Ferme Vi‑Ber inc. v. Financière agricole du Québec

Ferme Vi‑Ber inc. v. Financière agricole du Québec
Collection
Supreme Court Judgments
Date
2016-07-29
Neutral citation
2016 SCC 34
Report
[2016] 1 SCR 1032
Case number
36205
Judges
McLachlin, Beverley; Abella, Rosalie Silberman; Cromwell, Thomas Albert; Karakatsanis, Andromache; Wagner, Richard; Gascon, Clément; Côté, Suzanne
On appeal from
Quebec
Notes
SCC Case Information: 36205
Decision Content
SUPREME COURT OF CANADA
Citation: Ferme Vi-Ber inc. v. Financière agricole du Québec, 2016 SCC 34, [2016] 1 S.C.R. 1032
Appeal heard: December 10, 2015
Judgment rendered: July 29, 2016
Docket: 36205
Between:
Ferme Vi-Ber inc.
Appellant
and
La Financière agricole du Québec
Respondent
And Between:
Simon Cloutier et al.
Appellants
and
La Financière agricole du Québec
Respondent
Official English Translation
Coram: McLachlin C.J. and Abella, Cromwell, Karakatsanis, Wagner, Gascon and Côté JJ.
Joint Reasons for Judgment:
(paras. 1 to 95)
Reasons Dissenting in Part:
(paras. 96 to 136)
Wagner and Gascon JJ. (McLachlin C.J. and Abella, Cromwell and Karakatsanis JJ. concurring)
Côté J.
Ferme Vi‑Ber inc. v. Financière agricole du Québec, 2016 SCC 34, [2016] 1 S.C.R. 1032
Ferme Vi‑Ber inc. Appellant
v.
La Financière agricole du Québec Respondent
‑ and ‑
Simon Cloutier, Denis Trépanier, Société coopérative agricole des Bois‑Francs, Coopérative agricole Covilac, Coop Purdel, Société coopérative agricole La Seigneurie, Coopérative agricole Unicoop, 9012‑2151 Québec inc., Sogéporc inc., Gabriel Turgeon inc., Société en commandite Pascoporc, Groupe Dynaco, coopérative agroalimentaire, Coopérative agroalimentaire Comax, R. Rousseau & Fils, S.E.C., Ferme Olympique, S.E.C., Moulées Désy, S.E.C., Inter Agro inc., Techni‑porc inc., Élevage La Bretanne inc., 9038‑7747 Québec inc., Ferme Lor‑re inc., Ginette Marchesseault, Ferme Casimir inc., C&G Paquette inc., Entreprises B. Paquette inc., Porcheries du Button ltée, Élevages du Bas Ste‑Anne inc., Ferme Suporsonique, Gène‑Alliance inc., 9076‑1776 Québec inc., Cultures Excel inc., Francine Sauvageau inc., Ferme Jétizack inc., Cultures Quinto inc., Élevages Hébertville S.E.N.C., Jean‑Marc Henri inc., Ferme Porcéréale inc. (formerly known as Maraîchers de St‑Gilles (1991) S.E.N.C.), Ferme Gosford enr. S.E.N.C., Ferme André Breton inc., Ferme S. & M. Ménard inc., Ferme Luc Loranger inc., Méloporc inc., Ferme Frangis S.E.N.C., Ferme R.M. Côté & Fils (2000) inc., Ferme Porcine Marnie S.E.N.C., F. Ménard inc., Élevages Jacques Joyal inc., Ferme La Ronchonnerie inc., Ferme Mafran inc., Coopérative agricole Profid’Or, Isoporc inc., Ferme Gervais Gosselin inc., R. Robitaille et Fils inc., Groupe CDLM inc., Ferme Gaudreau inc., 9039‑2648 Québec inc., Ferme Denis Robitaille inc., Élevages du Haut‑Richelieu inc., Viaporc inc., Porc S.B. inc., Ferme G. Rompré inc., 9084‑9183 Québec inc., Porcs N&M inc., Ferme Porclair S.E.N.C., Ferme R.D.S. inc., Élevages L.D. ltée, Porc P.G. S.E.N.C., Ferme M.Y. Turgeon inc., Coopérative agricole de St‑Bernard, Élevage Y. Ducharme inc., Production A. Couture (no 1) ltée, Production A. Couture (no 2) ltée, Production A. Couture (no 3) ltée, Production A. Couture (no 4) ltée, Production A. Couture (no 5) ltée, Production A. Couture (no 6) ltée, Production René Lait inc., Alfred Couture Limitée, Ferme B.E.L. Porcs ltée, Porcs M.L. inc., Ferme Vallières & Gosselin inc., Meunerie St‑Elzéar ltée, Élevages Labrecque inc., Joly‑Grains inc., Joly‑Porcs inc., Site de la Colline inc., Site des Érables inc., Ferme Serge inc., Ferme Jolivoir inc., Aliments Breton inc., Ferme C.B. inc., Fermili inc., Luma Genetic Inc. (formerly known as Génétiporc inc.), Entreprises Magnum inc., Trans‑Porcité inc., Lait‑Porcité inc., Ferme C.M. S.E.N.C., Ferme Porc Saint