; Villede Saguenay v. Construction Unibec inc., 2019 QCCA 38; Construction Irebec inc. v. Montréal (Ville de), 2015 QCCS 4303; J.E.Verreault & Fils Ltée v. Attorney General (Quebec), (SCC), [1977] 1 S.C.R. 41; Cité de St-Laurent v. Boudrias, [1974]C.A. 473; Hinse v. Canada (Attorney General), 2015 SCC 35, [2015] 2 S.C.R. 621; Finney v. Barreau du Québec, 2004 SCC 36, [2004]2 S.C.R. 17; Prud’homme v.

Prud’homme, 2002 SCC 85, [2002] 4 S.C.R. 663; Canadian Food Inspection Agency v. ProfessionalInstitute of the Public Service of Canada, 2010 SCC 66, [2010] 3 S.C.R. 657; Immeubles Beaurom ltée v. Montréal (Ville de), 2007QCCA 41, [2007] R.D.I. 26; Pacific National Investments Ltd. v. Victoria (City), 2000 SCC 64, [2000] 2 S.C.R. 919; Beaudry v. Cité deBeauharnois, [1962] B.R. 738; Lalonde v. City of Montreal North, (SCC), [1978] 1 S.C.R. 672; Olivier v. Corporationdu Village de Wottonville, (SCC), [1943] S.C.R. 118; Cité de St-Romuald d’Etchemin v. S.A.F.

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Carleton — St-Omer (Villede), 2006 QCCS 4726, aff’d 2007 QCCA 1789. Statutes and Regulations Cited Act to amend various legislative provisions concerning municipal affairs, S.Q. 2001, c. 25, ss. 34, 54, 512. Act to amend various legislative provisions concerning municipal affairs and the Société d’habitation du Québec, S.Q. 2018, c. 8. By-law concerning the delegation of powers to officers and employees, June 26, 2002, Ville de Montréal, By-law 02-004, s. 22. Charter of Ville de Montréal, Metropolis of Québec, CQLR, c. C-11.4, s. 33 para. 2. Cities and Towns Act, CQLR, c.

C-19, ss. 47, 70.1 et seq., 114.7, 114.10, 350, 477.2, 573 et seq., 586, 604.6(2). Civil Code of Lower Canada. Civil Code of Québec, arts. 298, 300, Book Five, 1376, 1378 para. 1, 1385 to 1397, 1416 to 1419, 1422, 1457, 1491 , 1492, 1553 to 1555,1671, 1699 to 1707, 2101, 2158, 2163, 2803 para. 1, 2925. Municipal Code of Québec, CQLR, c. C-27.1, arts. 79, 438 para. 1. Authors Cited Barré, Xavier. “Nullité et inexistence ou les bégaiements de la technique juridique en France” (1992), 26 R.J.T. 20. Baudouin, Jean-Louis, et Pierre-Gabriel Jobin. Les obligations, 7e éd., par Pierre-Gabriel Jobin et Nathalie Vézina.

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Fabre-Magnan, Muriel. Droit des obligations , vol. 2, 3 e éd. Paris: Presses Universitaires de France, 2013. Fréchette, Pascal. La restitution des prestations . Montréal: Yvon Blais, 2018. Garant, Patrice, avec la collaboration de Philippe Garant et Jérôme Garant. Droit administratif , 7 e éd. Montréal: Yvon Blais, 2017. Garant, Patrice, Philippe Garant et Jérôme Garant. Précis de droit des administrations publiques , 6 e éd. Montréal: Yvon Blais, 2018. Gaudet, Serge. “Inexistence, nullité et annulabilité du contrat: essai de synthèse” (1995), 40 McGill L.J. 291.

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APPEALS from a judgment of the Quebec Court of Appeal (Schrager, Mainville and Hogue JJ.A.), 2018 QCCA 223 , 81 M.P.L.R. (5th) 39, [2018 ] AZ-51468022 , [2018] J.Q. n o 893 (QL), 2018 CarswellQue 742 (WL Can.), affirming a decision of Lefebvre J., 2015 QCCS 5456 , 46 M.P.L.R. (5th) 309, [2015] AZ-51233047, [2015] J.Q. n o 12811 (QL), 2015 CarswellQue 11236 (WL Can.) . Appeal of Ville de Montréal dismissed, appeal of Octane Stratégie inc. moot. Moldaver, Côté and Brown JJ. dissenting.

Olivier Nadon , Pierre-Yves Boisvert and Steven Rousseau , for the appellant Ville de Montréal (38066) and the respondents Richard Thériault and Ville de Montréal (38073). Sylvain Dorais and Jocelyn Ouellette , for the respondent (38066)/appellant

(38073) Octane Stratégie inc. Sébastien Laprise and Jean-Benoît Pouliot , for the intervener Union des municipalités du Québec (38066). Jean Prud’homme and Gabrielle Robert , for the intervener Ville de Laval (38066). English version of the judgment of Wagner C.J. and Abella, Karakatsanis, Gascon, Rowe and Martin JJ. delivered by The Chief Justice and Gascon J. — I. Overview [ 1 ] This case consolidates two files relating to an unpaid invoice for $82,898.63 for the production of a launch event for the appellant Ville de Montréal (“City”) more than 10 years ago. The issues raised in these appeals go beyond, however, the mere

payment of that invoice. The Court is called upon to determine whether the principles of Quebec civil law concerning the formation of contracts and the restitution of prestations apply under municipal law. [ 2 ] The respondent Octane Stratégie inc. (“Octane”) is 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 Richard Thériault (“Mr. 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. [ 3 ] 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. In view of the City’s failure to act, Octane finally sent it 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, for that matter, had not been granted as a result of the tendering process required by law. Octane therefore amended its pleading to add Mr. Thériault as a defendant.

