T-2380-73
Arthur Kofman and Associates (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Addy J.—Montreal, March 3 and
4; Ottawa, March 13, 1975.
Crown—Contracts—Plaintiff supplying personnel to
defendant—Personnel remaining employees of plaintiff—
Defendant ending contracts with plaintiff hiring same
employees directly—Whether plaintiff entitled to commis-
sion—Whether continuing contractual obligation—Quebec
Civil Code, arts. 1013-1016, 1019, 1021.
Plaintiff supplied personnel to defendant under 26 contracts,
terminable on one week's notice. Employees remained in plain
tiffs employ under defendant's direction. Plaintiff received a
fixed amount for each employee. Defendant terminated all
contracts, and directly hired all but one employee. Plaintiff
claims commissions normally exigible when services of supplied
personnel are ended so that client can re-hire directly.
Held, awarding a commission on each contract, article 1013
of the Quebec Civil Code, provides for literal interpretation of a
contract "unless the meaning of the parties ... is doubtful".
While there was no continuing contractual obligation after
removal of each employee, it is the custom of the trade that
when direct hiring occurs within three months of supply by the
agency, the agency is entitled to a fee. The parties had applied
this practice in past dealings, and, the contract being silent, the
intent of the parties seems doubtful. Article 1019, which states
that where ambiguity exists, a document is to be interpreted
against the drafting party, is not restricted to doubt arising
from wording but can be taken to include cases where the
contract is silent and one must decide on the parties' intent
regarding a situation not set out in the contract. Clause 15 does
not imply that no words can be imported into the contract; to
include a termination fee does not vary or contradict clauses 15
or 17, and under articles 1013-1015, and 1019, the contract
should be interpreted as including provisions normally existing
between employment agents and clients. This can not be avoid
ed by arguing that in requiring its own contracts defendant
refused to consent to the fee. If the custom was not to apply,
the contract should have specifically so stated. Under clause 18,
federal and Quebec civil laws are to apply; article 1016 of the
Civil Code, providing for resolution of doubt according to the
usage of the country ("area") is applicable at law as well as by
the express terms of the contract.
Finally, while plaintiff was described in the contracts as
ingénieur-conseil, its main occupation was locating, supplying
and assigning personnel, and it had dealt with plaintiff in this
capacity previously. Use of the abbreviation "Ing. Cons." does
not contradict or supersede the custom of the trade in the
region.
Canestrari v. Lecavalier (1915) 47 C.S. 296, applied.
ACTION.
COUNSEL:
S. Shriar for plaintiff.
G. Côté and J. Ouellet for defendant.
SOLICITORS:
Shriar, Polak and Cooperstone, Montreal, for
plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
ADDY J.: The plaintiff who, with his associates,
carries on the business of consulting engineers as
well as of personnel and staff development consult
ants dealing with the locating, supplying and
assigning of engineers and skilled technical sup
port personnel is suing the defendant represented
by the Minister of Public Works (hereinafter
referred to as "the Department") for the alleged
breach of twenty-six separate contracts under
which technical personnel were supplied to the said
Department. The personnel was required by the
Department to carry out an accelerated construc
tion program organized to relieve unemployment
in the Montreal district.
There was very little dispute as to the facts and,
after few witnesses were heard, counsel for the
parties decided to file an agreed statement of the
facts, which was filed as Exhibit 4 at trial, in order
to avoid the calling of several additional witnesses.
All twenty-six contracts were identical except as
to the time from which each person was to be
employed on the project of the Department and as
to the salaries to be paid for the services of each
such employee. The contract provided, in each
case, that the person supplied to the Department
was to remain an employee of the plaintiff in every
way, except that the employee would be perform
ing services under the direction of the Department.
The plaintiff was to receive a fixed amount from
the Department for supplying the services of each
employee. The difference between the amount
received from the Department for the services of
the employee and the amount actually paid to the
employee for salary and for other benefits by the
plaintiff constituted the latter's remuneration for
his services.
The contract, in each case, was in French and
contained a clause numbered 17 which read as
follows:
[TRANSLATION] 17. The firm as well as Her Majesty may
terminate this contract at any time on a week's prior notice in
writing.