S.E.N.C., Entreprises Rémy Laterreur inc., Rémy Laterreur, Élevages Explorateurs inc., Ferme Palene inc., Ferme André Hénault S.E.N.C., Germain Lapointe, Ferme Jenlica inc., Immeubles Clément Dubois inc., Fermes Roda inc., Fermes Richard inc., Ferme Jocko S.E.N.C., Ferme D.J. Frappier inc., Entreprises Paul Claessens inc., Ferme H. et M. Potvin S.E.N.C., Ferme Jean‑Paul Palardy inc., Entreprises Denis Lacoste inc., Chantal D’Amour, Ferme Bonneterre inc., Ferme D’Anjou & Fils inc., M.B.M. Daigle S.E.N.C., Ferme Réjean Turgeon inc., Ferme Jymdom inc., Ferme Jules Côté et Fils inc., Ferme D.M.L. inc., Ranch St‑Sylvestre inc., John Houley inc., Ferme Belgica inc., Ferme Bovipro S.E.N.C., Jacques Desrosiers, Éric Desrosiers, Ferme B&L Desrosiers S.E.N.C., 9078‑1170 Québec inc., Fermes St‑Henri, S.E.C., Ferme Ray‑Loi, S.E.C., Fermes St‑Apollinaire, S.E.C., Élevages St‑Félix, S.E.C., Élevages St‑Patrice, S.E.C. and Ferme Beaumontoise, S.E.C. Appellants
v.
La Financière agricole du Québec Respondent
Indexed as: Ferme Vi‑Ber inc. v. Financière agricole du Québec
2016 SCC 34
File No.: 36205.
2015: December 10; 2016: July 29.
Present: McLachlin C.J. and Abella, Cromwell, Karakatsanis, Wagner, Gascon and Côté JJ.
on appeal from the court of appeal for quebec
Agriculture — Farm income stabilization — Compensation — Calculation method — Legal framework applicable to Quebec’s Programme d’assurance stabilisation des revenus agricoles — Participants in program contesting method for calculating compensation payments that was adopted by La Financière agricole du Québec to take federal government grants to farmers into account — Whether program is contract and, if so, whether it is subject to rules applicable to contract of insurance within meaning of Civil Code of Québec — Whether La Financière, in determining compensation payable to participants under program, acted in conformity with its rights and obligations by linking amounts at issue collectively — Programme d’assurance stabilisation des revenus agricoles, 2001, 133 G.O. 1, 1336, s. 88(3).
La Financière agricole du Québec (“La Financière”) is a legal person established in the public interest under the Act respecting La Financière agricole du Québec. Its mission is to support and encourage the development of the agricultural and agro‑food sector within the perspective of sustainable development. For that purpose, it has set up income protection, insurance and farm financing programs. The appellants are Quebec farm producers that participated voluntarily in the Programme d’assurance stabilisation des revenus agricoles (“ASRA Program”) administered by La Financière. The ASRA Program protects participants from having their income drop below a level defined by La Financière for 10 agricultural products or classes of products designated as “insurable”. That level is reached where the “net annual income” of an average benchmark farm for an insured product is less than the “stabilized net annual income”, which corresponds to a percentage of the average annual regular salary of a skilled worker in Quebec. In short, the purpose of the ASRA Program is to guarantee that an average farm producer never earns less than a predetermined percentage of the average income of a skilled worker. Each producer participating in this voluntary program must pay a fixed contribution per unit of a designated product, agree to participate for a minimum of five years and insure all of their annual production for each designated product. La Financière makes a contribution to the program’s fund — the Fonds d’assurance stabilisation des revenus agricoles, of which it is the trustee — equal to twice the contributions paid by each participant. The amounts in the fund are used to finance the payment of compensation to participants.
