Groupe Axor Ingenierie-Construction Inc. v. Canada

Groupe Axor Ingenierie-Construction Inc. v. Canada
Court (s) Database
Federal Court Decisions
Date
2003-06-27
Neutral citation
2003 FCT 797
File numbers
T-127-00
Notes
Digest
Decision Content
Date: 20030627
Docket: T-127-00
Neutral citation: 2003 FCT 797
BETWEEN:
GROUPE AXOR INGÉNIERIE - CONSTRUCTION INC.
Plaintiff
and
HER MAJESTY THE QUEEN
Defendant
REASONS FOR JUDGMENT
LEMIEUX J.
INTRODUCTION AND FACTS
[1] By an action the plaintiff Groupe Axor Ingénierie - Construction Inc. ("Axor") is claiming from the Crown in right of Canada ("the Crown") the sum of $582,775.04 estimated and composed of (1) a deduction of $442,775.04 by Defence Construction Canada ("DCC") pursuant to certain contractual provisions between the DCC and Axor; (2) $60,000 in financial costs incurred on account of unlawful deductions by the DCC, calculated from the date of the deductions to the date the action was filed; (3) $60,000 in professional fees; and (4) $20,000 in administrative costs associated with the claim, the whole with interest and costs on a solicitor-client basis.
[2] The principal question is whether Axor, in its two bids of June 18 and July 31, 1996, on DCC calls for tenders, was required to take into account the public announcement made on April 23, 1996, by the Minister of Finance of Canada, Hon. Paul Martin ("the Minister"), an announcement supported by several technical documents and repeated the same day by the Minister in the House of Commons. It was announced that Canada had signed a memorandum with the Governments of Nova Scotia, New Brunswick and Newfoundland, designed to harmonize the sales taxes of those provinces with the federal system on April 1, 1997.
[3] The memorandum of understanding, only the English version of which was entered in evidence as No. D-6, provided "[S]ubject to the signing of a detailed agreement in accordance with clause 20, the parties agree to work towards the implementation of a harmonized sales tax system by April 1, 1997". Clause 20 of that memorandum stated: "Canada and the province will conclude, within six months of this memorandum of understanding, a detailed agreement elaborating the principles set out therein, which agreement will define the common tax base, provide for the single administration . . . and provide for, inter alia . . . ". The inter alia in clause 20 referred to 14 chapters of matters to be worked out. The technical documents published in support gave the reason for the harmonization and explained in general terms how it would work.
[4] The answer to the principal question depends on the interpretation of the term "public notice" contained in para. 22.4 of the General Conditions of the contract prescribed by the DCC, an interpretation which also requires review of the Federal Court of Appeal's judgment in Hervé Pomerleau Inc. v. Canada, [2000] F.C.J. No. 745, also concerning para. 22.4.
[5] On July 31, 1996, Axor filed a bid with DCC following a call for tenders by the latter, to design and construct (conception-ingénierie-design-built) a medical clinic at the Canadian Armed Forces base at Gagetown in New Brunswick ("Gagetown"), a project which was to be completed on July 1, 1997, at the latest. Axor was the lowest bidder and received this contract on August 27, 1996.
[6] Consequent upon a bid on June 18, 1996, with modifications submitted on July 11, 1996, Axor was also the lowest bidder and also received a DCC contract on August 27, 1996, for the design and building of a mess at the Canadian Armed Forces base at Greenwood in Nova Scotia ("Greenwood"), September 13, 1997, being the date the work was to be completed.
[7] The contractual provisions applicable to this case are to be found in the bid form prescribed by DCC (CDL-150) and the document titled "Standard Construction Contract Documents 1996" version (CDL-250), and read:
GC22 INCREASED OR DECREASED COSTS
22.1 The amount set out in the Articles of Agreement shall not be increased or decreased by reason of any increase or decrease in the cost of the work that is brought about by an increase or decrease in the cost of labour, plant or material or the wage rates set out in or prescribed pursuant to any applicable labour laws.