With the obvious intention of hiring directly as
its permanent employees the personnel supplied by
the plaintiff, the Department caused to be sent on
the 27th of November 1970, in each case, a regis
tered letter terminating the agreement as of the
2nd of December 1970. As of the same day, all of
the twenty-six persons, with the exception of an
engineer by the name of Marion, were hired
directly by the Department as its own employees
on the project. In the case of Marion, as he had at
one time been an employee of the Federal Govern
ment and would have lost the benefit of drawing
his pension as a retired Federal Government
employee had he been hired directly, special
arrangements were made that he be hired by an
engineering consultant firm engaged on the project
and that firm in turn provided his services to the
Department in return for a 20 per cent differential
in the salary as a fee for looking after the payment
of his salary and other benefits.
The plaintiff claims to be entitled to the com
mission that would normally be payable to a place
ment firm such as his when the services of an
employee of the firm are terminated by reason of
the client hiring the employee directly as its
employee. The Department, on the other hand,
claims that as the contract was terminated by it,
pursuant to clause 17 above quoted, there could be
no continuing contractual obligation between the
parties for anything done after the date of
termination.
In support of this contention, the Department
argues that clause 16 provides that the written
agreement contains the sole and entire contractual
obligation existing between the parties and that
paragraph 17, above quoted, is clear and unambig
uous and, therefore, not susceptible to interpreta
tion. He states that this paragraph clearly provides
that the contract itself may be ended on one week's
notice and the week's notice as provided for in the
contract was in fact given.
Article 1013 of the Civil Code of the Province of
Quebec reads as follows:
Art. 1013. When the meaning of the parties in a contract is
doubtful, their common intention must be determined by inter
pretation rather than by an adherence to the literal meaning of
the words of the contract.
This, in effect, provides that the meaning of the
words is not to be interpreted in any other manner
than by applying the literal meaning of the words
"unless the meaning of the parties in the contract
is doubtful."
There is no doubt whatsoever, in my mind, that,
when an employee is removed from the job by
either party following a notice under paragraph 17
of the contract covering that employee, there sub
sists no continuing obligation whatsoever on the
part of the Department under the contract nor
would there be a continuing obligation on the part
of the plaintiff to find a replacement if requested
to do so by the Department. It was clearly estab
lished at trial, however, that it was the well-recog
nized and established custom of the trade in 1970,
among firms such as that of the plaintiff engaged
in the finding and supplying of technical personnel,
that when the services of an employee were fur
nished to a client by the firm, and the client within
three months of the date when the employee began
work employed that person directly as its own
permanent employee, then the firm would be en
titled to be paid by the client a percentage fee
based on the amount of the first year's gross salary
of the employee, the percentage varying with the
amount of the salary, with the higher percentage
being paid for persons who were employed at
higher salaries, on the assumption that employees
able to command higher salaries were scarcer and
more difficult to find and to replace than lower
salaried employees. It was also established and
agreed that the plaintiff had conformed to this
practice and that such practice was well known to
the Department and has been applied also in
former dealings between the plaintiff and the
Department. This being so, and the contract being
completely silent on the point, and in the light of
the fact that it would seem to be completely
ridiculous for any company such as that of the
plaintiff with many years experience in this field to
go to the trouble of finding, hiring and supplying
technical and professional personnel and of finding
replacements for any personnel which the Depart
ment might, in the opinion of the Minister, find
unsatisfactory, only to have the contract in each
case cancelled within one week and the personnel
hired by the Department on a permanent basis
with the result that, for such services, the plaintiff
would be entitled only to receive, for his services
from the Department, the differential on one or
two weeks salary of the employee (as actually
appears to have been the case in some of the cases
covered by the present contracts), it appears to me
that the intention of the parties, as to what would
happen in such event, is indeed doubtful. The rules
of interpretation provided for in articles 1013 and
1021 of the Civil Code must therefore be
applicable.
It seems clear to me that article . 1013 is not
limited to cases where there is actual ambiguity in
the wording of the contract but may be taken to
include cases where doubt arises by reason of the
contract being completely silent as to some matter
which, expressly or by necessary implication,
forms part of the subject matter of the contract.
Although it might be argued that there is some
ambiguity in the words mettre fin (put an end to),
I cannot accede to this argument, as the words in
themselves are clear and unambiguous. What the
plaintiff is asking for in effect is to have the Court
stipulate what the intention of the parties is
regarding a situation not covered specifically by
the contract but as to which he claims the contract
must apply by necessary implication. It is a ques
tion of deciding how the intention of the parties
would have been expressed had the situation been
specifically covered in the wording of the contract
and is not essentially a question of ambiguity.
