Laurentide Motels Ltd. v. Beauport (City), [1989] 1 S.C.R. 705

Laurentide Motels Ltd.

(Les investissements T.R.L. Ltée),

Le restaurant Bastogne Inc. and

Thomas R. Lévesque Appellants

v.

City of Beauport Respondent

and

Gérard Tremblay Mis en cause

indexed as: laurentide motels ltd. v. beauport (city)

File No.: 19842.

1988: May 24; 1989: April 20.

Present: Beetz, McIntyre, Lamer, Wilson, Le Dain,* La Forest and L'Heureux‑Dubé JJ.

on appeal from the court of appeal for quebec

Municipal law -- Extra-contractual liability of municipalities ‑‑ Firefighting -- Applicable law: public or private law -- Whether civil law applies to a municipality regarding determination of its liability for damage caused by fire -- Whether Anns and City of Kamloops apply to Quebec -- Civil Code of Lower Canada, arts. 356, 1053 -- Cities and Towns Act, R.S.Q. 1977, c. C‑19, ss. 412, 423.

Civil liability -- Municipality -- Firefighting -- Malfunction of and failure to maintain hydrants -- Fault by firefighters in the performance of their duties ‑- Whether city liable for damage caused by fire -- Whether civil law applies to a municipality regarding determination of its liability for damage caused by fire -- Quantum of damages -- Additional indemnity -- Civil Code of Lower Canada, arts. 356, 1053, 1054, 1056c, 1073.

Courts -- Appeal -- Court of Appeal intervening in trial judge's findings and conclusions of fact -- Whether Court of Appeal erred by substituting its opinion for that of trial judge.

Damages -- Additional indemnity -- Calculation -- Civil Code of Lower Canada, art. 1056c.

Damages -- Future damages -- Burning of hotel complex -- Sale of residue of hotel complex three years later -- Sale taken into consideration in calculating future damages -- Cost of reopening deducted.

A client's negligence led to a fire that damaged appellants' hotel complex in the city of Beauport. As soon as they arrived, the firefighters sprayed water from the fire truck onto the fire, but the water soon ran out owing to the impossibility of connecting with the hydrants. The latter, which were difficult to reach and covered with snow, were unusable because they were frozen or broken. It was not until some forty minutes later that water was finally obtained from the hydrants. The appellants brought an action for damages against the person who had set the fire and the respondent, alleging fault by the latter in fighting the fire, namely that its equipment had not been maintained and did not function properly, as well as fault by its employees in the performance of their duties.

The trial judge allowed the action and found the person who had set the fire liable for part of the damage and the respondent liable for the remainder. The trial judge blamed the respondent for its negligence in checking and maintaining the fire hydrants and its employees for a number of faults in the performance of their duties. The trial judge found that, on the evidence, the fire had almost been put out when the water ran out in the fire truck. He concluded that it was the lack of water coupled with the faults of the respondent's employees which had caused the remainder of the damage. He accordingly directed the respondent to pay the sum of $2,542,732.83 in damages. The Court of Appeal, hearing only an appeal by the respondent, reversed the Superior Court judgment.

The appeal at bar seeks to determine (1) whether the delictual civil liability of municipalities in firefighting is governed by public or by private law; (2) whether the fault alleged against the respondent makes it liable; and (3) whether the quantum of damages and the calculation of the additional indemnity should be varied.

Held: The appeal should be allowed.

(1) Applicable law

Per Beetz, McIntyre, Lamer, Wilson and La Forest JJ.: Article 356 C.C.L.C. provides that political corporations such as municipal corporations are in principle governed by the public law. The civil law applies to them only exceptionally. Consequently, it is the public law which must determine when the civil law will apply to municipal corporations. Public law in Quebec has two sources: the statutory law and the common law. Since there is no express statutory provision dealing with a municipality's delictual and quasi‑delictual relations with individuals, it is the second source of public law, the "public" common law as it exists at present, which determines the respects in which a municipal corporation falls "within the control of the civil law" in its relations with individuals. Under the "public" common law established in the Anns and City of Kamloops cases, a municipality cannot be held responsible for its policy decisions. (Policy decisions are decisions of a political nature such as the initial decision to exercise the power to establish a service.) A municipality, however, which acts within the operational sphere of its discretionary powers -- i.e., within the practical execution of its policy decision -- is subject to the private law standards of conduct. In Quebec, the private law stan­dards of conduct are those enunciated in the Civil Code, and particularly in arts. 1053 et seq. C.C.L.C.

Here, respondent's by‑laws indicate that it exercised the discretionary powers conferred upon it by the Cities and Towns Act to establish a fire‑fighting service and waterworks. There is no statutory provision either exonerating respondent from, or subjecting it to, liability for damage caused by its acts pursuant to its discretionary powers. Therefore, the question whether the civil law applies to determine the respondent's responsibility must be reasoned by the common law. Under the common law, arts. 1053 et seq. C.C.L.C. will apply if the acts or omissions alleged to have caused damage -- the failure to keep the fire hydrants clear and operational and the acts and omissions of the municipality's firefighters -- fall within the operational sphere of the municipality's activities.

The respondent could have, as a matter of policy, established some scheme of inspection and repair. The failure to make such a policy decision, however, does not allow the respondent to escape the application of the private law. Absent a policy decision to which the omission alleged to have caused damage can be attributed, the inspection and repair of the fire hydrants must be taken to be in the operational sphere, since they are the practical execution of the respondent's policy decision to establish the water system and to allocate personnel and money to maintain the system. The acts and omissions of respondent's firefighters, too, should be characterized as operational in nature. The responsibility of the respondent, therefore, falls to be determined by arts. 1053 et seq. C.C.L.C., and the trial judge's finding that the respondent was at fault under arts. 1053 et seq. C.C.L.C. was correct.

Per L'Heureux-Dubé J.: Municipal corporations in Quebec are governed by public law, which has its origin in the common law.

So far as the liability of municipalities is concerned, Anns and City of Kamloops, together with certain subsequent common law judgments, set out the principles of public law which apply in Canada and in Quebec. Applying these principles, the fact that a municipal corporation makes a policy decision or refuses to do so does not entail its civil liability; if, however, the municipal corporation exercises its powers, discretionary or otherwise, so as to make its decision operational, it can be held liable for any damage caused to another through its fault, or through that of its employees in the course of their duties, unless the enabling legislation expressly excludes such liability or authorizes the municipal corporation to exonerate itself from liability. The private law criteria set out by the common law as stated in these judgments cannot however be applied in Quebec, as since the Quebec Act and in keeping with the Canadian Constitution, jurisdiction over property and civil rights has been a matter for the provinces. Pursuant to art. 356 C.C.L.C., in the absence of provisions to the contrary in their charters or enabling legislation, and subject to public law, municipal corporations are therefore governed by the Civil Code of Lower Canada in private law matters.

In the case at bar the respondent exercised its discretionary power conferred by the Cities and Towns Act to create a firefighting service (a policy decision), and no provision of that Act, not even s. 442, confers an immunity on municipalities from their extra-contractual liability in respect of the operation of their water and firefighting services. Though the Act also does not impose any specific liability in this regard, it is clear, in light of the by-laws adopted by the respondent dealing with firefighting and water services, the monies allocated and employees assigned to maintenance of the water system, including hydrants, that the respondent undertook, at the very least by implication, to maintain this service and ensure that it was in good working order (an operational decision). In the exercise of its discretionary power, arts. 1053 et seq. C.C.L.C. were therefore applicable to the respondent's activities.

(2) Fault and Causal Link

Under arts. 1053 et seq. C.C.L.C., the respondent must be held liable for the additional damage caused by the fire, as this was due to its fault in maintaining its water and firefighting systems and to the fault of its employees in carrying out their duties. This fault had a causal link with the damage sustained by the appellants and was the direct and immediate consequence of it.

The trial judge committed no error in his determination of the facts or in the conclusions which he drew from them, and the Court of Appeal was not justified in intervening and substituting its opinion for that of the trial judge. A trial judge's findings of fact based on the credibility of witnesses are not to be reversed on appeal unless it can be established that the trial judge made some palpable and overriding error which affected his assessment of the facts. In the case at bar the determination of the facts in this great volume of opposing evidence was based essentially on the trial judge's view of the credibility of the testimony of various witnesses. The trial judge ruled on the credibility of the key witnesses, he indicated why he preferred one witness rather than another, and there is nothing in a review of the evidence to suggest that in so doing he made a palpable error in determining the facts or an error which could have a bearing on the outcome of the case in the conclusions that he drew from them. Far from being unreasonable, his findings are supported by the evidence.

(3) Damages and Additional Indemnity

An appellate court should not alter the quantum of damages set by the trial judge unless it can be shown that he applied an erroneous rule of law or that the amount awarded was palpably incorrect compensation for the damage suffered. It was not shown that the trial judge erred in selecting the depreciated replacement method to determine the value of the damage caused to the buildings and their contents or that the amount awarded for this was unreasonable. However, the amount awarded for incidental expenses must be deducted. Although events occurring after the date of the loss are generally not taken into account in estimating loss in a delictual or quasi‑delictual matter, this rule is not absolute and is subject to exceptions, especially in the case of estimation of loss for future damages. In the case at bar the sale of the hotel complex three years after the fire prospectively eliminated the assumption that the appellants would rebuild and reopen the motel. The items for pre-opening costs, publicity and renewal of liquor licences are expenses that were not, and never will be, incurred. However, the trial judge properly awarded compensation for lost profit for a total period of two years. The evidence was that the residue of the hotel complex continued to be operated with reduced profits after the fire and the two-year period corresponds to the time needed to rebuild a hotel of this kind and resume operations. The eventual sale of the hotel complex does not have the necessary nexus for it to be said that, had it not been for the fire, the appellants would have sold their business and that they intended to sell it in any case.

Finally, the wording of the judgment should be varied with respect to calculation of the additional indemnity. The additional indemnity provided for in art. 1056c C.C.L.C. is intended to compensate for loss due to delay in paying the amount ordered. The excess interest authorized by that article thus runs until the date the damages are finally paid. Although the trial judge has a discretion whether to award the indemnity, he has no discretion as regards the calculation of that indemnity, as this must necessarily be calculated by applying to the amount awarded by judgment from the date when the action at law was instituted "a percentage equal to the excess of the interest rate fixed according to section 53 of the Revenue Department Act, R.S.Q. 1964, c. 66, over the legal interest rate". The amount by which the interest rate fixed under s. 53 exceeds the legal interest rate, which was 5 per cent at the time the trial judgment was rendered, has subsequently fluctuated many times. The additional indemnity awarded by the trial judge must therefore be calculated by applying each of these rates for the periods during which they were in effect, rather than by using the 5 per cent rate referred to in the trial judgment. Limiting the additional indemnity to 5 per cent would be depriving the appellants of full compensation for the financial loss incurred by them as a consequence of being deprived of the amount owed from the time of the trial judgment.

Cases Cited

By Beetz J.

Applied: City of Kamloops v. Nielsen, 1984 21 (SCC), [1984] 2 S.C.R. 2; Anns v. Merton London Borough Council, [1978] A.C. 728; referred to: East Suffolk Rivers Catchment Board v. Kent, [1941] A.C. 74; Adricon Ltée v. Town of East Angus, 1977 197 (SCC), [1978] 1 S.C.R. 1107.

By L'Heureux-Dubé J.

Applied: City of Kamloops v. Nielsen, 1984 21 (SCC), [1984] 2 S.C.R. 2; Anns v. Merton London Borough Council, [1978] A.C. 728; referred to: East Suffolk Rivers Catchment Board v. Kent, [1941] A.C. 74; Wing v. Moncton, 1940 289 (NB CA), [1940] 2 D.L.R. 740; Stevens‑Willson v. City of Chatham, 1934 7 (SCC), [1934] S.C.R. 353; Chevalier v. Corporation de la Cité de Trois‑Rivières (1913), 20 R. de J. 100; Magasin Continental (Québec) Ltée v. Rhéaume, C.A. Québec, No. 8797, August 30, 1973; Larivière v. Cité de Montréal (1941), 1941 219 (QC CS), 47 R.L. 505; Cité de Pont‑Viau v. Gauthier Mfg. Ltd., 1978 4 (SCC), [1979] C.A. 77; Corporation of Montreal v. Doolan (1871), 18 L.C.J. 124; Phaneuf v. Corporation du Village de St‑Hugues (1936), 61 K.B. 83; City of Verdun v. Sun Oil Co., 1951 53 (SCC), [1952] 1 S.C.R. 222; Westminster Corporation v. London and North Western Railway Co., [1905] A.C. 426; Authier v. Corporation de la Ville de l'Assomption (1903), 9 R. de J. 374; Lefebvre v. Town of Grand-Mère (1917), 1917 87 (SCC), 55 S.C.R. 121; City of Montreal v. Mulcair (1898), 1898 46 (SCC), 28 S.C.R. 458; Napper v. Cité de Sherbrooke, 1968 99 (CSC), [1968] S.C.R. 716; Peltier v. Corporation of the Village of Gatineau Pointe (1937), 76 C.S. 180; Brousseau v. Cité de Québec (1912), 42 C.S. 91; Roy v. Cité de Montréal (1892), 2 C.S. 305; Wilshire v. Corporation du village de St‑Louis du Mile‑End (1899), 8 Q.B. 479; Quesnel v. Emard (1912), 1912 622 (QC CA), 8 D.L.R. 537; Fournier v. Cité de Lachine (1926), 66 C.S. 109; Lanouette‑Perreault v. Corporation municipale de St‑Théodore de Chertsey, Sup. Ct. Joliette, No. 705‑05‑000840‑75, January 30, 1979; Harris v. Marter (1874), 1874 72 (NB SC), 15 N.B.R. 165; Welbridge Holdings Ltd. v. Metropolitan Corporation of Greater Winnipeg, 1970 1 (SCC), [1971] S.C.R. 957; Marcoux v. Ville de Plessisville, [1973] R.P. 385; Joseph Investment Corp. v. Cité d'Outremont, 1972 155 (SCC), [1973] S.C.R. 708; R. v. Corporation of the City of Sault Ste. Marie, 1978 11 (SCC), [1978] 2 S.C.R. 1299; Langelier v. Giroux (1932), 52 K.B. 113; Brown v. Corporation de Montréal (1871), 4 R.L. 7; Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96; Adricon Ltée v. Town of East Angus, 1977 197 (SCC), [1978] 1 S.C.R. 1107; O'Reilly v. Mackman, [1982] 3 W.L.R. 604; Attorney General of Quebec v. Labrecque, 1980 24 (SCC), [1980] 2 S.C.R. 1057; McLeave v. City of Moncton (1902), 1902 73 (SCC), 32 S.C.R. 106; Vallières v. Cité de Montréal (1908), 33 C.S. 250; Harper v. Cité de Montréal (1908), 16 R. de J. 229; Levinson v. Cité de Montréal (1911), 39 C.S. 259; Exchange Bank of Canada v. The Queen (1886), 11 App. Cas. 157; Bank of Montreal v. Attorney General of Quebec, 1978 173 (SCC), [1979] 1 S.C.R. 565; J. E. Verreault & Fils Ltée v. Attorney General of Quebec, 1975 179 (SCC), [1977] 1 S.C.R. 41; Mainwaring v. Nanaimo, 1951 273 (BC CA), [1951] 4 D.L.R. 519; Miller & Brown Ltd. v. City of Vancouver (1966), 1966 393 (BC CA), 59 D.L.R. (2d) 640; Barratt v. Corporation of the District of North Vancouver, 1980 219 (SCC), [1980] 2 S.C.R. 418; McCrea v. City of White Rock (1974), 1974 1147 (BC CA), 56 D.L.R. (3d) 525; Martel v. City of Montreal, [1943] C.S. 290; Seguin v. Town of Hawkesbury, 1955 135 (ON CA), [1955] O.R. 956; Yuen Kun Yeu v. Attorney-General of Hong Kong, [1988] A.C. 175; Curran v. Northern Ireland Co‑ownership Housing Association Ltd., [1987] 2 All E.R. 13; Sutherland Shire Council v. Heyman (1985), 1988 ABCA 234, 60 A.L.R. 1; Berkovitz by Berkovitz v. United States, 108 S. Ct. 1954 (1988); Montreal Light, Heat and Power Co. v. Cité de Montréal (1917), 26 K.B. 368; Joseph Brant Memorial Hospital v. Koziol, [1978] l S.C.R. 491; Maryland Casualty Co. v. Roland Roy Fourrures Inc., 1973 141 (SCC), [1974] S.C.R. 52; Chartier v. Attorney General of Quebec, 1979 17 (SCC), [1979] 2 S.C.R. 474; Schreiber Brothers Ltd. v. Currie Products Ltd., 1980 11 (SCC), [1980] 2 S.C.R. 78; Lensen v. Lensen, 1987 4 (SCC), [1987] 2 S.C.R. 672; Pelletier v. Shykofsky, 1957 65 (SCC), [1957] S.C.R. 635; St‑Pierre v. Tanguay, 1958 72 (SCC), [1959] S.C.R. 21; Dorval v. Bouvier, 1968 3 (CSC), [1968] S.C.R. 288; Métivier v. Cadorette, 1975 2 (SCC), [1977] 1 S.C.R. 371; Beaudoin‑Daigneault v. Richard, 1984 15 (SCC), [1984] 1 S.C.R. 2; Volkert v. Diamond Truck Co., 1940 62 (SCC), [1940] S.C.R. 455; Morin v. Blais, 1975 3 (SCC), [1977] 1 S.C.R. 570; Nance v. British Columbia Electric Railway Co., 1951 374 (UK JCPC), [1951] A.C. 601; Proctor v. Dyck, 1953 6 (SCC), [1953] 1 S.C.R. 244; Watt v. Smith, 1967 48 (CSC), [1968] S.C.R. 177; Industrial Teletype Electronics Corp. v. City of Montreal, 1975 197 (SCC), [1977] 1 S.C.R. 629; Hamel v. Brunelle, 1975 1 (SCC), [1977] 1 S.C.R. 147; Andrews v. Grand & Toy Alberta Ltd., 1978 1 (SCC), [1978] 2 S.C.R. 229; Hôpital général de la région de l'amiante Inc. v. Perron, 1980 2419 (QC CA), [1979] C.A. 567; Woelk v. Halvorson, 1980 17 (SCC), [1980] 2 S.C.R. 430; Snyder v. Montreal Gazette Ltd., 1988 66 (SCC), [1988] 1 S.C.R. 494; Hôpital Notre‑Dame de l'Espérance v. Laurent, [1978] l S.C.R. 605; Royal Insurance Co. v. Rourke, [1973] C.A. 1046; Colomba v. Madill, [1979] C.S. 17; Delarosbil v. Prévoyance, Cie d'assurance, [1978] C.S. 363; Findlay v. Howard (1919), 1919 66 (SCC), 58 S.C.R. 516; Pratt v. Beaman, 1929 61 (SCC), [1930] S.C.R. 284; Golden Eagle Canada Ltd. v. Ray Gas Bar Inc., [1973] C.A. 680; Procureur général du Québec v. Dugal, J.E. 82‑1169; Travelers Insurance Co. of Canada v. Corriveau, 1982 222 (SCC), [1982] 2 S.C.R. 866, aff'g [1980] C.A. 4; Girard v. Lavoie, [1975] C.A. 904.