It argued that, at the initial meeting, he had given it a mandate to produce the event for the City and that he had assured it many times that the City would pay the costs incurred. [ 4 ] The Superior Court allowed Octane’s action against the City. The trial judge concluded from the evidence that Mr. Thériault had indeed given Octane a mandate but that the contract was null because it had been awarded in contravention of the rules of public order for awarding municipal contracts.

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 , CQLR, c. C-19 (“ C.T.A. ”). He therefore ordered restitution by equivalence for the services provided, and he determined that the fair value of those services was the cost of producing the event, $82,898.63. The City appealed that award, and Octane filed an appeal against Mr. Thériault. The Court of Appeal dismissed the City’s appeal as well as Octane’s appeal, which had become moot.

Considering itself bound by the trial judge’s findings concerning the existence of a mandate between Octane and the City for the production of the launch event, the Court of Appeal affirmed that the C.T.A. does not derogate from the rules on restitution of prestations and accepted the trial judge’s reasoning with respect to the application of those rules to the facts. The majority added 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.

The City and Octane both appeal to this Court. [ 5 ] In our view, the City’s appeal must be dismissed. This makes it unnecessary to rule on Octane’s appeal. While we agree with the Court of Appeal’s conclusions with respect to the application of the rules on restitution of prestations in the municipal context, we are of the opinion that it erred in according deference to the trial judge’s findings concerning the existence of a contract between the City and Octane.

The mandate given to Octane was not authorized by a resolution of the municipal council or by an officer acting under a delegation of powers, with the result that the City simply never expressed its will to be bound by contract to Octane. This leads to another conclusion: no contract for the production of the launch event came into existence between the City and Octane.

Because it is not possible to annul a juridical act that never came into existence, the trial judge erred in ordering that the parties be restored to their previous positions on this basis. [ 6 ] We agree, however, with the majority of the Court of Appeal that the rules on receipt of a payment not due apply in this case, which means that the restitution of prestations is nonetheless necessary. Octane provided services to the City through its subcontractor even though it had no contract with the City. The City therefore received and benefited from services that were not due to it.

Unless Octane had a liberal intention, which cannot be presumed, that payment must be restored to it. Since the City has not shown that the trial judge erred in assessing the fair value of the services provided or in declining to exercise his discretion to refuse restitution or to modify its scope or modalities under para. 2 of art. 1699 of the Civil Code of Québec (“ C.C.Q. ” or “ Civil Code ”), there is no basis for reviewing his conclusion in this regard. The City must therefore restore the sum of $82,898.63 to Octane. II.

Background [ 7 ] In June 2002, during the Sommet de Montréal, the City and its various partners emphasized the City’s need for a transportation plan. The City laid out its vision of that plan in March 2005, but the final version was not ready to be presented to the public until 2007. Between 2005 and 2007, the City relied on the expertise of Octane, among others, to develop the plan in collaboration with its employees.

The launch event was planned for May 17, 2007, which was a symbolic date because it was the anniversary of the City’s founding. [ 8 ] Originally, preparations for the event were to be handled internally by the City’s communications branch. However, with less than a month to go before the event, André Lavallée, the member of the City’s executive committee responsible for shared transportation, was dissatisfied with the proposed project. On April 20, he contacted Marc Blanchet, the City’s director of transportation, to share his concerns. Mr.

Blanchet immediately contacted Pierre Guillot-Hurtubise, a partner at Octane, to seek assistance with the matter. He invited him to a meeting at city hall on April 23, during which he asked him to prepare a strategic plan for the May 17 event. That mandate involved a few hours of work relating to strategic advice; the budget agreed upon was $10,000. [ 9 ] On April 27, a second meeting was held at city hall to discuss the organization of the event. In addition to Mr.

Guillot-Hurtubise and Louis Aucoin — another partner at Octane — several members of the City’s administration and of the mayor’s office staff were present, including Mr. Lavallée and his political attaché, Mr. Blanchet, Mr. Thériault, who at the time was the director of communications and administration in the office of the mayor, as well as the coordinator of communications for the office of the mayor and of the executive committee, the communications officer and operations manager in the communications branch, and the communications officer for transportation and the plan.

On that occasion, the City’s representatives shared their vision of the event and emphasized how important it was that the launch concept be imaginative and that the event be a [ translation ] “landmark” event that was “lavish” and “glitzy”. The individuals responsible for liaising with Octane and the various municipal actors who were to play a role in the project were chosen. According to the evidence accepted by the trial judge, Mr. Thériault, with the agreement of everyone present, asked Octane to prepare a concept that would live up to their expectations.