The plaintiff argues that article 1019 of the
Civil Code should be applied. This article reads as
follows:
Art. 1019. In cases of doubt, the contract is interpreted
against him who has stipulated and in favor of him who has
contracted the obligation.
Although this article, in my view, is in itself
somewhat ambiguously worded, it has been inter
preted as having somewhat the same effect as the
common law rule of contra proferentem to the
effect that, where there is ambiguity, a document
is interpreted against the party who drafted it. In
other words, it does not apply only to the case
where a contract, which stipulates certain obliga
tions on the part of one party, has been drafted by
the other who is to benefit to these undertakings
but is applicable to a contract where there are
mutual undertakings on the part of both parties.
Canestrari v. Lecavalier' refers to this principle.
The headnote, which fairly summarizes the deci
sions, reads as follows:
[TRANSLATION] 2. It is a recognized principle in the interpre
tation of contracts that where a document has been drafted by
one party, any doubt or ambiguity contained therein is to be
interpreted against the party who drafted it.
Acting Chief Justice Archibald, at page 298,
stated:
But if the contract is not as clear as it might have been, it is the
fault of the defendants who actually drew the contract and
wrote it out and are to be presumed to have put into it
everything which is necessary to their own interest.
The article is, however, somewhat broader in
one way than the contra proferentem rule which
generally has been limited to cases where there is
ambiguity. As in the case of article 1013, article
1019 refers to cases where doubt exists; it does not
restrict the doubt to that arising from ambiguity in
wording. It can be taken to include cases where the
contract is silent on a point and one is obliged to
decide as to the intention of the parties regarding a
situation not specifically covered in the contract.
This, in essence at least, seems to be the case here.
The only clause in the contract which might poss
ibly be construed to prevent article 1016 or 1019
from applying would be clause 15 which reads as
follows:
[TRANSLATION] 15. This agreement shall constitute the sole
and only contractual bond between the firm and Her Majesty.
This clause does not state that no words can be
imported into the contract itself in order to com
plete it; it merely states that the agreement consti
tutes the sole and only contract between the par
ties. Any provision which necessarily must be
implied in the contract does form part of it and
therefore does not infringe against the clause. As a
1 (1915) 47C.S.296.
matter of interest, clause 15, if taken literally, is
obviously incorrect and does not conform to real
ity, since it is common ground that there were
twenty-six contracts, all of which form part of the
present action, and not only one contract between
the parties. Clause 15 must, therefore, be taken to
include the words "in so far as this employee is
concerned."
At the hearing, counsel for the defendant argued
as if clause 15 read something to the effect that no
provisions other than those expressed in writing in
the contract are to be imported into the contract.
The clause obviously does not state this.
The including of a fee to be payable on termina
tion of a contract in the event of the employee
being hired directly by the Department does not in
any way vary or contradict the express or implied
terms of either clause 17 or of clause 15, and for
the above-mentioned reasons I find that, pursuant
to the provisions of articles 1013, 1014, 1015 and
1019, the contract could be interpreted at law as
including the provisions normally recognized as
existing between hiring agencies and their clients
to the effect that when an employee, who has been
supplied to the client on a temporary basis, is hired
directly by the client as its own employee on a
permanent basis, a fee based on a percentage of
the employee's rate of salary during the first year
of employment becomes payable to the agency.
The next question to be determined is whether
in fact the above-mentioned provision should be
applied as between the parties to this contract.
Paragraph 2 to the plaintiff's statement of claim
reads as follows:
2. THAT Plaintiff's charges to its clients for such services are
basically the same as those charged by similar firms throughout
the Province of Quebec, and include the following:—
(a) If the client requires only casual or temporary help, the
candidate ultimately selected may work directly in the
employ of Plaintiff, who is responsible for paying the person
engaged his earnings, and the client pays to Plaintiff a sum
based on an agreed-upon hourly rate for the said services,
and the commission or fee earned by Plaintiff is the differ
ence between the hourly rate paid the technician by Plaintiff
and the hourly rate paid to Plaintiff by the client ("differen-
tial rate");
(b) If the client decides at any stage to place the candidate
on its own payroll on a temporary basis, the client continues
to pay Plaintiff the same differential fee;
(c) If the client decides at any stage to hire the candidate on
a permanent basis, the fee charged by Plaintiff varies be
tween 7 1 / 2 % and 12% of the gross annual salary at which the
candidate commenced in the permanent employ of the client,
called a "permanent placing fee".