Statutes and Regulations Cited

Act respecting the Ministère du Revenu, R.S.Q. 1977, c. M‑31, s. 28.

Act to amend the Taxation Act and other legislation and to make certain provisions respecting retail sales tax, S.Q. 1989, c. 5, s. 250.

Charter of the Town of Beauport, S.Q. 1950-51, c. 91, s. 17.

Cities and Towns' Act, 1922, S.Q. 1922, c. 65, ss. 422, 441.

Cities and Towns' Act, R.S.Q. 1925, c. 102, ss. 433, 452.

Cities and Towns Act, R.S.Q. 1964, c. 193 (now R.S.Q. 1977, c. C‑19), ss. 426, 433, 452.

Cities and Towns Act, R.S.Q., c. C‑19, ss. 28(1), (3), 412(22), (41), (42), (44), 423, 429, 430, 431, 434, 436, 439, 442, 450, 585(7).

Civil Code of Lower Canada, arts. 13, 18, 356, 1053, 1056c, 1073, 1077.

Constitution Act, 1867, s. 92(13).

Municipal Code of Quebec, R.S.Q., c. C‑27.1, arts. 724, 725, 772.

Municipal Code of the Province of Quebec, S.Q. 1870, 34 Vict., c. 68, s. 637.

Municipal Code of the Province of Quebec, R.S.Q. 1888, s. 6134.

Police Act, R.S.Q., c. P‑13, s. 2.1.

Quebec Act (U.K.), 14 Geo. 3, c. 83, s. VIII.

Revenue Department Act, R.S.Q. 1964, c. 66, s. 53.

Authors Cited

Archambault, Jean‑Denis. "La responsabilité délictuelle municipale: fondement et application au combat des incendies" (1981), 41 R. du B. 3.

Archambault, Jean‑Denis. "La responsabilité municipale dans le combat des incendies -- Malette c. Portage du Fort" (1984), 15 R.G.D. 107.

Archambault, Jean‑Denis. "Les sources juridiques de la responsabilité extra‑contractuelle municipale" (1985), 16 R.G.D. 101.

Baudouin, Jean‑Louis. La responsabilité civile délictuelle. Cowansville: Yvon Blais Inc., 1985.

Civil Code of Lower Canada: First, Second and Third Reports. Quebec: George E. Desbarats, 1865.

Côté, Pierre‑André. The Interpretation of Legislation in Canada. Translated by Katherine Lippel, John Philpot and Bill Schabas. Cowansville: Yvon Blais Inc., 1984.

Ducharme, Léo. L'administration de la preuve. Montréal: Wilson & Lafleur, 1986.

Dussault, René. Traité de droit administratif canadien et québécois, t. 2. Québec: Presses de l'Université Laval, 1974.

Fleming, John G. The Law of Torts, 6th ed. Sydney: Law Book Co., 1983.

Garant, Patrice. Droit administratif, 2e éd. Montréal: Yvon Blais, 1985.

Garant, Patrice. "Les sources du droit de la responsabilité de la puissance publique" (1986), 46 R. du B. 260.

L'Heureux, Jacques. "La responsabilité extra‑contractuelle des municipalités: un point de vue différent sur l'arrêt Ville de Beauport c. Laurentide Motels" (1987), 47 R. du B. 160.

L'Heureux, Jacques. "Sources du droit et règles applicables en matière de responsabilité extra‑contractuelle au Québec" (1985), 16 R.G.D. 131.

Langelier, F. Cours de droit civil de la province de Québec, t. 2. Montréal: Wilson & Lafleur, 1906.

Le nouveau Bescherelle 3: La grammaire pour tous. Paris: Hurtubise H.M.S., 1980.

McNicoll, Micheline. "La réparation: une question de contrôle judiciaire" (1986), 32 McGill L.J. 187.

McNicoll, Micheline. "La responsabilité civile délictuelle des municipalités en matière de combat des incendies" (1983), 24 C. de D. 379.

Mignault, P.‑B. Le droit civil canadien, t. 2. Montréal: C. Théoret, 1896.

Morin, Michel. "La Cour suprême et les motifs d'intervention d'une cour d'appel sur des questions de faits," [1985] R.D.J. 121.

Pigeon, Louis‑Philippe. Drafting and Interpreting Legislation. Toronto: Carswells, 1988.

Todd, Stephen. "The Negligence Liability of Public Authorities: Divergence in the Common Law" (1986), 102 L.Q.R. 370.

Walton, Frederick Parker. The Scope and Interpretation of the Civil Code of Lower Canada. Toronto: Butterworths, 1980.

APPEAL from a judgment of the Quebec Court of Appeal, [1986] R.J.Q. 981, 3 Q.A.C. 163, which reversed a judgment of the Superior Court (1980), 9 M.P.L.R. 184. Appeal allowed.

Gratien Boily and Louis Vallières, for the appellants.

Raynold Bélanger, Q.C., André Gagnon, Q.C., and Jean‑Charles Lord, for the respondent.

Beetz J.

The judgment of Beetz, McIntyre, Lamer, Wilson and La Forest JJ. was delivered by

Beetz J. -- I have had the advantage of reading the opinion of my colleague, Justice L'Heureux-Dubé, and I concur with her disposition of the appeal and with most of her reasons. However, because I have a different view of the construction of art. 356 C.C.L.C., I would like to address the question of the law applicable to municipal corporations in Quebec.

The issue that this case presents is whether the city of Beauport can be held responsible under the civil law for damage caused to property when the efforts of the municipality's fire fighters to extinguish a fire were unsuccessful.

So stated, the issue is deceptively simple. In fact, this case raises the difficult question of the coexistence and interaction of two separate systems of law in Quebec. The appellants claimed damages against the author of the fire, an individual, as well. This aspect of their claim was easily resolved: without dispute from any litigant, art. 1053 C.C.L.C., in other words, the civil law, applied. However, the city of Beauport is a municipality and therefore a political corporation, in the words of art. 356 C.C.L.C. Does the civil law apply to a municipality to determine its responsibility for damage caused by fire?

The process of answering this question must begin with art. 356 C.C.L.C.:

356. Secular corporations are further divided into political and civil; those that are political are governed by the public law, and only fall within the control of the civil law in their relations, in certain respects, to individual members of society.

Civil corporations constituting, by the fact of their incorporation, ideal or artificial persons, are as such governed by the laws affecting individuals; saving the privileges they enjoy and the disabilities they are subjected to.

This article, rather than setting out a simple rule of law, is directory in nature in that it indicates the law which applies to political corporations. According to art. 356, there are two bodies of law which apply to municipal corporations: the public law and the civil law. The public law of Quebec, it is agreed, consists of statute law and the common law as it applies to public bodies. The civil law, which is a body of private law, consists largely, although not exclusively, of the law enunciated in the Civil Code of Lower Canada and the Civil Code of Quebec.

Article 356 states that municipal corporations are governed by the public law (i.e., statute law and common law) except in their relations, in certain respects, to individual members of society. The task is then to determine if responsibility for damage caused by fire falls within the class of "relations, in certain respects, to individual members of society". Unfortunately, art. 356 does not give any indication of how to make this determination, nor even which body of law governs the question.

The learned authors who have wrestled with art. 356 and have attempted to pin the meaning of "in their relations, in certain respects, to individual members of society" to the ground form two camps, as my colleague observes. I will attempt to summarize the two theses without doing violence to either.

One thesis, advanced by Archambault in, inter alia, "La responsabilité délictuelle municipale: fondement et application au combat des incendies" (1981), 41 R. du B. 3, posits the principle that under art. 356 C.C.L.C. the public law is the legal regime of general application for municipal corporations; the civil law applies only exceptionally. Professor Archambault accepts, relying on an almost uniform jurisprudence, that the civil responsibility of municipal corporations falls within this exceptional regime. Nonetheless, the public law can displace the civil regime in certain circumstances (at pp. 40-41):

[TRANSLATION] Article 356 C.C. says that public law takes priority over civil law. When legislation simply authorizes or requires a municipal corporation to build a sidewalk or lay down a road, it exempts the corporation from the civil law obligations a private contractor has of keeping his property or service in good condition despite the vagaries of the weather and deterioration from use, and of making adequate provision for pedestrians and drivers. Under public law, the legislator considers that, when exercising its statutory powers as a public undertaking, the corporation is subject to no other obligations than the continuing obligations resulting from its decision to allow taxpayers to move about in the area. In the absence of contrary legislation, the only civil law obligation to which a municipal corporation is still subject is that of not causing damage beyond what may result from natural causes. Under public law, therefore, a municipal corporation cannot be held liable for damage due to natural conditions -- snow, water, wind and so on -- when, pursuant to a statutory power, it has acquired a public service that is designed to cope with the consequences of action by the elements but for whatever reason is unable to do so.

Though it may appear exceptional to the civil lawyer, this relative immunity applies in public law, and as such overrides the civil law obligations of the municipal corporation.

I cite Professor Archambault at length because it is at this point that his thesis differs from that of the second camp.

Professor Archambault extracts the rules relating to the relative immunity of municipal corporations from the classic common law case East Suffolk Rivers Catchment Board v. Kent, [1941] A.C. 74 (H.L.), which is considered to be an accurate statement of the common law position on the tortious liability of local authorities before the decision in Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.). The common law rules have application, in Professor Archambault's opinion, because they form part of the public law of Quebec. The Quebec Act of 1774, Professor Archambault explains, re-established the preeminence of the civil law in matters relating to property and civil rights. However, at the time of the enactment of the Quebec Act, the law of Quebec was the common law. A fundamental rule of the common law is that the common law governs, except in so far as it is derogated from by statute. The Quebec Act derogates from the common law, it is true, but only with respect to property and civil rights, thus leaving the common law to operate in all other areas, notably public law, until it too is derogated from by statute.

The effect of this first analysis, in the context of the case at bar, would be to exonerate the municipality from all liability, as did Nichols J.A. of the Court of Appeal, since the alleged fault of the municipality and its agents caused no more damage than that which would have been sustained in the absence of any public service.

The second camp in the debate over the meaning of art. 356 C.C.L.C. and the law applicable to the civil responsibility of municipal corporations counts among its members the authors McNicoll, L'Heureux and Garant, whose articles are cited in my colleague's reasons for judgment. Though each author adds his or her own nuances, they share the same essential understanding of the problem.

According to this second thesis, the principle that a municipal corporation can incur civil responsibility for damage caused to an individual is not a principle of civil law but of "public" common law. The applicable law in respect of the civil responsibility of municipal corporations is that enunciated in City of Kamloops v. Nielsen, 1984 21 (SCC), [1984] 2 S.C.R. 2, in which Wilson J. for the majority adopted the reasoning of Lord Wilberforce in Anns v. Merton London Borough Council, supra.

In these cases, the authors of the second theory of municipal responsibility see the erosion of the old public law rule that a municipal corporation cannot be held responsible for damage caused to an individual unless it acts negligently in the performance of a statutory duty or, in the exercise of a statutory power, it causes damage by its negligence that would not have been caused had it done nothing. The erosion manifests itself in the replacement of the power/duty analysis by a new policy/operational analysis of statutory conferrals of power. Under this new paradigm, while a municipality cannot be held responsible for any "policy" decision it might make, policy decisions being decisions of a political nature such as the initial decision to exercise the power to establish a service, when the municipality moves into the "operational" sphere of the power, that is to say the practical execution of its policy decision, private law duties or obligations arise.

At this juncture, the adherents of the second theory contend, one leaves the common law to return to the civil law of Quebec. In the common law provinces, tort law will govern the liability of a municipality for negligence in the operational sphere. In Quebec, however, the responsibility of a municipal corporation falls to be governed by arts. 1053 et seq. C.C.L.C. and the concept of fault rather than the concepts of negligence and the duty of care.

Of course, the public law, in the form of statute law, may explicitly exonerate the municipality from responsibility for its fault. Failing the intervention of the legislator, however, the municipality is subject to the law enunciated in the Civil Code.

In large measure, I adhere to the second school of thought. My reasoning differs somewhat from that of authors McNicoll, L'Heureux and Garant, however, so I will attempt to set out my own thoughts on the matter of the civil responsibility of municipalities.

Article 356 C.C.L.C. states that political corporations are governed by the public law. This statement, though necessary, is no more than obvious. A political corporation, such as a municipal corporation, is entirely a creature of statute. Article 18 C.C.L.C. provides:

18. Every human being possesses juridical personality.

Whether citizen or alien, he has the full enjoyment of civil rights, except as otherwise expressly provided by law.

In contrast, a municipal corporation has no rights and no powers except those conferred by statute. A municipal corporation cannot exceed the powers conferred upon it by the Cities and Towns Act, R.S.Q. 1977, c. C-19, or other statute, on pain of nullity. In principle, therefore, municipal corporations are subject to the law which creates them, the public law.

The Commissioners who drafted the Civil Code of Lower Canada did not intend that it be otherwise. In Civil Code of Lower Canada: First, Second and Third Reports (1865), they write at p. 231:

It will be felt that it was necessary to treat only of those corporations which fall under the control of the civil law, those governed by the public and administrative law not falling within the jurisdiction of the Commissioners; it was equally necessary for them to limit themselves to laying down the general rules, without entering into the details, nor into the enumeration of those which are peculiar to each corporation, which are to be found in the charter of each of them, and which vary according to the circumstances, their nature and the object for which they are destined.

It is for these objects that it is at once declared as a principle, that each corporation is above all obliged to conform to the conditions which have been imposed upon it by its charter, and also by the general laws made for the government of all kinds of corporations; and this other principle that, as artificial persons, corporations, in their relations with the other members of society, are clothed with the same powers and are bound by the same obligations as natural persons are, in so far as they are not hindered or exempted therefrom, either by the nature of their constitution, or by a special or general law.

Municipal corporations, which now hold so important a place in this province, have only been introduced here within a few years (1840); the act which gave them to us (4 Vict. ch. 4) has been frequently modified by many different laws, which are all re‑united and put in order in chapter 61 of the Consolidated Statutes of Lower Canada. In this statute, which forms the charter, not of creation, but of government of all municipal corporations present and future, are to be sought the rules according to which they are formed, organized and conducted. [Emphasis added.]

These paragraphs make it clear that the Commissioners here refer to civil corporations only, not to political corporations. Moreover, the first underlined passage contains a statement inconsistent with its application to municipal corporations which do not, in any circumstances, enjoy powers not conferred upon them by statute. Certainly they do not enjoy the powers of natural persons, even in their relations with other members of society.

The fact that the powers and duties of municipal corporations are described and governed by the public law does not necessarily exclude all application of the civil law to those corporations. The question of when the civil law may apply to municipal corporations is, however, a question of public law, not of private law. I have posited that in principle the public law governs municipal corporations. This proposition is consistent with the wording of art. 356 C.C.L.C., which suggests that political corporations are subject to the civil law only exceptionally. It would be surprising if the law of exception, here the civil law, determined its own application. Moreover, the civil law is the "droit commun" of Quebec: by its very nature, then, it applies in the same fashion to all those who are subject to it. There is no rule of the civil law that could indicate when the civil law would apply and when it would not.