[ 10 ] In the days following that meeting, Octane worked to develop a launch concept. It contacted, among others, Gilles Blais, the president of Productions Gilles Blais (“PGB”), a firm specializing in event production and organization. At the same time, City representatives asked Octane to be responsible, in addition to its initial mandate, for graphic design and the production of certain tools for the event, including the guest lists, invitation cards, labels and CD-ROMs. [ 11 ] Between April 30 and May 15, Octane sent the City several scenarios for the launch, accompanied by its budget estimates.

The estimates went from $274,975 to $196,000, then $178,000 and finally $123,470. That final estimate, which was sent to the City on May 15, included Octane’s fees for its consulting services, costs and expenses for the preparation of materials, and PGB’s production costs and staging and technical equipment costs, which amounted to $82,898.63. The same day, Octane and PGB made their agreement official and signed a subcontract for the production of the event. [ 12 ] It should be noted that Octane paid the $82,898.63 to PGB in three instalments on May 14, May 25 and August 10, 2007.

On August 10, 2007, the two firms signed a document stating that Octane had paid PGB that amount [ translation ] “as an advance on a contract signed by the [C]ity of Montréal and Gilles Blais”. Mr. Blais stated that he undertook to repay that advance to Octane upon payment by the City. However, five days later, Mr.

Blais specified in a letter to Octane that no contract had been signed with the City and that it was in fact with Octane that a subcontracting agreement had been [ translation ] “negotiated, reached and signed” on May 15, 2007 for “the design, production, creation and public and media presentation” of the City’s transportation plan. [ 13 ] The event was held on the scheduled date, May 17, 2007. The trial judge found from the evidence that it was a great success: Sup.

Ct., at para. 21. [ 14 ] On June 4, Octane sent the City three invoices for its consulting services for the development of the launch concept, graphic design and the production of materials for the event. The invoices, which totalled $52,203.34, were paid by the City in March and April 2008. The City’s municipal council approved the purchase orders for those services on October 27, 2008. [ 15 ] However, payment of the production costs for the launch event was a different matter. Octane had several informal discussions about payment for PGB’s services, but to no avail.

There was confusion at the City over the matter: it was not clear whether the transportation branch or the communications branch was responsible for paying for the services. On October 27, 2009, nearly 30 months after the launch, Octane, which had not yet been paid for PGB’s services, officially sent the City a fourth invoice, which was for the $82,898.63 paid to PGB. [ 16 ] On May 14, 2010, Octane instituted an action against the City because the invoice was still unpaid.

On October 21, 2010, the City disclosed its grounds of defence, in which it stated, for the first time, that it had never authorized the contract, which, for that matter, had not been awarded in accordance with the tendering procedure provided for in the C.T.A. On November 22, 2011, Octane amended its pleading to add Mr. Thériault as a defendant. It argued that he had given it a mandate to produce the event for the City at the preparatory meeting on April 27, 2007 and that he had reassured it many times that the City would pay for PGB’s services.

On August 21, 2015, the City amended its grounds of defence to allege that Octane’s action was prescribed in relation to both defendants. III. Judicial History A. Quebec Superior Court ( 2015 QCCS 5456 , 46 M.P.L.R. (5th) 309) [ 17 ] The Superior Court allowed Octane’s motion to institute proceedings and ordered the City to pay it $82,898.63. Octane’s alternative claim against Mr. Thériault was dismissed, although the judge noted that he would have allowed it if he had dismissed the claim against the City. [ 18 ] The trial judge first found that neither the claim against the City nor the claim against Mr.

Thériault was prescribed. The six-month period provided for in s. 586 C.T.A. did not apply to contractual matters. B y arguing that the rules for awarding contracts had not been complied with, the City was admitting that the action had a contractual basis. Moreover, Octane could not have added Mr. Thériault as a defendant before being informed that the City intended to contest the existence of the alleged contract. It was not until October 21, 2010, the date the City had disclosed its grounds of defence, that Octane could see the possibility of making an alternative personal liability claim against Mr. Thériault.

Because Octane had amended its motion on November 22, 2011 for that purpose, the trial judge found that its action was not prescribed. [ 19 ] The trial judge then rejected the City’s arguments to the effect that it had never authorized a mandate in favour of Octane. In fact, the City had given Octane four separate mandates for the launch of the transportation plan. The fourth mandate was specifically for the production of the event, which Octane had chosen to subcontract to PGB and the cost of which was $82,898.63.

The judge also rejected the City’s argument that Octane had deliberately divided up its invoices to bypass the requirement that a public call for tenders be made for any contract over $100,000. [ 20 ] The trial judge noted that it was Mr. Thériault who had given that fourth mandate: he was the one who had conducted the meeting on April 27, 2007 and received all the proposed scenarios and the budget estimates for the launch of the plan. The judge found Mr.

Thériault personally liable to pay the invoice for $82,898.63 because he had not only given Octane the mandate but had reassured it several times that the City would pay the costs incurred. The judge further noted that Mr.