The appellants contested certain decisions made by La Financière in determining their compensation payments for 2007. Those decisions were related to the calculation method chosen by La Financière, in determining the compensation payable under the program, to take account of additional income received as farm financial assistance from the federal government. Both the parties and the courts below used the word “linkage” to characterize the process of taking such income into account, which is provided for in s. 88(3) of the ASRA Program. Amounts so received are linked either “collectively” — on the basis of the amounts the average benchmark farm would have received — or “individually” — on the basis of the amounts each ASRA Program participant actually received from the various governments. La Financière deducts the amounts so “linked” from the compensation. The appellants argued that the ASRA Program was a contract of insurance and that La Financière had, by collectively linking certain amounts received as financial assistance, improperly incorporated additional income into its calculations so as to reduce their compensation under the program in violation of the terms of the contract, which had to be interpreted on the basis of their reasonable expectations as insured persons.
The appellants applied to the Superior Court, which allowed their action, characterizing the ASRA Program as a contract of insurance and ordering La Financière to pay them substantial additional compensation for 2007. The Court of Appeal set aside that judgment, finding that the ASRA Program was not a contract of insurance and that the impugned decisions were reasonable.
Held (Côté J. dissenting in part): The appeal should be dismissed.
Per McLachlin C.J. and Abella, Cromwell, Karakatsanis, Wagner and Gascon JJ.: Despite the broad discretion conferred on La Financière by the Act respecting La Financière agricole du Québec and the ASRA Program, the program cannot be considered simply a government program that is governed by public law. As can be seen from a review of its structure and how it functions, it is different from two classic examples of social programs that fall under public law: social insurance programs and agricultural subsidies. Unlike a social insurance program, it applies to only one sector and is neither universal nor compulsory, and its benefits are not calculated using simple formulas applicable to broad classes of persons and situations. It includes several contract‑style clauses for terminating the contract for predetermined reasons, which create acquired rights for the current year. Moreover, La Financière’s considerable management autonomy is limited by the need to comply with the contractual conditions that bind it and the participants. These characteristics, together with the contributions required from participants, also distinguish the ASRA Program from simple agricultural subsidy programs granted on an ex gratia basis and without consideration.
This program in fact has the characteristics of an administrative contract, that is, a contract to which a public authority is a party, and all the rules needed to guide the actions of the parties can be found in private law. However, administrative contracts are distinguishable from contracts between private parties, since parity between the parties does not always exist. Where the government’s contractual relations are concerned, therefore, the public interest must be considered in interpreting those relations and may weigh in favour of a broader discretion in implementing the government scheme, especially where that scheme has a social objective. These are not principles of public law, but considerations related to the object of the contract that may influence the interpretation of the scope of the contractual powers of the public authority in question. The government’s discretion nonetheless has its limits. In the context of an administrative contract, those limits do not derive from the public law duty of procedural fairness but are instead based on good faith and contractual fairness, which flow, in Quebec law, from the application of arts. 6, 7, 1375 and 1434 of the Civil Code of Québec (“C.C.Q.”).
Furthermore, the ASRA Program is an innominate administrative contract that does not have the three main characteristics of a contract of insurance set out in art. 2389 C.C.Q., namely (i) an obligation on the client to pay a premium or assessment; (ii) the occurrence of a risk; and (iii) an obligation on the insurer to make a payment to the client if the insured risk occurs. It cannot therefore be subject to the rule of interpretation based on the reasonable expectations of the insured that applies to a contract of insurance and, in Quebec law, applies solely in its minimum dimension, that is, to resolve any ambiguity in the terms of the contract in favour of the insured.
For the purpose of determining whether it was open to La Financière to collectively link the amounts received under the federal assistance programs at issue in this case, it is the rules of contractual interpretation set out in arts. 1425 to 1432 C.C.Q. that apply. Section 88(3) of the ASRA Program does not specify how compensation received under government assistance programs is to be linked. It states only that, for this purpose, La Financière must consider “[a]ny amounts to which a participant is entitled” under such programs. When properly interpreted in light of the contract as a whole (art. 1427 C.C.Q.) and La Financière’s past practices (art. 1426 C.C.Q.), s. 88(3) of the ASRA Program does not require that amounts be linked individually but, on the contrary, gives La Financière the discretion to decide what linkage method to employ.