If, as I suggest, the question of when the civil law applies to municipal corporations is governed by the public law, then any plaintiff claiming damages against the city pursuant to arts. 1053 et seq. must demonstrate that as a matter of public law, arts. 1053 et seq. apply to his action. The public law of Quebec is acknowledged to be composed of two elements: statute and the common law. In the case at bar, the statutory component of the public law, the Cities and Towns Act, confers the power upon municipalities to establish waterworks and a fire-fighting service, but gives no express indication of whether a municipality can be held responsible for damages caused in the exercise of that power.

The second component of the public law is the common law. Two clarifications must be made at this point. First, only that part of the common law which is of public character is applicable. Because the common law makes, in principle, no distinction between public and private law, the identification of the "public" common law can be a difficult task. Nonetheless, because Quebec is a jurisdiction of two juridical regimes, the civil law and the common law, the identification must be made. Second, it is the common law as it exists at present that is applicable in Quebec under art. 356 C.C.L.C. I agree with my colleague that the contention that the "public" common law applicable in Quebec is that of 1866 is untenable.

The pertinent case law (East Suffolk Rivers Catchment Board v. Kent, supra, Anns v. Merton London Borough Council, supra, and City of Kamloops v. Nielsen, supra) is canvassed in my colleague's judgment and I will confine myself to a restatement of the common law rule concerning the liability of municipal corporations and other public authorities.

Where the legislator confers a power upon a public authority, the conferral of power is usually couched in terms of a discretion. The discretionary power is necessary to allow the public authority latitude in which to make decisions that can be categorized as policy decisions: decisions of a political nature for which the authority should be accountable not before the courts but before the electorate or the legislature. Anns v. Merton London Borough Council, supra, and City of Kamloops v. Nielsen, supra, indicate that the form such policy decisions may take varies, ranging from by-laws and resolutions to internal directives, administrative decisions and even a discretion in the execution of activities within the operational sphere. The only duty incumbent upon the authority in the policy sphere is to make its decisions responsibly and in accordance with the object of the Act which conferred the power. However, the discretion conferred by the legislator is not so broad as to exclude all liability for the authority's actions. Once the authority moves into the operational sphere of its power, i.e. the practical execution of its policy decision, the authority will be liable for damage caused to an individual by its negligence. I point out that different considerations apply when an exercise of the power conferred on the authority must inherently adversely affect the interests of individuals. A power to establish waterworks and a fire-fighting service is not, however, such a power.

The question now arises as to whether this common law rule is a rule of public law or of private law. If it is a rule of private law, it cannot apply in Quebec: the Quebec Act established the preeminence of the civil law in matters relating to property and civil rights. It is true that in Anns, supra, and City of Kamloops, supra, the examination of the liability of the public authorities was expressed in the vocabulary of the common law concepts of negligence and duties of care. This does not preclude the possibility that the rule which establishes that within the operational sphere of its powers a public authority can be liable for damage caused by its negligence is a rule of public law. In fact, I do not believe that the rule can be categorized as other than a rule of public law. A rule which has application only to public bodies, which exists and is justified by the public nature of those bodies, is surely a rule of public law. Lord Wilberforce writes at p. 754 of Anns v. Merton London Borough Council, supra:

... the local authority is a public body, discharging functions under statute: its powers and duties are definable in terms of public not private law. The problem which this type of action creates, is to define the circumstances in which the law should impose, over and above, or perhaps alongside, these public law powers and duties, a duty in private law towards individuals such that they may sue for damages in a civil court.

What emerges from this statement is that the policy/operational analysis developed in Anns, and adopted in City of Kamloops, is designed to determine when the private law will apply to public authorities. Such a rule, as I have suggested above, is a rule of public law.

The second question to be addressed is how much of the common law rules relating to the liability of public authorities applies in Quebec. Essentially, the rule that within the operational sphere of its powers, a public authority owes a duty of care to avoid causing damage to those in sufficient proximity establishes a standard of conduct for public authorities. The standard established is that which all persons, not only public authorities, are subject to. Lord Wilberforce writes at pp. 755-56 of the Anns decision, supra:

... parallel with public law duties there may coexist those duties which persons -- private or public -- are under at common law to avoid causing damage to others in sufficient proximity to them. [Emphasis added.]

The standard of conduct to which all persons are subject in Quebec is that set out in arts. 1053 et seq. C.C.L.C. In Quebec, the "droit commun" --that is, the common law of the land -- is the civil law. I conclude that while the common law rule that municipal corporations are subject to the private law within the operational sphere of their powers applies in Quebec, the common law rules relating to the existence of a duty of care do not. In Quebec, the question of whether in the circumstances of a given case, a municipality has breached the standard of conduct imposed upon it falls to be determined by the "droit commun" of Quebec, arts. 1053 et seq. C.C.L.C. This principle has been almost unanimously recognized by the Quebec courts which, when they do conclude that a municipality may be held responsible for the damage it has caused to an individual, determine the content and extent of that responsibility according to the provisions of the Civil Code.

I find it useful, by way of conclusion, to root the principles discussed above in the text of art. 356 C.C.L.C., which I reproduce again for convenience:

356. Secular corporations are further divided into political and civil; those that are political are governed by the public law, and only fall within the control of the civil law in their relations, in certain respects, to individual members of society.

Civil corporations constituting, by the fact of their incorporation, ideal or artificial persons, are as such governed by the laws affecting individuals; saving the privileges they enjoy and the disabilities they are subjected to.

Article 356 C.C.L.C. provides that in principle, political corporations such as municipal corporations are governed by the public law. The civil law applies to them only exceptionally. Public law in Quebec has two sources, the statutory law and the common law. The meaning of the phrase "in certain respects" in art. 356 C.C.L.C. is therefore a problem to be resolved either by statutory provision or by the common law. As this Court observed in Adricon Ltée v. Town of East Angus, 1977 197 (SCC), [1978] 1 S.C.R. 1107, at p. 1120, in the matter of a municipality's contractual relations with individuals, the question is resolved by statute, since s. 28(1)(3) of the Cities and Towns Act confers upon a municipality the power to "contract, transact, bind and oblige itself and others to itself, within its powers." In the matter of a municipality's delictual and quasi-delictual relations with individuals, no express statutory provision is made. Here the second source of public law, the "public" common law as it exists at present, must determine the respects in which a municipal corporation falls within the control of the civil law in its relations with individuals. Under this common law, a municipal corporation which acts within the operational sphere of its discretionary powers is subject to private law standards of conduct. In Quebec, the private law stan­dards of conduct are those enunciated in the Civil Code, and particularly in arts. 1053 et seq. C.C.L.C.

The symmetry between the policy/operational rule drawn from the "public" common law and the collective relations/individual relations opposition established by art. 356 C.C.L.C. is no accident. When a municipal corporation exercises its discretionary powers to address political exigencies, it must make a judgment as to the interest of the community as a whole and is responsible to the community as a whole through the ballot box. However, once a municipality moves into the operational sphere of its powers, its negligent acts are susceptible of causing a distinct harm to an individual member of society, and it is responsible to that individual before the courts.

The application of the principles I have outlined above to the facts of the case at bar reveals that the responsibility of the city of Beauport for the damage caused to the appellants falls to be determined by arts. 1053 et seq. C.C.L.C.

The by-laws of the city of Beauport indicate that the city has exercised the discretionary powers conferred upon it by s. 412(22), (41), (42), and (44) and s. 423 of the Cities and Towns Act to establish a fire-fighting service and waterworks. Because of the view I take of art. 356 C.C.L.C. and the law applicable to the city of Beauport, I do not find it necessary to decide the question of what obligations or duties, if any, the municipality's by-laws impose upon it.

As my colleague indicates in her reasons, there is no statutory provision either exonerating the city of Beauport from, or subjecting the city of Beauport to, liability for damage caused by its acts pursuant to its discretionary powers. The resolution of the question of whether arts. 1053 et seq. C.C.L.C. apply to determine the city of Beauport's responsibility must therefore begin in the "public" common law. The first step in the analysis set out in the Anns and City of Kamloops decisions, supra, is to determine whether the acts or omissions alleged to have caused damage fall within the sphere of policy or within the operational sphere of the municipality's activities. The acts and omissions in question here fall into two categories: the failure to keep the fire hydrants clear and functioning and the acts and omissions of the municipality's firefighters. I will consider each in turn.

The testimony of Armand Grenier, a superintendent of the city of Beauport whose duties included ensuring that the fire hydrants were inspected, maintained and cleared, shows that no real policy decision was ever taken with respect to the inspection and repair of the fire hydrants. As a matter of practice, all hydrants would be inspected during the summer to ensure that they were functional, but no records were kept of those inspections. In winter, again as a matter of practice, all fire hydrants would be cleared after each snowfall, but again, no records were kept of these activities. There is no doubt that the municipality could have, as a matter of policy, established some scheme of inspection and repair. However, failure to make such a policy decision does not allow the municipality to escape the application of the private law. Wilson J. wrote for the majority in City of Kamloops v. Nielsen, supra, at p. 24, that:

In my view, inaction for no reason or inaction for an improper reason cannot be a policy decision taken in the bona fide exercise of discretion.

Therefore, in the absence of a policy decision to which the omission alleged to have caused damage can be attributed, the inspection and repair of the fire hydrants must be taken to be in the operational sphere, since they are the practical execution of the municipality's policy decision to establish the water system and to allocate personnel and money to the maintenance of the system. Private law standards therefore apply to the municipality's conduct.

The characterization of the acts and omissions of the city of Beauport's firefighters poses no difficulties: they are clearly operational in nature. Doubtless there exists a discretion in the execution of the firefighters' operational activities. But this discretion exists in the operational rather than the policy sphere, and the exercise of this discretion is itself an operational decision. Here too, private law standards apply.

I, like my colleague, accept the trial judge's finding that the city of Beauport was at fault under arts. 1053 et seq. C.C.L.C.

L'Heureux-Dubé J.

English version of the reasons delivered by

L'Heureux-Dubé J. -- The essential question in this appeal is the liability of municipal corporations in Quebec for their firefighting services.

In the case at bar a huge hotel complex located in the city of Beauport in Quebec, through the negligence of a client who was smoking, went up in flames on the night of February 24‑25, 1972. The owners of the building and its contents sued both the person who had set the fire, Gérard Tremblay, and the city of Beauport. They alleged fault by the latter in fighting the fire, namely that the city's equipment, including the fire hydrants and the waterworks, had not been maintained and did not function properly, resulting in a shortage of water. They also alleged fault by its employees in the performance of their duties, especially the fire chief.

The Superior Court (1980), 9 M.P.L.R. 184, allowed the action and found Gérard Tremblay liable for part of the damage, estimated at $54,123.48. It ordered the city of Beauport to compensate for the remainder of the damage, a total of $2,542,732.83.

The Court of Appeal, [1986] R.J.Q. 981, hearing only an appeal by the city of Beauport, found it was not liable and so allowed the appeal and dismissed the action: hence the appeal at bar.

The parties chose to focus the debate on the following points, which I will deal with in the same order:

-the applicable law in Quebec: is it Quebec civil law, as the appellants argued, or English public law, as suggested by the respondent city? -- in either system, what legal consequences does the exercise by a public corporation of its discretionary power have for its delictual liability?

-fault;

-the causal link;

-the quantum of damages.

I. The Law

A) Preliminary Observations

Article 356 of the C.C.L.C. is the key to the debate:

356. Secular corporations are further divided into political and civil; those that are political are governed by the public law, and only fall within the control of the civil law in their relations, in certain respects, to individual members of society.

Civil corporations constituting, by the fact of their incorporation, ideal or artificial persons, are as such governed by the laws affecting individuals; saving the privileges they enjoy and the disabilities they are subjected to.

There are two opposing interpretations of this provision and the debate has recently assumed the appearance of a controversy following the judgments at trial and in the Court of Appeal in the present case. (For the first interpretation, see Archambault, "La responsabilité délictuelle municipale: fondement et application au combat des incendies" (1981), 41 R. du B. 3; Archambault, "La responsabilité municipale dans le combat des incendies -- Malette c. Portage du Fort" (1984), 15 R.G.D. 107; Archambault, "Les sources juridiques de la responsabilité extra‑contractuelle municipale" (1985), 16 R.G.D. 101. Contra, see: L'Heureux, "Sources du droit et règles applicables en matière de responsabilité extra‑contractuelle au Québec" (1985), 16 R.G.D. 131; L'Heureux, "La responsabilité extra‑contractuelle des municipalités: un point de vue différent sur l'arrêt Ville de Beauport c. Laurentide Motels" (1987), 47 R. du B. 160; McNicoll, "La responsabilité civile délictuelle des municipalités en matière de combat des incendies" (1983), 24 C. de D. 379; McNicoll, "La réparation: une question de contrôle judiciaire" (1986), 32 McGill L.J. 187; Garant, "Les sources du droit de la responsabilité de la puissance publique" (1986), 46 R. du B. 260.)

The supporters of one interpretation, including the respondent and, in particular, Nichols J.A., argue essentially that in the exercise of a discretionary power, unless an obligation is imposed on the municipality by statute, which is not the situation here, or the municipality has itself undertaken such an obligation, which they contend is not the case here, the municipality cannot be sued for damages beyond those which may have resulted from the absence of a public service. This, they argue, is an application of the rules of public law as stipulated by art. 356 C.C.L.C., and they cite academic opinion and case law in support. (Archambault, loc. cit., 41 R. du B., at pp. 45, 49, 60‑61, 65 and 68; Wing v. Moncton, 1940 289 (NB CA), [1940] 2 D.L.R. 740 (N.B.S.C. App. Div.); Stevens‑Willson v. City of Chatham, 1934 7 (SCC), [1934] S.C.R. 353; East Suffolk Rivers Catchment Board v. Kent, [1941] A.C. 74 (H.L.), at pp. 87‑88 and 102.)

The proponents of the other view, which include the appellants and the Superior Court, maintain that if there is no legislation imposing a duty or obligation on it, or granting it immunity, a municipal corporation that chooses by way of by‑law to undertake to perform an act, even a discretionary one, commits a fault giving rise to liability under Quebec civil law if it does not fulfil its obligation or acts negligently in doing so, according to their interpretation of art. 356 C.C.L.C. They too call in aid a range of case law and academic opinion. (L'Heureux, McNicoll and Garant, loc. cit.; Chevalier v. Corporation de la Cité de Trois‑Rivières (1913), 20 R. de J. 100 (C. rév.); Magasin Continental (Québec) Ltée v. Rhéaume, C.A. Québec, No. 8797, August 30, 1973, at p. 19; Larivière v. Cité de Montréal (1941), 1941 219 (QC CS), 47 R.L. 505 (Sup. Ct.); Cité de Pont-Viau v. Gauthier Mfg. Ltd., 1978 4 (SCC), [1979] C.A. 77, at p. 84; City of Kamloops v. Nielsen, 1984 21 (SCC), [1984] 2 S.C.R. 2; Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.); Corporation of Montreal v. Doolan (1871), 18 L.C.J. 124 (C.A.))

The power/duty versus policy/implementation dichotomy is central to the debate, as are the sources and origins of art. 356 C.C.L.C. and the extent to which English public law applies in the case at bar.

Municipal corporations derive the powers delegated to them from the Cities and Towns Act, R.S.Q. 1964, c. 193 (now R.S.Q. 1977, c. C‑19), and their actions beyond those limits will be invalid (Phaneuf v. Corporation du Village de St‑Hugues (1936), 61 K.B. 83, opinion of Tellier J., at pp. 90‑91; City of Verdun v. Sun Oil Co., 1951 53 (SCC), [1952] 1 S.C.R. 222, at p. 228; Westminster Corporation v. London and North Western Railway Co., [1905] A.C. 426 (H.L.), at p. 430). Some provisions of this Act are peremptory, others discretionary. The provisions dealing with firefighting fall into the latter class: they do not impose any obligation on municipal corporations to acquire a firefighting service, but give them the power to do so. For our purposes these provisions are contained essentially in certain paragraphs of ss. 426 and 433 (as numbered in 1972, but in the 1977 revision numbered 412 and 423 respectively. Like the Court of Appeal I will use that last numbering here), which, apart from certain minor changes which are not relevant here, read now as they did then:

412. The council may make by‑laws:

(22) To protect the lives and property of the inhabitants and to prevent accidents by fire;

(41) To organize, maintain and regulate a fire department and fire‑brigade, and to equip and maintain the same with all necessary appliances by purchase or lease; to provide for the construction of fire stations; to appoint all officers and employees necessary for the extinction and suppression of fires, the protection of property from fire, and the prevention of accidents by fire; to provide for the punishment of any person who may interfere with any member of the fire‑brigade in the performance of his duty, or refuse to obey the lawful orders of the chief or deputy‑chief of the fire‑brigade, or who may tamper with or obstruct any of the signal boxes, wires or apparatus of the fire‑alarm department, or give a false alarm;

(42) To authorize the demolition of buildings, houses and fences, when deemed necessary to arrest the progress of fire; and to empower the mayor, the chief of the fire‑brigade or other officers or employees of the municipality to exercise this power. If there be no by‑law, the mayor may, during a fire, exercise this power by giving special authority;

(44) To authorize the mayor, under such provisions as the council may enact, to send fire‑engines, men and apparatus to any outside municipality that may be endangered by fire; provided however that such municipality shall be held responsible for all expenditure or damage which may be incurred in connection therewith;

423. The council may make by‑laws to provide for the establishment or acquiring, maintenance, management and regulation of waterworks, public wells, cisterns or reservoirs, to supply water to the municipality, and to instal hydrants, fountains, public drinking places and apparatus for filtering and purifying water.