Thériault had subsequently done nothing to make sure that Octane was paid even though he could have recommended to the City’s executive committee that the invoice be paid. [ 21 ] Having said that, the trial judge acknowledged that the City should have issued an invitation to tender because the value of the contract awarded to Octane for the production of the event was estimated at more than $25,000.

However, he noted that no one at the City had brought up the need to comply with that rule and that it was also [ translation ] “inconceivable” that the City could have issued an invitation to tender between the meeting on April 27 and the event planned for May 17. The judge nonetheless concluded that, since those rules of public order had not been complied with, the contract had to be annulled and the parties restored to their previous positions in accordance with art. 1699 C.C.Q.

He therefore rejected the argument that the imperative rules in the C.T.A. preclude the restitution of prestations in the municipal context. In the judge’s view, if the legislature had wanted to create an exception to

that general law principle in the municipal context, it could have done so in the C.T.A. or the C.C.Q. , but it had not. In reaching this conclusion, the judge relied on the jurisprudence of the Court of Appeal affirming that art. 1699 C.C.Q. applies in the municipal context. [ 22 ] Finally, since restitution for the services could not be made in kind, the trial judge found that it had to be made by equivalence as provided for in art. 1700 C.C.Q. He noted that Octane’s services had been provided in good faith, had been of good quality and had benefited the City.

In his view, the amount claimed by Octane, $82,898.63, was equivalent to the fair value of the services provided in this case. B. Quebec Court of Appeal ( 2018 QCCA 223 , 81 M.P.L.R. (5th) 39) [ 23 ] The City appealed, and Octane filed an incidental appeal against Mr. Thériault because the trial judge had not made any award against him despite finding him liable. Mr. Thériault moved for the

summary dismissal of that appeal on the ground that Octane could not file an incidental appeal against him because he was not an appellant in the principal appeal. The Court of Appeal dismissed the motion but gave Octane leave to file a notice of appeal in a separate file. In the end, it unanimously dismissed the City’s appeal, though one judge wrote concurring reasons.

In light of that outcome, Octane’s appeal was declared to be moot. [ 24 ] On the issue of whether a contract had been entered into by Octane and the City, the majority were of the view that the City had not identified any palpable and overriding error in the trial judge’s findings on this point. The majority therefore stated that they were bound by those findings. They upheld the trial judge’s reasoning on the application of art. 1699 C.C.Q. in the municipal context, including where rules of public order in the C.T.A. have been breached.

In their opinion, it is precisely where a juridical act is annulled because one of the conditions essential to its validity is not met that the parties must be restored to their previous positions. In this regard, they noted that art. 1699 C.C.Q. marked a change of direction from the situation that existed under the Civil Code of Lower Canada and that it had been recognized in many Court of Appeal decisions since then that the restitution of prestations applies in the municipal context.

They concluded from a review of the case law on the matter that the trial judge had properly ordered the restitution of prestations. [ 25 ] The majority added, however, that even if there had been no contract between Octane and the City, the restitution of prestations could still have been ordered under the rules on receipt of a payment not due.

In their view, the conditions that must be met for those rules to apply were met, since Octane, through its subcontractor, PGB, had produced the launch event believing mistakenly, but in good faith, that it was bound to provide the services in question to the City. [ 26 ] Finally, the majority noted that the application of the rules on restitution of prestations in the municipal context is not contrary to the public interest underlying the provisions of the C.T.A. , since in such a case a municipality is bound to return only the actual value of what it received.

A municipality that has overpaid for services it received can therefore show that it is required only to restore a lower amount equivalent to the actual value of the services. The majority added that a breach of good faith may lead a court to exercise its discretion to refuse the restitution of prestations if the circumstances warrant.

They found that, in the instant case, the trial judge’s findings of fact on this issue were supported by the evidence, so there was no reason to refuse restitution or to modify its scope or modalities using the discretion conferred by para. 2 of art. 1699 C.C.Q. [ 27 ] The judge who wrote concurring reasons agreed with the majority’s analysis of the application of restitution of prestations in the municipal context. She also agreed that the City had to restore the prestation it had received to Octane because of the nullity of the contract.

However, she found that it was not necessary to deal with the issue of receipt of a payment not due. She expressed reservations about the application of the rules on receipt of a payment not due in this case because, in her view, the services in question had been provided by PGB, not by Octane, and it was doubtful that Octane had made a payment to the City. IV. Issues [ 28 ] Two preliminary remarks are in order before we outline the issues raised by this case. [ 29 ] First, although the case involves two files, Octane’s appeal against Mr.

Thériault and the City (38073) remains subsidiary to the City’s appeal (38066). Octane is appealing to this Court for the same reason it appealed to the Court of Appeal, that is, to obtain an award against Mr. Thériault in the event that the City is successful in the principal appeal. The City is also a respondent in file 38073 because it is required to assume Mr. Thériault’s defence under ss. 114.10 and 604.6(2) C.T.A. [ 30 ] Second, Octane’s claim is only for PGB’s production costs and staging and technical equipment rental costs, which amount to $82,898.63.