The general structure of the program and the contract as a whole support the conclusion that collective linkage is normally required. In fact, a reading of s. 88(3) of the ASRA Program in the context of the program as a whole, which is based on the collective concept of a benchmark farm, leads to the conclusion that collective linkage must be preferred. Section 88(3) is in Division XI, the title of which refers to the collective concept of “Farm Models”. Moreover, ss. 86 and 92 of the ASRA Program clearly state that the net annual income used to calculate the compensation, which includes amounts received from government sources, is that of a “specialized benchmark farm for each of the products or classes of products”.
Although La Financière has sometimes linked amounts individually in the past, it appears from the evidence that decisions to do so were usually based on the number of participants that received the amounts in question and not on the fact that government assistance had been paid directly to producers. As a result, neither the contract as a whole nor past practice supports a conclusion that La Financière was under a statutory or contractual obligation to link the amounts individually in this case.
Although La Financière had the discretion to link the amounts collectively, it was required to exercise that discretion in accordance with the requirements of good faith and contractual fairness. The decision to link the amounts collectively in this case was made following extensive consultations with representatives of farm producers and after impact simulation studies had shown that most of the program’s participants would benefit from that decision. By linking them collectively, La Financière also favoured the smallest producers. This situation was consistent with La Financière’s mission. Finally, the decision to link the amounts collectively was compatible with the specific features of the federal programs at issue. La Financière thus exercised its powers in accordance with the requirements of good faith and contractual fairness. It was open to La Financière in fixing the compensation payable to the appellants to choose to link the amounts they had received under the relevant federal financial assistance programs collectively, which means that the appellants are not entitled to the amounts they claim.
Per Côté J. (dissenting in part): The only determinative issue in this case is one of contractual interpretation. Regardless of whether the contract is characterized as a contract of insurance or as an innominate contract that falls under both public law and private law, the result is the same. It is true that the appellants participated voluntarily in the ASRA Program, but insofar as that program involves a contract of adhesion imposed by La Financière, that is, a contract that is not negotiated with participants, the characterization makes no difference. If there is any ambiguity, it must be resolved in favour of the adhering party in accordance with art. 1432 C.C.Q. The rule of interpretation of reasonable expectations adds nothing to the existing rules of interpretation.
The reason why producers participate in the ASRA Program is simple: they expect to receive the full compensation they are owed in return for paying their contributions. When La Financière deprives them of all or part of the compensation to which they are entitled, judicial intervention is warranted. The common intention of the parties, the overall scheme of the ASRA Program and past practices confirm that La Financière contravened the program in deciding to subtract excessively high amounts of notional income from the amounts to which participants were otherwise entitled.
It sometimes happens that during the year individual participants receive additional amounts to which they are personally entitled from other government agencies. The program expressly authorizes La Financière to take such amounts into account in its calculations to ensure that participants do not receive double compensation for a single loss. However, although s. 88(3) of the ASRA Program does authorize La Financière to ensure that participants do not receive double compensation, it does not permit La Financière to attribute notional amounts to some participants in order to overcompensate other participants for policy reasons.
In this case, not only did the chosen linkage method not make it possible to avoid double compensation, it also prevented many participants from receiving the full compensation to which they were entitled under the ASRA Program. While it is true that La Financière’s mission is broad, that mission does not authorize it to subvert the purpose of s. 88(3) by assuming a discretion it does not have.
Once the ASRA Program had been adopted, La Financière had to comply with the rules of the game it had itself established. In the case of amounts received directly from other granting organizations that can be considered to be annual receipts, s. 88(3) provides that, in calculating annual receipts, La Financière must take into account “[a]ny amounts to which a participant is entitled on the basis of the volume of marketed products and secondary products”. La Financière may not therefore penalize a participant for amounts to which he or she is not entitled owing to the inherent limits of those other programs. By referring to a “participant”, s. 88(3) requires La Financière to take into account the amounts that were actually received. The definition set out in s. 2 refers to an individual participant in the ASRA Program, not to a “benchmark farm”, and the same is true of the definition of “annual receipts”. If La Financière disregards the inherent limits of those programs and if the amounts attributed to participants bear no relation to the amounts they actually received, it is in breach of its contractual obligations.
The evidence shows that, where amounts have been granted directly to a producer under another program in the past, La Financière has never used a linkage method — whether collective or individual — that had the effect of negating the compensation to which participants were entitled by attributing amounts that disregarded the inherent limits of those programs. La Financière’s choice in the cases at issue is therefore also inconsistent with its past practices.