Section 452 (now 442) of this Act was relied on by the city of Beauport as a ground of defence, and this ground was accepted by two of the three judges of the Court of Appeal:

442. The municipality shall not be bound to warrant the quantity of water to be supplied; and no person may refuse, on account of the insufficiency of the water supply, to pay the annual special tax and the compensation for the use of the water.

In the case of the exercise of a discretionary power by a municipal corporation, case law and doctrine have consistently stated that failure to exercise this power does not render the municipal corporation liable (Authier v. Corporation de la Ville de l'Assomption (1903), 9 R. de J. 374 (Sup. Ct.), at p. 380; Lefebvre v. Town of Grand-Mère (1917), 1917 87 (SCC), 55 S.C.R. 121, at p. 132; City of Montreal v. Mulcair (1898), 1898 46 (SCC), 28 S.C.R. 458; Napper v. Cité de Sherbrooke, 1968 99 (CSC), [1968] S.C.R. 716, at p. 726; Peltier v. Corporation of the Village of Gatineau Pointe (1937), 76 C.S. 180, at p. 181; McNicoll, loc. cit., 24 C. de D., at pp. 404‑7; L'Heureux, loc. cit., 16 R.G.D., at pp. 142‑46; Archambault, loc. cit., 41 R. du B., at pp. 50‑51; City of Kamloops and Anns, supra). The exercise of this power depends on the wishes or the political constraints of a municipal corporation, whose decision is affected by various factors such as the extent of its territory, its population, its financial resources, pressure from its electorate and so on. The municipal corporation will answer only to its electorate for its political decision on whether to introduce such a service. In this regard a municipality, which is a public body, is governed by public law as indicated in art. 356 C.C.L.C. (L'Heureux, loc. cit., 16 R.G.D., at pp. 141‑42; Brousseau v. Cité de Québec (1912), 42 C.S. 91 (C. rév.), at p. 93; Roy v. Cité de Montréal (1892), 2 C.S. 305, at p. 306; Wilshire v. Corporation du village de St-Louis du Mile-End (1899), 8 Q.B. 479, at p. 486; Authier, supra; Quesnel v. Emard (1912), 1912 622 (QC CA), 8 D.L.R. 537 (C. rév.), at p. 541; Archambault, loc. cit., 41 R. du B., at pp. 50‑51).

When the municipality elects to acquire a firefighting service, its act also has political ramifications, and here again it will not be liable for exercising this choice in the manner in which it decides to do so. For example, a municipal corporation may decide to acquire a single fire engine, to hire only one firefighter, not to maintain its equipment, not to instal hydrants and so on depending on a number of factors which it alone is in a position to assess and for which it will be answerable to its electorate. It cannot be held liable for the inadequacy of the firefighting measures it thus chooses to take (L'Heureux, loc. cit., 16 R.G.D., at pp. 148‑49; McNicoll, loc. cit., 24 C. de D., at pp. 405‑7; Fournier v. Cité de Lachine (1926), 66 C.S. 109, at p. 111; Quesnel, supra, at p. 541; Lanouette‑Perreault v. Corporation municipale de St-Théodore de Chertsey, Sup. Ct. Joliette, No. 705‑05‑000840‑75, January 30, 1979, at p. 8; Brousseau, supra, at p. 93). If, for example, the municipality was unable to respond to two fires which occurred simultaneously, it would not be liable (Harris v. Marter (1874), 1874 72 (NB SC), 15 N.B.R. 165 (S.C. App. Div.), at pp. 172‑74, cited by Archambault, loc. cit., 41 R. du B., at p. 51). Here again the municipality is governed by public law (L'Heureux, loc. cit., 16 R.G.D., at pp. 142‑43; Welbridge Holdings Ltd. v. Metropolitan Corporation of Greater Winnipeg, 1970 1 (SCC), [1971] S.C.R. 957; Marcoux v. Ville de Plessisville, [1973] R.P. 385 (C.A.)) Where there is a statutory obligation to act, the municipality will be liable (Joseph Investment Corp. v. Cité d'Outremont, 1972 155 (SCC), [1973] S.C.R. 708, opinion of Pigeon J., at p. 712), just as non‑liability will be the rule where there is a statutory immunity (Archambault, loc. cit., 16 R.G.D., at p. 116).

These principles of public law are not the subject of any academic or judicial dispute and are not at issue here. However, I feel it is essential to state these premises in order to put the matter in its proper context and avoid any ambiguity, particularly in view of the confusion that appears to reign in some of the decided cases and doctrine.

The question before the Court arises at quite a different level. At issue here are the legal consequences of the discretionary political decision of a municipal corporation to establish a firefighting service by way of by‑law. The issue arises in this grey area of "statutory silence" or the absence of any statutory obligation or immunity. Specifically it concerns a firefighting service as established by the municipal corporation in the exercise of its discretionary power to decide the quality and extent of such a service, a matter which is solely for the corporation to decide and subject to the requirements of public law.

B) Judgments

1. Superior Court

Roberge J. first concluded that the person who set the fire, Gérard Tremblay, was liable for part of the damage suffered by the appellants. Tremblay did not file an appeal and so far as he is concerned the matter is now res judicata. The liability of the city of Beauport for the remainder of the damage, on the question of law before the Court at this stage, was considered by the trial judge in light of the by‑law adopted by the city to create a fire department. He asked himself the following question (at p. 193):

[TRANSLATION] Because it exercised this power, can we say that Beauport can be held liable when there is a fire?

He answered this question as follows (at pp. 193-94):

[TRANSLATION] The courts have always given a categorically negative answer to this question, but happily a reversal of this trend is now well under way; the Court does not intend to review these old cases; it will confine itself to certain cases that take the new approach.

The shift would appear to have been made by the Court of Appeal in Magasin Continental (Québec) Ltée v. Rhéaume et Ville de Québec (Q.C.A. 8797 et al., August 30, 1973, unreported).

After discussing this case, and in particular the obiter dictum of Brossard J.A., the trial judge cited the judgment in Lanouette‑Perreault and the case of Cité de Pont-Viau, supra, including in particular the following passage from the opinion of Lamer J.A., as he then was (at p. 84):

[TRANSLATION] Bearing in mind the reservations I have just made, when the chief and his firefighters responded to the alarm and took charge of the situation, at that point if not before, they assumed on the city's behalf, an obligation to carry out their functions en bon père de famille and any fault in the performance of that obligation that might be alleged against them will make the city liable for the damage caused by such fault.

The trial judge then referred to the following passage from R. v. Corporation of the City of Sault Ste. Marie, 1978 11 (SCC), [1978] 2 S.C.R. 1299, where Dickson J., as he then was, said (at p. 1329):

When the defendant is a municipality, it is of no avail to it in law that it had no duty to pick up the garbage, s. 354(1)(76) of The Municipal Act, R.S.O. 1970, c. 284, merely providing that it "may" do so. The law is replete with instances where a person has no duty to act, but where he is subject to certain duties if he does act.

Roberge J. concluded (at p. 196):

[TRANSLATION] This Court concludes, based chiefly on this Gauthier Mfg. case, that a municipal corporation which has a firefighting service may be held liable when certain types of fault, lack of care, negligence or recklessness, which are not simply errors of judgment, are proven against the corporation or its employees in the course of their duties.

2. Court of Appeal

Vallerand, Nichols and Chouinard JJ.A., who filed separate opinions, concurred in the result for different reasons and reversed the Superior Court judgment.

The Court of Appeal judgment held essentially that the establishment of a firefighting service by a municipal corporation, a matter within the exercise of a discretionary power, is governed by public law, which imposes no obligation to maintain such a service, in the absence of legislation or a by‑law to that effect. Where the city of Beauport has undertaken no such obligation, as it submits is the case here, Vallerand and Nichols JJ.A. concluded there was no duty to act, and so no liability beyond the damage which the fire, left to itself, would have caused; in this they agree with the approach of Professor Archambault. Chouinard J.A. differed on this point: once a municipal corporation chose to exercise its discretion and to provide a firefighting service, [TRANSLATION] "it voluntarily created obligations for itself which it had to carry out so as not to cause damage to third parties by a lack of care, by the use of improper methods by the city or its employees" (p. 1015). He would have applied the rules in arts. 1053 et seq. C.C.L.C. in assessing the fault, concurring in this respect with Vallerand J.A., who stated in general terms (at p. 1005):

[TRANSLATION] To determine . . . "if he owes (a) duty to them" . . . we must leave the civil law and move to public law.

In other words, the actions taken by public bodies in this area are a matter for public law, not the civil law.

Note, however, that once the public law problem has been resolved, we must return to the fold immediately without stopping to consider the legal effects on liability at common law or under the statutory law of other jurisdictions.

Vallerand and Chouinard JJ.A. both found, however, that s. 442 of the Cities and Towns Act was a bar to the appellants' action in the instant case. Nichols J.A. concluded, after a carefully documented analysis of the origins of art. 356 C.C.L.C. and the principles of public law, that [TRANSLATION] "the liability of municipalities arising out of the operation of fire and water services must be governed by public law" (p. 991), because he said water and fire services do not establish [TRANSLATION] "individual relations" with other members of society. He rejected the application of Anns and City of Kamloops, supra, to Quebec, as he considered that those cases applied the rules of English private law. In his opinion, [TRANSLATION] "private law is exclusively a matter for the provincial legislature in Quebec" (p. 1002) and since the codification [TRANSLATION] "neither Quebec private law nor English private law can be applied: the first because it contravenes art. 356 C.C.L.C. and the second because it is precluded by the Quebec Act" (p. 997). In any case, public law as it stood at the time of codification [TRANSLATION] "did not hold a municipality liable merely for inaction" (p. 1002), he added, a conclusion which he thought was in any event similar to that of Quebec civil law, in which [TRANSLATION] "omission, inaction, passivity or failure to act are only a fault to the extent that there is a duty to act" (p. 997).

None of the judges of the Court of Appeal accepted the trial judge's findings of fact on the causal faults, hence the dismissal of the appellants' action.

It can thus be seen that one of the fundamental differences in law between the Court of Appeal and the Superior Court, as well as between Nichols and Vallerand JJ.A. and Chouinard J.A., rests on the premise that by choosing to exercise its discretionary power and establish a firefighting service, in the absence of legislation imposing such a duty and responsibility on it, the city of Beauport did not, in the opinion of the former, assume the duty of maintaining that service and was therefore not liable for failing to maintain it. In the latter's opinion the duty of maintenance existed merely because the service had been established. This would result in liability in the event of causal fault, although in this case liability was excluded by the enabling legislation, according to the Court of Appeal.

C)Public Law Respecting the Exercise of a Discretionary Power by a Public Body

The Quebec Act of 1774 sealed the fate of the two major legal systems that would govern the law applicable in Quebec: French civil law as it stood before 1760 with its subsequent amendments in Quebec for everything relating to property and civil rights, and the common law as it stood in England at that time, and as subsequently amended, for what related to public law. Section VIII stated:

. . . and that in all Matters of Controversy relative to Property and Civil Rights, Resort shall be had to the Laws of Canada, as the Rule for the Decision of the same . . . until they shall be varied or altered by any Ordinances that shall, from Time to Time, be passed in the said Province.

Section 92(13) of the Constitution Act, 1867 incorporates this rule:

92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subject next hereinafter enumerated; that is to say, --

93. Property and Civil Rights in the Province.

Louis‑Philippe Pigeon said the following (Drafting and Interpreting Legislation (1988), at pp. 65‑66):

This is why, for instance, English law is the basis of municipal and school law, and of administrative law generally. Our Court of Appeal rendered a very important decision on this point: Langelier v. Giroux, 52 B.R. 113 (Que.).

The judgment lays down an extremely important principle: in matters of public law in the Province of Québec, the basic law is English law. Why? Because in keeping with the rule that general law is not derogated from beyond what is expressed, application of common law extends to all that is not formally excluded.

In everything not related to property and civil rights, then, common law is the fundamental law in the Province of Québec. Moreover, "property and civil rights" must be interpreted according to the meaning given the expression in an Act of the British Parliament, passed in 1774, since the words must not be interpreted according to civil law. . . Indeed, when distinctions are to be drawn between systems of law, those distinctions must be drawn in accordance with a determined system. And as the Supreme Court decided with respect to interpretation of the Constitution Act, 1867 -- R. v. National Trust Co., 1933 53 (SCC), [1933] S.C.R. 670 (S.C.C.) -- the legal system under which those distinctions must be drawn is common law.

Before going any further it is perhaps best to clarify which public law is involved. Some writers have claimed to see in Nichols J.A.'s opinion an assertion that the applicable public law is that which existed at the time of the codification. Garant, loc. cit., at p. 266:

[TRANSLATION] The position of two judges of the Court of Appeal, especially Nichols J.A., that the liability of public corporations is governed by English public law at the time of the 1866 codification leads them to conclude that this public law is the common law as it stood in 1866, not as it has developed since that time, through the decisions of the Supreme Court of Canada or the courts of other provinces in cases arising in other provinces. Quebec common law would thus be different from other common law.

L'Heureux, loc. cit., 47 R. du B., at p. 167:

[TRANSLATION] Seeking to determine English public law as it stood at the time of codification, he (Nichols J.A.) concluded that that law "did not hold a municipality liable merely for inaction".

In my opinion, this is an incorrect interpretation of the reference made by Nichols J.A. to the Quebec Act and to English public law as it stood in England at the time of the codification. The statement by Nichols J.A. was made in the context of the application of Anns and City of Kamloops, supra, in Quebec. In his view, those cases are not binding in Quebec because they apply the private law of England, which the Quebec Act provides does not apply in Quebec. If Quebec private law is also not applicable, it is because according to his interpretation of art. 356 C.C.L.C., the solution of the dispute rests with public law, which at common law has remained the same as that existing at that time, since only the private law in this area has subsequently been amended by the common law. This in my opinion is the context in which we should read the following observations, the fine points of which appear to have escaped certain commentators (at p. 1002):

[TRANSLATION] 8. While the English courts, and after them the Supreme Court of Canada for the common law provinces, have changed the state of the law so that municipalities are henceforth subject to private law in cases involving the implementation of discretionary policies, private law is exclusively a matter for the provincial legislature in Quebec, as the field of private civil liability is included in the expression "property and civil rights" in the Quebec Act and in s. 92(13) of the Constitution Act, 1867;

9. Anns and Nielsen are therefore not applicable in Quebec; [Emphasis added.]

No writer nor court of law has ever defended such an argument, since the common law which applies in Canada in the area of public law, in criminal as in administrative law, in the absence of legislation excluding it, is the common law as subsequently amended by statute and case‑law. When Louis-Philippe Pigeon, op. cit., referred back to the common law as it stood in 1774, this was solely in order to make it clear that the expression "property and civil rights" in the Quebec Act must be given the meaning it had at that time (at p. 66):

In everything not related to property and civil rights, then, common law is the fundamental law in the Province of Québec. Moreover, "property and civil rights" must be interpreted according to the meaning given the expression in an Act of the British Parliament, passed in 1774, since the words must not be interpreted according to civil law.

These principles are well established. However, it is not sufficient to say that public bodies, such as municipal corporations, are governed by public law: the content and limits of that law must still be defined. In the grey area resulting from statutory silence, now being considered by this Court, if a municipal corporation has a discretionary power regarding firefighting, where is the rule and what is it? I have already indicated in outline the major distinctions that must be made. I shall therefore only deal here with the limited aspect affecting the specific question to be addressed.

1. East Suffolk Rivers Catchment Board v. Kent

Until recently it appeared that both doctrine and case law, in Quebec as in the common law jurisdictions, by application of public law, were unanimous in concluding that public corporations were not liable if acting in the exercise of their discretionary powers. It is not clear, however, that the necessary distinctions have always been made between liability arising from the failure of a public corporation to exercise a discretionary power and that arising from the exercise of that discretionary power and the manner in which it was exercised. Similarly, it will be noted that there is no distinction made as to whether express legislation is required in the area of implementing the policies of public bodies. The implied obligation of implementation following the exercise of a discretionary power does not appear to have been closely examined in the legal literature, nor do the courts seem to have dealt with it at any length. These are precisely the aspects which are under consideration here and are at the very heart of the debate.

Public law has its origin in the common law, and common‑law decisions must thus be examined to determine the state of public law in the area applicable in Canada.

