Resolute FP Canada Inc. Appellant v. Hydro-Québec and Gatineau Power Company, 2020 SCC 43

SUPREME COURT OF CANADA Citation: Resolute FP Canada Inc. v. Hydro-Québec, 2020 SCC 43, [2020] 3 S.C.R. 789 Appeal Heard: January 21, 2020 Judgment Rendered: December 11, 2020 Docket: 38544 Between: Resolute FP Canada Inc. Appellant and Hydro-Québec and Gatineau Power Company Respondents Official English Translation Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ.

Reasons for Judgment: (paras. 1 to 177) Kasirer J. (Wagner C.J. and Abella, Moldaver, Karakatsanis, Brown and Martin JJ. concurring) Dissenting Reasons: (paras. 178 to 279) Côté J. (Rowe J. concurring) r esolute fp canada inc. v. hydro-québec Resolute FP Canada Inc. Appellant v. Hydro-Québec and Gatineau Power Company Respondents

Indexed as: Resolute FP Canada Inc. v. Hydro-Québec 2020 SCC 43 File No.: 38544. 2020: January 21; 2020: December 11.

Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ. on appeal from the court of appeal for quebec Contracts — Assignment — Power supply contract entered into in 1926 by forest products company and private electricity supply company — Private company and Hydro-Québec entering into contract for sale of movable property and lease of immovables in 1965 in context of nationalization of electricity in Quebec — Whether 1965 contract made Hydro-Québec forest products company’s other contracting party by way of assignment of 1926 contract, thereby enabling Hydro-Québec to claim from company payment of levies imposed on it by two Quebec statutes.

In 1926, the corporate predecessor of Resolute FP Canada Inc. (“Resolute”) and the Gatineau Power Company (“Gatineau Power”) signed a synallagmatic contract of successive performance for the supply of electric power.

Article 20 of that contract provided that Resolute would accept any increases in the price of electricity that might result from future increases in taxes or charges levied by the provincial or federal government on electrical energy generated from water power. In the early 1960s, the Quebec government acquired the capital stock of a number of private power production companies, including Gatineau Power, which became a wholly owned subsidiary of Hydro-Québec. In 1965, Hydro-Québec entered into a bilateral contract with Gatineau Power that was designed to unify that company’s management and operations.

This contract provided for the sale of all of Gatineau Power’s movable property to Hydro-Québec and the lease to the latter of all of the former’s immovables for a term of 25 years. Hydro-Québec was to benefit from the revenue derived from Gatineau Power’s power contracts, and was entitled to use the premises leased from the latter as if they were its own. In 1982, Resolute and Hydro-Québec entered into a contract for the supply of additional power.

Between 2005 and 2009, Gatineau Power assigned to Hydro-Québec three power plants that Hydro-Québec had been leasing from it and that had supplied Resolute before the nationalization. Starting in 2007, Hydro-Québec had two levies imposed on it under provincial legislation: a new amount fixed by s. 32 of the Hydro-Québec Act (“ HQA ”) and an amount provided for in s. 68 of the Watercourses Act (“ WA ”) from which it had previously been exempted. The levied amounts are paid into the Generations Fund, a fund established by the Quebec government in 2006 for the purpose of reducing the public debt.

In 2011, Hydro-Québec sent Resolute an electricity bill for over $3 million. Relying on the price adjustment clause in the 1926 contract, Hydro-Québec claimed from Resolute an increase in the price of electricity that resulted from the levies it paid to the Quebec government. Resolute paid this bill under protest and asked the Superior Court to declare that it did not owe the amount being claimed from it to either Hydro-Québec or Gatineau Power. The Superior Court granted Resolute’s motion to institute proceedings for a declaratory judgment.

It declined to find that the effect of the 1965 contract was that Gatineau Power had assigned its rights and obligations under the 1926 contract to Hydro-Québec, and declared that Hydro-Québec could not claim payment of the levies from Resolute. The Court of Appeal allowed Hydro-Québec’s appeal in part, declaring that the levies in question constituted taxes or charges that were payable by Resolute to Hydro-Québec under the 1926 contract. Held (Côté and Rowe JJ. dissenting): The appeal should be dismissed.

Per Wagner C.J. and Abella, Moldaver, Karakatsanis, Brown, Martin and Kasirer JJ.: The 1965 contract effected an assignment of the 1926 contract. As a result, Hydro-Québec is a party to the 1926 contract and can therefore invoke art. 20 of that contract with respect to Resolute. Because the two levies at issue are a “tax or charge” on electricity generated from water power within the meaning of that same art. 20, the 1926 contract applies to them and they are therefore payable by Resolute to Hydro-Québec under that agreement. The Court of Appeal was justified in intervening in this case.

It took note of Resolute’s argument that Hydro-Québec and Gatineau Power had admitted that no assignment had been made. Observing that Hydro-Québec had framed its arguments differently in its appeal, the court rightly rejected this argument. The trial judge understood Hydro-Québec to be essentially arguing that it was Resolute’s other contracting party and that the 1926 contract had been assigned. In her analysis, she not only referred to that argument, but also took it into account and formally rejected it. Resolute in fact made specific submissions on the

interpretation of the 1965 contract at trial. Moreover, the position of Hydro-Québec and Gatineau Power has at all times been that art. 20 of the 1926 contract applies and that Hydro-Québec may request a price increase. There is every reason to believe that the trial judge understood that Hydro-Québec had made no concession in this regard. The Court’s role at this stage of the litigation consists in determining whether the trial judge made a palpable and overriding error in interpreting the 1965 contract, not whether she made the exact error identified by the Court of Appeal .

It is necessary, in interpreting a contract, to seek the common intention of the parties while taking into account the nature of the contract, the circumstances in which it was formed, the

interpretation which has already been given to it by the parties or which it may have received, and usage (arts. 1425 and 1426 C.C.Q. ). Each clause is to be interpreted in light of the others so that each one is given the meaning derived from the contract as a whole (art. 1427 C.C.Q. ). In this case, none of these considerations suggest that Gatineau Power and Hydro-Québec intended to achieve anything other than the assignment contemplated in the text of the 1965 contract. Assignment of contract is known in Quebec civil law.

It is firmly rooted in commercial life, and it enables contracting parties to meet complex objectives. It is a business technique with a legitimate malleability that is supported by the principle of autonomy of the will. Assignment of contract — seen as a transfer to the assignee not merely of rights and obligations but also of the contract itself — can

be achieved in a manner that, while protecting the interests of the assigned party, is compatible with the principles of binding force and relativity of contract. There is thus no conceptual or moral bar to the assignment of a contract, seen as a patrimonial asset in itself, provided that the operation protects the interests of the assigned party. Although, according to the subjective conception of contract, the contract is viewed as a legal relationship, it is also possible to consider the contract from another angle, as being patrimonial in nature.

It is this conception that helps to explain the fact that a contract can be assigned. In this case, the key clauses of the 1965 contract have the effect of assigning the 1926 contract and are incompatible with the very essence of the concepts of mandate and administration of the property of others.

It is true that the 1965 contract confers certain powers of administration on Hydro-Québec; however, Gatineau Power, in selling its movables and leasing its immovables to the state-owned enterprise, transferred legal rights to Hydro-Québec that the latter may exercise in its own interest, which is something that a mandatary or an administrator of the property of others cannot do. What is more, Hydro-Québec took on personal obligations that are incompatible with the functions of a mandatary or an administrator of the property of others, who as a general rule does not give undertakings in his or her own name.

This operation means that the 1965 contract is one that could be characterized as a contract of sale, lease, assignment and mandate whose assignment component was necessary in order to achieve the objective of nationalizing electricity stated in the

preamble. In the absence of evidence from the time of formation of the 1965 contract that would indicate the common intention of the parties, the

preamble to the agreement is particularly important for the purpose of identifying the objectives of the parties to the contract, Gatineau Power and Hydro-Québec. It is true that a

preamble is not generally intended to create obligations, but it is helpful to make connections between the undertakings of Hydro-Québec on the one hand and the expectations of Gatineau Power on the other. The objectives of the parties as stated in the

preamble provide insight into the fundamental structure of the contract: Hydro-Québec undertook to assume liability for Gatineau Power’s obligations and, in return, Hydro-Québec was to control the production of energy under Gatineau Power’s power supply contracts for the term of the agreement and would receive the revenue derived from it. To conclude that Hydro-Québec acts only in Gatineau Power’s name and in its interest in managing its assets and contracts is inconsistent with the objectives stated in the

preamble. The contract forms part of the process of nationalization of electricity: it is Hydro-Québec that is charged with generating, acquiring, selling, transmitting and distributing electric power and energy throughout the province of Quebec, which it does in its own name, in accordance with the law, and not in the name or in the interest of others; it does so by exercising rights it holds, not by exercising powers in Gatineau Power’s interest. Thus, the 1965 contract does not name Hydro-Québec mandatary of Gatineau Power in relation to its power contracts.