22.2 Notwithstanding GC22.1 and GC35, an amount set out in the Articles of Agreement shall be adjusted in the manner provided in GC22.3, if any change in a tax imposed under the Excise Act, the Excise Tax Act, the Old Age Security Act, the Customs Act or the Customs Tariff or any Provincial Sales Tax legislation imposing a Retail Sales Tax on the purchase of tangible personal property incorporated into Real Property
22.2.1 occurs after the date of the submission by the Contractor of his tender for the contract,
22.2.2 applies to material, and
22.2.3 affects the cost to the Contractor of that material.
22.3 If a change referred to in GC22.2 occurs, the appropriate amount set out in the Articles of Agreement shall be increased or decreased by an amount equal to the amount that is established by an examination of the relevant records of the Contractor referred to in GC51 to be the increase or decrease in the cost incurred that is directly attributable to that change.
22.4 For the purpose of GC22.2, where a tax is changed after the date of submission of the tender but public notice of the change has been given by the Minister of Finance before that date, the change shall be deemed to have occurred before the date of submission of the tender. [Emphasis added.]
[8] Article 3 of the tender form filed by the defendant as Exhibit D-1 deals with taxes and reads:
3. We understand and agree that all applicable taxes, permits and fees are our responsibility and are included in our Tendered Price. The exception to the foregoing is the Goods and Services Tax (GST) . . .
[9] Subsequently, on October 23, 1996, the Minister announced that the detailed agreements mentioned in clause 20 of the memorandum of understanding of April 23, 1996, had been signed, "outlining the new harmonized sales tax system which will be implemented in those provinces on April 1, 1997".
[10] On November 29, 1996, the Minister announced the tabling in the House of Commons of a notice of a ways and means motion dealing with the bill making the legislative amendments required for sales tax harmonization ("HST"). Subsequently, on December 2, 1996, the Minister tabled Bill C-70 on harmonization in the House of Commons. This legislation received Royal Assent on March 20, 1997, and became effective on April 1, 1997.
[11] Before harmonization New Brunswick imposed a provincial sales tax ("PST") of 11% on building materials, and in Nova Scotia this tax was of a similar amount.
[12] The purpose of the harmonization was to combine the two sales tax systems, federal and provincial, as of April 1, 1997, producing a single HST of 15%, with two components: 7% for the federal government and 8% for each of the three Atlantic provinces. The old provincial sales taxes would be repealed, creating a net reduction of 3% (from 11% to 8%) in the provincial tax on building materials delivered to building sites after April 1, 1997.
[13] Noting the tax change implemented by Parliament at the end of March 1997, the DCC on May 12, 1997, invoked the provisions of para. 22.3 of the contractual clauses against Axor, as it felt it was entitled to benefit from the 3% reduction imposed on building materials delivered to the sites of Gagetown and Greenwood after April 1, 1997.
[14] In Axor's view, it was para. 22.4 of the contractual clauses that applied, and para. 22.3 had no application in the circumstances. Axor submitted that no tax change had occurred within the meaning of para. 22.2 (that is, a tax change occurring after the date on which Axor tendered for the contracts), since under article 22.4 this tax change was deemed to have occurred before the date on which the two Axor bids were submitted to the DCC following the public notice of harmonization given by the Minister on April 23, 1996.
[15] The DCC withheld from the amount it owed Axor, in the form of a contractual credit:
(1) the sum of $177,411.44, representing the amount that would have been payable by Axor as provincial sales tax on goods delivered to the Gagetown site after April 1, 1997, but for the goods and services tax harmonization; and
(2) the sum of $265,363.00, representing the amount that would have been payable by Axor as provincial sales tax on goods delivered to the Greenwood site after April 1, 1997, but for the goods and services tax harmonization.
EVIDENCE
[16] Four individuals testified for Axor:
(1) Michel Taillefer, a consumer tax consultant;
(2) Benoit Auclair, an employee of Axor who was responsible for preparing the two tenders to the DCC for the Gagetown and Greenwood projects;
(3) Pierre Chevalier, assistant to the controller of the Axor Group and responsible for coordinating this case with the DCC; and
(4) Eric Gamache, whose principal duties for Axor were to award the contracts to the sub-contractors and manage the actual construction at Gagetown and Greenwood.
[17] The DCC called no witnesses. It relied on the documentary evidence admitted by consent, on cross-examinations at the hearing and on examinations before and after defence. It cited Hervé Pomerleau, supra.