The nature and scope of the rules of public law and case law governing the liability of municipalities are particularly important here, where the dividing line between public and private law is crucial. This task is made all the more difficult as, at least initially, the common law courts made no clear distinction between public and private law, which are both derived from the same source, the common law. However, to place public law in its true context with regard to the liability of public corporations, and municipal corporations in particular, we need only go back to East Suffolk Rivers Catchment Board v. Kent, supra. In that case, a breach occurred in a sea retaining wall owing to an exceptionally high tide. In the exercise of its statutory powers, the Board decided to repair the wall but did the work so inefficiently that the flooding continued for 178 days, causing serious damage to Mr. Kent's land. According to the evidence repairs done with reasonable skill could have been complete in 14 days. Mr. Kent sued the Board. The House of Lords dismissed the action, Lord Atkin dissenting, on the ground that "the Act imposed upon the appellants no duty of repairing the wall. It merely gave them the power of doing so" (p. 98). Lord Romer added (at p. 102):

Where a statutory authority is entrusted with a mere power it cannot be made liable for any damage sustained by a member of the public by reason of a failure to exercise that power. If in the exercise of their discretion they embark upon an execution of the power, the only duty they owe to any member of the public is not thereby to add to the damages that he would have suffered had they done nothing. So long as they exercise their discretion honestly, it is for them to determine the method by which and the time within which and the time during which the power shall be exercised; and they cannot be made liable, except to the extent that I have just mentioned, for any damage that would have been avoided had they exercised their discretion in a more reasonable way.

This restrictive interpretation of the liability of public bodies in the exercise of their discretionary powers was the interpretation accepted in Canada as well as Quebec until Anns, supra, in 1978. (Mainwaring v. Nanaimo, 1951 273 (BC CA), [1951] 4 D.L.R. 519 (B.C.C.A.); Miller & Brown Ltd. v. City of Vancouver (1966), 1966 393 (BC CA), 59 D.L.R. (2d) 640 (B.C.C.A.); Barratt v. Corporation of the District of North Vancouver, 1980 219 (SCC), [1980] 2 S.C.R. 418; McCrea v. City of White Rock (1974), 1974 1147 (BC CA), 56 D.L.R. (3d) 525 (B.C.C.A.); Seguin v. Town of Hawkesbury, 1955 135 (ON CA), [1955] O.R. 956 (C.A.); Martel v. City of Montreal, [1943] C.S. 290.)

2. Anns v. Merton London Borough Council

This case significantly altered the rule as stated in East Suffolk. The issue raised in Anns was one of the liability of the local authority responsible for approving the plans to build a block of maisonettes without subsequently ensuring that the plans were observed. The walls and floors of these buildings had serious construction defects directly related to failure to observe the officially approved plans: hence the action against the Council. In his judgment, Lord Wilberforce set forth the principles that should govern the law in this area in the common law provinces.

Anns is important in both private law and public law. In the area of public law, it overturns the restrictive interpretation given in East Suffolk to the exercise of discretionary powers by a public body. In private law, it applies the law of negligence to the facts of the case. As the aspects of public and private law are nearly always discussed together, Anns must be carefully examined to distinguish the one from the other. These two aspects were adopted together, as was required, in the common law provinces. For the purposes of the case at bar, however, developments in the law of negligence are not relevant since they fall strictly within private law. We are only concerned here with what relates to public law. Lord Wilberforce indicated the dividing line between public and private law when he wrote (at p. 754):

. . . the local authority is a public body, discharging functions under statute: its powers and duties are definable in terms of public not private law. The problem which this type of action creates, is to define the circumstances in which the law should impose, over and above, or perhaps alongside, these public law powers and duties, a duty in private law towards individuals such that they may sue for damages in a civil court.

It is perhaps unfortunate that there is some confusion arising out of the use of the word "duty" by Lord Wilberforce in two different contexts. In speaking of "powers and duties", he refers to those devolving under the enabling legislation. In this formulation, the powers and duties of a municipality must be defined in terms of public law. However, when he later uses the word "duty" it can only refer to private law, to the duty of care in the law of negligence, which he says may exist "over and above . . . the duties" imposed by public law. There is therefore nothing to prevent the application of the rules of civil liability over and above, and alongside, statutory duties. Thus, for example, public law might impose a statutory duty to inspect or maintain certain equipment. In addition to this statutory duty, there would be a duty to act with due care. In Quebec civil law terms, this would be expressed as a duty to act "en bon père de famille".

Lord Wilberforce also introduced the "policy/operational" concepts into the area of public law. Enabling legislation, such as the Cities and Towns Act or the Municipal Code of Quebec, may confer wide discretionary powers on municipalities, such as the power to establish a firefighting service. The "operational" area is what ensures that public policy‑making decisions, discretionary or otherwise, will be implemented. Lord Wilberforce goes on to say (at p. 754):

Although this distinction between the policy area and the operational area is convenient, and illuminating, it is probably a distinction of degree; many "operational" powers or duties have in them some element of "discretion". It can safely be said that the more "operational" a power or duty may be, the easier it is to superimpose upon it a common law duty of care.

In so doing, Lord Wilberforce removes all ambiguity: the duty of care is clearly a matter for private law, and in Quebec, private law is the civil law. What I think is most significant in this passage is the statement that independent civil liability can coexist regardless of whether the enabling statute imposes a duty or only confers a power. I consider that Anns settles the state of the common law so far as English public law is concerned, public law which is applicable to municipal corporations in Quebec as elsewhere in Canada. Only the private law aspect, the law of negligence, dealt with in Anns would be irrelevant or inapplicable in Quebec, where private law is within the domain of the civil law.

3. City of Kamloops v. Nielsen

This case, which dates from 1984, has much in common with Anns, supra. In City of Kamloops, the plans for building a house were approved by the city subject to certain conditions regarding the depth of the foundations. The builder did not comply with these requirements and a stop work order was issued. As no other steps were taken by the city, construction continued despite the injunction. The subsequent purchaser sued the city, holding it responsible for the deficiencies and damage related directly to the defective foundations. Wilson J., speaking for the majority, discussed the principles formulated in Anns, supra. She referred to the public law/private law distinction, citing Lord Wilberforce (at pp. 8‑9):

Lord Wilberforce pointed out that the local authority is a public body whose powers and duties are definable in terms of public rather than private law. However, in some circumstances the law could impose over and above, or perhaps alongside, these public law powers and duties a private law duty towards individuals enabling them to sue the authority for damages in a civil suit.

She later reiterated the private law test of the law of negligence and applied it.

It is therefore possible to distinguish the public law/private law aspects both in Anns and in City of Kamloops, supra. In its public law aspect, Anns and after it City of Kamloops, which adopted it, departed from some of the immunities of public bodies that had existed since East Suffolk, supra. These immunities were based on the concepts of duties and powers. Instead, Anns made a distinction between policy decisions, whether discretionary or not, and the operational area, in which those policies are implemented, superimposing in both cases the existence of civil liability.

The public law/private law distinction in Anns and City of Kamloops is not easy to detect and this may be why the Quebec Court of Appeal had some difficulty determining whether these cases were applicable to Quebec, and to what extent. Nichols J.A. refused to apply them, as he felt this was an application of English private law, which is excluded by the Quebec Act. However, as I believe I have already shown, these two cases are only concerned with private law to the extent that they superimpose it on the powers or obligations created by public law. In the Quebec context, this is consistent with art. 356 C.C.L.C., which provides that private law is applicable to political corporations "in their relations, in certain respects, to individual members of society".

4. Subsequent Developments

The law rarely stands still for very long. Since Anns, a certain line of authority has appeared in the common law in England which seems to be trying to limit the scope of Anns (Yuen Kun Yeu v. Attorney-General of Hong Kong, [1988] A.C. 175 (P.C.), and Curran v. Northern Ireland Co‑ownership Housing Association Ltd., [1987] 2 All E.R. 13 (H.L.)) However, a careful reading of these decisions shows that the aim is not to minimize the principle that a public corporation is liable but rather to limit the breadth of the principles of liability in private law (torts principles) developed by Lord Wilberforce in Anns.

Historically, at common law, no action for damages could lie without a form of action defining its extent. The concept of negligence developed much later. In modern law, negligence is no longer regarded as a distinct head: rather, "negligence is a basis of liability, rather than a single nominate tort" (Fleming, The Law of Torts (6th ed. 1983), at p. 98). As such, negligence may cover a very wide field and this is why the courts of law have developed techniques such as the "duty of care" to limit the scope of liability in certain cases "in consonance with current notions of policy" (Fleming, op. cit. at p. 99). Yuen Kun Yen, supra, is a good illustration of this. Investors in a company registered with the Commissioner of Deposit‑taking Companies in Hong Kong sued the Commissioner when the company went into liquidation and they lost the money they had invested. They alleged that the Commissioner was liable either because he had certified a company whose affairs were conducted fraudulently or because he had not ensured that it complied with certain regulations. The Privy Council dismissed the action. The case was reported under the heading of a negligence action, and decided on the basis of the rules of negligence. The principle that a public body could be found liable was not questioned, nor was the potential for a coexistence of a duty of care alongside statutory obligations. The Court held instead that there was no duty of care in the circumstances.

Similarly, in Curran, supra, Lord Bridge clearly established that the scope of Anns was limited only in its private law aspect, when he wrote (at p. 17):

My Lords, Anns v Merton London Borough may be said to represent the high‑water mark of a trend in the development of the law of negligence . . .

In 1985 the High Court of Australia (Sutherland Shire Council v. Heyman (1985), 1988 ABCA 234, 60 A.L.R. 1) unanimously reversed the Court of Appeal, which had held a local authority liable for damage caused by the defective foundations of a house. Gibbs C.J. described Anns as "a fundamental principle of the law of negligence" (at pp. 11-12), but Mason J. stated the following general principle (at p. 27):

It is now well settled that a public authority may be subject to a common law duty of care when it exercises a statutory power or performs a statutory duty. The principle that when statutory powers are conferred they must be exercised with reasonable care, so that if those who exercise them could by reasonable precaution have prevented an injury which has been occasioned, and was likely to be occasioned, by their exercise, damages for negligence may be recovered [citations omitted] has been applied mainly to private Acts. However, it has been frequently applied in Australia to public authorities . . . [I]t has been generally accepted that, unless the statute manifests a contrary intention, a public authority which enters upon an exercise of statutory power may place itself in a relationship to members of the public which imports a common law duty to take care. [Emphasis added.]

It seems clear that this case applies only to the private law aspect of Anns and does not in any way limit the authority of Anns in its public law aspect; quite the contrary, especially if we read the following passage from the opinion of Mason J. (at p. 26):

When a statute sets up a public authority, the statute prescribes its functions so as to arm it with appropriate powers for the attainment of certain objects in the public interest. The authority is thereby given a capacity which it would otherwise lack, rather than a legal immunity in relation to what it does . . . In framing such a statute it is inconvenient to describe the intended activities of the authority in terms of a series of positive duties. It is preferable to express those activities as functions or powers so that the authority is free to make policy‑making decisions and discretionary judgments with a view to attaining the statutory objects . . . Viewed in this light statutory powers are not in general mere powers which the authority has an option to exercise or not according to its unfettered choice. They are powers conferred for the purpose of attaining the statutory objects . . . There is, accordingly, no reason why a public authority should not be subject to a common law duty of care in appropriate circumstances . . .

In his review of the Commonwealth decisions following Anns, Professor Stephen Todd ("The Negligence Liability of Public Authorities: Divergence in the Common Law" (1986), 102 L.Q.R. 370) makes certain relevant observations in analysing the public law/private law aspects in Anns and City of Kamloops, supra, at pp. 396‑97:

Where, however, the local authority acts pursuant to a statutory power, it is not the statute which is the source of any duty. The point is that the authority may be in a position where a duty arises at common law. The statute provides the authority or reason for acting but no more than that. The source of the duty is in familiar common law principles of foreseeability, proximity, reliance and the like. Any supposed purpose of the statute should not debar recovery of damage which is of a foreseeable kind and is not otherwise irrecoverable for some good reason of policy.

It is interesting to note that the American case law is moving in the same direction, as indicated in a recent judgment of the United States Supreme Court (Berkovitz by Berkovitz v. United States, 108 S. Ct. 1954 (1988)) in which Marshall J., speaking for the unanimous Court, writes (at p. 1964):

In addition, if the policies and programs formulated by the Bureau allow room for implementing officials to make independent policy judgments, the discretionary function exception protects the acts taken by those officials in the exercise of this discretion. Cf. id., at p. 820, 104 S.Ct., at pp. 2767‑2768 (holding that discretionary function exception barred claim that employees charged with executing the FAA's spot‑checking program make negligent policy judgments respecting the proper inspection of airplanes). The discretionary function exception, however, does not apply if the acts complained of do not involve the permissible exercise of policy discretion. Thus, if the Bureau's policy leaves no room for an official to exercise policy judgment in performing a given act, or if the act simply does not involve the exercise of such judgment, the discretionary function exception does not bar a claim that the act was negligent or wrongful. Cf. Indian Towing Co. v. United States, 350 U.S., at p. 69, 76 St.Ct., at pp. 126‑127 (holding that a negligent failure to maintain a lighthouse in good working order subjected Government to suit under the FTCA even though the initial decision to undertake and maintain lighthouse service was a discretionary policy judgment). [Emphasis added.]

5. Conclusion

From the foregoing I conclude that the public law/private law aspects may be distinguished in Anns and City of Kamloops, as in subsequent cases, and that these cases apply in their public law aspect in Quebec as in Canada. Consequently, public law, applicable in Canada as in Quebec, provides that public corporations, which includes municipal corporations, may incur civil liability in the exercise of their discretionary statutory powers in addition to and alongside their statutory obligations. However, this conclusion does not decide the question before the Court, though it paves the way for doing so.

D) Power/Duty; Policy/Implementation

In this dichotomy it will be recalled that, under the Cities and Towns Act, the city of Beauport had the power and not the duty to equip itself with a firefighting service, and that it exercised this power by taking the policy decision to establish such a service. It acquired appropriate equipment and allocated the firefighters and other employees it thought were necessary for the proper operation of such a service. We are thus at the operational stage here, and no longer at that of policy‑making.

Considering only the principles of public law applicable to the case at bar, as stated in Anns and City of Kamloops, there can be no doubt that any wrongful implementation will result in liability if there is damage having a causal connection with the fault.

However, these principles apply only if the enabling Act or the city itself, in the exercise of its discretionary policy‑making power, has not limited the public corporation's obligations in this regard in any way.

The first question to be settled in this process, therefore, concerns the statutory immunity which, in the opinion of the Court of Appeal, the Cities and Towns Act confers on municipalities under s. 442, dealing with water supply. The second stage, if it proves to be necessary, will consist in examining the by‑laws of the city of Beauport dealing with its water and firefighting services, to determine the scope and extent of the obligations assumed by the city of Beauport when it decided to equip itself with this service. In other words, the question is whether the city of Beauport intended to operate this service.

E) Section 452 of the Cities and Towns Act

Section 452, now 442, of the Cities and Towns Act reads as follows:

442. The municipality shall not be bound to warrant the quantity of water to be supplied; and no person may refuse, on account of the insufficiency of the water supply, to pay the annual special tax and the compensation for the use of the water.

Does this section of the enabling Act confer an immunity on a municipal corporation as to maintaining the water supply? The Court of Appeal held that it does. With respect, that is not my opinion.

Section 442 appeared for the first time in the Cities and Towns' Act, 1922, S.Q. 1922, c. 65, assented to on December 29, 1922. The section was then numbered 441. It appeared in an identical form, but renumbered 452, in a subsequent version of the Act (R.S.Q. 1925, c. 102). The wording of the section has never in fact been amended since it was promulgated, except that it has been again renumbered and is now 442.

The Court of Appeal cited this section in ruling out liability on the part of the municipality, in particular per Vallerand and Chouinard JJ.A. In his reasons Vallerand J.A. saw s. 442 as an obstacle to applying the common law, and in particular Anns and City of Kamloops, supra. In his view, those cases would apply [TRANSLATION] "if there were no relevant provision of a Quebec statute" (p. 1008). In his view, s. 442 is such a "relevant provision". He explained (p. 1008):

[TRANSLATION] But where in Kamloops the by‑law imposed an express duty on the inspector, here s. 442 of the Cities and Towns Act exempts the municipality from any liability for an insufficiency of water.

Chouinard J.A. supported this view (p. 1015):

[TRANSLATION] I agree with the critical analysis by Vallerand J.A. of the grounds of liability accepted by the trial judge and with his interpretation of ss. 423 and 442 of the Cities and Towns Act.

At the outset Vallerand J.A. noted the ambiguity of the wording of this section (at pp. 1008‑9):

[TRANSLATION] The wording is awkward to say the least; the juxtaposition of propositions bizarre; their ultimate object ambiguous. Is it a single proposition which concerns only taxation, or two very distinct propositions one dealing with civil liability and the other with taxation? I think reasons can be found in support of either interpretation.

He sought his answer in textual arguments: the phraseology of the section, its context, its punctuation and the definition of words.

With respect to phraseology, he linked the two distinct propositions regarding civil liability and taxation by giving them a common basis, [TRANSLATION] "failure to supply water" (p. 1009), and concluded that s. 442 has a twofold effect: to preclude civil liability and to ensure the payment of taxes. The context of the part of the Act in which s. 442 falls gave him his second argument. This division is titled "Water Supply", which he felt suggests that s. 442 is concerned with the supply of water rather than with taxation, as other sections in the same division would also suggest. On the question of punctuation, Vallerand J.A. was very influenced by the presence of a semicolon (at p. 1009):

[TRANSLATION] It seems to me that the intent was to differentiate the two parts of the sentence without separating them completely as a period (.) or still better two separate sections, would have done.