Rather, the entire 1926 contract was assigned by operation of the relevant provisions of the 1965 contract, as interpreted having regard to the objectives stated in the

preamble and to the totality of the 1965 contract. If the contract is read as a whole, the

interpretation to the effect that Hydro-Québec has managed Gatineau Power’s assets and contracts must be rejected. On the contrary, for the term of the lease, Gatineau Power did not simply confer powers over the 1926 contract on Hydro-Québec; rather, it transferred rights and obligations to Hydro-Québec, subject to an extinctive term. On entering into the 1965 contract, Hydro-Québec undertook personally to perform the obligations provided for in the 1926 contract, including the obligation to supply electricity to Gatineau Power’s customers.

At the same time, Hydro-Québec obtained a right to all the advantages of the 1926 contract, including the right to be paid, personally, for the electricity it is contractually obliged to supply to Resolute. Furthermore, the term imposed by the parties for the 1965 contract does not preclude the existence of an assignment of contract.

There is no legal bar to an assignment of contract being limited in time if the parties agree to this, subject to the rules concerning the assigned party’s consent — the general conditions for validity of a contract apply to an assignment of contract, which is, like any contract, subject to the general provisions of the C.C.Q. , including those relating to the term of the contract (arts. 1508 et seq.).

Even though an assignment is a translatory act through which rights and obligations are transferred from one patrimony to another, a type of act that is ordinarily absolute, there is nothing in the civil law that precludes the parties from devising a translatory act or

an act of alienation whose effects are not permanent. Freedom of contract is key: assignment of contract does not follow a single model but may on the contrary, like any contract, be tailored to the intention of the parties, provided that it is consistent with the rules governing its validity. In this case, the parties were therefore free to limit the translatory effect of the assignment in time so as to tailor it to the business model that was consistent with their objectives.

The assignment of the 1926 contract had full translatory effect — the assignor, Gatineau Power, transferred all of its rights and all of its obligations under this power contract to the assignee, Hydro-Québec — but only for the term of the agreement. Factors extrinsic to the 1965 contract also confirm that there was an assignment of the 1926 contract and that that assignment is still in effect.

The assignment of the 1926 contract cannot have expired as a result of the sale of the three plants on the Gatineau River given that, despite that sale, the lease provided for in the 1965 contract on which the assignment is based continued to be in effect, because Gatineau Power leased all its immovables to Hydro-Québec. In addition, the 1965 agreement transferred all of Gatineau Power’s claims and obligations without distinguishing contracts on the basis of the plants to which they related.

Resolute’s mill is now supplied by Hydro-Québec’s integrated network, and it is not possible to say that the electricity it receives comes from a particular plant. The lease remained in effect in 2011, when Hydro-Québec claimed, as assignee of the 1926 contract, the agreed payment for electricity as increased under art. 20 of that contract. Resolute’s consent, which was necessary in order for the assignment of the contract to be valid, was given in the 1926 contract. It is clear from the very words of art. 22 of that contract that the parties consented in advance to any possible assignment of the contract.

If the conception of assignment of contract as a whole is adopted, the assigned party’s consent is required. If assignment is seen as the transfer of the contract itself, which implies the transfer of party status to the assignee, the assigned party’s consent is necessary from the standpoint of both relativity of the assignment and binding force of the assigned contract.

In order to give effect to the principle of relativity of contract, the transfer of the existing contract to a new contracting party requires the consent of a party on which a new partner is imposed that has characteristics not possessed by the assignor. The principle of binding force of contract also leads to the conclusion that the assignee cannot assert him or herself as a new contracting party of the assigned party without the latter’s consent.

The assigned party’s consent is required even where the assignment of contract is imperfect in order to ensure conformity with the general principles of the law of contracts and to protect the assigned party. The assigned party’s consent can, as in this case, be given in advance: because Resolute’s predecessor had consented to the assignment in advance in the 1926 contract, Gatineau Power validly transferred its status as party to the contract to the assignee, Hydro-Québec. Gatineau Power thus serves as a personal surety against any future breach

by Hydro-Québec of its obligations. The fact that the assignment in this case is imperfect does not change the outcome, since it is nonetheless Hydro-Québec that, as a principal debtor that also has party status, supplies electricity and can therefore raise the price of the electricity under art. 20. If consent was given in advance, however, the assignment of a contract cannot be set up against the assigned party if he or she was never informed of the assignment.

In the absence of express rules on assignment of contract, the conditions for setting up such an assignment can be clarified by considering the rules with respect to assignment of claim. An assignment of claim may be set up against the assigned party as soon as that party has acquiesced in it or received a copy or a pertinent extract of the act of assignment or any other evidence of the assignment which may be set up against the assignor.

In this case, the evidence shows that Resolute’s predecessor and Hydro-Québec signed a new contract in 1982 for the distribution of power that was in addition to what was provided for in the 1926 contract. Thus, Resolute knew it was doing business with Hydro-Québec well before the litigation began and had acquiesced in that situation. The assignment may therefore be set up against it.

The assignment of the 1926 contract does not violate the rule against making an assignment of claim (and therefore, by extension, an assignment of contract) that is injurious to the rights of the debtor or that renders his or her obligation more onerous (art. 1637 para. 2 C.C.Q. ). The increase in the price of electricity resulted not from the assignment of contract, but from legislative changes. The parties to the 1926 contract expressly provided that they would be subject to future provincial laws and that those laws would affect their contractual relationship.

The assignment of the 1926 contract therefore had full effect with respect to Resolute, and Hydro-Québec is entitled, as a party to that contract, to claim payment from it for the taxes and charges contemplated in art.

Article 20 of the 1926 contract applies to the levies provided for in s. 32 of the HQA and s. 68 of the WA , and Hydro-Québec can therefore claim payment for them from Resolute. First, although Hydro-Québec is a mandatary of the government, it is nonetheless a separate entity, and the legislature can therefore impose a tax or charge on it. The amounts that are collected differ from the revenues collected by the government when Hydro-Québec declares dividends, even though all of Hydro-Québec’s shares are owned by the government; they cannot be lumped together.

Next, the amounts payable under s. 68 of the WA , like the levy under s. 32 of the HQA , constitute a tax or a charge, and not an allocation of government revenues. The fact that the legislature decided to allocate the collected amounts to the Generations Fund does not change the nature of the levy. The nature of the levy must not be confused with the place where it is to be deposited.

Moreover, a reading of the contract suggests that the parties’ intention was to have the price for electricity remain stable, subject to the imposition of new taxes and charges, such that the seller company’s net revenue would remain constant but it would not be penalized if its production costs rose because of an unforeseen tax or charge levied upon electricity. Lastly, no claim for payment of the tax under the WA was extinguished by prescription or tacitly waived. Per Côté and Rowe JJ. (dissenting ): The appeal should be allowed and the Superior Court’s decision restored.

The trial judge did not make a reviewable error in finding that Gatineau Power had not assigned the 1926 contract to Hydro-Québec and that the 1965 contract had instead made Hydro-Québec a mandatary of Gatineau Power. Gatineau Power’s status as a party to the 1926 contract was therefore not transferred to Hydro-Québec, and Hydro-Québec is a third person in relation to that contract. The relativity of the 1926 contract prevents Hydro-Québec from invoking the price adjustment clause to pass on the taxes or charges for which it may be liable.

As a result, Resolute is not required to pay either the charge under s. 32 HQA or the one under s. 68 WA . The Court of Appeal should not have intervened by analyzing the case from a new angle without regard for the Superior Court’s findings of fact and the judicial contract before it. The characterization of a contract must be considered to be a question of mixed fact and law when it involves the consideration of a multitude of facts, such as the circumstances surrounding the formation of the contract and how the parties subsequently applied it.

In such a case, the applicable standard for appellate intervention is palpable and overriding error, unless there is an extricable error of law. Appellate courts must take a highly deferential approach to mixed questions, because the answer to such questions is intertwined with the weight assigned to the evidence by the trial judge, who is in a much better position than an appellate court to assess and weigh such matters.

To determine whether there is a reviewable error in the trial judge’s reasons in this case, the Court must review the Superior Court’s decision and consider the arguments presented to that court and the manner in which it disposed of them. First, the trial judge did not make a reviewable error in rejecting the three arguments made by Hydro-Québec and Gatineau Power with respect to assignment. At no time did Hydro-Québec and Gatineau Power argue in the Superior Court that the 1965 contract had effected an assignment of the 1926 contract.

Rather, they argued that the assignment had occurred either in 1982, when Hydro-Québec and Resolute entered into a contract for the supply of additional electric power, or in 1997, when Hydro-Québec became the exclusive distributor of electricity under the Act respecting the Régie de l’énergie , or in 2005-2006, when Gatineau Power transferred the ownership of its power plants to Hydro-Québec. The trial judge correctly understood that the issue was whether the contract had been assigned either in 1982, in 1997 or in 2005-2006. She decided the case as it had been presented to her.