[18] Michel Taillefer testified that on April 23, 1996, he sent Axor an information pamphlet about the announcement by Hon. Paul Martin the same day regarding the proposed harmonization and about 100 or so changes to the federal GST system, and that following a conversation with Pierre Chevalier, at the latter's request, he sent him a letter on April 28, 1996, telling him that the HST would have the effect of reducing building material prices as of April 1, 1997.
[19] Pierre Chevalier admitted that he knew about the proposed HST on April 23, 1996. He knew this from reading the newspapers and from the call he received from Mr. Taillefer. Further information was provided by the contents of Mr. Taillefer's letter of April 28, 1996. Mr. Chevalier considered this development a very important one and informed Axor's senior estimator.
[20] The importance of Benoit Auclair's testimony was his saying that in the estimate of costs calculated as likely to be incurred, to determine the overall price that Axor would bid for Gagetown and Greenwood, he had taken into account the reduction in effective GST rates on building materials resulting from the HST scheduled for April 1, 1997.
[21] He entered in evidence Exhibits P-3 and P-4. These exhibits are a summary of the projected cost of the Gagetown and Greenwood projects. The Axor team which piloted the development of the two DCC bids thought that the costs calculated per square foot were too high for this kind of construction and that Axor, which was assessing the competition, would not win the contracts unless it found a means of reducing costs and therefore the overall price of the bid.
[22] Mr. Auclair, assisted by the word "tax ?????" which he had noted at the time on the cost summary in Exhibit P-3 , testified that the tender price for the Greenwood project was reduced by $250,000 in view of the anticipated drop in the effective GST rates, applying a two-part statistical formula:
(1) a projection of work progress to April 1, 1997, at 30% of the construction completed; and
(2) for the work to be completed after April 1, 1997, the application of a 60% ratio for the cost of manpower and 40% for the cost of building materials.
[23] Mr. Auclair indicated that the same methodology was used to reduce initial cost projections and the overall price for Gagetown.
[24] I accept the following from Mr. Gamache's testimony.
[25] First, after obtaining the two contracts, when Axor asked for tenders from sub-contractors, it did so on the basis of taxes in effect at the time the bids were submitted by them to Axor. For example, if a sub-contractor had submitted its bid on March 1, 1997, it would have had to include all the taxes in effect at the time of its submission, that is, it would have had to take into account the 11% GST on building materials despite the fact that it was expected that the latter would be reduced by 3% as a result of the HST on materials delivered after April 1, 1997.
[26] Second, Mr. Gamache explained that this system was used for the sake of fairness, since the HST was applied in accordance with the state of the construction, something which Axor could control but the sub-contractor could not. For example, the precise date of the delivery by a sub-contractor of a cooling fan depended on the point to which work had advanced so that it would be possible to receive it.
[27] Thirdly, this methodology did not result in double recovery for Axor, in the sense that Axor pocketed a portion of the GST that was not due. Mr. Gamache explained that Axor was paying the sub-contractors in accordance with a percentage of the progress of work, not on receipt of various invoices. The percentage of the price paid by Axor to sub-contractors who had concluded contracts with Axor before April 1, 1997, but whose material deliveries extended after that date, included the old PST at 11%.
[28] For this category of sub-contractors, in order to determine the true amount of PST which was not due but paid by it, Axor had to conduct inquiries with each of them in order to make the necessary adjustments.
ARGUMENT
[29] Axor submitted that in its tenders to the DCC in June and July 1996 it was required to take into account the proposed reduction in PST on building materials delivered to the site after April 1, 1997, since this fiscal change had been announced by Hon. Paul Martin on April 23, 1996, and under the General Conditions prescribed by the DCC which were incorporated in all calls for tenders made by the latter, this fiscal change was deemed by para. 22.4 "to have occurred before the date of submission of the tender", which excluded any adjustment mentioned in paras. 22.2 and 22.3 of the General Conditions, since those paragraphs only applied to a change occurring after the date of the tender.