In March and April 2008, the City paid Octane’s other three invoices for its consulting services for the development of the launch concept, graphic design and the production of the materials used during the event. But it should be noted that the City has brought an action in the Court of Québec seeking reimbursement of these amounts paid to Octane. That action has been stayed for the moment. In this Court, the City explained that it is seeking reimbursement of these amounts because they were paid in error given the non-existence of any contract between it and Octane.

By its own admission, therefore, the City is relying in that action, for its own benefit, on the rules governing restitution of prestations based on receipt of a payment not due. [ 31 ] With this in mind, the issues before the Court are as follows: 1. Do the rules on restitution of prestations apply in the municipal context? 2. Is the restitution of prestations necessary in the instant case and, if so, on what basis? 3. Should an award be made against Mr. Thériault personally? [ 32 ] In our view, the rules on restitution of prestations apply in the municipal context.

Although it is true that no contract came into existence between the City and Octane for the production of the launch event because the City did not pass a resolution or by-law to authorize one, the restitution of prestations is nonetheless necessary under the rules on receipt of a payment not due. Restitution must be made by equivalence in the amount of $82,898.63, as the trial judge found, there is no basis for refusing restitution or for

modifying its scope or modalities in any way, and Octane’s action in this regard is not prescribed. It follows that Octane’s appeal againstMr. Thériault personally is moot. We will deal with each of these issues in turn. V. Analysis A. Restitution of Prestations in the Municipal Context [33] The City argues that the provisions of the Civil Code governing the restitution of prestations, arts. 1699 to 1707C.C.Q., are inconsistent with the rules of public order set out in the C.T.A.

It submits that the application of the rules on restitution ofprestations in the municipal context creates a [translation] “bypass” or “formula” for avoiding the application of the rules in the C.T.A.(A.F., at paras. 5 and 36). As the City sees it, the restitution of prestations defeats the application of the C.T.A. by allowing a person to bepaid out of public funds even though the person has contravened rules designed to protect the interests of the public. It maintains thatbecause restitution is contrary to the spirit and letter of the rules for awarding municipal contracts set out in ss. 573 et seq.

C.T.A., thegeneral law must yield to the special Acts applicable to legal persons established in the public interest, as provided for in art. 1376C.C.Q. According to the City, the C.T.A. thus derogates expressly from the rules on restitution of prestations, which are, as a result,inapplicable under municipal law. [34] We agree with the trial judge and the Court of Appeal that the rules on restitution of prestations in the C.C.Q. applyin the municipal context. The City’s arguments do not withstand scrutiny. The general law applies to municipalities unless the legislaturederogates from it.

Neither the C.C.Q. nor the C.T.A. provides for such a derogation. We would add that it is rather paradoxical that theCity, which in this Court is contesting the application of the rules on restitution of prestations in the municipal context, is itself relying onthose rules in the Court of Québec in seeking restitution of the payments made to Octane in 2008 for the first three invoices. [35] As for the concerns raised by the City and the interveners about the danger of creating a “bypass”, they are largelytempered by the control mechanisms built into the rules on restitution of prestations.

Those rules are based on fairness, and theprovisions of the Civil Code give judges the flexibility they need to decide whether it is appropriate to order the restitution of prestationsand, if so, to determine the modalities and scope of restitution in light of the circumstances of each case. These robust controlmechanisms are sufficient to ensure that the rules on restitution of prestations are not used improperly in the municipal context.

(1) Application of the General Principles in the C.C.Q. to Municipalities [36] The Civil Code sets out a number of guiding principles of Quebec civil law. Its preliminary provision indicates that itis the foundation of all other laws that apply or rely on civil law concepts. By virtue of arts. 300 and 1376 C.C.Q., this includes the lawsthat govern legal persons established in the public interest, such as municipalities (art. 298 C.C.Q.).

Article 300 para. 1 C.C.Q. thusprovides that legal persons established in the public interest are primarily governed by the special Acts by which they are constituted andby those which are applicable to them. Paragraph 2 of that

article refers directly to the suppletive nature of the Civil Code; it states thatthe C.C.Q.’s general rules concerning their status as legal persons, their property or their relations with other persons are applicable tothem. Further, art. 1376 C.C.Q. provides that the rules set forth in Book Five, Obligations, “apply to the State and its bodies, and to allother legal persons established in the public interest, subject to any other rules of law which may be applicable to them”.

This provisionindicates that, where obligations are concerned, the C.C.Q. represents the general law applicable to legal persons established in thepublic interest (Doré v. Verdun (City), (SCC), [1997] 2 S.C.R. 862, at paras. 25 et seq.; Prud’homme v. Prud’homme,2002 SCC 85, [2002] 4 S.C.R. 663, at para. 27; see also P.-A.

Côté, “La détermination du domaine du droit civil en matière deresponsabilité civile de l’Administration québécoise — Commentaire de l’arrêt Laurentide Motels” (1994), 28 R.J.T. 411, at p. 423).Since the rules on restitution of prestations are in the Book on Obligations, they apply to municipalities unless other special rulesexclude their application. According to the City, this is precisely the effect of ss. 573 et seq.