She did not make a reviewable error in interpreting the 1982 contract as not effecting an assignment, in not accepting the argument that the coming into force of the Act respecting the Régie de l’énergie in 1997 had affected the relativity of the 1926 contract, or in rejecting the argument that the transfer of the ownership of the plants in 2005-2006 had effected an assignment of the 1926 contract, given the absence of evidence of the setting up of an assignment against Resolute and the fact that a reading of the acts of transfer reveals no so-called assignment of contract .

Second, the trial judge did not make a palpable and overriding error in accepting Resolute’s argument — uncontested before her — that the 1965 contract had not effected an assignment. The evidence in the record supported such a conclusion, and it was entirely justified for her to give effect to the judicial contract between the parties by accepting Resolute’s uncontested argument after she rejected the three arguments made by Hydro-Québec and Gatineau Power. T he parties’ subsequent conduct confirms the trial judge’s conclusion in this regard.

Article 1426 of the C.C.Q. calls for consideration of the parties’ subsequent conduct when interpreting a contract. This rule is based on the following premise: it is assumed that the parties seek to perform their obligations rather than to evade them, and that their conduct until the day a dispute arises is an indicator of their common intention crystallized earlier in their contract.

The parties’ subsequent conduct takes on even greater importance in the case of long-term contracts, because t he more time has elapsed, the more compelling the parties’ subsequent conduct will be as evidence of their original intent . The trial judge relied largely on the facts put before her and did not make a palpable and

overriding error in relying on the parties’ subsequent conduct.

Indeed, the absence of evidence of the setting up of an assignment againstResolute was in addition to the financial statements making no reference to any assignment, the notices of renewal all addressed toGatineau Power, the invoices indicating the electricity supplied under the 1926 contract separately from that supplied under the 1982contract, the testimony of a Hydro-Québec manager confirming that there had been no assignment, and the opportunistic reinterpretationof the parties’ legal situation in order to treat it as an assignment of the 1926 contract.

The trial judge was also bound by the judicial contract between the parties, in which the characterization of the 1965contract was not in dispute. Hydro-Québec and Gatineau Power, which had the burden of proof, did not dispute the fact that the 1965contract had made Hydro-Québec a mandatary and had not assigned the 1926 contract. Rather, their position was that the 1965 contractwas a mandate, sale and lease agreement and that the assignment had occurred later, in 1982 at the earliest.

Only Resolute discussed howthe terms of the 1965 contract should be interpreted, and it did so to establish that the contract had not effected an assignment, despite thefact that it did not have the burden of proof. Hydro-Québec and Gatineau Power offered no

interpretation of the terms of the 1965contract that would give it a scope different from that proposed by Resolute. It is justified for a trial judge to accept an uncontestedargument and not to undertake a needless

interpretation exercise. To require otherwise would undermine the very foundations of theadversarial system.

Article 10 of the Code of Civil Procedure reiterates the adversarial nature of the civil justice system. It is the partieswho control the course of their case, not the courts (art. 19 para. 1 C.C.P.). Accordingly, the courts cannot base their decisions onarguments or rationales that have not been debated (art. 17 para. 2 C.C.P.). The principle of proportionality and of proper administrationof judicial resources requires nothing less of them (art. 18 C.C.P.).

The issues between the parties become joined once both sides have presented their arguments; the judicial contract thenreflects the procedural relationship (lien d’instance) between the parties with respect to the questions that are in issue and those that arenot in dispute. The trial judge is also bound by this judicial contract. This means that the judge cannot disregard the contract and rule ona ground or an argument that is not in issue.

This holds true even when the judicial contract relates to a question of law, unless it is amatter of public order that would allow the judge to go beyond the parties’ consent. Although an admission of law is not, strictlyspeaking, binding on the courts, they must nonetheless take note of a party’s decision not to contest, and thus to acknowledge, theexistence of a legal situation. The judge’s task is primarily to look where the parties ask him or her to look, not to reframe the debate.

Therole of a court that has to render a declaratory judgment is limited to resolving a genuine problem between the parties with respect to thescope of a specific juridical act; the court must therefore take care to remain within the defined parameters of the debate before it so as toavoid prejudicing the future legal arguments raised by the parties or the interests of third persons who are not parties to the proceeding. In this case, the core of the issue forming the judicial contract between the parties had to do with the assignment at one ofthe three suggested points in time.

The parties’ procedural relationship did not encompass the characterization of the 1965 contract. Thetrial judge focused her analysis on the core of that issue. After she rejected the arguments of Hydro-Québec and Gatineau Power, all thatremained was Resolute’s uncontested argument that the 1965 contract had not effected an assignment either, a legal situation that wasconfirmed, in her view, by the absence of evidence of the setting up of an assignment against Resolute and by the evidence in the recordconcerning the parties’ subsequent conduct. As a result, the trial judge did not have to consider the

interpretation of the 1965 contract indetail, and it is not appropriate on appeal to engage in an exercise that was not fully before the trial judge by analyzing the 1965 contractat length. Since the trial judge did not make a reviewable error in finding that the 1926 contract had not been assigned toHydro-Québec, Gatineau Power did not transfer its status as a party to that contract to Hydro-Québec. As it is not a party to the 1926contract, Hydro-Québec cannot increase the price of the electricity supplied to Resolute.

This is because status as a party to the 1926contract is what makes it possible to invoke the price adjustment clause in order to pass on any “tax” or “charge” paid. The principle ofrelativity of contract means that a contract has effect only between the contracting parties and that it does not affect third persons(art. 1440 C.C.Q.). As a result, third persons cannot rely on the content of a contract for their own benefit, except in a few very limitedcases, none of which applies here. The 1926 contract states that the only contracting parties are Resolute and Gatineau Power.

Therelativity of the 1926 contract therefore prevents Hydro-Québec from invoking the price adjustment clause in that contract in order topass on the charges it paid under the HQA and the WA. Cases Cited By Kasirer J. Applied: Uniprix inc. v. Gestion Gosselin et Bérubé inc., 2017 SCC 43, [2017] 2 S.C.R. 59; approved: N.C. Hutton Ltd. v.Canadian Pacific Forest Products Ltd., ; considered: Modern Cleaning Concept Inc. v.

Comité paritaire del’entretien d’édifices publics de la région de Québec, 2019 SCC 28, [2019] 2 S.C.R. 406; referred to: Quebec (Attorney General) v.Algonquin Développements Côte-Ste-Catherine inc. (Développements Hydroméga inc.), 2011 QCCA 1942, [2011] R.J.Q. 1967; Salomonv. Matte-Thompson, 2019 SCC 14, [2019] 1 S.C.R. 729; Pincourt (Ville de) v. Construction Cogerex ltée, 2013 QCCA 1773; GroupeSutton-Royal inc. (Syndic de), 2015 QCCA 1069; Aqueduc du Lac St. Jean v. Fortin, (SCC), [1925] S.C.R. 192; GeneralAccident Insurance Co. v. Cie de chauffage Gaz naturel, [1978] C.S. 1160; Banque royale du Canada v.

P.G. du Québec, [1976] C.S.634; Hamel v. Banque de Montréal, 2008 QCCS 3603; Nesterenko v. Skierka, 2010 QCCS 3613, [2010] R.J.Q. 2007; Alberta (TreasuryBranches) v. M.N.R., (SCC), [1996] 1 S.C.R. 963; Place Québec inc. v. Desmarais, [1975] C.A. 910; Denis Cimaf inc.v. Caisse populaire d’Amos, ; Comité paritaire de l’entretien d’édifices publics de la région de Québec v. ModernConcept d’entretien inc., 2017 QCCA 1237, aff’d 2019 SCC 28, [2019] 2 S.C.R. 406; Lee v. Pointe of View Developments (Encore) Inc.,2010 ABQB 558, 35 Alta.

L.R. (5th) 42; Immobilière Natgen inc. v. 2897041 Canada inc., [1998] R.D.I. 545; Caisse populaire de Mariav. Beauvais et Verret Inc., (QC CA), [1994] R.D.J. 592; Westbank First Nation v. British Columbia Hydro andPower Authority, (SCC), [1999] 3 S.C.R. 134; 620 Connaught Ltd. v. Canada (Attorney General), 2008 SCC 7, [2008]1 S.C.R. 132. By Côté J. (dissenting) Hydro-Québec v. Matta, 2020 SCC 37, [2020] 3 S.C.R. 595; Uniprix inc. v. Gestion Gosselin et Bérubé inc., 2017 SCC 43,[2017] 2 S.C.R. 59; 3091-5177 Québec inc. (Éconolodge Aéroport) v. Lombard General Insurance Co. of Canada, 2018 SCC 43, [2018]

3 S.C.R. 8; Churchill Falls (Labrador) Corp. v. Hydro-Québec, 2018 SCC 46, [2018] 3 S.C.R. 101; Housen v. Nikolaisen, 2002 SCC 33,[2002] 2 S.C.R. 235; Benhaim v. St-Germain, 2016 SCC 48, [2016] 2 S.C.R. 352; J.G. v. Nadeau, 2016 QCCA 167; Salomon v.Matte-Thompson, 2019 SCC 14, [2019] 1 S.C.R. 729; Nelson (City) v. Mowatt, 2017 SCC 8, [2017] 1 S.C.R. 138; Skyline Holdings Inc.v. Scarves and Allied Arts Inc., ; Richer v. Mutuelle du Canada (La), Cie d’assurance sur la vie, (QCCA), [1987] R.J.Q. 1703; Rainboth v. O’Brien (1915), 24 B.R. 88; Imperial Oil v.