What is problematic in this case is that La Financière’s action had the effect of overcompensating certain participants to the detriment of the others, that it disregarded the impact of the caps under the federal programs on the insurance coverage of participants and that the amounts it ultimately attributed bore no relation to the amounts that had actually been received, not that it chose a particular linkage method. This was the conclusion reached by the trial judge, and there is no reason to intervene in this regard.
The producers’ appeal should be allowed, but the trial judge’s award should be reduced by subtracting from it an amount equal to the contributions the producers would have had to pay in exchange for higher compensation.
Cases Cited
By Wagner and Gascon JJ.
Referred to: Law v. Canada (Minister of Employment and Immigration), [1999] 1 S.C.R. 497; Peters v. Canada (Attorney General), 2009 FC 400; Martin Service Station Ltd. v. Minister of National Revenue, [1977] 2 S.C.R. 996; Confédération des syndicats nationaux v. Canada (Attorney General), 2008 SCC 68, [2008] 3 S.C.R. 511; Trépanier v. Financière agricole du Québec, 2011 QCCS 1802; Jacobs v. Agricultural Stabilization Board, [1982] 1 S.C.R. 125; George A. Demeyere Tobacco Farms Ltd. v. Continental Insurance Co. (1984), 46 O.R. (2d) 423; Brissette v. Financière agricole, 2006 QCCS 1620; Canada (Attorney General) v. Mavi, 2011 SCC 30, [2011] 2 S.C.R. 504; Glykis v. Hydro‑Québec, 2004 SCC 60, [2004] 3 S.C.R. 285; Financière agricole du Québec v. Forand, 2009 QCCQ 10263; Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860; Colautti Brothers Marble Tile & Carpet (1985) Inc. v. Windsor (City) (1996), 36 M.P.L.R. (2d) 258; Rollo Bay Holdings Ltd. v. Prince Edward Island Agricultural Development Corp. (1993), 110 D.L.R. (4th) 132; Financière agricole du Québec v. Coddington, 2013 QCCQ 6238; Lafortune v. Financière agricole du Québec, 2016 SCC 35, [2016] 1 S.C.R. 1091; Brissette Estate v. Westbury Life Insurance Co., [1992] 3 S.C.R. 87; Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744; Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252; National Bank of Greece (Canada) v. Katsikonouris, [1990] 2 S.C.R. 1029; Excellence (L’), compagnie d’assurance‑vie v. Desjardins, 2005 QCCA 1035, [2005] R.R.A. 1085; Affiliated FM Insurance Co. v. Hafner Inc., 2006 QCCA 465; Souscripteurs du Lloyd’s v. Alimentation Denis & Mario Guillemette inc., 2012 QCCA 1376; Consolidated‑Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; Industrielle, Compagnie d’Assurance sur la Vie v. Bolduc, [1979] 1 S.C.R. 481.
Statutes and Regulations Cited
Act respecting La Financière agricole du Québec, CQLR, c. L‑0.1, ss. 1, 3, 19, 22.
Agricultural Products Insurance Act, 1996, S.O. 1996, c. 17, sch. C.
Agricultural Stabilization Act, R.S.C. 1970, c. A‑9.
Canada Pension Plan, R.S.C. 1985, c. C‑8 .
Civil Code of Québec, arts. 6, 7, 1375, 1425 to 1432, 1426, 1427, 1434, 2389, 2408 to 2413, 2466 to 2468, 2470 to 2474.
Employment Insurance Act, S.C. 1996, c. 23 .
Immigration and Refugee Protection Act, S.C. 2001, c. 27 .
Programme d’assurance récolte, (2002) 134 G.O. 1, 261, ss. 10, 15, 27, 35 to 37, 38, 42.
Programme d’assurance stabilisation des revenus agricoles, (2001) 133 G.O. 1, 1336, ss. 1, 2 “adhérent”, “recettes annuelles”, 6, 7, 13, 16(3), 18, 19, 21, 22, 78, 80, 86, 87, 88 [am. (2009) 141 G.O. 1, 51, s. 21], 89, 92, 101, 103.
Unemployment Insurance Act, 1971, S.C. 1970‑71‑72, c. 48 [repl. 1996, c. 23].
Authors Cited
Bergeron, Jean‑Guy. Les contrats d’assurance (terrestre): lignes et entre-lignes, t. 1. Sherbrooke: SEM Inc., 1989.