The agreed upon facts established that the
plaintiff offered to supply candidates required by
the Department for the remuneration provided for
in its brochure and accompanying letter or at a flat
rate per man as set out in paragraph 2 above of the
plaintiff's statement of claim. This offer of the
plaintiff was not accepted by representatives of the
Department but the Department insisted on draft
ing its own contract and having it signed in the
case of each employee supplied.
Counsel for the defendant maintained, at trial,
that, as the normal method of hiring in payment
was not accepted, there was a definite refusal on
the part of the representatives of the Department
to consent to any remuneration being payable
should the employees be hired permanently and
that this was the only reason why the written
contracts were required, it being the intention of
the parties that the written contract in each case
would supersede the custom, which admittedly
existed. There are three obvious answers to this
argument: the first one being that if the sole
reason why written contracts were prepared and
signed was to avoid the custom from applying and
more particularly the custom as to the liability for
payment in the event of personnel supplied being
hired as permanent employees of the Department,
it is strange indeed that no reference whatsoever
was made in the contract either that the custom
would be completely excluded in a general sense or
that, more specifically, there would be no liability
in the event of the permanent hiring of personnel.
This could have been covered adequately in a very
few words in the contract. Furthermore, if it is
intended that custom is not to apply where the
contract is silent on a point which obviously falls
within the subject matter of the contract, the
contract itself should specifically state that that
particular custom is excluded. As the learned
author Trudel stated in his text "Traité de Droit
Civil du Québec," Volume 7, at page 288:
[TRANSLATION] Unless otherwise agreed, a party to a contract
is presumed to be aware of and to conform with the practices
and customs of the situs of the contract. This indeed seems to
be a presumption juris et de jure within the limits of its
application.
In the case at bar, there is certainly no specific
mention that the custom would not apply.
In the second place, it is obvious from the many
clauses in the contract pertaining to special rights
of the defendant and particular obligations of the
plaintiff which have not in any way been estab
lished as being part of custom and which provide
more than ample reason for the Department wish
ing to have a written contract executed.
Furthermore, clause 18 of the contract reads as
follows:
[TRANSLATION] 18. This contract shall be interpreted in
accordance with the relevant federal laws or, alternatively, in
accordance with the civil law of the Province of Quebec.
By this provision, firstly, the federal laws and
then subsidiarily the civil laws of the Province of
Quebec are specifically made applicable to the
interpretation of the contract. There are no appli
cable federal laws. However, article 1016 of the
Civil Code reads as follows:
Art. 1016. Whatever is doubtful must be determined
according to the usage of the country where the contract is
made.
This article is not only applicable at law but is
made applicable by the express terms of the con
tract itself.
The word - "country" in article 1016 has been
interpreted as meaning the region or area and not
necessarily the whole country.
As to the human and social reasons behind the
rules of custom and their application, the learned
author Trudel, in his text "Traité de Droit civil du
Québec" to which I have referred, states at pages
286 and 287 as follows:
[TRANSLATION] The contract, though a legal institution, is first
and foremost an act of man. The law cannot disregard the
human and social aspects of any contract. Human freedom,
which creates the contract and governs its substance, operates
in a particular area, within a specific framework. This area is
not exclusively geographic. In law, it will primarily be social,
professional, commercial and so forth. A party to a contract is
constantly surrounded by a particular atmosphere made up of
usage and custom, habits and morals. This environment induces
the individual to adopt the manner of speaking, of acting and of
thinking generally observed in others. The law of least resist
ance is at the root of all these individual concessions to what is
termed practice and custom. In like fashion, this human weak
ness enables the individual to lead a social existence, a natural
state which originated and developed exclusively through man's
close association with man. Yet, a subservience of this type is
not really incompatible with free will: its very existence depends
on the multiplicity and permanent impact of entirely free,
individual and carefully considered actions. Such actions
became the practice when people in the same area performed
them without forethought or hesitation and without closely
examining the reasons for doing so. Spontaneous action from
that moment supplanted conscious wilful action without reduc
ing or eliminating the needs and motivations that previously
governed the considered actions of each individual. People who
are less gifted thus profit from the experience of the more
fortunate; they benefit from wise decisions which may have
resulted originally from great difficulty and hard work. This
proves that the action of an individual in unconsciously con
forming with custom is for that reason no less suitable to his
needs or consonant with his desires. This is the true foundation
for these two rules of interpretation. The law assumes that the
parties to a contract wish to partake of the wisdom which is
their common heritage. Whether consciously or not, everyone
does so as naturally as they breathe the air about them. It
follows then that this is not an arbitrary assumption; it derives
from living in society, one of man's inherent characteristics.