Jacques, 2014 SCC 66, [2014] 3 S.C.R. 287;Compagnie d’assurances générales Co-Operators v. Coop fédérée, 2019 QCCA 1678, aff’d 2020 SCC 41, [2020] 3 S.C.R. 785; Gervaisv. Association canadienne de protection médicale, 2007 QCCS 4564; Janacek v. Bell Canada, (QC CA), [2001]R.J.Q. 584; Godbout v. Pagé, 2017 SCC 18, [2017] 1 S.C.R. 283; Droit de la famille — 871, (QC CA), [1990] R.J.Q.2107; Apple Canada Inc. v. St-Germain, 2010 QCCA 1376, [2010] R.J.Q. 1627; Sunoco inc. v. Église Vie et Réveil inc., les ministèresd’Alberto Carbone, ; Lizotte v.

Aviva, Compagnie d’assurance du Canada, 2015 QCCA 152, aff’d 2016 SCC 52,[2016] 2 S.C.R. 521; 4077334 Canada inc. (Solutions Voysis IP) v. Sigmasanté, 2013 QCCS 2859. Statutes and Regulations Cited Act respecting the Quebec Hydro-Electric Commission, R.S.Q. 1941, c. 98A [am. 1944, c. 22], ss. 4, 10, 29, 40. Act respecting the Régie de l’énergie, S.Q. 1996, c. 61, s. 62. Act to amend the Act to insure the progress of education, S.Q. 1947, c. 32, s. 9. Act to assure budgetary control of certain expenditure, S.Q. 1961, c. 8, ss. 13, 18.

Act to insure the progress of education, S.Q. 1946, c. 21, ss. 2, 3, 19 paras. 1 and 2. Act to reduce the debt and establish the Generations Fund, CQLR, c. R-2.2.0.1, s. 2. Act to reduce the debt and establish the Generations Fund, S.Q. 2006, c. 24. Business Corporations Act, CQLR, c. S-31.1, s. 227. Civil Code of Lower Canada, arts. 1138, 1571, 1619, 1655, 2577, 2578. Civil Code of Québec, arts. 1110, 1113, 1114, 1310, 1425, 1426, 1427, 1434, 1439, 1440, 1508 et seq., 1517, 1637, 1641, 1671, 1870 to1873, 2130, 2138 paras. 1 and 2, 2475, 2476. Code civil (France), arts. 1216, 1216-1.

Code of Civil Procedure, CQLR, c. C-25.01, arts. 10, 17 para. 2, 18, 19 para. 1, 79, 142. Hydro-Québec Act, CQLR, c. H-5, ss. 3.1.1, 3.1.2, 3.1.3, 16, 32. Watercourses Act, CQLR, c. R-13, s. 68. Authors Cited Aynès, Laurent. La cession de contrat et les opérations juridiques à trois personnes, dans Collection Droit Civil — Etudes etRecherches. Paris: Economica, 1984. Baudouin, Jean-Louis, et Pierre-Gabriel Jobin. Les obligations, 7e éd., par Pierre-Gabriel Jobin et Nathalie Vézina. Cowansville, Que.:Yvon Blais, 2013. Brierley, John E. C., and Roderick A. Macdonald, eds.

Quebec Civil Law: An Introduction to Quebec Private Law. Toronto: EmondMontgomery, 1993. Cantin Cumyn, Madeleine. “Essai sur la durée des droits patrimoniaux” (1988), 48 R. du B. 3. Cantin Cumyn, Madeleine. “Le pouvoir juridique” (2007), 52 McGill L.J. 215. Cantin Cumyn, Madeleine, et Michelle Cumyn. Traité de droit civil: L’administration du bien d’autrui, 2e éd. Cowansville, Que.: YvonBlais, 2014. Carbonnier, Jean. Droit civil, vol. II. Paris: Quadrige/PUF, 2004. Colliot, Julie. “La cession de contrat consacrée par le Code civil” (2016), 4 R.J.O. 31. Cornu, Gérard, ed. Dictionary of the Civil Code.

Paris: LexisNexis, 2014, “specialia generalibus derogant”. Cumyn, Michelle. “La délégation du Code civil du Québec: une cession de dette?” (2002), 43 C. de D. 601. Fabien, Claude. “Mandate”, in Reform of the Civil Code, vol. 2-C, Obligations VII, VIII. Montréal: Barreau du Québec, 1993, 1. Ferland, Denis, et Benoît Emery. Précis de procédure civile du Québec, vol. 1, 5e éd. Montréal: Yvon Blais, 2015. Flour, Jacques, Jean-Luc Aubert et Éric Savaux. Les obligations, vol. 3, Le rapport d’obligation, 8e éd. Paris: Dalloz, 2013.

Gendron, François. L’interprétation des contrats , 2 e éd. Montréal: Wilson & Lafleur, 2016. Goubeaux, Gilles. La règle de l’accessoire en droit privé . Paris: Librairie générale de droit et de jurisprudence, 1969. Grammond, Sébastien. “Interprétation des contrats”, dans JurisClasseur Québec — Collection droit civil — Obligations , vol. 1, par Pierre-Claude Lafond, dir. Montréal: LexisNexis, 2008, fascicule 6 (feuilles mobiles mises à jour septembre 2020, envoi n° 23). Grammond, Sébastien. “The

Interpretation of Contracts in Civil Law” (2010), 52 S.C.L.R. (2d) 411 . Jobin, Pierre-Gabriel, et Michelle Cumyn. La vente , 4 e éd. Montréal: Yvon Blais, 2017. La Forest, Gérard V. The Allocation of Taxing Power Under the Canadian Constitution , 2nd ed. Toronto: Canadian Tax Foundation, 1981. Levesque, Frédéric. Précis de droit québécois des obligations: contrat, responsabilité, exécution et extinction . Cowansville, Que.: Yvon Blais, 2014. Lluelles, Didier, et Benoît Moore. Droit des obligations , 3 e éd. Montréal: Thémis, 2018. Marler, William de Montmollin. The Law of Real Property — Quebec .

Toronto: Burroughs, 1932. Piché, Catherine. “Le ‘dialogue’ des parties et la vérité plurielle comme nouveau paradigme de la procédure civile québécoise” (2017), 62 McGill L.J. 901. Popovici, Adrian. La couleur du mandat . Montréal: Thémis, 1995. Private Law Dictionary and Bilingual Lexicons , 2nd ed. by Paul-André Crépeau, ed., Cowansville, Que.: Yvon Blais, 1991, “assignment of contract”. Reid, Hubert, avec la collaboration de Simon Reid. Dictionnaire de droit québécois et canadien , 5 e éd. Montréal: Wilson & Lafleur, 2015, “ contrat judiciaire ”.

Sarna, Lazar. “Assignments of Book Accounts, Assignor’s Warranties and Standing to Sue” (1978), 56 Can. Bar Rev. 626. Tancelin, Maurice. Des obligations en droit mixte du Québec , 7 e éd. Montréal: Wilson & Lafleur, 2009. APPEAL from a judgment of the Quebec Court of Appeal (Vauclair, Marcotte and Roy JJ.A.), 2019 QCCA 30 , [2019] AZ-51560250, [2019] J.Q. n o 56 (QL), 2019 CarswellQue 102 (WL Can.), setting aside in part a decision of Le Bel J., 2016 QCCS 3862 , [2016] AZ-51315251, [2016] J.Q. n o 10288 (QL), 2016 CarswellQue 13488 (WL Can.). Appeal dismissed, Côté and Rowe JJ. dissenting.

Yves Martineau , Patrick Girard and Guillaume Boudreau-Simard , for the appellant. Dominique Ménard , Max R. Bernard and Nicolas Roche , for the respondents. English version of the judgment of Wagner C.J. and Abella, Moldaver, Karakatsanis, Brown, Martin and Kasirer JJ. delivered by Kasirer J. — I. Overview [ 1 ] In 2011, the appellant, Resolute FP Canada Inc. (“Resolute”) — a forest products company — received an unexpected electricity bill.