Dussault, René, and Louis Borgeat. Administrative Law: A Treatise, vol. 1, 2nd ed. Translated by Murray Rankin. Toronto: Carswell, 1985.
Garant, Patrice, avec la collaboration de Philippe Garant et Jérôme Garant. Droit administratif, 6e éd. Cowansville, Que.: Yvon Blais, 2010.
Issalys, Pierre, et Denis Lemieux. L’action gouvernementale: Précis de droit des institutions administratives, 3e éd. Cowansville, Que.: Yvon Blais, 2009.
Lluelles, Didier. Précis des assurances terrestres, 5e éd. Montréal: Thémis, 2009.
Lluelles, Didier, et Benoît Moore. Droit des obligations, 2e éd. Montréal: Thémis, 2012.
Thouin, Marie‑Chantal. “La théorie de l’attente raisonnable de l’assuré” (1997), 64 Assurances 545.
APPEAL from a judgment of the Quebec Court of Appeal (Hilton, Gagnon and Savard JJ.A.), 2014 QCCA 1886, [2014] AZ‑51115390, [2014] J.Q. no 11218 (QL), setting aside a decision of Monast J., 2012 QCCS 284, [2012] AZ‑50827524, [2012] J.Q. no 701 (QL), 2012 CarswellQue 666 (WL Can.). Appeal dismissed, Côté J. dissenting in part.
Bruno Lepage, Madeleine Lemieux and Dominique‑Anne Roy, for the appellants.
Matthieu Brassard, Jean‑Pierre Émond and Valérie Blanchet, for the respondent.
English version of the judgment of McLachlin C.J. and Abella, Cromwell, Karakatsanis, Wagner and Gascon JJ. delivered by
Wagner and Gascon JJ. —
I. Overview
[1] At issue in this appeal is the application of private law to the implementation of certain government financial support programs. More specifically, the Court must identify the rules governing the interpretation of the rights and obligations of the parties to the Programme d’assurance stabilisation des revenus agricoles, (2001) 133 G.O. 1, 1336 (“ASRA Program”), administered by the respondent, La Financière agricole du Québec (“La Financière”).
[2] The appellants are Quebec farm producers that participated voluntarily in the ASRA Program. Under that program, La Financière undertook, in return for contributions from producers, to protect them from the income fluctuations associated with the agricultural market. The appellants contested certain decisions made by La Financière in determining their compensation payments for 2007. Those decisions were related to the calculation method chosen by La Financière, in determining the compensation payable under the program, to take account of additional income received as farm financial assistance from the federal government. The appellants argued that the ASRA Program was a contract of insurance and that La Financière had improperly incorporated that additional income into its calculations so as to reduce their compensation under the program, in violation of the terms of the contract, which had to be interpreted on the basis of their reasonable expectations as insured persons.
[3] The producers applied to the Superior Court, which allowed their action, characterizing the ASRA Program as a contract of insurance and ordering La Financière to pay them substantial additional compensation for 2007. The Court of Appeal set aside that judgment, finding that the ASRA Program was not a contract of insurance and that the impugned decisions were reasonable.
[4] We would dismiss the appeal. The ASRA Program is not a contract of insurance but simply an innominate contract under the civil law. It cannot be subject to the rule of interpretation based on the reasonable expectations of the insured that applies to a contract of insurance as defined in the Civil Code of Québec (“C.C.Q.”). While it is true that the contract must be interpreted having regard to the public interest and to La Financière’s social objective, it is nonetheless governed exclusively by private law, not by public law. For the purpose of determining the compensation payable to its participants, the ASRA Program gives La Financière a discretion to determine how to calculate any other income they have received from government sources. La Financière exercised that discretion in accordance with the requirements of good faith and contractual fairness, which means that the appellants are not entitled to the amounts they claim.
II. Background
[5] La Financière is a legal person established in the public interest under the Act respecting La Financière agricole du Québec, CQLR, c. L‑0.1 (“AFAQ”). Its mission is to “support and encourage the development of the agricultural and agro‑food sector within the perspective of sustainable development” (s. 3 AFAQ). For that purpose, it has set up income protection, insurance and farm financing programs.