[30] The Crown argued that the public announcement on April 23, 1996, was not a public notice within the meaning of article 22.4 of the General Conditions, since that announcement did not give the public notice of a fiscal change, simply mentioned a memorandum of understanding on harmonization with a view to arriving at a final agreement.
[31] In the Crown's submission, it was actually the notice of October 23, 1996, announcing that a comprehensive agreement on the HST had been signed which was the notice contemplated by para. 22.4, since this was the notice given effect by the legislation authorizing the fiscal change, that was later adopted on March 20, 1997.
(1) Axor
[32] Counsel for Axor based his argument on five points: the context surrounding each tender, the meaning to be given to article 22 of the General Conditions, the very public nature of the announcement on April 23, 1996, the impact of Pomerleau, supra, and the rules of interpretation.
[33] He submitted that the procedure for tendering in response to DCC calls for tenders is very well known, that the competition is fierce and that the successful bidder does not negotiate the terms of the contract, but accepts contractual clauses known in advance and drafted by the DCC.
[34] He noted that the phrase "public notice" is not defined in para. 22.4, and submitted that it should be given its ordinary meaning in the context of article 22, which is designed to define its nature as a contractual clause setting a fixed price, with the possibility of adjustment limited to fiscal changes in materials that occur after the date of submission, but with the exception of a fiscal change for which the Minister has given public notice before that date.
[35] Bidders should take into account fiscal changes public notice of which has been given before the date of submission, or be penalized in the event of an announced increase by the obligation to pay the DCC the increased tax, and in the event of announced decrease in a tax by the obligation to pass on a benefit to the DCC, without any right to take advantage of it by reducing the amount of its bids.
[36] He discussed the public nature of the announcement, relying on the Minister's speech in the House on April 23, 1996, and the fact that that announcement related to the carrying out of a promise of fundamental GST reform in the Liberal Party's Red Book published during the electoral campaign.
[37] Counsel for Axor referred to the many technical documents supporting the announcement of April 23, 1996, and noted that the amount of the provincial portion in the HST was known - 8% at the time.
[38] An important factor is the Crown's admission a few days before the hearing began that Axor had sufficient information as of April 23, 1996, to determine the fiscal impact that would result from the HST and take it into account in its bids.
[39] Axor characterized Pomerleau, supra, as a completely unique case: a case in which the federal Minister of Finance, Hon. Marc Lalonde, on April 19, 1983, filed a notice of a ways and means motion ("the notice of motion") in connection with his budget in which he announced that as of October 1, 1984, the federal sales tax ("FST") on building materials and equipment destined for buildings would increase from 5% to 6%.
[40] Unfortunately, on July 9, 1984, Parliament was dissolved and a general election called for September 4, 1984, even before the bill giving effect to the notice of motion could be adopted.
[41] Pomerleau bid on six DCC calls for tenders between July 11 and September 13, 1984, based on a 5% FST.
[42] On September 27, 1984, the new Minister of Finance, Michael Wilson, announced that he would be tabling in the House of Commons legislation authorizing an increase in the FST to 6% effective October 1, 1984.
[43] The DCC demanded that Pomerleau submit a price reflecting a 6% FST, relying on the public notice given by Hon. Lalonde on April 19, 1983.
[44] The Federal Court of Appeal ruled that Pomerleau did not have to take the public notice of April 19, 1983, into account because it had ceased to be effective with the dissolution of Parliament, the result of which was that any legislation pending before it had to be readopted at the next session.
[45] In Axor's submission, the public notice contemplated by para. 22.4 is not a notice of a ways and means motion, since in Pomerleau, supra, Décary J.A. regarded Hon. Wilson's announcement on September 27 as the applicable public notice which was later the subject of a notice of motion tabled on November 8, 1984.
[46] The rule of interpretation relied on by Axor, since this is a contractual and not a legislative context, was the intent of the parties, namely, what they had in mind when they were considering article 22 of the General Conditions. In Axor's submission, the parties were seeking a means of determining the effects of a change in the system of taxes applicable to building materials either before or after the date of a bid following a DCC call for tenders. The context is that of a procedure for adjustment. In the circumstances, Axor argued that it had to take the PST reduction into account and that it did in fact take it into account.
[47] Axor also relied on the contra proferentem rule, a rule of interpretation that a contract drafted by one party must be interpreted against it if any doubt arises.