The respondent Hydro-Québec, relying on a clause of a power contract dating from 1926, sought to significantly increase the price of electricity purchased from it by Resolute, citing taxes or charges Hydro-Québec paid to the Quebec government that it could, under the 1926 contract, claim from Resolute. [ 2 ] Resolute sees this as unfair. It asserts that, because Hydro-Québec was not incorporated until the 1940s, it had not signed the 1926 contract, which remains in effect and instead binds Resolute and the Gatineau Power Company (“Gatineau Power”), a private electricity producer.

Hydro-Québec counters that this is not true, because even though Gatineau Power continues to exist, it assigned that contract to Hydro-Québec in 1965 at one stage of the nationalization of electricity in Quebec, and the Canadian International Paper Company (“CIP”), Resolute’s corporate predecessor, consented to that assignment in advance in the original contract. [ 3 ] Resolute in turn argues that, properly understood, the contract between Gatineau Power and Hydro-Québec merely made the latter a mandatary for purposes of managing the 1926 contract, as opposed to a true party to the contract in its own name.

As well, it would be unacceptable to consider the 1965 arrangement between Gatineau Power and Hydro-Québec, which was concluded without Resolute’s knowledge, to be a valid assignment of contract. To do so would be to impose on it, without its consent, a counterparty in the 1926 contract with which it has not agreed to do business. Resolute says it owes nothing to Hydro-Québec in this regard, because it is a debtor only to Gatineau Power.

It therefore seeks a declaration that the taxes or charges being claimed by Hydro-Québec, the effect of which is to raise the price of electricity, cannot be claimed from it — a declaration that was granted at trial ( 2016 QCCS 3862 ), but was then denied on appeal ( 2019 QCCA 30 ). [ 4 ] In this appeal, this Court is asked to reconsider the conditions for and effects of assignment of contract, a juridical operation by which, according to the conclusion of the Court of Appeal, the assignor, Gatineau Power, a contracting party, had carried

out an inter vivos transfer to the assignee, Hydro-Québec, of claims and debts arising from the 1926 contract with the assigned party, which had since become Resolute. [1] [ 5 ] Conventional assignment of contract, which is viewed sometimes as the addition of an assignment of claims to a transfer of debts and sometimes as the transfer of a contract as a whole, has long been a source of uncertainty among jurists. One might assume that this uncertainty, which is conceptual and moral in nature, results in part from the absence of a nominate scheme in the civil codes.

Although the Civil Code of Lower Canada (“ C.C.L.C. ”) and the Civil Code of Québec (“ C.C.Q. ”) do regulate certain specific forms of assignment of contract (e.g. assignment/transfer of lease in arts. 1870 to 1873 C.C.Q. and arts. 1619 and 1655 C.C.L.C. ; assignment/transfer of a contract of insurance in arts. 2475 and 2476 C.C.Q. and arts. 2577 and 2578 C.C.L.C. ), they provide no explicit general scheme for this well-known business practice. [ 6 ] Thus, civilians have long raised questions about assignment of contract because, according to a subjective conception, the contract is [ translation ] “a relationship, not property”, and “a contractual relationship cannot be assigned, since, like a debt, it has no patrimonial value” (see the description by J.

Flour, J.-L. Aubert and É. Savaux, Les obligations , vol. 3, Le rapport d’obligation (8th ed. 2013), at No. 400 (emphasis deleted)). From a moral perspective — and this relates directly to the points raised by Resolute in its appeal — the fact that the assigned party did not consent to the assignment between the assignor and the assignee is the central concern. Some authors have pointed out that it could be unfair to impose on the assigned party a new debtor who might prove to be unreliable, if not insolvent, after the assignment of the contract.

Even more fundamentally, the principles of binding force and relativity of contract are sometimes seen as a complete bar to the transfer of a contract if the assignment would impose on the assigned party a new contracting party and new undertakings to which it has not consented (see the explanations of F. Levesque, Précis de droit québécois des obligations: contrat, responsabilité, exécution et extinction (2014), at paras. 928 and 1019; and of J.-L. Baudouin and P.-G. Jobin, Les obligations (7th ed. 2013), by P.-G. Jobin and N.

Vézina, at No. 1042). [ 7 ] Despite this uncertainty and the apparent silence of the general law, however, assignment of contract is firmly rooted in commercial life, and it enables contracting parties, as in this case, to meet complex objectives (see, e.g., D. Lluelles and B. Moore, Droit des obligations (3rd ed. 2018), at No. 3227). This appeal confirms that assignment of contract has a key role to play as a business technique, given that, being a contract itself, assignment has a legitimate malleability that is supported by the principle of autonomy of the will.

Here, the parties set up a novel assignment mechanism, one with a translatory effect on the rights and obligations under the contract, although that effect is temporally limited by a lease to which the assignment is accessory.

In this case, the technique of assignment made it possible, at one stage of the nationalization of electricity, to balance the interests of the assignor, Gatineau Power, and that company’s secured creditors with those of the government and Hydro-Québec and even, despite the objections it now raises, those of Resolute in the assigned contract. [ 8 ] In fact, the dispute between the parties shows how assignment of contract — seen as a transfer to the assignee not merely of rights and obligations but also of the contract itself — can be achieved in a manner that, while protecting the interests of the assigned party, is compatible with the principles of binding force and relativity of contract.

In addition to being a composite technique comprising two mechanisms involving the transfer of, respectively, claims and debts under a contract, assignment represents first and foremost, in this case, a legal mechanism by which one party to the 1926 contract, the assignor, Gatineau Power, transferred its [ translation ] “status as contracting party” [2] to a third person, the assignee, Hydro-Québec, in a manner that is consistent with the moral foundation of relativity of the original contract.

Overall, the answer to Resolute’s objections, the most important of which is that it did not consent to the operation, lies in legal rules that protect the assigned party’s interests by requiring that party’s consent in order for the assignment to be valid. The

interpretation I propose here is thus consistent with an important current in Quebec doctrine and jurisprudence, as well as with recently reformed French law. According to all these authorities, there is no conceptual or moral bar to the assignment of a contract, seen as a patrimonial asset in itself, provided that the operation protects the interests of the assigned party. II. Background [ 9 ] In 1926, CIP and Gatineau Power signed a synallagmatic contract of successive performance for the supply of electric power in which Gatineau Power undertook to deliver 40,000 kW of electricity per month to CIP, while the latter undertook in exchange to pay for that electricity. In the

preamble to the contract, the parties mentioned that Gatineau Power was building hydroelectric plants on the Gatineau River and that CIP wished to obtain electrical energy from those plants for the operation of its mills. The original term of the contract was 40 years, a term that CIP had an option to renew for additional 10-year periods. It is admitted that the 1926 contract has been renewed several times and is still in effect.

It is also admitted that, as a result of various transactions that are not at issue in this case, Resolute is the holder of CIP’s rights and obligations under the 1926 contract. [ 10 ] The 1926 contract provided for a stable price for electricity.

However, art. 20 provided that CIP would accept any increases in the price that might result from future increases in taxes or charges levied by the provincial or federal government on electrical energy generated from water power: The Purchaser agrees that if during the term of this Agreement any future Dominion or Province tax or charge is levied upon electrical energy generated from water power in such manner as to increase the taxes and charges presently effective then the amount of such tax or charge, but not more than the amount of the increase shall be added to the billing for electrical energy under this Agreement. (A.R., vol.

I, at p. 174) This price adjustment clause was never invoked by Gatineau Power. [ 11 ] The contract contains a number of provisions concerning the quantities of electricity to be delivered by Gatineau Power and the terms for payment of the price for that electricity, even including a clause that gives Gatineau Power the right to request that payments be made “in gold coin” (art. 15).

It also provides for mutual undertakings related to the sale of electricity, including clauses concerning renewal (art. 21), dispute settlement (arts. 18 and 19), and civil liability of the parties in the event of personal injury or damage to property (art. 7). In addition to art. 20 with respect to the price, two provisions are of particular relevance to the issues in this case. In art. 17, the parties agreed that the contract was to be subject to both present and future provincial and federal regulation. And

they stipulated in art. 22 that “[t]his Agreement shall enure to the benefit of and be binding upon the successors or assigns of both parties”. [ 12 ] In the early 1960s, the Quebec government acquired the capital stock of a number of private power production companies, including Gatineau Power. Since then, Gatineau Power has been a [ translation ] “wholly owned subsidiary” of Hydro-Québec (A.F., at para. 7 ).

This phase of the nationalization of electricity followed the creation of Hydro-Québec and the expropriation of a Montréal company in 1944; that expropriation had included all the movable and immovable property used in the production of electricity as well as the bulk of the expropriated company’s contracts. In this new phase involving Gatineau Power, the Quebec government was no longer acting by way of expropriation, but instead purchased shares of the companies concerned, which was a method contemplated by law (see

An Act respecting the Quebec Hydro-Electric Commission , R.S.Q. 1941, c. 98A (inserted into the Revised Statutes by S.Q. 1944, c. 22), s. 40, to which Act the 1965 contract refers). [ 13 ] Thus, in 1965, Hydro-Québec entered into a bilateral contract with Gatineau Power that was part of a broader process designed to unify the management and operations of Gatineau Power and the other private companies whose shares Hydro-Québec had already purchased.