[6] Among other things, La Financière offers a crop insurance service that compensates participants for losses caused, for example, by unfavourable and unpredictable weather conditions. This Programme d’assurance récolte, which is published in the Gazette officielle du Québec, (2002) 134 G.O. 1, 261, has equivalents in several other Canadian provinces. In Ontario, for instance, there is the Agricultural Products Insurance Act, 1996, S.O. 1996, c. 17, sch. C. La Financière also offers the ASRA Program, which provides financial support to producers. This appeal concerns the interpretation of the rights and obligations of the parties to the ASRA Program, which had no equivalent elsewhere in Canada at the time the dispute in this case arose. The 137 appellants are farm producers that participated voluntarily in the program. The ASRA Program is published in the Gazette officielle du Québec. It replaced the Farm Income Stabilization Insurance Scheme in 2001; the latter had been created in 1975 and was administered first by the Commission administrative des régimes d’assurance‑stabilisation des revenus agricoles until 1979, and then by the Régie des assurances agricoles du Québec until 2001, the year La Financière was established (s. 1 AFAQ).
[7] The ASRA Program protects participants from having their income drop below a level defined by La Financière for 10 agricultural products or classes of products designated as [translation] “insurable”. That level is reached where the “net annual income” of an average benchmark farm for an insured product is less than the “stabilized net annual income”, which corresponds to a percentage of the average annual regular salary of a skilled worker in Quebec (s. 89 ASRA Program). What this means is that the higher the net annual income of the benchmark farm is, the lower the compensation will be. In essence, the purpose of the program is to guarantee that an average farm producer never earns less than a predetermined percentage of the average income of a skilled worker.
[8] In exchange, each producer participating in this voluntary program must pay a fixed contribution per unit of a designated product (s. 78 ASRA Program). Producers must agree to participate for a minimum of five years (s. 16(3)) and must insure all of their annual production for each designated product (s. 18). La Financière makes a contribution to the program’s fund — the Fonds d’assurance stabilisation des revenus agricoles, of which it is the trustee (s. 6) — equal to twice the contributions paid by each participant (s. 80). The amounts in the fund are used to finance the payment of compensation to participants (s. 7), and, unless an agreement is entered into or an alternative program is implemented, any surplus or deficit must be apportioned among the participants in proportion to their contributions (s. 13). No amendment made by La Financière to the terms of the ASRA Program, except one relating to the contribution rate, may take effect until the insurance year after the amendment comes into force (s. 21 para. 2).
[9] The first paragraph of s. 87 of the program provides that [translation] “[t]he net annual income [of a benchmark farm] corresponds to the annual receipts minus cash disbursements and depreciation.” The annual receipts of a benchmark farm are described in s. 88 of the ASRA Program. Section 88(3), as it read at the time this dispute arose, read as follows concerning amounts granted by government agencies:
[translation]
3° Any amounts to which a participant is entitled on the basis of the volume of marketed products and secondary products and that are granted by government agencies in the form of price compensation for the insurable product or under a government farm business risk management program.
Thus, in calculating the annual receipts of the average benchmark farm, La Financière takes account of other income from federal and provincial government contributions under a risk management program or in the form of price compensation for insurable products. The parties use — as did the courts below — the word [translation] “linkage” to characterize the process of taking such income into account. From the compensation to be paid under the ASRA Program, La Financière therefore deducts the “linked” amounts in order to take account of any other income that might have an effect on the financial needs of the average benchmark farm, which is the reference standard for the program.
[10] Amounts so received are linked either “collectively” — on the basis of the amounts the average benchmark farm would have received — or “individually” — on the basis of the amounts each ASRA Program participant actually received from the various governments. The higher the linked amounts, the lower the compensation received under the program, since increases in the benchmark farm’s income that result from the linkage process translate directly into a decrease in the compensation paid to each participant under the program. Whether government assistance should be linked collectively or individually is at the heart of the dispute between the appellants and La Financière.
[11] La Financière often acts as an intermediary in administering federal or provincial grants to Quebec farm producers. For that purpose, it has entered into a number of agreements with the federal government to distribute amounts that the federal government pays directly to producers in other provinces. At times, La Financière also integrates amounts paid by the federal government directly into the ASRA Program’s fund.
[12] In May and July 2007, the federal government announced the payment of grants to Canadian farmers (including ASRA Program participants) under two programs: the Cost of Production Benefit (“COPB”) program and the AgriInvest Kickstart (“Kickstart”) program. Under these two assistance programs, grants were made to producers, who were not required to make contributions.