He concluded from this that the first part of the sentence is not necessarily linked to the second, which opens the way to a separate interpretation of each: the first relating to civil liability and the second to taxation. Finally, Vallerand J.A. dwelt on the word "warrant" ["garantir"], which in the Petit Robert may mean [TRANSLATION] "or protect it against possible damage: liability resulting from such an obligation", and concluded (at p. 1009):

[TRANSLATION] Without wishing to be simplistic, I do not see how the municipality could be held liable for an insufficiency of water in view of this wording.

With great respect, I am not persuaded by any of these arguments: it is not that I object to arguments based on wording, it is simply that in my opinion they cannot resolve the ambiguity inherent in this section in accordance with the conclusions of the Court of Appeal.

I start from the premise that a clause excluding liability so fraught with consequences for taxpayers has to be sufficiently clear. I really do not see how it can be slipped into a line or so in a provision which contains a little over three lines and which, for the most part, deals with the payment of water taxes. I do not say that this is a conclusive argument, but when we look at the provisions of an Act imposing liability or providing exemptions from liability, we see that the legislator has done this clearly either in a paragraph or in a section specially devoted to this purpose, and generally using the word "liability" or a synonym. (See, for example, s. 585(7) of the Cities and Towns Act and arts. 724, 725 and 772, Municipal Code of Quebec, R.S.Q. c. C‑27.1.)

As I mentioned above, s. 442 has been included in each revision of the Cities and Towns Act since it was originally enacted in 1922. The real purpose of the section is illustrated by its historical background.

The situation of the city of Beauport is probably the same as that of several other municipalities. The original water supply system was built and operated by a private company. It was later purchased by the municipality. The city grew rapidly and demand eventually exceeded the capacity of the system. It became necessary to expand the system and other sources of water had to be acquired. This situation is well illustrated by several of the city of Beauport's by‑laws, the preambles of which contain the following passages:

[TRANSLATION] Whereas the present waterworks for the municipality of the village of Beauport does not cover all its territory; whereas its water supply is insufficient, and the Corporation has acquired new sources which must be connected to the existing system; [By‑law No. 48, August 20, 1923]

Whereas it has become necessary to construct earthworks and build extensions to the water distribution and sewer systems in the municipality of the city of Beauport . . . [By‑law No. 110, April 5, 1948]

Whereas the city of Beauport has for some years been steadily developing and experiencing continuing growth, which regularly requires the making of capital expenditures to meet new demands; [By‑law No. 136, April 16, 1951]

These by‑laws authorized the acquisition of additional water sources and expansion of the system to meet the continually growing demand. As such measures required funds, the by‑laws created a "special annual tax" to defray the cost of developing the water system. Seen in this way, the purpose of s. 442 no longer presents a problem. The municipality was not in a position to guarantee the quantity of water as its rapid growth had made the existing resources inadequate. Moreover, taxpayers could not be allowed to refuse to pay the "special annual tax" solely on the ground of a water shortage, since it was this very tax which was to be used to maintain and develop the system. I do not think there can be any doubt that s. 442 was intended to deal with this situation. In light of this historical and legislative background, I do not see any good reason to give this section a meaning other than its ordinary one.

At this point, I come back to the textual arguments, which despite the foregoing could, I agree, be conclusive. However, in my opinion that is not the case.

The arguments based on the wording of s. 442 rest essentially on the premise that s. 442 contains two separate propositions, and that this is justified by reference to both the context and the punctuation. As to the context, under the heading "Water Supply" are to be found, besides s. 442 and certain other sections, ss. 429, 430, 431, 434, 436 and 439, which deal directly or indirectly with taxation or compensation for the water service. It is not surprising in such a context that s. 442 deals with taxes. Further, the titles placed on various parts of the Act do not prevent provisions dealing with taxation existing alongside those dealing with the water supply. This is clear if one looks at other general titles. The title "Lighting", for example, contains nine sections dealing in general terms with the municipality's authority to provide a lighting system. Section 450 deals expressly with the special tax and compensation. It is in keeping with the logic of the Act that certain aspects of taxation should be included under general headings when they relate more particularly to this specific field. I do not think it can be concluded from the context that s. 442 is more concerned with the water supply than with taxation: it deals with them both, and I do not see how one is to infer the meaning given to the section by the Court of Appeal.

The debate on punctuation seems to me to disregard the conjunction "and" which follows the semicolon. The purpose of a conjunction, as we know, is to establish a connection, not a breach. What is the force of this semicolon in such a position? I think the following comment by Pelletier J. in Montreal Light, Heat and Power Co. v. Cité de Montréal (1917), 26 K.B. 368, at p. 375, is entirely apposite:

[TRANSLATION] But there is this unfortunate semicolon, which puts the whole matter in doubt! -- and it may be a mistake by a proofreader or printer. I find a semicolon to be a rather uncertain basis . . .

A debate on punctuation cannot take the place of an interpretation based on the legislative context and ordinary meaning of words. The reliability of punctuation as a tool of interpretation has indeed been questioned, and this passage from the opinion of Pelletier J. is cited with approval by P. A. Côté in his text The Interpretation of Legislation in Canada (1984), at p. 48. Vallerand J.A. relies on recent authority. However, as I have already noted, the section has retained its original form since 1922. In any case, even modern authorities on punctuation do not seem to agree with Vallerand J.A.'s interpretation. Though they admit that the semicolon separates two propositions, they also note that [TRANSLATION] "The two propositions usually have a logical connection between them" (Le nouveau Bescherelle 3: La grammaire pour tous (1980), at p. 184). Here the logical connection between the two propositions would be that the payment of taxes and compensation for the use of water are directly connected with the municipality's refusal to warrant its quantity. There is no reason to assume that the legislator intended to exempt the municipality from its civil liability.

Finally, as to the definition of the word "warrant" suggested by Vallerand J.A., I do not think it is appropriate to substitute a non‑legal definition for a legal term. Côté, op. cit., offers the following explanation of this (at p. 199):

Finally, a dictionary may be relatively useless, either because a word has several potentially applicable ordinary meanings, or because the problem associated with the word cannot be resolved simply by looking at the ordinary meaning: . . .

In the case at bar, the question reaches beyond the dictionary definition of the word "warrant". It is only because Vallerand J.A. finds that two distinct propositions exist in s. 442 that his definition of "warrant" is applicable. In the absence of that dichotomy this interpretation cannot be sustained and is consistent neither with the context of s. 442 nor with the ordinary meaning of the words.

Archambault, loc. cit., 15 R.G.D., discusses the meaning of s. 442. He divides the section into two distinct parts, separated by the all‑powerful semicolon. He argues that the first part [TRANSLATION] "is addressed directly to the municipal corporation and clearly limits the content of its obligations" and that it would be superfluous if it were not interpreted as an exclusion of liability for an insufficient water supply (p. 112). He suggests that this results from the fact that the general civil law defences are otherwise available (that is, absence of fault, Act of God and act of a third party). Archambault writes (at p. 113):

[TRANSLATION] And as the legislator is deemed not to speak in vain, he must necessarily have intended to depart from the ordinary law and to reduce the obligations of the municipal corporations in question by granting them delictual civil immunity.

With respect, this interpretation does not necessarily follow from the wording of s. 442. Professor Archambault's argument is based on an isolated reading of the two propositions. If the provision is regarded as a whole, this problem does not arise. The section can simply be read as providing that despite an insufficiency of the water supply, taxpayers cannot refuse to pay the special taxes or compensation for water use.

This is the opinion of Professor L'Heureux, who comments on Vallerand J.A.'s argument on this point, loc. cit., 47 R. du B., at pp. 170‑71:

[TRANSLATION] [W]e do not share the view of Vallerand J.A. on the interpretation of s. 442. [Text of s. 442 omitted.]

This section thus contains two parts which must be read together and interpreted in relation to each other. In our view reading the section as a whole indicates that its purpose is not to relieve the municipality of liability for fault in maintaining hydrants, but to prevent taxpayers refusing to pay the special tax and compensation by alleging an insufficiency of water. The first part of the section simply gives the reason for the second.

I agree.

In conclusion, I do not find the arguments based on the wording of s. 442 persuasive. They must yield to the logic of the particular context of cities and the historical and factual reasons which help to discern both the legislative intent and the real meaning of this provision. There is no reason to torture the text so as to find in it a clause excluding liability when, given its ordinary meaning, s. 442 is not open to extrapolation of this kind. Accordingly, I do not see the enabling legislation as containing provisions which absolve a municipality from its liability for failing to maintain its water system.

If the Cities and Towns Act does not confer an immunity on municipal corporations from their extra‑contractual liability in respect of the operation of their water and firefighting services, it is clear that the Act also does not impose any specific liability in this regard. However, a municipality could not be exempted from civil liability unless the Act expressly exempted it, or authorized it, by an enabling provision, to exempt itself by way of by‑law. A by‑law, which is a secondary source of law, limiting or excluding the civil liability of a municipality, cannot validly alter the common law, which is the main source of law, unless an express provision of the Act allows it to do so. There is no such enabling provision in the Cities and Towns Act. There is thus the most complete "statutory silence", which in my opinion leaves the field open to the application of the principles of private law, which, as we have seen, is consistent with the common law principles applicable in Quebec and in the rest of Canada.

However, it is still necessary to determine the extent and scope of the obligations the city itself assumed when it decided to establish its water supply system and firefighting service. The solution must be sought in the by‑laws it adopted in this regard.

F) By‑laws

1. By‑laws Relating to Water System

The power of the city of Beauport to adopt by‑laws derives from art. 637 of the Municipal Code of the Province of Quebec, S.Q. 1870, 34 Vict., c. 68, revised by s. 6134 of the R.S.Q. 1888, which empowers municipal corporations to adopt by‑laws:

637. To provide for the establishment, protection and management of aqueducts, public wells or reservoirs, and to prevent the same from being fouled or wasted.

To grant, for a fixed number of years to any company, person, or firm of persons, who undertakes to construct an aqueduct, public well, or reservoirs, or who assumes the management thereof, an exclusive privilege of laying pipes to supply water within the limits of the municipality, or in any part of the municipality, and to enter into a contract for such supply of water for one or more years but for a period not exceeding twenty‑five years.

Such a by‑law was adopted by the city of Beauport on April 9, 1897. This by‑law made one J. E. Bédard responsible for building and operating a water system in the municipality. Section 1 of the by‑law explains its twofold purpose:

[TRANSLATION] I. Whereas it is necessary for reasons of health and fire protection that there be a waterworks in Beauport; and whereas despite the difficulties of such an undertaking a resident of this parish, Mr. J. E. Bédard, attorney, has just built for himself and some of his neighbours a waterworks that would supply water to the area around the village and the Côte des Pères if it were extended as it is capable of being, and whereas the said J. E. Bédard would be prepared to do this at his own expense if the council grants him a waterworks privilege; the said J. E. Bédard, his heirs and assigns, are authorized to build and maintain a public waterworks within the limits of this municipality and to do all work required to that end, provided the municipality is saved harmless from any damages for which it may be liable in connection with the said waterworks. [Emphasis added.]

Section 6 provides that [TRANSLATION] "The Corporation of Beauport may cause whatever number of hydrants it deems appropriate to be placed along the route of the said waterworks, and pay the owner of the waterworks the cost, purchase price and installation charges thereof . . . ." The municipality thus provided that other hydrants could be added to the original system, thereby assuming responsibility for their cost and installation. Though s. 8 provides that [TRANSLATION] "The owner of the waterworks shall not be liable for any damage that may result from an interruption of service from the said waterworks by the freezing of the main pipe or other accident", this type of provision is not surprising in view of the reluctance of a person building and maintaining a water system to guarantee uninterrupted operation. As such, it should be noted that the damages excluded by s. 8 are those which could result from freezing and "accidents", not those that could result from negligent maintenance. The owner still has an obligation to maintain the system. This follows from the provision by which Bédard undertook to do all the work required to this end, provided the municipality was saved harmless from all damages for which it might be held liable in connection with the said waterworks.

This same by‑law or municipal contract was revised on November 26, 1906. Section 5 of the 1906 by‑law contains the same clause excluding liability as the preceding by‑law, except for the additional reservation for [TRANSLATION] "any Act of God". From this it appears that the clause excluding liability was originally intended to exclude liability arising out of unforeseen accidents, not that resulting from fault. Section 3 also indicates that the exemption clause is not absolute: [TRANSLATION] "All work in connection with the said waterworks shall be done by the owner, at his own expense and risk . . .".

The 1906 by‑law also includes sections dealing specifically with hydrants.

[TRANSLATION] 18. The Council may require the owner to erect along the route of the waterworks such number of hydrants as it sees fit, by paying the cost, purchase and installation charges to the owner plus an advance of 15 per cent and in consideration of an annual rental of $10.00 per hydrant.

These provisions and the applicable tariff place the municipality on the same footing as a taxpayer with respect to the water system. Taxpayers are responsible for the cost of installing their own water service, including connecting their pipes with the main system. Section 9 imposes certain duties on taxpayers: [TRANSLATION] "Subscribers shall keep their taps in good order at all times . . . . " By analogy, the municipality can be said to assume responsibility for maintaining the water system.

On November 29, 1922, the city of Beauport adopted a by‑law providing for repurchase of the water system. This by‑law also provided for the acquisition of new water sources for the system, in view of its increased capacity and demand. The preamble states that it [TRANSLATION] "is in the public interest for the corporation of the village of Beauport to acquire the said waterworks and the said sources". This by‑law also deals with the use of revenue from the waterworks. Section 7, which sets up a special bank account known as the "Waterworks Account", indicates in general terms the use to be made of this revenue: [TRANSLATION] "The cost of administering and maintaining the waterworks shall be paid from this account". (Emphasis added.) The obligation to maintain the water system could not be more clearly assumed.

Section 9 authorizes a levy to be imposed on taxpayers in the event that revenue from the waterworks is inadequate to cover its entire cost. The by‑law gives as an example the cost of purchasing the system and acquiring new sources of water. The management and maintenance of the system are also mentioned as being among its costs. Another by‑law, number 48, was adopted by the municipality on August 20, 1923. The purpose of this by‑law is described in its preamble:

[TRANSLATION] Whereas the present waterworks for the municipality of the village of Beauport does not cover all its territory; whereas its water supply is insufficient, and the Corporation has acquired new sources which must be connected to the existing system;

Whereas the hydrants and other necessary facilities must be adapted to the said water system to provide protection against fire . . . [Emphasis added.]

While this by‑law deals essentially with financing the proposed additions and changes to the system, I feel it is also reasonable to conclude from it that the municipality intended to give an undertaking to improve its water system and allocated the necessary funds for this purpose in order to have a water system sufficient for fighting fires.

Section 16 gives us a detailed picture of the waterworks account. The money collected from taxpayers was placed in this account for the following purposes:

[TRANSLATION] This account shall be used to pay the costs of administering and maintaining the waterworks and sewers, and to make capital and interest payments on bonds issued to purchase the water system under the by‑law of November 1922. The balance in the said account shall be used to make payments of interest and capital on bonds issued under this by‑law. [Emphasis added.]

This provision, which thus specifies a variety of uses for monies collected, lists them in order of priority: first and foremost are management and maintenance. This leads me to conclude that not only is the municipality undertaking to carry out its obligations, it is giving the highest priority to maintaining its water system.

Section 19 expressly states that hydrants are part of the water system. It provides that:

[TRANSLATION] 19. The municipal or public water system shall consist as such of water sources, basins and reservoirs, mains and hydrants. Public sewers shall consist of all collector sewers, to which private sewers are connected, and all those carrying sewage water from collector pipes to the banks of the St. Lawrence; the Corporation shall be financially responsible for the public water system and public sewers, and they shall be administered, built, maintained and repaired by and at the cost of the Corporation, up to the side lines of public roads. [Emphasis added.]

Section 23 contains an exclusion of liability almost identical to that contained originally in the Bédard contract. This new clause provides that:

[TRANSLATION] 23. The Corporation shall not be liable for damage caused by the interruption of water or sewer service from the freezing of mains, drought, accident or Act of God.

As in the earlier case, this clause is limited to "accidents" and other exceptional circumstances. It is not an absolute exclusion of liability, and certainly not an exclusion of liability for fault.

The city of Beauport was incorporated by letters patent on January 11, 1924. From that time onwards, it was subject to the Cities and Towns' Act, 1922.

At the time, s. 422 of that Act read as follows:

422. The council may make by‑laws to provide for the establishment or acquiring, maintenance, management and regulation of water‑works, public wells, cisterns or reservoirs, to supply water to the municipality, and to instal hydrants, fountains, public drinking places and apparatus for filtering and purifying water . . .

The Cities and Towns' Act, 1922 was subsequently amended to make the foregoing provision number 433 in the R.S.Q. 1925. However, the wording stayed the same.

On February 7, 1938, the municipality adopted by‑law 58 dealing once again with the water system. This by‑law amended the earlier by‑law dealing with the method of payment for the water service, but the provisions regarding municipal liability remained the same as before. The next by‑law was adopted on April 5, 1948. By‑law 110 was adopted to allow a further expansion of the system. This by‑law authorized the levying of an annual "special tax" to cover the cost of expansion.