(2) The Crown
[48] Counsel for the Crown drew a picture with two public notices: that of April 23, 1996, and that of October 23, 1996, but with very different consequences.
[49] Relying on article 3 of the tender form, which requires any bidder to include all applicable taxes in the overall price, he formulated a general principle in calls for tenders that there was a duty to place all bidders on an equal footing so as to create equality of opportunity in the competitive process. Axor knew it had to include all applicable taxes, including the PST at 11%.
[50] The purpose of article 22 of the General Conditions is to establish some stability in costs (and so in prices bid), but also to protect the parties against fiscal change while the contract is in effect.
[51] In this context, para. 22.1 represents stability and clause 22.2 is an exception if three specific conditions are met: (1) there is a change to a fiscal statute; (2) which occurs after the date of the bid and which applies to materials only; and (3) this change affects the cost of the materials. Paragraph 22.4 is an exception to the exception.
[52] In this context the concept of a public notice found in para. 22.4 must be associated with or must make reference to a legislative process or the tabling of legislation that will create a fiscal change. He argued (transcript of January 8, 2003, at pp. 129-130):
[TRANSLATION]
The public notice is thus closely associated with the tabling of a ways and means notice and subsequent adoption of legislation. It is not a public notice which is in the air, it is a public notice which forms part of a legislative process.
[53] He did not maintain that the concept of a public notice in para. 22.4 should be given the meaning of a notice of ways and means motion, but that the relevant public notice in the case at bar is the one that leads to such a motion and the tabling of legislation that will approve the fiscal change. This position, he said, is that adopted by Décary J.A. in Pomerleau, supra, at paras. 21, 22 and 23 of his reasons for judgment.
[54] The notice of April 23, 1996, does not have the necessary features to be regarded as the public notice within the meaning of para. 22.4 of the General Conditions. That notice simply mentions the memorandum of understanding establishing a process to harmonize the FST with the PST in the distant and unforeseeable future.
[55] Further, the April 1996 notice mentioned that the Minister had tabled a notice of a ways and means motion, but this was not in connection with the HST, it concerned 100 or so changes to the GST. As regards the HST, the announcement of April 23, 1996, was one which indicated that the federal government and the three Atlantic provinces had signed a memorandum of understanding with a view to arriving at a final agreement. All that was announced was an agreement to work to conclude a final agreement, and unless all parties signed the final agreement nothing would happen.
[56] In short, counsel for the Crown said that the public notice within the meaning of para. 22.4 is the one dealing with the legislative change and the creation of a harmonized sales tax system, after the signature of a specific and final agreement, followed by a bill tabled pursuant to a ways and means motion notice.
[57] In April 1996 there was no question of introducing a change in the tax system to bring about harmonization. The public notice of April 1996 was not followed by a notice of motion and a bill. It was the notice of October 1996 that initiated the legislative process.
[58] Axor did not have to take the April 1996 public notice into account, but in accordance with article 3 of the tender form had to include the entire PST and subsequently allow para. 22.3 to have its effect. By acting as it did, Axor changed the rules governing the call for tenders for the Gagetown and Greenwood projects.
[59] The Crown went on to note that in his letter of April 28, 1996, Mr. Taillefer spoke of fiscal changes which [TRANSLATION] "might occur". He did not speak to Axor in terms of a necessary certainty.
ANALYSIS
(a) Pomerleau
[60] In Pomerleau, supra, the contractor had filed six bids with the DCC between July 11 and September 19, 1984, incorporating a 5% excise tax. Pomerleau was the successful bidder. The filing of these bids by Pomerleau took place after the announcement by Hon. Marc Lalonde on April 19, 1983, of a 6% increase in this tax, and also after Parliament was dissolved on July 9, 1984, but before the announcement by the new Minister of Finance, Michael Wilson, that the increase announced by Hon. Lalonde would be introduced in full as contemplated by October 1, 1984, by the new Conservative Parliament, with retroactive effect since the legislation received Royal Assent on February 6, 1985.
[61] To complicate the matter Hon. Lalonde announced during the election campaign that if re-elected the Liberal government would reintroduce legislation to approve the increase announced by him in April 1983.