C.T.A., which govern the awarding ofmunicipal contracts. [37] On this point, the City argues that the purpose of these provisions, in their spirit and letter, is to strictly regulate theformation of municipal contracts in order to protect public funds.

From this perspective, if the restitution of prestations applies in themunicipal context in cases where these rules of public order have been infringed, a contracting party could, after the fact, rely on thebenefit derived by a municipality from services provided to it in order to obtain “compensation” paid out of public funds, despite the factthat the process was unlawful (A.F., at para. 4).

According to the City, these provisions of the C.T.A. therefore derogate from the rulesestablished by the C.C.Q. for the restitution of prestations. [38] Before we address this argument, a terminological clarification is required. Where a juridical act is subsequentlyannulled with retroactive effect, the principle is that the parties must be restored to their previous positions under the rules on restitutionof prestations (arts. 1422 and 1699 to 1707 C.C.Q.). Contrary to what the City argues, this is not [translation] “compensation” or“payment” for a service received.

A contract that is annulled or resolved disappears from a legal standpoint; the effects it may haveproduced since its formation must therefore disappear with it. In such a case, not only are the parties relieved of their respectiveobligations, but they must also be restored to the legal and economic positions they were in before the contract was concluded (J.-L.Baudouin and P.-G. Jobin, Les obligations (7th ed. 2013), by P.-G. Jobin and N. Vézina, at Nos. 377 and 920; D. Lluelles and B. Moore,Droit des obligations (3rd ed. 2018), at No. 1223; J. Pineau, D. Burman and S.

Gaudet, Théorie des obligations (4th ed. 2001), byJ. Pineau and S. Gaudet, at No. 413). Whether such restoration is ordered to be made in kind or by equivalence makes no difference.According to art. 1700 C.C.Q., restitution of prestations in kind is the rule, while restitution by equivalence is the exception; in bothcases, however, restitution flows from the same principle of restoring the parties to their previous positions. [39] Sections 573 et seq. C.T.A. require certain rules to be followed when municipal contracts are awarded.

Since thepurpose of these provisions is to protect public funds and taxpayers’ interests, a contract entered into in violation of these rules isabsolutely null (arts. 1416 to 1418 C.C.Q.; Autobus Dufresne inc. v. Réseau de transport métropolitain, 2017 QCCS 5812, at para. 41; Construction Irebec inc. v. Montréal (Ville de), 2015 QCCS 4303, at para. 104 ; Centre de téléphone mobile (Québec)inc. v. Marieville (Ville de), 2006 QCCS 1179, [2006] AZ-50359395, at para. 32; P. Garant, Droit administratif (7th ed. 2017), at p. 476;J. Hétu and Y. Duplessis, with L.

Vézina, Droit municipal: Principes généraux et contentieux (2nd ed. (loose-leaf)), vol. 1, at para. 9.73;P. Giroux and D. Lemieux, Contrats des organismes publics québécois (loose-leaf), at para. 5-800; Baudouin and Jobin, at No. 372). The

fact that these provisions are of public order and that their violation is sanctioned by the absolute nullity of the contract is not an expressor even an implicit derogation from the rules on restitution of prestations. It is precisely because the contract is held to be null, and istherefore deemed never to have existed under art. 1422 C.C.Q., that the restitution of prestations is important: a person who has receivedsomething under a null contract has received it without right (Lluelles and Moore, at No. 1224). The fact that ss. 573 et seq.

C.T.A. are ofpublic order and that their violation is sanctioned by absolute nullity is not inherently incompatible with the principle of restitution. Infact, these provisions make it all the more necessary that the parties be restored to their previous positions. [40] In the absence of clear, unequivocal legislative direction to this effect, the importance of the C.T.A.’s public orderprovisions is not enough to exclude the application of the rules of the general law.

As the trial judge rightly noted, if the legislature hadintended to derogate from the rules on restitution of prestations in the municipal context, it would have stated this clearly, either in theC.T.A. or in the C.C.Q. (Sup. Ct., at para. 153).

Since there is no such derogation, the principle remains the restoration of the parties totheir previous positions, which must occur “where” (“chaque fois” (each time) in the French version) a juridical act is annulled withretroactive effect (art. 1699 C.C.Q.; Baudouin and Jobin, at No. 920; Pineau, Burman and Gaudet, at No. 206; C.A., at para. 38).Moreover, there is no support in the case law or the academic literature for the City’s argument that the rules on restitution of prestationshave no place in the municipal context.

In fact, the jurisprudence of the Court of Appeal indicates just the opposite: Ville de Saguenay v.Construction Unibec inc., 2019 QCCA 38, at paras. 43-44 ; Québec (Ville) v. GM Développement inc., 2017 QCCA 385, 72M.P.L.R. (5th) 203; Lacroix & Fils ltée v. Carleton-sur-Mer (Ville), 2014 QCCA 1345, 27 M.P.L.R. (5th) 10, at paras. 77-83; Montréal(Ville de) v. St-Pierre (Succession de), 2008 QCCA 2329, [2009] R.J.Q. 54; Habitations de la Rive-Nord inc. v. Repentigny (Ville), (Que. C.A.).