On March 14, 1951, the Charter of the town of Beauport was consolidated as c. 91 of S.Q. 1950‑51. This Act amended certain provisions of the Cities and Towns Act, only s. 433 of which is relevant for our purposes:

433. The council may make by‑laws to provide for the establishment or acquiring, maintenance, management and regulation of water‑works, public wells, cisterns or reservoirs, to supply water to the town, and to instal hydrants, fountains, public drinking places and apparatus for filtering and purifying water, and to supply water to neighbouring municipalities by meter according to the tariff fixed by the council.

The amendment thus reproduced in essence the wording of the earlier Act.

The next by‑law dealing with the water system is number 136, dated April 16, 1951. This by‑law covered the financing of several projects thought desirable by the council. One of these projects was the water system:

[TRANSLATION] . . . the city of Beauport has for some years been steadily developing and experiencing continuing growth, which regularly require the making of capital expenditures to meet new demands;

On January 19, 1956, the council adopted by‑law 211 setting water rates. Section H of the by‑law, which allowed the municipality [TRANSLATION] "to suspend water service for the time necessary to do repairs on its water system, or in case of fire . . .", indicated that the municipality undertook to maintain and repair the system; to use the system to fight fires and to provide a sufficient quantity of water for that purpose; and to exempt itself from any liability resulting from such interruptions of service. The last point supports my interpretation of the provision excluding liability contained in s. 442 of the Cities and Towns Act. As noted, this provision excludes liability resulting from a decrease in the quantity of water as the result of certain events. Those events seem to be limited to accidents and Acts of God, which is supported by Section H, since the council considered it necessary to insert an additional exclusion clause to cover other circumstances.

The next by‑law is number 285, adopted on February 28, 1961. The wording of by‑law 285 is identical to that of the former by‑law, except for changes in the rates. However, a new clause q stated that:

[TRANSLATION] q) The rates provided and imposed in this by‑law are set to enable the city to pay the outstanding debt for the water service and to defray the costs of maintaining that service . . . [Emphasis added.]

All subsequent by‑laws contain almost identical provisions, including the last by‑law, 581, which provides that the amended rates will be used for maintaining the system.

This retrospective shows that the city of Beauport has always had the power, either under the Municipal Code or under the Cities and Towns Act, to adopt by‑laws relating to the construction of a water system and to maintain that system. This power was exercised. Though the municipal by‑laws do not specify the content and extent of the maintenance obligations, the wording of the by‑laws leaves no doubt as to the municipality's responsibility to maintain the system. It also specifically provided that part of the money collected from rates would be used to maintain the system. This constitutes an express undertaking to maintain the water system, which, as we have seen, includes hydrants.

In actual fact, the city of Beauport confirmed its obligation to maintain its water system, as appears from the evidence presented of its budgets and the assignment of employees to maintain hydrants.

2. Budgetary Provisions Regarding Waterworks

The budgets of the city of Beauport support the existence of this obligation to repair and maintain the waterworks. The following amounts are shown in the books under the headings and for the years indicated:

1967Maintain waterworks and sewer $40,000.00

1968Maintain waterworks and sewer $30,000.00

1969Maintain waterworks and sewer $32,000.00

1970Maintain waterworks and sewer $30,000.00

1971Maintain waterworks and sewer $43,000.00

1972Maintain waterworks and sewer $43,000.00

For 1967‑1972, money was set aside by the municipality as revenue from [TRANSLATION] "water rates", as indicated below:

1967$111,000.00

1968$111,000.00

1969$161,000.00

1970$174,500.00

1971$175,000.00

1972$225,000.00

The city of Beauport also specifically assigned employees to remove snow from hydrants, as appears from the testimony of the city of Beauport employee responsible for this task, Roger Pascal (c.a., vol. V, at pp. 886‑91):

[TRANSLATION]

Q.As a labourer, your work from '67 to '72 consisted more or less of doing what?

A.All kinds of work.

Q.All kinds of work?

A.Yes.

Q.All kinds of work -- manual work?

A.Yes.

Q.Which could be what sort of thing?

A.Well, driving trucks . . .

Q.Driving trucks. And doing carpentry work?

A.No.

Q.No. Doing repairs?

A.Repairs, water main and sewer breakdowns . . .

THE COURT:

Q.The superintendent asked you the day after the fire -- that is, the morning of the fire?

A.The morning of the fire.

Q.If you had done what the previous day?

A.Whether I had shoveled the hydrants.

GRATIEN BOILY:

Q.So far as you can recall, then, you shoveled on Monday?

A.I shoveled on Monday morning.

Q.You shoveled on Monday morning? You remember because it was the end of the week?

A.The beginning of the week.

Q.The beginning of the week.

A.Monday morning -- it was the beginning of the week.

3. By‑laws Relating to Fire Protection

With regard to firefighting, s. 412 of the Cities and Towns Act (426 at the time) applies, a section which I feel needs to be reproduced again here:

412. The council may make by‑laws:

(41) To organize, maintain and regulate a fire department and fire‑brigade, and to equip and maintain the same with all necessary appliances by purchase or lease; to provide for the construction of fire stations; to appoint all officers and employees necessary for the extinction and suppression of fires, the protection of property from fire, and the prevention of accidents by fire; to provide for the punishment of any person who may interfere with any member of the fire‑brigade in the performance of his duty, or refuse to obey the lawful orders of the chief or deputy‑chief of the fire‑brigade, or who may tamper with or obstruct any of the signal boxes, wires, or apparatus of the fire‑alarm department, or give a false alarm;

By‑law 146 was adopted by the city of Beauport on May 22, 1951. Its preamble states that the city of Beauport had just built a fire station, set up a fire department and bought a fire engine. In 1949, the municipality had bought a fire pump and other firefighting equipment. It created and trained a fire brigade. In 1951, the council recognized:

[TRANSLATION] . . . that the situation needs to be legalized by the adoption of a by‑law pursuant to s. 426(39) to (44) inclusive of the Cities and Towns Act.

This by‑law created a fire department. The power conferred by the Cities and Towns Act was actually exercised. Certain relevant provisions of the by‑law used peremptory language:

[TRANSLATION] 5. The equipment of the department and of the brigade shall always be available at the fire station, so that it can be put into effective use as soon as the first alarm is sounded. [Emphasis added.]

Sections 6 and 7 provided for an inventory of equipment to be kept. This inventory was to be reviewed and submitted to the council twice a year.

[TRANSLATION] 8. The said review shall include, as suggestions for the council, proposed replacements and recommended purchases of apparatus, equipment and accessories to keep the fire department well equipped and the brigade well supplied with whatever is necessary for effective firefighting. [Emphasis added.]

Section 10 of the by‑law set out the fire chief's duties. These duties were described in peremptory terms. They were principally to ensure that the equipment was always in good condition and available for firefighting.

Section 11 set out the duties of the chief and deputy chief. Two of these duties should be noted:

[TRANSLATION]

(d) to deploy the apparatus of the department and members of the brigade most effectively so as to confine and limit the seat of the fire so far as possible and extinguish it as quickly as possible;

(e) to deploy equipment and firefighters so as to get as close as possible to the seat of the fire, using wherever possible ladders and other equipment by which it can be stopped and put out as soon as possible.

Section 14 authorized the chief or deputy chief to destroy buildings in order to control a fire:

[TRANSLATION] 14. The chief of the fire brigade, and in his absence the deputy chief, is authorized by this by‑law to order the demolition of any buildings, houses and enclosures when this is deemed necessary in order to impede the progress of a fire. In their absence, the mayor is authorized to exercise this power.

Section 16 implicitly referred to the city's potential liability for damage caused by the fire brigade:

[TRANSLATION] 16. The mayor is by this by‑law authorized to send the fire engine, the hose truck and other departmental apparatus, together with members of the brigade, to assist any outside municipality threatened by fire, provided however that such municipality shall be liable for expenses or damages resulting therefrom.

In this final section, the municipality implicitly acknowledges that it could be sued for damages arising out of its firefighting activities.

4. Fire Department Budget

The following table, which was entered in evidence, is part of the city of Beauport's budgets for the years shown. The items relating to firefighting were taken from an appendix titled [TRANSLATION] "fire department":

[TRANSLATION]

Expenses: 19671968196919701971­1972

Department vehicles,

gas, oil and maintenance$ 300 300 3001,0002,0001,000

[Emphasis added.]

Firefighters' salaries$2,0003,0003,0004,0008,0006,000

N.B. In 1979, the words "and municipalities" were added to the heading "Firefighters' Salaries". In 1972, the words "and outside municipalities" were added.

5. Conclusion

From this analysis I conclude that not only did the city of Beauport intend to operate the water and firefighting service which it created, it expressly assumed an obligation to maintain them, in the spirit and letter of the by‑laws which it adopted in this respect and in fact.

Even if one were to come to the opposite conclusion on this point, I share the opinion of Chouinard J.A. when he says (at pp. 1015‑16):

[TRANSLATION] Moreover, it goes without saying that the absence of any duty to act in this regard places a municipal corporation beyond the scope of any relevant action. However, once it chooses to exercise a discretion and to offer such municipal services, it has deliberately created for itself obligations which it should respect so as not in so doing to cause damage to third parties by negligent action or wrongful procedure on its part or that of its employees. The measure of its duty to third parties seems to me to be that of the civil law (arts. 1053, 1054 and 1055 C.C.) This, I think, is how art. 356 C.C. is to be construed. . . . [Text of article not reproduced.]

This is also the interpretation given to it by many writers in the past.

In short, the private law duty of care applies to a municipal corporation when it undertakes to implement decisions which may have been discretionary at the outset. Thus, if such a corporation decides to establish a service it undertakes to provide it in a reasonable manner, so as to avoid causing damage to individuals. Applying the civil law to relations between municipal corporations and persons (art. 356 C.C.), our Court of Appeal arrived at an equivalent result in Cité de Pont-Viau v. Gauthier Mfg. Ltd., as in certain other earlier decisions.

This is what I would call the necessary implication of the by‑laws relating to firefighting and water services, if one considers, as one must, the objectives of such by‑laws, namely effective firefighting.

To begin with, it would seem wholly improbable and would be completely contrary to common sense for a municipality to acquire equipment to fight fires and assign firefighters for that purpose, at considerable cost to taxpayers, without intending to be responsible for the maintenance of such equipment. This goes without saying, and it is so obvious that, when it created a firefighting service, the city did not think it useful or necessary to adopt a by‑law dealing with maintenance. It simply proceeded as a matter of fact to provide maintenance and allocate the money and employees necessary for that purpose.

In my view, in a case like the one at bar, where the Act gives a municipality the power to create a firefighting service and provide for its maintenance, the absence of a specific and express by‑law covering what necessarily and implicitly follows from the by‑law adopted cannot serve as a basis for negating its obligations in this regard. The statutory silence will be interpreted in accordance with the evidence and the facts of the case.

In this regard, I feel that once the policy decision to establish a firefighting service has been made, a municipality implicitly assumes a duty to maintain that service, subject to the following: both the extent and scope of the policy decision made by the municipality, and the presence in the enabling legislation of provisions exempting it from liability, or expressly allowing it to exclude its liability by way of by-law, must be taken into account. In this respect I agree with Professor L'Heureux when he writes (loc. cit., 16 R.G.D., at p. 148):

[TRANSLATION] In this regard, when a municipality has the discretionary power to establish and maintain a service, it seems to us to go without saying that if it decides to establish such a service, it must take the necessary steps to maintain the service and the necessary facilities and that it will be liable if it does not do so. Maintenance of a service and the necessary facilities follows necessarily and logically from its creation. Moreover, maintenance of a service and the facilities is related much more to the implementation than to the establishment of a policy. It follows from the implementation of the policy to create the service.

On the other hand, if the authority to maintain the service and the facilities is discretionary under the law, the municipality may decide not to maintain the service or not to maintain the facilities. It must, however, then make a clear decision to this effect, since, in the absence of a policy decision to the contrary, the maintenance obligation results from the creation of the service, as we have said.

In short, a municipality incurs extra-contractual civil liability in the event of fault or negligence on its part in the performance of the obligations it has thus assumed unless the law expressly exempts it from liability or allows it to exclude its liability by way of by-law and the municipality does so. (I note in passing that this obligation will clearly be one of means and not of result.) The facts of the case at bar support this view, but even in the absence of such facts it is also supported by the expectations created in taxpayers who have assumed the cost of acquiring a firefighting service, and who accordingly have every reason to think they will be able to rely on that service to fight fires on their properties. If such taxpayers do not expect all fires to be prevented, they can at least expect to rely on the municipality to fight fires as effectively as possible. If no liability is incurred by the fact of the fire itself, fault in the firefighting process will give rise to liability.

While it is true that the municipality is anxious to ensure effective protection in the event of a conflagration, this function is not unique or at variance with that of ensuring effective protection for taxpayers in the event of fires on their properties. What is at issue here is not a contractual obligation to each taxpayer in the city but instead the obligational content of the city's exercise of its discretionary power to equip itself with such a service.

How could the purchase of costly equipment at taxpayers' expense be justified if it were only to be used in the event of a conflagration? Certainly the city could, for lack of resources or some other reason, limit its service or even decide not to establish such a service, but if that were its decision it would be a policy‑making decision that it would have to embody in a specific by‑law. Taxpayers would be informed of the decision by this means, which is the purpose of a by‑law, and they would have no expectations apart from what was contained in the by‑law. They could in no way raise objections except at election time. Such a by‑law does not exist here.

I therefore conclude that in the case at bar the by‑laws enacted by the city of Beauport to acquire a water and firefighting service necessarily, if not specifically, imply a duty to maintain such service. This duty is confirmed by the city's actions. This conclusion necessarily takes us back to the crux of the matter, which is to determine the rules applicable in such an operational context to the liability of municipal corporations in Quebec for their firefighting services, in view of the complete statutory silence in this regard and on the basis that public law governs public bodies in Quebec.

We should now determine the scope of art. 356 C.C.L.C.

G) Article 356 C.C.L.C.

This article, which I will cite here again, reaffirms that, generally speaking, public law governs public bodies:

356. Secular corporations are further divided into political and civil; those that are political are governed by the public law, and only fall within control of the civil law in their relations, in certain respects, to individual members of society.

Civil corporations constituting, by the fact of their incorporation, ideal or artificial persons, are as such governed by the laws affecting individuals; saving the privileges they enjoy and the disabilities they are subjected to.

Even though art. 356 C.C.L.C. provides that in certain cases public law will not be applicable to public corporations, it does not set out any criteria for determining in which respects private law applies.

This article was introduced when the civil law of Quebec was codified in 1866 and has not been amended since. In general the Commissioners preparing the codification relied on the Code Napoléon as the primary source of their recommendations, amending and adapting it where required as they were authorized to do. However, they did draw on other sources from time to time. This was true of Title Eleventh of their Report, headed "Of Corporations" (Civil Code of Lower Canada: First, Second and Third Reports (1865)). "This title is quite new: it is not to be found in the Code Napoleon" (p. 229), they said by way of introduction, as the Code Napoléon apparently considered that corporations "should form no part of the civil law properly so called; they would therefore depend on that part of the public law called administrative law" (p. 229), according to a writer cited by the Commissioners. The latter commented (at pp. 229‑31):

This assertion appears to be incorrect. It is true corporations owe their legal existence to the public authority (royal or legislative). Once created and organised, they become artificial persons, capable of certain rights and privileges and bound by certain duties and obligations; but these rights and these duties are not in all respects those of ordinary persons; the very nature of corporations, their object and destination, are the necessary causes of several of these differences, while others proceed from precautions which public interest has caused to be taken against the enterprises and inroads to which public bodies are generally inclined, the responsibility of which being divided among the members is less strongly felt by each of them.

It was therefore necessary, by special rules, to provide for these exceptional objects, many of which cannot fall within the direct operation of the public law. These rules tending to organise the relations of these artificial persons with the other members of society must necessarily be borrowed from the civil law, of which they form a part, as well as those which govern the rights, obligations, incapacities and privileges of minors, absentees, insane persons, etc.

The omission in the Code Napoleon of all provisions on this subject is probably due to the little attention paid formerly in France to corporations . . . [Emphasis added.]

The Commissioners went on to explain (at p. 231):

To fill up the void which is thus left there, the Commissioners have prepared and submit the present title, intituled: "Of Corporations", in imitation of that to be found in the code of Louisiana, from which, however, they have obtained but little aid.

It will be felt that it was necessary to treat only of those corporations which fall under the control of the civil law, those governed by the public and administrative law not falling within the jurisdiction of the Commissioners; it was equally necessary for them to limit themselves to laying down the general rules, without entering into the details, nor into the enumeration of those which are peculiar to each corporation, which are to be found in the charter of each of them, and which vary according to the circumstances, their nature and the object for which they are destined.

It is for these objects that it is at once declared as a principle, that each corporation is above all obliged to conform to the conditions which have been imposed upon it by its charter, and also by the general laws made for the government of all kinds of corporations; and this other principle that, as artificial persons, corporations, in their relations with the other members of society, are clothed with the same powers and are bound by the same obligations as natural persons are, in so far as they are not hindered or exempted therefrom, either by the nature of their constitution, or by a special or general law.