[62] Pomerleau sought a readjustment from the DCC, but it was denied on the ground that para. 22.4 of the General Conditions applied to contracts awarded by DCC. According to this view, Pomerleau should have taken the 1% increase into account when it submitted its bid to the DCC as Hon. Lalonde had dealt with it in a public notice.
[63] In this Court, Pomerleau claimed an amount representing the total additional cost to the contractor of a 1% tax increase effective October 1, 1984.
[64] Denault J. of this Court ruled in its favour and on May 31, 2000, his judgment was affirmed by the Federal Court of Appeal, per Décary, Létourneau and Noël JJ.A., Létourneau J.A. dissenting.
[65] Décary J.A. examined the issue in para. 20 of his reasons, and in the following paragraph approved the interpretation of a "public notice" put forward by counsel for Pomerleau. These two paragraphs read:
¶ 20 The issue turns essentially on the interpretation to be given to the phrase "public notice" contained in clause GC22. According to counsel for Her Majesty, this phrase refers to any public notice given by the Minister of Finance, regardless of parliamentary context: such a notice is effective as soon as it is given, regardless of the fact that Parliament may subsequently be dissolved. According to counsel for the respondent, the phrase contemplates a public notice given by the Minister of Finance in a parliamentary context: that notice may no longer be set up against a contract when at the time of the bids there was no longer a Parliament capable of adopting legislation to give effect to the announced intention to impose a tax. Further, counsel for the respondent added, if there is any doubt as to the meaning of the expression "public notice" that doubt should be resolved in favour of the party who has contracted the obligation (here the respondent bidder) in accordance with the rule for interpreting contracts laid down in art. 1019 of the Civil Code of Lower Canada.
¶ 21 The interpretation of the contract suggested by the respondent seems correct to me, or at least reasonable in the circumstances. Paragraph .2, .3 and .4 of GC22 contemplate a "fiscal change" occurring after a bid is filed. This "fiscal change" must result from "a change in a tax imposed pursuant to the Excise Act" and other statutes named. The "public notice" given by the Minister of Finance is notice of the "fiscal change", and so necessarily of a legislative amendment to be made with retroactive effect. This "public notice" is given before the filing of the bid. [Emphasis added.]
[66] Décary J.A. proceeded with his analysis, the gist of which is found in the following paragraphs:
¶ 22 We know, from the agreement which has developed on budgetary policy, and which by exception allows the government to collect on a voluntary basis a tax which Parliament has not yet approved, that the public notice that makes such early implementation possible is a formal notice that the government intends to table legislation to that effect. What is in question is a notice of legislative intent, and in my opinion it cannot be otherwise: the measure is so exceptional in our parliamentary system that the public notice cannot be severed from the legislative process which must eventually be completed, and without which the notice can have no effect.
¶ 23 Also, when the contract refers to public notice of a change in a tax imposed under legislation, it necessarily refers to the same notice to which the legislation has given effect. The legislation here is that which came into effect in February 1985, and the notice here, to which the legislation gave effect, the press release by the Minister dated September 27, 1984.
¶ 24 As the Parliament which could have given effect to the Notice of Motions of April 19, 1983, was dissolved on July 9, 1984, that Notice of Motions could no longer be associated with a legislative process and accordingly could no longer be the notice contemplated by clause GC22. Moreover, I note that this was the approach taken by the Minister himself as he felt it necessary, in a new Parliament, to start the process over from the beginning and to issue an independent press release and then a Notice of Motions before proposing adoption of the legislation. It was also the approach initially taken by the Department of Public Works. [Emphasis added.]
[67] Noël J.A. concurred with Décary J.A. and dismissed the appeal for the following reasons:
¶ 1 I have had the benefit of reading the opinions of Décary J.A. and of Létourneau J.A. Like Décary J.A. and Denault J. before him, I consider that paragraph 22.4 of clause GC22 is not clear as to the meaning to be given to the words "public notice". In my opinion, since the "public notice" mentioned in paragraph 22.4 deals with the changing of a tax imposed by legislation, it is far from clear that the meaning to be given to these words is independent of the legislative process as Létourneau J.A. suggests.