This contract provided for the sale of all of Gatineau Power’s movable property to Hydro-Québec and the lease to the latter of all of the former’s immovables for a term of 25 years. It further provided that Hydro-Québec would assume certain responsibilities toward Gatineau Power’s creditors, including with respect to bonds subscribed to under a trust deed referred to in the contract. The contract was subject to approval by the “holders of the bonds” in question.

Hydro-Québec was to benefit from the revenue derived from Gatineau Power’s power contracts, and was entitled to use the premises leased from the latter as if they were its own. [ 14 ] According to the parties’ agreed statement of admissions, this contract is still in effect.

Until 2011, the year when the dispute between the parties arose, Gatineau Power’s financial statements in fact indicated that the 1965 lease continued to apply, having been tacitly renewed. [ 15 ] The central question in the case is as follows: Did the 1965 contract make Hydro-Québec Resolute’s other contracting party by way of an assignment of the 1926 contract? [ 16 ] There is almost no evidence in the record regarding the circumstances of formation of the 1965 contract, and evidence of the parties’ conduct since the contract was signed is fragmentary.

What we do know, however, is that since at least 1999, all bills for electricity supplied under the 1926 contract have been issued by Hydro-Québec. In 1986, 1996 and 2006, notices of renewal of the 1926 contract were sent to [ translation ] “Gatineau Power Company c/o Hydro-Québec”. According to a record dated 2012 from Quebec’s enterprise register and to undisputed testimony, Gatineau Power is inactive, has no employees actively working for it and does not even have a bank account.

It is domiciled at Hydro-Québec’s head office, and Hydro-Québec appoints its officers and directors. [ 17 ] In 1982, CIP and Hydro-Québec entered into a contract for the supply of additional power. The new contract identified Hydro-Québec as [ translation ] “[t]he provider [that] already supplies the subscriber with 40,000kW of power” and referred explicitly to the contract originally entered into “between Gatineau Power and Canadian International Paper Company” in 1926 (art. 4a)).

Gatineau Power did not participate in that agreement, which is binding on Resolute as CIP’s successor. [ 18 ] In 1996, the province passed the Act respecting the Régie de l’énergie , S.Q. 1996, c. 61, which granted Hydro-Québec, with a few exceptions, a monopoly over the distribution of electric power in Quebec (s. 62). [ 19 ] Between 2005 and 2009, Gatineau Power assigned to Hydro-Québec three power plants on the Gatineau River that Hydro-Québec had been leasing from it and that had supplied CIP before the nationalization.

After the assignment of these three plants, Gatineau Power still owned immovables, as can be seen from its financial statements. In 2011, Gatineau Power reported that these fixed assets had an unconsolidated value of approximately $18 million. It is admitted that Gatineau Power owns a hydroelectric power plant on the Ottawa River. [ 20 ] Starting in 2007, Hydro-Québec had two levies imposed on it: a new amount fixed by s. 32 of the Hydro-Québec Act , CQLR, c. H-5 (“ HQA ”), and an amount provided for in s. 68 of the Watercourses Act , CQLR, c. R-13 (“ WA ”), from which it had previously been exempted.

The levied amounts are paid into the Generations Fund, a fund established by the Quebec government in 2006 for the purpose of reducing the public debt. [ 21 ] On November 30, 2011, Hydro-Québec sent AbiBow Canada Inc., CIP’s successor, which has since become Resolute, an electricity bill for over $3 million. A covering letter referred to the 1926 contract, including the price adjustment clause.

A significant portion of the amount Hydro-Québec was now claiming from Resolute corresponded to an increase in the price of electricity that resulted from the levies imposed on Hydro-Québec over the preceding three years under s. 32 of the HQA and s. 68 of the WA . [ 22 ] Resolute objects to this increase. It paid the bill from Hydro-Québec under protest and filed an action in the Superior Court for a declaratory judgment and for reimbursement. It asked the court to declare that it did not owe the amount being claimed from it to either Hydro-Québec or Gatineau Power. A.

Judgment of the Quebec Superior Court (Le Bel J.), 2016 QCCS 3862 [ 23 ] The Superior Court granted Resolute’s amended motion to institute proceedings for a declaratory judgment. It declared that Hydro-Québec could not claim the levies under s. 32 of the HQA and s. 68 of the WA from Resolute, and also could not claim arrears or administrative fees related to those levies. The trial judge ordered that the overpayments be reimbursed. [ 24 ] The trial judge declined to find that the effect of the 1965 contract was that Gatineau Power had assigned to Hydro-Québec the rights and obligations it had agreed to in 1926.

She observed that there was no indication that the 1965 contract had been brought to Resolute’s attention. She also noted that Resolute was still benefiting from the 1926 contract, the existence of which had been confirmed in 1982 when it entered into the contract with Hydro-Québec for additional power. [ 25 ] The trial judge wrote that [ translation ] “[i]t is difficult to pinpoint the exact moment [an] assignment of contract

[would have taken] place”, adding that since the nationalization of electricity, Hydro-Québec has held all the shares in Gatineau Powerand “managed its assets and contracts” (para. 53 ). She pointed out that Hydro-Québec had decided to acquire Gatineau Power’sthree plants on the Gatineau River that were covered by the acts of assignment concluded in the 2000s. She went on to say that, if thosetransactions were to have any effect on the application and

interpretation of the 1926 contract, Hydro-Québec had “never informed[Resolute FP] in due time[, and i]t is difficult to find that these transactions effected an assignment of contract” (para. 54). [26] Even if art. 22 of the 1926 contract did authorize an assignment of the contract, the trial judge added, such a changecould not be set up against the other party to the contract [translation] “without first being brought to its attention” (para. 55).

In anyevent, if there had been an assignment of contract, such an assignment would not have released Gatineau Power from its obligations(para. 56). [27] The trial judge concluded that the parties to the 1926 contract are still Gatineau Power and Resolute, and thatHydro-Québec cannot avail itself of art. 20 of the 1926 contract (para. 60). [28] The trial judge also expressed the opinion that the amounts claimed by Hydro-Québec do not constitute a “tax orcharge” within the meaning of art. 20 of the 1926 contract, but are instead amounts already belonging to the government that are beingallocated to the reduction of the public debt (paras. 65-66).

In this context, she concluded that it cannot be said that the amounts thustaken from Hydro-Québec, which already belonged to the province, are a “tax or charge” within the meaning of the 1926 contract(para. 67). B. Judgment of the Quebec Court of Appeal (Vauclair, Marcotte and Roy JJ.A.), 2019 QCCA 30 [29] In a unanimous decision, the Court of Appeal allowed Hydro-Québec’s appeal in part. It declared that the leviesprovided for in s. 32 of the HQA and s. 68 of the WA constituted taxes or charges that were payable by Resolute to Hydro-Québec underart. 20 of the 1926 contract.

It also confirmed that Hydro-Québec could not claim arrears from before October 2011 and that, as theSuperior Court had decided, Hydro-Québec had to reimburse the overpayments. [30] The Court of Appeal began by examining the question whether the levies at issue were taxes or charges within themeaning of art. 20 of the 1926 contract. It stated that the words “tax or charge” must be given their ordinary meaning here (para. 12). The court proposed to follow Quebec (Attorney General) v.

Algonquin Développements Côte-Ste-Catherine inc.(Développements Hydroméga inc.), 2011 QCCA 1942, [2011] R.J.Q. 1967, in which it had been held that [translation] “the amountspayable under

section 68 of the Watercourses Act constitute a tax” (para. 13). As for the levy under s. 32 of the HQA, the Court ofAppeal held that it was not necessary to determine whether it constituted a tax or a charge, since the 1926 contract applied to both(para. 15). [31] The Court of Appeal rejected Resolute’s argument that the levies constituted an [translation] “allocation” ofgovernment revenues rather than “taxation”; in its view, Resolute was “confusing the legal nature — tax or charge — of the fees payableto the government with the place where the levied amounts are deposited” (para. 16).

On this point, the Court of Appeal thereforeconcluded that the trial judge had made a reviewable error in holding that the 1926 contract did not apply to the levies payable unders. 68 of the WA and s. 32 of the HQA (para. 19). [32] The Court of Appeal then sought to identify the parties to the 1926 agreement in light of Hydro-Québec’s argumentthat the 1965 contract had effected an assignment of that contract from Gatineau Power (assignor) to Hydro-Québec (assignee). [33] The court reviewed the provisions of the 1965 contract.