This preamble has a very practical corollary. A contract will
be affected by the custom of the place where the contract is
made. The extent to which a contract is affected by social
factors must somehow be limited, otherwise it would never be
possible to clarify doubtful issues. This is however the very
purpose of interpretation. [The underlining is mine.]
In the description of the parties, at the begin
ning of each contract, the plaintiff was described
under his professional title "Ing. Con.," being the
abbreviation for ingénieur-conseil and not as an
employment agent or under any other description
which would indicate that he was in the business of
locating, hiring and lending out personnel as an
agency. Based on that fact, counsel for the defend
ant argued that in the case of these particular
contracts the Department was dealing with the
plaintiff strictly in his capacity as a consulting
engineer and that each contract was for the ser
vices of a technician supplied from a regular engi
neering firm and not from a firm which normally
supplies technical personnel. He then went on to
argue that one must therefore logically conclude
that the custom which applied to the last-men
tioned type firm, not having been established as
existing in the case of regular engineering firms, it
could not be held that the custom applied as
between the parties to the contracts in issue before
me.
The argument, a rather clever one, does not
however take into account many other factors. The
plaintiff was at all times a consulting engineer but
his primary occupation was the locating, interview
ing, evaluation, supplying and assigning of engi
neers and skilled technical and support personnel.
This was specifically pleaded as such in paragraph
1 of the statement of claim and admitted to be true
in paragraph 1 of the statement of defence. The
plaintiff had formerly dealt with the Department
and the evidence before me was that it always was
for the last-mentioned purpose and in this last-
mentioned capacity. There is nothing in the con
tract which would indicate that there is any re
sponsibility on the plaintiff to the Department qua
engineer; the responsibility is strictly to supply the
services of the particular person named in the
contract and, if not satisfactory, to supply a
replacement. It is also interesting to note that
many of the candidates were first referred to the
Department by the plaintiff and were approved by
it and commenced working before any contracts
were ever signed. The use of the abbreviation for
consulting engineers in the description of the plain
tiff does not contradict the concept that he was
contracting in his usual capacity as he had been in
the past, and the mere inclusion of these words is
not sufficient to contradict or supersede the gener
al custom of the trade in the Montreal area, and, a
fortiori, where this general custom was applied
between the parties in their former dealings.
Finally, all the personnel referred, and whose
services were covered by these contracts, were
retained by the Department as permanent
employees in the same employment on the job. For
the above reasons, I cannot subscribe to the argu
ment that, in the face of this, merely because the
plaintiff is described as one of the parties under his
professional title, the Court should hold that the
Department was dealing with him (or his firm) in
this particular case, strictly qua engineer, and I
find that the defendant is liable to pay the plain
tiff, in accordance with each contract, the compen
sation established by the above-mentioned custom,
which is to be taken as being included in the terms
of each contract.
It has been clearly established that, in each of
the twenty-six contracts, the employees were hired
by the Department within the three-month period
and compensation is therefore payable to the
plaintiff in each case based on the normal scale
existing at the time.
At the hearing, the parties submitted as Exhibit
P-6 a table showing among other things the names
of all twenty-six employees, the dates their services
were originally supplied to the defendant, the dates
when they were subsequently hired by the Depart
ment as permanent employees, their first gross
annual salary in each case, the percentage of
commission to be applied in each case as a fee to
the plaintiff in accordance with the custom of the
trade at the time, and the commission which would
be payable to the plaintiff were the custom held to
apply. The amount totals $31,889.20.
The plaintiff will therefore be entitled to judg
ment in this amount plus costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.