¶ 2 When paragraph 22.4 is read in the context of the clause where it appears, the argument that the parties were agreed in respect of a notice associated with the legislative process, which would suffer the fate of the legislation it was announcing, may be made just as easily as the contrary argument. It follows that the first notice would have become invalid when the House was dissolved and the second would have been without effect as it was issued after the House was dissolved and before a new government was formed.
¶ 3 Since the issue is one of contractual interpretation, since the ambiguous clause was stipulated by the Department of Public Works and since this ambiguity allows for the reading adopted by the respondent, I feel that Denault J. properly opted for the interpretation favouring the respondent. [Emphasis added.]
[68] Létourneau J.A. described the position taken by Décary J.A. as one based on the theory of an absence of valid public notice (that issued by Hon. Lalonde on April 19, 1983) "because that public notice could not be severed from the legislative process and the latter had been suspended by the dissolution of Parliament". In his view, Pomerleau's argument rested on the theory of the counter-notice, that is, that the dissolution of Parliament amounted to a notice countering the public notice given by Hon. Lalonde.
[69] He concluded that "In practical terms, these two theories overlap as they lead to an identical outcome". He went on:
As the approach taken by the respondent and that taken by my colleague are both based on the absence of a valid public notice, I propose to analyze the two positions together as, be it said with the greatest respect, I feel that they result from the same misunderstandings of the very nature of the notice contemplated in the contract, the objective sought by that notice and the rule of interpretation applicable in the circumstances.
[70] In the view of Létourneau J.A., "This is not the place to analyse and deplore the extent of the confusion surrounding the legislative process at the time Parliament is dissolved or prorogued: rather, we must interpret a specific provision of the contract governing the parties, in particular the concept of 'public notice' contained in paragraph 22.4 . . .".
[71] This is how he saw this concept.
¶ 4 In my opinion, the meaning to be given to the term "public notice" depends on the objective sought by clause GC22. Apparently, the provisions contained in GC22 are designed to insulate the contract from any cost fluctuation, except that relating to materials when it is the result of an increase or decrease in the tax applicable to those materials, here the federal sales tax. In that event, clauses 22.2, 22.3 and 22.4 are intended to provide fair protection for both parties to the contract by allowing for a possible change in the tax rate and the fact that a bidder was, or was not, informed in good time of such a possibility so he could protect himself against the financial consequences that might result.
¶ 5 If we keep in mind the obvious objective sought by the parties in clause 22.4, I have to agree that this contractual provision is clear and unambiguous. It becomes obvious that the word "notice" contained in it must be given its ordinary, usual and everyday meaning, namely accordingly to the English dictionary Merriam-Webster Collegiate Dictionary 2000, that of a "warning or intimation of something" or "notification by one of the parties to an agreement". The dictionary Le Petit Robert defines notice as [TRANSLATION] "what is brought to someone's attention". The Dictionnaire de droit québécois et canadien gives a similar definition: it defines notice as [TRANSLATION] "actions by which something is brought to someone's attention" (Hubert Reid, 2d ed., Wilson et Lafleur Ltée, Montréal, 1996, p. 53). That is precisely what the appellants did in the case at bar: they brought to the respondent's attention the fact that there might be an increase in the federal sales tax. [Emphasis added.]
[72] Létourneau J.A. concluded that "There is no doubt that the public notice given by the Minister of Finance on April 19, 1983 meets the requirements of clause 22.4 and simply initiates the process of implementing it in accordance with the clearly expressed intent of the parties". He considered that to say that the public notice of April 19, 1983, was not valid for the purpose of the contract was "to insert into the actual wording of a quite clear contractual provision, without good reason, an ambiguity which is external and foreign to the contract, namely that surrounding the legislative process, and then conclude that the contractual provision itself is ambiguous and requires interpretation and that the ambiguity must be interpreted against the party drafting the contract".
[73] Létourneau J.A. reasoned that "the respondent could not use factors external to the contract to create an ambiguity which serves its interests and allows it to rely to its benefit on the rule in art. 1019 of the Civil Code of Lower Canada, that an ambiguity should be interpreted in its favour".