In its view, the mandate concerned only the immovables,given that Hydro-Québec had purchased Gatineau Power’s movable property. Quoting art. 6 of the 1965 contract, the judges stated thatthe 1926 contract, including the right to demand the supply of electricity and the obligation to pay for it, had been sold as movableproperty, and stressed that [translation] “[t]he parties provided that contracts, as negotiable instruments, were included in the sale” andthat money and electricity are movable property (para. 26).

The Court of Appeal also noted that Hydro-Québec retained all revenue frompower contracts, “whereas a mandatary would have collected them in order to remit them to its mandator” (para. 28). [34] The court observed, relying on N.C. Hutton Ltd. v. Canadian Pacific Forest Products Ltd., (Que.C.A.), that the parties to the 1926 contract had consented in advance to a possible assignment of their contract. [35] In sum, the court was of the view that the trial judge had [translation] “made a reviewable error in holding that the1926 [c]ontract had not been assigned to Hydro-Québec” (para. 40).

Hydro-Québec could therefore bill Resolute under art. 20 of the1926 contract for the amount of the charges paid to the government. But it could not bill for charges relating to the period precedingOctober 2011, as the trial judge had not erred regarding retroactivity and arrears. This conclusion with respect to arrears was not appealedto this Court. III.

Analysis [36] Resolute raises two main objections to the Court of Appeal’s conclusion that the levies provided for in s. 32 of theHQA and s. 68 of the WA constitute taxes or charges that are payable to Hydro-Québec under art. 20 of the 1926 contract. [37] First, Resolute submits that Hydro-Québec cannot invoke art. 20, because in its view the only parties to that contractare itself and Gatineau Power.

Resolute disputes the characterization adopted by the Court of Appeal in its analysis of the 1965 contract— that it effected an assignment of contract — insisting that the trial judge made no reviewable error in interpreting that agreement.

Inany event, even if the characterization of the agreement as an assignment of contract were found to be correct, Resolute maintains that itnever consented to such an assignment, which means that the purported assignment would not be valid and could not be set up against it.What is more, that assignment could not render its obligations more onerous, which would be the case, Resolute argues, if the pricefixed in 1926 were increased as Hydro-Québec requests. [38] Second, Resolute maintains that, even if Hydro-Québec were a party to the 1926 contract, the levies provided for in

s. 32 of the HQA and s. 68 of the WA are not a “tax or charge” on electricity generated from water power within the meaning of art. 20 of that contract. [ 39 ] It should be noted that the two contracts at the heart of the litigation were entered into before the C.C.Q. came into force. The parties essentially agree that whether the C.C.L.C. or the C.C.Q. is applied does not affect the outcome of the litigation. They did not dwell on this point, nor did the Superior Court and the Court of Appeal consider it necessary to detail the differences between the two codes in order to resolve the case. A.

Is Hydro-Québec a Party to the 1926 Contract, and Can It Invoke That Contract With Respect to Resolute? [ 40 ] Resolute disputes the Court of Appeal’s conclusion. It maintains that Hydro-Québec is, as the trial judge stated, a mandatary and not an assignee of Gatineau Power under the 1965 contract. Because Hydro-Québec is doing business with Resolute as a representative of Gatineau Power, it cannot invoke art. 20 of the 1926 contract in its own name in order to increase the price for electricity. [ 41 ] Resolute advances, in support of the trial judge’s

interpretation of the 1965 contract, three arguments that I propose to discuss in turn:

(1) Hydro-Québec did not allege assignment of contract, and even argued the contrary at trial; (2) the Court of Appeal intervened on the highly factual issue of contractual

interpretation without identifying a palpable and overriding error on the trial judge’s part; and (3) the Court of Appeal erred in concluding that the sale of Gatineau Power’s movable property to Hydro-Québec entailed an assignment of the 1926 contract. After doing so, I will consider Resolute’s alternative arguments on its first ground of appeal: (4) it had not consented to the assignment; (5) the assignment could not be set up against it; and (6) the effect of the assignment of contract was to render its obligations under the 1926 contract more onerous.

(1) Hydro-Québec’s Position at Trial [ 42 ] Resolute asserts that Hydro-Québec did not allege at trial that there had been an assignment of the 1926 contract, and that counsel for Hydro-Québec even recognized in his arguments before the trial judge that there had been no assignment. [ 43 ] This argument was rightly rejected by the Court of Appeal (para. 39). The trial judge — who heard the evidence and arguments — understood Hydro-Québec to be essentially arguing that it was Resolute’s other contracting party and that the 1926 contract had been assigned (see paras. 34 and 44).

In her analysis, she not only referred to that argument several times, but also took it into account and formally rejected it (paras. 59 and 60). [ 44 ] Resolute in fact made submissions on this point at trial (plaintiff’s outline of argument of April 26, 2016, R.R., at paras. 3 and 23-80; see also A.R., vol. VI, at pp. 137-72). One of the key issues raised in this case, in its view, was [ translation] “who is Resolute’s other contracting party?” Not long after saying that, it noted that “ it’s a question of

interpretation of D-1 [the 1965 contract] that brings us here today”. Resolute aptly summed up the two possibilities: “ assignment or mandate”. [ 45 ] The Court of Appeal took note of Resolute’s argument that the respondents had admitted that no assignment had been made. Observing that Hydro-Québec had framed its arguments [ translation] “ differently”, the court rejected this argument (para. 39). I agree with its reasons. I would point out that the respondents’ position has at all times been that art. 20 of the 1926 contract applies and that Hydro-Québec may request a price increase (see, e.g., A.R., vol.

VII, at pp. 118-19, 124, 126 and 144; see also A.R., vol. VIII, at pp. 27 and 39; defendants’ outline of argument of May 4, 2016, R.R., at paras. 1, 7, 20, 25, 29-34, 85, 106 and 109).

A Hydro-Québec manager even testified at trial that he had had no knowledge of the Gatineau Power Company or of its activities before taking over the file at issue in this case in 2011. [ 46 ] A review of the transcript of the hearing at trial supports a conclusion that the apparent incoherence in the parties’ positions can be explained in part by the fact that there was some confusion as to the scope of the agreed statement of admissions (see, on this point, A.R., vol. VIII, at pp. 1-19).

Counsel for the respondents at trial seems to have assumed that the 1926 contract [ translation] “has effect as between AbiBow Canada Inc. and Hydro-Québec”. The objection of counsel for Resolute on this point had taken him “by surprise” in the middle of oral argument. After this exchange, the parties agreed that the question “who is a contracting party?” in respect of the 1926 contract, to quote counsel for Resolute, remained to be answered.

This can also be seen from Hydro-Québec and Gatineau Power’s notice of appeal. [ 47 ] Logically, it is clear that Hydro-Québec can only avail itself of the 1926 contract’s price increase clause if it is Resolute’s other contracting party. There is every reason to believe that the trial judge understood that Hydro-Québec had made no concession in this regard either in its pleadings or in its argument.

In fact, in their defence, Hydro-Québec and Gatineau Power formally denied the following allegation by Resolute in its motion to institute proceedings: [ translation ] “To the best of Resolute FP’s knowledge, the Contract was not assigned by Gatineau Power to [Hydro-Québec], but [Hydro-Québec] is responsible for administering it and for collecting the amounts payable to Gatineau Power in the latter’s name”. When all is said and done, the trial judge clearly understood that the assignment issue was central to the case, and she disposed of this argument in her reasons.

(2) Intervention of the Court of Appeal [ 48 ] Resolute argues that, because the Court of Appeal identified no palpable and overriding error by the trial judge, it could not overrule her

interpretation of the 1965 contract. In Resolute’s view, the Court of Appeal merely proposed a different

interpretation of that contract and thereby failed to show deference to the

interpretation adopted by the trial judge. [ 49 ] Resolute is of course right that, in accordance with the principles set out by this Court in Uniprix inc. v. Gestion Gosselin et Bérubé inc. , 2017 SCC 43 , [2017] 2 S.C.R. 59, the

interpretation of the 1965 contract proposed by the trial judge must be accepted absent a palpable and overriding error. Let us take a closer look at the approaches taken in turn by the Superior Court and the Court of Appeal in order to determine whether this Court should intervene in the case at bar. [ 50 ] In discussing the facts, the trial judge quoted various clauses of the 1965 contract (arts. 3, 4, 5, 8, 9a), 9b) and 9g)),

but did not explicitly analyze them. She certainly did not quote arts. 6 and 7 of that contract. The quotation reproducing the above- mentioned provisions of the 1965 contract was in fact [ translation ] “taken from the plaintiff’s [Resolute’s] memorandum” (para. 15, note 6) and was preceded by an introductory phrase, added in the memorandum, in which that contract was called the “Lease / Mandate (D-1)” (para. 15).

It can also be seen that the trial judge was concerned more with the question of the “exact moment [an] assignment of contract [would have taken] place” than with the basis in the 1965 agreement that would confirm or refute a conclusion to that effect (para. 53). That being said, she nonetheless stated that, in the 1965 contract, Gatineau Power “named [Hydro-Québec] mandatary for the management of its operations and contracts” (para. 51) and that it is Hydro-Québec that “has . . . managed [Gatineau Power’s] assets and contracts” (para. 53).