(2) Restitution of Prestations in the Municipal Context Does Not Create a “Bypass” [41] In this regard, the “bypass” argument raised by the City is not persuasive. First of all, the rules on restitution ofprestations give a judge the power to determine the fair value of restitution. Where restitution cannot be made in kind, it may be made byequivalence (art. 1700 C.C.Q.).

It is up to the judge to objectively determine the value for which restitution must be made in order torestore the parties to their previous positions, based on the evidence in the record and the circumstances of each case (Baudouin andJobin, at No. 922; Pineau, Burman and Gaudet, at No. 210). It is true that the value the parties assign to a service in their contract willoften correspond to its true value, but this will not always be the case (Baudouin and Jobin, at No. 25; Pineau, Burman and Gaudet, atNo. 210).

It follows that a municipality will not necessarily be bound by the price charged or even by the terms of the agreement oncerestitution must be made for a prestation provided under a contract for services that is declared null.

The Court of Appeal correctly notedthat a municipality that has undertaken to pay far too much for services because it has failed to comply with the competitive biddingprocedure will be able to prove the fair value of the services provided and will be required to restore only that value (para. 62). [42] In addition, para. 2 of art. 1699 C.C.Q. provides that a court may, exceptionally, refuse the restitution of prestationsor modify the scope or modalities of restitution where one party derives an undue advantage from it.

The Superior Court stated in a recentdecision that [translation] “[d]eriving an undue advantage means receiving a profit or securing a gain or benefit that seems to a reasonableperson to be unfair — in short, that offends against reason and fairness” (Rouleau v. Canada (Procureur général), 2016 QCCS 4887, atpara. 132 ). This could be the case, for example, where restitution results in a gain for one party or causes a loss that is reflectedin a corresponding gain for the other party, because the purpose of restitution is to restore the parties to their previous positions, not toenrich them (Langevin v.

Mercier, 2010 QCCA 1763, at paras. 67-73 ; Boucher v. Développements Terriglobe inc., [2001]R.D.I. 2013 (Que. C.A.), at para. 31; Fortier v. Compagnie d’arrimage de Québec ltée, 2014 QCCS 1984, at paras. 90-92 ;Hakim v. Guse, 2013 QCCS 1020; 9112-2648 Québec inc. v. Cauchon et associés inc., (Que. Sup. Ct.), atparas. 21-22; Marcotte v.

Longueuil (City), 2009 SCC 43, [2009] 3 S.C.R. 65, at paras. 35-36). [43] The reason why restitution is tempered in this way is readily understandable: since the purpose of the rules onrestitution is to restore the parties to their previous positions, it would be paradoxical if restitution were to be a source of unjustenrichment (Ministère de la Justice, Commentaires du ministre de la Justice, vol. 1, Le Code civil du Québec — Un mouvement desociété (1993), at pp. 1056-57; Lluelles and Moore, at No. 1237).

By giving a court the power to refuse restitution or to modify its scopeor modalities, the legislature ensures that the remedy for a first inequity does not create a second one. Of course, the existence of anundue advantage is not presumed, and the debtor of the restitution bears the burden of proving that the creditor of the restitution enjoyssuch an advantage in each case (Amex Bank of Canada v. Adams, 2014 SCC 56, [2014] 2 S.C.R. 787, at para. 38; Lluelles and Moore, atNo. 1237; Baudouin and Jobin, at No. 921; Pineau, Burman and Gaudet, at No. 219; K. A.

Desfossés, L’extinction de l’obligation et larestitution des prestations (Art. 1671 à 1707 C.c.Q.) (2015), at para. 1699 560; S. Gaudet, “La restitution des prestations: premiersregards sur les articles 1699 à 1707 du Code civil du Québec”, in Les Obligations: quoi de neuf? — Reprenons par le commencement,voulez-vous? (1995)).

But to the extent that undue advantage tempers the requirement that the parties be restored to their previouspositions and gives the court the flexibility needed to assess the circumstances surrounding restitution, para. 2 of art. 1699 C.C.Q.ensures that the application of the rules on restitution in the municipal context will not create an incentive to bypass rules of public order. [44] We note in this regard that the fair value of the services provided and the undue advantage that one party wouldderive from restitution are two separate concepts.

According to the wording of art. 1700 C.C.Q., restitution by equivalence is anexception to restitution in kind. A judge ruling on restitution by equivalence must determine the fair — or objective — value of theproperty or service provided. This determination is separate from the question of whether one party would derive an undue advantagefrom full restitution, which falls within the exceptional discretion conferred on a court by para. 2 of art. 1699 C.C.Q.

For example, thevalue of a prestation does not necessarily exclude the profit the other contracting party would have made if the contract had not beendeclared null (Baudouin and Jobin, at No. 925; Pineau, Burman and Gaudet, at No. 210). However, a judge might find that includingsuch a profit when granting restitution for services provided could accord an undue advantage in the municipal context. In other words,there must [translation] “remain an undue advantage only after the general rules are applied”, including the rules governing theassessment by equivalence of the value of services rendered (P.