[74] He felt that "Saying that the public notice of April 19, 1983, is not valid is also to confuse the concept of public notice mentioned in clause 22.4 of the contract and that of Notices of Ways and Means Motions on the Budget by which the public notice of the contract was implemented", and at paras. 10 and 11 concluded as follows:
¶ 10 However interesting or intriguing the vagaries of the electoral and legislative process may be, they cannot alter the factual and legal reality, or if you like, conceal the true perspective on the course of events. The respondent received in good time a notice telling it of a possible tax increase and warning it to protect itself against such an increase by immediately inserting the latter in its bid. Apparently, so as to enhance its position in relation to the other bidders, it preferred to keep to a lower bid and speculate on the fact that the tax might not be adopted, as well as on the legal effect of the dissolution of Parliament. It failed in the first stage of its speculation as, although it did obtain the better position it desired, the tax was nonetheless imposed as announced and it is now under an obligation to bear the consequences. It therefore now falls back on the second stage of its speculation, diverting attention from its contract, to the detriment of the taxpayer, who through the Minister of Finance duly informed it of a tax increase and, despite having carried out the contractual obligation in its entirety, is now being required to pay the cost of this speculation.
¶ 11 It is one thing to give the benefit of legislative ambiguity to a taxpayer who, to his detriment and against his will, is suffering the harmful effects of such ambiguity: but in my opinion it is quite another thing to extend that benefit to a contracting party which, after being duly warned to protect itself, chose instead to speculate on the ambiguity in order to, first, improve its contracting position, and then, once it had obtained the contract, again seek to benefit from the ambiguity.
(b) Principles
[75] I adopt from the fifth edition of Les obligations by the writers Baudouin and Jobin the following principles on the interpretation of contracts:
[TRANSLATION]
(1) "When faced with contradictory arguments by the parties, the judge then has a delicate task to perform: determining the original mutual intent of the parties who agreed to be bound by such a contract"; (p. 343)
(2) "The judge must not confine himself just to the literal meaning of the words used by the parties, but must go beyond the formal description and seek to determine the very idea which they actually sought to express"; (p. 343)
(3) the Civil Code lays down a number of complementary rules "which are designed to guide the Court in its interpretive function (arts. 1426 to 1432); (p. 343)
(4) "In the case of a clear contract, the judge's function is one of implementation rather than interpretation. The difference between implementation and interpretation is not just semantic: the process of implementation seeks to ensure a given legal norm suits a given factual situation, whereas interpretation seeks to define the limits of a legal norm before it can be implemented. Accordingly, there has to be some ambiguity or doubt as to the meaning to be given to the language of the contract if the process is to be one of interpretation: if there is no such ambiguity the Court should not distort a clear contract on the pretext of determining that intent. It should limit itself to implementation of what is literally stated, assuming that the wording accurately reflects the intention of the parties. If on the other hand there is any doubt, the rules of interpretation will reject the literal meaning in favour of the true intention of the parties at the time the contract was formed"; (pp. 344-45)
(5) "Ambiguity may arise first from the actual language of the contract: a word with several meanings, a clumsy sentence structure or a contradiction between certain clauses of the contract are examples. Additionally, a contract which seems clear on its face may lead to interpretation when it appears that what is stated does not reflect the actual intent of the contracting parties". (p. 345)
(6) "Equity and good faith may have a part to play in the interpretive process . . . as it can be said that in modern law good faith and equity must guide the judge in interpreting the contract". However, the writers indicate that "the Court must intervene on this basis with caution", and should not by this means "use one of these principles to overturn a clear intention; but when despite everything the intent remains unclear, the Court will certainly be entitled to adopt the interpretation which it considers most equitable for the parties and most consistent with the rule of good faith". (p. 346)
[76] In their text the writers Baudouin and Jobin discuss the rule of interpretation in favour of the party accepting the contract under art. 1432 of the Civil Code, the so-called contra proferentem rule of interpretation, as follows:
[TRANSLATION]
The rule is that in a standard form or consumer contract the Court must in cases of doubt interpret the contract in favour of the accepting party or consumer . . . However, to apply the rule . . . it is clearly necessary for there to be a genuine ambiguity in the contract. (p. 354)
According to the writers this is