Given the trial judge’s conclusions on the meaning of the contract, it can be assumed that, in her view, the articles she quoted established a mandate to manage the 1926 contract and were inconsistent with an

interpretation to the effect that there was an assignment from Gatineau Power to Hydro-Québec. The trial judge also relied on certain factors extrinsic to the 1965 contract, such as the nationalization of electricity and the parties’ actions after entering into the contract, in support of her

interpretation (see para. 51). Her analysis, based as it was on evidence intrinsic and extrinsic to the contract, was thus at the second step of the

interpretation exercise described by this Court in Uniprix , at paras. 36-37, namely the identification, in the absence of clear language, of the common intention of the parties. [ 51 ] The respondents argue that errors in “characterizing” the 1965 contract led the trial judge to conclude that there was a mandate rather than an assignment of contract, which implies that the standard for intervention in this case is that of an error of law. But I agree with Resolute that the standard is palpable and overriding error.

Characterization of a contract often requires that it first be interpreted (see Uniprix , at paras. 39-40). Even though the ultimate question relates to the characterization of the contract — its association with the proper normative category, that is, with assignment of contract or mandate — it seems clear to me that, in this case, this step is in large part the result of an “interpretation exercise”, to use the expression of Wagner J. (as he then was) and Gascon J. in Uniprix (para. 43).

That result necessarily depends on the meaning to be given to the clauses of the contract that condition Hydro-Québec’s exercise of its rights and fulfillment of its obligations. [ 52 ] Thus, it was open to the Court of Appeal to intervene only if the trial judge had made a palpable and overriding error.

But while Resolute is right about the applicable standard, it is mistaken in submitting that the Court of Appeal was not justified in intervening in this case. [ 53 ] I wish to be clear that there is no suggestion that the Court of Appeal identified the wrong standard here, that is, that it sought an error of law and not a palpable and overriding error. It is true that the Court of Appeal referred to a [ translation ] “reviewable error” in the trial judge’s finding that the 1926 contract had not been assigned to Hydro-Québec (para. 40 ).

This expression — which encompasses any error that justifies an appellate court’s intervention — is perfectly adequate to indicate that the trial judge had made an error of the type identified in Uniprix (see also, e.g., Salomon v. Matte-Thompson , 2019 SCC 14 , [2019] 1 S.C.R. 729, at paras. 40-42 ). [ 54 ] A careful reading of the Court of Appeal’s reasons shows that it was of the view that the trial judge had made a palpable error in concluding on the basis of her

interpretation of the 1965 contract that the mandate established in that contract was not limited to the management of immovables, but included the management of contracts (see paras. 25 and 28). The Court of Appeal also identified, in interpreting the 1965 contract and in assessing the parties’ actions after entering into the contract, errors that confirmed, contrary to the trial judge’s

interpretation, that the 1926 contract had been assigned in 1965 (see para. 32). The court considered these to be overriding errors in that they had led the trial judge to find that the 1926 contract had not been assigned by the 1965 contract (see para. 40). I cannot therefore accept Resolute’s argument that the Court of Appeal intervened without identifying a palpable and overriding error on the trial judge’s part. [ 55 ] As to this Court’s role at this stage of the litigation, it is also shaped by the standard of appellate intervention.

As was explained in Uniprix : In the case at bar, this Court’s role is in fact limited to deciding whether the trial judge committed a palpable and overriding error in applying the relevant principles of

interpretation to . . . the contract . . . . [para. 44] [ 56 ] Thus, our role consists in determining whether the trial judge made a palpable and overriding error in interpreting the 1965 contract, not whether she made the exact error identified by the Court of Appeal. [ 57 ] As I will explain below, although I disagree with the Court of Appeal’s

interpretation regarding certain clauses of the contract, I agree with its view that the 1965 agreement effected an assignment of the 1926 contract and — with all due respect — that the trial judge made a palpable and overriding error in her

interpretation of that agreement in stating that Gatineau Power had named Hydro-Québec [ translation ] “mandatary for the management of its operations and contracts” (paras. 15 and 51). This error can also be seen in the trial judge’s assertion that Gatineau Power had not assigned its rights and obligations to Hydro-Québec (see para. 53 ). The trial judge’s findings were incompatible with the words of the 1965 contract and disregarded clauses that relate directly to the issue raised in this case: whether the rights and obligations under the 1926 contract were assigned.

With respect, the content of her reasons suggests that the totality of the 1965 contract was not considered. More specifically, given the objectives stated in the

preamble of that contract and the circumstances in which it was concluded, the 1926 contract was assigned by the combined effect of arts. 4 through 8 of the 1965 contract. [ 58 ] The 1965 contract, which was entered into following the acquisition of all of Gatineau Power’s capital stock by Hydro-Québec in one phase of the nationalization of electricity, concerns a wide range of relations between the two companies, but does not refer specifically to the 1926 contract. The trial judge described the 1965 contract as a [ translation ] “mandate, sale and lease agreement” (para. 51).

It is true that it has characteristics of each of these three juridical operations. The fact that the 1965 contract has, among other things, a sale component, a lease component and a mandate component is not in dispute. Nor, of course, is there anything to bar a subsidiary from selling assets to its parent company or to preclude the existence of a lease or mandate between companies that are thus related. But it is the balance between these elements that was, I find, misunderstood at trial because of a palpable and overriding error.

As I will endeavour to explain, the trial judge erred in stating, in relation to Gatineau Power’s operations as an electricity producer, that Hydro-Québec had been “manag[ing] its assets and contracts” since the nationalization of electricity (para. 53).

[59] The trial judge’s conclusion suggests that Hydro-Québec is, in managing assets and contracts under the contract,acting in Gatineau Power’s name as mandatary and in its interest as administrator of the property of another.

With respect for thecontrary view, to say without qualification that Hydro-Québec manages Gatineau Power’s assets is to disregard the totality of thecontract and the approach according to which each clause of a contract is interpreted in light of the others so that each is given themeaning that flows from the contract as a whole. [60] I find that these errors justify appellate intervention to reverse the trial judge’s finding that no assignment of contractresulted from the 1965 contract.

(3) Interpretation of the 1965 Contract (

a) Overview of the Applicable Legal Principles [61] It should be noted that it is necessary, in interpreting a contract, to seek “[t]he common intention of the parties”(art. 1425 C.C.Q.) while taking into account, in the words of the C.C.Q., “the nature of the contract, the circumstances in which it wasformed, the

interpretation which has already been given to it by the parties or which it may have received, and usage” (art. 1426 C.C.Q.).Each clause is to be interpreted “in light of the others” so that each one is given the meaning derived from the contract as a whole(art. 1427 C.C.Q.).

In this case, none of these considerations suggest that Gatineau Power and Hydro-Québec intended to achieveanything other than the assignment contemplated in the text of the contract. [62] To begin, it should be borne in mind that mandate is a contract by which the mandator confers upon the mandatary thepower to represent him or her in “the performance of a juridical act” (art. 2130 C.C.Q.; see also C. Fabien, “Mandate”, in Reform of theCivil Code, vol. 2-C, Obligations VII, VIII (1993), at pp. 3-5; A. Popovici, La couleur du mandat (1995), at pp. 17-18).

An essentialaspect of the contract of mandate is that mandataries are not personally liable to third persons except in very specific circumstances, inparticular when they act in their own names, exceed their powers or commit faults in the performance of their mandates (Fabien, atpp. 15-17). [63] Furthermore, the law imposes two duties on mandataries.

A mandatary must (1) “act honestly and faithfully in thebest interests of the mandator, and . . . avoid placing himself in a position where his personal interest is in conflict with that of hismandator” (art. 2138 para. 2 C.C.Q.; see also Fabien, at pp. 8-9; Pincourt (Ville de) v. Construction Cogerex ltée, 2013 QCCA 1773, atparas. 180-81 ); and (2) “act with prudence and diligence” in performing the mandate (art. 2138 para. 1 C.C.Q.).

Regarding thefirst duty, it is important to bear in mind that even mandataries charged with full administration of the property of others cannot use themandator’s property for their own needs or purposes (art. 1310 C.C.Q.; see also Groupe Sutton-Royal inc. (Syndic de), 2015 QCCA1069, at para. 122 ). As Professor Cantin Cumyn observes, the duty to act faithfully [translation] “prohibits using the powers inthe personal interest of the person in whom they are invested” (“Le pouvoir juridique” (2007), 52 McGill L.J. 215, at p. 231; see alsoM. Cantin Cumyn and M.

Cumyn, Traité de droit civil: L’administration du bien d’autrui (2nd ed. 2014), at Nos. 301 et seq.). As for thesecond duty, Professor Cantin Cumyn explains that the conduct of an administrator

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