Fréchette, La restitution des prestations (2018), at p. 426). [45] The City, supported by the interveners, suggests that obtaining a municipal contract in violation of the rules of publicorder for awarding such contracts necessarily constitutes an undue advantage and that a court hearing such a case should automaticallyrefuse the restitution of prestations. We cannot accept that argument. The discretion to refuse restitution or to modify its scope ormodalities under para. 2 of art. 1699 C.C.Q. is exceptional (Amex, at para. 38; St-Pierre (Succession de); Lluelles and Moore, at

No. 1237; Baudouin and Jobin, at No. 921; Pineau, Burman and Gaudet, at Nos. 395-96; Desfossés, at para. 1699 560). To suggest thatrestitution must be refused automatically where there has been a failure to comply with the law is contrary to the very wording of thisprovision. The discretion to refuse restitution or to modify its scope or modalities cannot be exercised unless it has first been shown thatrestitution would accord an undue advantage. The violation of a rule of public order will not necessarily result in such an advantage(Lluelles and Moore, at No. 1237).

Moreover, because the purpose of the restitution of prestations is not to punish negligent conduct butsimply to restore the parties to their previous positions after their obligational relationship is nullified, it seems unwise to endorse a rulethat would automatically preclude any restitution. Such a rigid approach would be inconsistent with the purpose underlying therestitution of prestations.

In this regard, the discretion conferred on a court is an equitable one that must be exercised with a view toachieving a balance between the parties (Langevin, at para. 71; Baudouin and Jobin, at No. 921; Fréchette, at pp. 423-24). Theappropriateness of tempering restitution under para. 2 of art. 1699 C.C.Q. must be assessed on a case-by-case basis and not, as the Citysuggests, on the basis of automatic or pre-established rules. B. Restitution of Prestations in the Instant Case [46]

Chapter IX of Title One of the Book on Obligations, which is the

chapter dealing with the restitution of prestations,does not create a right to restitution. Rather, it sets out the mechanism for restoring the parties to their previous positions, that is, themodalities involved and the circumstances in which the mechanism operates.

Such restoration presupposes the existence of an obligationthat can ground restitution. [47] According to para. 1 of art. 1699 C.C.Q., there is an obligation to make restitution where a person is bound to returnto another person that which he or she has received without right, in error or under a juridical act which is subsequently annulled withretroactive effect. The last of these situations is provided for in art. 1422 C.C.Q., which states that a contract that is null is deemed neverto have existed.

In such a case, the past effects of the contract are erased and the parties are restored to the legal and economic positionsthey were in before the juridical act was entered into (Desfossés, at para. 1699 555; Lluelles and Moore, at Nos. 1222-23; Fortin v.Chrétien, 2001 SCC 45, [2001] 2 S.C.R. 500, at para. 25). The rules on receipt of a payment not due in arts. 1491 and 1492 C.C.Q. arealso one of the sources of the obligation to make restitution (Lluelles and Moore, at No. 1362; Baudouin and Jobin, at No. 529; Pineau,Burman and Gaudet, at No. 263; Desfossés, at para. 1699 555).

Thus, a payment made in error, in the absence of an obligationalrelationship, requires the person who receives it to make restitution (art. 1554 C.C.Q.; Amex, at paras. 28-39). [48] Here, the trial judge concluded that the City had an obligation to restore to Octane the prestations received on thebasis of a contract that was declared null. In his view, a contract had indeed been entered into by the City and Octane for the productionof the launch event of May 17, 2007, but that contract had to be annulled because it had been entered into in violation of the rules forawarding contracts set out in ss. 573 et seq.

C.T.A. The Court of Appeal considered itself bound by that conclusion and upheld the trialjudge’s decision. The majority added that, even if they had found that the City and Octane had not entered into a contract, they wouldnonetheless have ordered the restitution of prestations under the rules on receipt of a payment not due. [49] In this Court, the City argues that the courts below erred in ordering restitution.

First, it submits that no contract wasentered into by the parties because it could not have given its consent to an agreement without a resolution duly passed by its municipalcouncil or authorization by an officer acting under a delegation of powers who was entitled to consent in its name. As a result, it argues,an obligation to make restitution cannot have originated in a juridical act that was subsequently annulled pursuant to art. 1422 C.C.Q.,because no such juridical act ever existed.

Nor, the City adds, can an obligation to make restitution be grounded in receipt of a paymentnot due, because the conditions set out in art. 1491 C.C.Q. are not met. According to the City, Octane made a payment of $82,898.63 toPGB, not to the City.

And even if there was a payment, it was not made in error. [50] We agree with the City that no contract came into existence between it and Octane for the event production servicesand that restitution therefore cannot be grounded in the retroactive annulment of a juridical act in accordance with the doctrine of nullity.Nonetheless, we are of the view that the conditions imposed by the rules on receipt of a payment not due are satisfied in the instant case,with the result that the parties must still be restored to their previous positions under arts. 1491 and 1492 C.C.Q.

We will begin bylooking at why the trial judge erred in finding that Octane and the City had a contr

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