[13] Amounts paid under the two programs were calculated as a percentage of each producer’s allowable net sales (“ANS”), although both programs had ANS caps above which producers received nothing. The caps were $450,000 for the COPB program and $3 million for Kickstart. They corresponded to maximum payments per producer of $12,240 for the COPB program and $96,000 for Kickstart. All ASRA Program participants were eligible to receive amounts under those programs, but the largest producers received only the maximum amounts.
[14] In managing the ASRA Program, La Financière decided to link amounts received under the COPB and Kickstart programs collectively. It fixed the compensation for 2007 on the basis of what the benchmark farm would have received under those two programs. The ANS of the hypothetical benchmark farm used to collectively link the amounts were less than the maximum allowed by the federal government. However, in collectively linking the amounts, La Financière calculated the average income the benchmark farm would have earned per unit of designated product and then multiplied this by each participant’s number of units of the designated product. These calculations led La Financière to attribute to some of the largest producers, including the appellants, amounts of federal assistance greater than the amounts they had actually received. As a result, the compensation paid to these producers under the ASRA Program was reduced by more than would have been the case had La Financière linked the amounts individually on the basis of what each of them had actually received.
[15] The 137 appellants were unhappy about being disadvantaged in this way, and in January 2008 they asked La Financière to review its decision and link the amounts in question individually. Their request was denied on the ground that a review could not be sought for decisions relating to the [translation] “terms of the programs administered by La Financière”.
[16] In November 2008, La Financière amended the ASRA Program to specify that amounts received under other financial assistance programs would now be linked collectively [translation] “unless La Financière agricole considers it appropriate” to link them individually (s. 88(3) added by (2009) 141 G.O. 1, 51, s. 21).
[17] Following a fruitless exchange of letters with La Financière, the appellants instituted proceedings in the Superior Court in two cases that were ultimately joined for hearing. They argued that the ASRA Program had to be characterized as a contract of insurance within the meaning of the Civil Code of Québec. In their submission, this characterization engaged the principle of interpretation based on the [translation] “reasonable expectations of the insured”, sometimes also called the doctrine of “legitimate expectations of the insured”, according to which any ambiguity, or even any unambiguous provision of a contract of insurance, must be interpreted in a manner consistent with the expectations of the insured. They submitted that, in light of past practice, it was reasonable for them to expect La Financière to link the amounts paid by the federal government individually. The decision to do so collectively was therefore, in their view, [translation] “arbitrary, discriminatory and improper” because of its negative effect on the compensation paid to many participants. That decision resulted in the amendment of the contract in the course of an insurance year, which the program did not permit, and deprived the appellants of amounts to which they were entitled.
[18] In their conclusions, the appellants asked the court to declare that La Financière [translation] “must, under the ASRA Program, deduct any amounts to which each participant is entitled under a federal program on an individual basis”. They also asked that the calculation that resulted from linking the COPB and Kickstart amounts be declared to be invalid in respect of all ASRA Program participants (who numbered 16,747 at the time). Each of them claimed the amount it would have received for 2007 had the amounts been linked individually, a total of over $14 million.
[19] La Financière countered that the ASRA Program is not a contract of insurance, adding that the AFAQ gives it a broad discretion to determine the amount of the assistance granted to producers and to establish the conditions applicable to such assistance, including the method to be employed in linking the amounts it must take into account in granting compensation. Linking them collectively was in its view consistent with the nature of the ASRA Program, which is based on a benchmark farm and not on data specific to each participant. La Financière also argued that the chosen method had been advantageous to a clear majority of participating producers. It explained that it had in the past linked amounts individually only in cases in which a single group of ASRA Program participants had received amounts to be linked, and that it had done so in such cases to avoid attributing income to all the participants that some of them had not received. La Financière added that it had exercised its power to decide on the method to employ in linking amounts on a case‑by‑case basis having regard to its mission and to the impact of each contribution on the participants as a whole.
III. Judicial History
A. Superior Court, 2012 QCCS 284
[20] The trial judge found that the ASRA Program was a contract of insurance, explaining that La Financière insured a risk in exchange for the payment of a contribution. She noted that La Financière had the power to decide what data would be taken into account in calculating the compensation that was payable, but that any unilateral amendment of the terms of the ASRA Program by La Financière could apply only to the year following the amendment and only after having been published in the Gazette officielle du Québec.
[21] The trial judge observed that, before being amended in November 2008, s. 88(3) had referred expressly to [translation] “amounts to which a participant is entitled”. There was therefore nothing preventin