Municipal corporations, which now hold so important a place in this province, have only been introduced here within a few years (1840); the act which gave them to us (4 Vict. ch. 4) has been frequently modified by many different laws, which are all re‑united and put in order in chapter 61 of the Consolidated Statutes of Lower Canada. In this statute, which forms the charter, not of creation, but of government of all municipal corporations present and future, are to be sought the rules according to which they are formed, organized and conducted. [Emphasis added.]

The Commissioners accordingly borrowed certain material of a general nature from the Louisiana Civil Code. Though Title Eleventh is found to contain several articles similar to those in the Louisiana Civil Code, the latter contains no provision similar to art. 356 C.C.L.C. The comments on this article in the Report of the Commissioners, Second Report, May 22, 1862, are to the effect that (at p. 233):

The secular are divided into political and civil; the former, governed by the public law, only fall under the control of the civil law in their relations with the other members of society, while civil corporations, being persons in the enjoyment of the civil state, are governed by the laws applicable to natural persons, saving certain privileges and certain incapacities.

It will be noted that the words "in certain respects" and "individual" are not there. However, the text they proposed contains these words (p. 349). Despite intensive research, it was not possible to find any explanation by the Commissioners for this addition. One may speculate as to the authors' intention in this respect, but one thing is certain: the Commissioners did not intend by this provision to exempt public corporations from the ordinary obligations of every citizen under the civil law "in so far as they are not hindered or exempted therefrom, either by the nature of their constitution, or by a special or general law". (In order to explain the absence of a similar provision from the Louisiana Civil Code, Professor Archambault, loc. cit., 16 R.G.D., at pp. 107‑9, refers to the state of the law as it was in Louisiana at that time.)

The judgment in Langelier v. Giroux (1932), 52 K.B. 113, referred to by Pigeon J. in the passage cited above, after finding that the immunity of a witness before a court of law came within English public law, added that TRANSLATION] "the precepts of English common law may have an effect . . . on the application of our art. 1053, but not so as to counteract the French theory of fault and delictual liability" (p. 126). That judgment forms part of a virtually consistent line of decided cases recognizing the authority of the civil law where the contractual and extra‑contractual liability of public bodies is concerned (Doolan, supra; Brown v. Corporation de Montréal (1871), 4 R.L. 7 (Sup. Ct.), at p. 10).

As Professor Archambault comments, loc. cit., 41 R. du B., at pp. 15‑16:

[TRANSLATION] To proceed with our approach, we can say that "in certain respects" generally includes the area of the civil delictual liability of municipal corporations. In 1871 Beaudry J., referring to U.S. and common law as well as Civil Code sources, found that municipal corporations were covered by the "ordinary rule" of liability. In the same year, in an action brought against a municipal corporation for the acts of its employees, the Court of Appeal held that the liability of municipal corporations should be decided by French law. Since that time the courts, though occasionally hesitating, have regularly recognized the authority of the civil law in the solution of such conflicts. Academic commentators have done the same. [Emphasis added.]

He cites a long list of judicial and academic authorities in support, including Mignault, Langelier, Nadeau, Tremblay and Savoie, Dussault, Garant, L'Heureux and McNicoll.

In Le droit civil canadien (1896), t. 2, Mignault wrote the following concerning art. 356 C.C.L.C. (at p. 335):

[TRANSLATION] Article 356 sets out a provision of great importance when it speaks of the control the civil law may exercise over political corporations. As a political entity, the corporation does not fall within the civil law. But political though it may be, it must nonetheless have certain relations with individuals which may be regarded as private, and those relations are covered by the civil law. Thus, a city governs its citizens and exercises legislative powers: in this respect it is covered by public law and is independent of the civil law. However, if one of its officers is guilty of fault injuring a third party, or the city itself abuses its powers and forces a citizen to pay money which he does not owe, the civil law will require it to compensate for the injury committed or to repay the money paid in error. This distinction emerges very clearly from the judgment rendered in Brown v. La cité de Montréal (4 R.L., p. 7 and 17 L.C.J. p. 46). [Emphasis added.]

Ten years later Langelier stated it as follows, in Cours de droit civil de la province de Québec (1906), t. 2, at p. 65:

[TRANSLATION] Many corporations, like the state, fall under public rather than private law: examples are municipal corporations and school corporations. They are persons capable of having rights and obligations under civil law, but this is the least important aspect of their existence as corporations. As you will see when you study this part of public law, they are a kind of mini‑state within the state, they have their independent constitutions and governments. Like the state, they only fall under civil law insofar as they are legal persons, that is, insofar as they are capable of having rights and obligations.

The last paragraph of our article states a very important rule: it is that when a corporation is created it becomes a person exactly like physical persons, and has the same rights as physical persons, unless there is legislation to the contrary or there is some inconsistency between the nature of the corporation and certain rights. [Emphasis added.]

The Privy Council (Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96) even said (at p. 111) that citizens of the province of Quebec:

. . . should enjoy their property, usages and other civil rights, as they had before done, and that in all matters of controversy relative to property and civil rights resort should be had to the laws of Canada, and be determined agreeably to the said laws. In [the Quebec Act] the words "property" and "civil rights" are plainly used in their largest sense;

Two aspects of these consistent judicial and academic opinions seem significant. First, they are derived from art. 356 C.C.L.C. and contemporary writers at the time the Civil Code of 1866 was adopted, and they are in line with the comments of the Commissioners themselves. Second, they start with the premise that where there is no "legislation to the contrary" (Langelier, op. cit., at p. 65) or "in so far as they are not hindered or exempted therefrom, either by the nature of their constitution, or by a special or general law" (Reports of the Commissioners, op. cit., at p. 231), the civil law will be applicable to public corporations in their relations "to individual members of society". This then is what some writers have characterized as the "statutory silence" which would make the civil law applicable.

The argument defended by Professor Archambault starts with the opposite premise, namely that there will only be delictual civil liability if there is a statutory provision providing for such liability (such as s. 2.1 of the Police Act, R.S.Q., c. P‑13) or a statutory obligation imposed on the municipality or one which it has itself undertaken.

Professor Archambault, loc. cit., 41 R. du B., is right however to present the problem in these terms (at pp. 5‑6):

[TRANSLATION] While municipal corporations have a definite connection with English public law by virtue of their public and political nature, delictual civil liability descends in a direct line from the Quebec Civil Code, itself the heir of the general principles of French civil law.

The Commissioners responsible for the codification undoubtedly visualized an idyllic union when they married the two legal systems in the same provision. Article 356 C.C. states that municipal corporations, which are political in nature, "are governed by the public law, and only fall within the control of the civil law in their relations, in certain respects, to individual members of society".

However, as we shall see, it was not long before the courts and legal literature were engaging in stormy debates as to which authority should prevail: in a matter involving municipal delictual civil liability, should the civil law be applied and to what extent can it override the often inconsistent English law? [Emphasis added.]

The words "in certain respects" and "individual" in art. 356 C.C.L.C. are the chief source of this dispute.

The meaning of these words has been discussed in doctrine and the case law. Beetz J. mentions them briefly in Adricon Ltée v. Town of East Angus, 1977 197 (SCC), [1978] 1 S.C.R. 1107, in an entirely different context, where the Court had to determine the contractual liability of the town of East Angus (at p. 1120):

A municipal corporation is a political body which falls within the control of the civil law in its relations, in certain aspects, to individual members of society: art. 356 C.C. The reservation expressed by this article in the words "in certain respects" refers to special provisions of the type found in the Cities and Towns Act. Section 26(1) of this Act provides that a municipal corporation, under its corporate name, shall have perpetual succession and may, inter alia, "enter into contracts, transact, bind and oblige itself and others to itself, within its powers". It does not specify that a municipal corporation may enter into contracts only by means of an explicit act uttered by itself, contrary to art. 988 C.C. for example. Section 26(2) of the Cities and Towns Act confers upon municipal corporations additional powers which they may exercise by resolution of their councils, but this is an enabling provision and these additional powers are not at issue in the case at bar.

In the past, commentators at once concluded, as I have already indicated, that by "certain respects" must be understood those which were not covered by public law or by the particular statutes, charters and by‑laws of public bodies. Undoubtedly, as Nichols J.A. points out, the Reports of the Commissioners mention these limitations; but what of the "statutory silence"? Should it be given the weight suggested by Professor Archambault or should this silence be regarded as giving the civil law overriding effect? The latter position is the one taken by McNicoll, loc. cit., 24 C. de D., at p. 401:

[TRANSLATION] On the other hand, where there is "statutory silence" it is the civil law which applies. In the cases under consideration all the powers exercised by municipal authorities are those described as "discretionary", as no statutory obligation has been imposed on them; moreover, the silence is most complete on the possible liability that the municipality may incur in choosing to exercise certain powers.

Professor Patrice Garant, loc. cit., expands on the phrase "in certain respects" in this comment on the Court of Appeal judgment in the case at bar (at p. 265):

[TRANSLATION] First, art. 356 contrasts "public law" with "civil law", but as we have shown above, in the sense these concepts had in 1866. Then, art. 356 contrasts "individual relations" with "general relations". The relations that a public corporation has with the members of society collectively are governed by public law, that is, by rules outside the ordinary law, to be found either in local statutes or in English law. On the other hand, relations with "individual" members of society are governed by the civil law, but "in certain respects".

Why this last limitation? -- because in some cases, or in some respects, the relations public bodies have with an individual continue to be governed by public law: they cannot be governed by the civil law for various readily understandable reasons, such as the framework of legality to be observed.

According to Professor L'Heureux, loc. cit., 16 R.G.D., at p. 138:

[TRANSLATION] The words "in certain respects" are ambiguous. In our opinion, however, they can only refer to matters governed by the civil law and not affected by legislation to the contrary. Accordingly, municipalities are not governed by the rules of civil law in their relations with individual members of society in matters that do not fall within the civil law.

Similarly, the word "individual" has been the subject of divergent commentaries.

Archambault, loc. cit., 41 R. du B., at pp. 16‑17:

[TRANSLATION] Attaching the label "delictual civil liability" to a dispute between a municipal corporation and an individual will not suffice to make the resolution of that dispute entirely a matter for the civil law. Article 356 C.C. clearly states that the civil law governs only relations between the public corporation and an individual person. This requires further explanation.

For Archambault, the word "individual" indicates a contrast, that is [TRANSLATION] "the individual as opposed to the collective, public or social aspect of the same person". In his opinion (at p. 17):

[TRANSLATION] A physical or artificial person may sometimes be dealt with individually (marriage, filiation, sale or hypothec) while at other times being dealt with publicly (a mayor exercising his powers, a judge deciding a case, a Crown corporation doing work and so on). Either aspect of the same person can of course be simultaneously apparent when a dispute arises. The protagonists may also, in one case, rely on their rights as an "individual" person, and in another, on their rights as a "public" person.

L'Heureux, loc. cit., 16 R.G.D., at p. 141:

[TRANSLATION] In our opinion, the words "to individual members of society" mean "to individual persons". First, as we have seen the words "members of society" mean physical and artificial persons. Second, as we have also seen, the word "individual" relates to "members of society". Finally, the word "individual" cannot be intended to distinguish the individual from the public acts of members of society, since apart from the exceptional cases mentioned the acts of the latter are individual acts. In our view, this word can only mean "individual members of society", that is, "individual persons".

The courts have almost unanimously recognized that the civil law applies in disputes between individual persons and public corporations, even where there is no provision imposing statutory liability on municipal corporations, interpreting the word "individual" as applying to individual persons in their relations with public bodies.

Nichols J.A. did not understand it in this way. To him, when a municipal corporation acts for the common welfare of taxpayers, which would be the case here, it does not have individual relations with them. He wrote (at p. 988):

[TRANSLATION] The article tells us, therefore, that "in certain respects" municipal corporations are governed by civil law "in their relations . . . to individual members of society".

What are these "respects"? They were not listed by the Commissioners.

However, it can be seen from the way in which the article is worded that even in their relations with individual members of society municipal corporations are not always governed by the civil law, as they are so governed only in certain respects.

I shall not speculate at greater length on the scope of the exception implied in the words "in certain respects". The phrase which seems most important for the purposes of the case at bar is the one in which it is stated that municipal corporations are governed by the civil law "dans leurs rapports avec les autres membres de la société individuellement". The English wording proposed by the Commissioners omits the word "autres": "in their relations . . . to individual members of society".

A municipality which organizes a water and hydrant system and a firefighting service does not have individual relations with its residents.

Such services are available to the whole municipal community, without distinction.

I assume that there is no legal reason why a municipality could not have an exclusive agreement with one of its taxpayers to furnish it with a water supply to fight any fires that might occur on that taxpayer's premises, but that is not the situation under consideration here. [Emphasis by Nichols J.A.]

Nichols J.A. concluded that public law applies by a [TRANSLATION] "literal application of art. 356". In this he agreed with Professor Archambault.

Finally, it has been argued that the very phraseology of art. 356 C.C.L.C. implies a subordination of the civil law to public law. Professor Archambault, loc. cit., 41 R. du B., explains this as follows (at p. 12):

[TRANSLATION] From this we can try to determine the scope of art. 356 C.C. At the outset it states the rule that municipal corporations are subject to public law. Additionally, the article goes on, corporations will fall within the control of the civil law, but only as to their relations with individuals in certain respects.

The Commissioners appear to disagree (op. cit., at p. 231):

It is for these objects that it is at once declared as a principle, that each corporation is above all obliged to conform to the conditions which have been imposed upon it by its charter, and also by the general laws made for the government of all kinds of corporations; and this other principle that, as artificial persons, corporations, in their relations with the other members of society, are clothed with the same powers and are bound by the same obligations as natural persons are, in so far as they are not hindered or exempted therefrom, either by the nature of the constitution, or by a special or general law. [Emphasis added.]

Aside from these various interpretations, what I think is fundamental in Professor Archambault's argument is his view of the sources of art. 356 C.C.L.C. He states that art. 356 C.C.L.C. creates [TRANSLATION] "no new law", a statement squarely contradicted by the Commissioners. The latter point out that the entire chapter on corporations is new law. This statement by Professor Archambault, loc. cit., 41 R. du B., rests on the premise that (at pp. 12‑13):

[TRANSLATION] Even without art. 356 C.C., it would be fair to say today that political corporations, including municipal corporations, are governed by public law. Municipal corporations, which did not exist under French rule, were introduced and developed after the Conquest, were covered by the Quebec Act and came after the phrase "Property and Civil Rights", and before the letter of the Civil Code, they were legally governed by English public institutions. Article 356 C.C. recognizes law rather than imposing it. This is why in municipal law and public law in general, English law is, after statutory law, an important source of law.

However, as noted by the Commissioners, Quebec had no municipal corporations legally organized in Canada before 1840. No one disputes that they were governed by English public law at that time. However, and in my opinion this is the stumbling block, what is new law is the incorporation into the Civil Code of provisions regarding public corporations, hitherto ignored by the Code Napoléon. What is also new law is their being made subject to the civil law "in certain respects", in their relations with "individual members of society", as indicated in the second clause of the first paragraph of art. 356 C.C.L.C., respects discussed by the Commissioners when they state that "these rights and these duties are not in all respects those of ordinary persons" (p. 229).

It is Professor Archambault's implied contention that, because public corporations were subject to English public law at that time, the drafters of the Civil Code did not have the power to tie them to the civil law, except "in certain respects", which in this context must be read very restrictively ‑- at least, that is what I understand from his argument (41 R. du B., at pp. 14‑15):

[TRANSLATION] In drafting the law, the Commissioners could not ignore at least two unavoidable limitations on the application of civil law to public corporations.

The first, imposed by British law, namely the Quebec Act, and in particular s. 8 supra, limits the authority of Canadian civil law solely to "Property and Civil Rights". The codification could not contradict this law. Whatever form was imposed on it, art. 356 C.C. had to give the civil law authority over public corporations exceptionally, and not so as to exceed the imperatives of the Quebec Act. In its widest meaning, "in certain respects" cannot include more than the content of "Property and Civil Rights" without infringing the Quebec Act and giving rise to illegality. In other words, public corporations will be governed by the civil law only in areas where the latter may otherwise legally apply. The civil law goes beyond the Civil Code but is limited to "Property and Civil Rights". Anything beyond that is of necessity subject to English public law.

In the second place, the Commissioners must have known that the Canadian Parliament -- after 1867 the Quebec legislature once again ‑‑ would make amendments, varying in extent as it saw fit, to the provisions governing civil law relations between public corporations and individual persons. Does s. 8 of the Quebec Act not say that the existing civil law rules will apply "until they shall be varied or altered by any Ordinances that shall from Time to Time be passed in the said Province". In the Commissioners' minds, the legislature could thus remove from the scope of the civil law certain aspects of relations covered by art. 356 C.C. This was done in, among other areas, actions against municipal corporations.

The Commissioners accordingly had good reason to limit cautiously the scope of the exceptional provisions in art. 356 C.C. The phrase "in certain respects" may not have been the most happy choice but it definitely indicated the need for caution. Public corporations are only subject to the civil law in their relations with individual persons on an exceptional basis, to the extent that such relations involve matters included in "Property and Civil Rights" and not removed from the ambit of the civil law by statute. [Emphasis added.]

Although one may agree with some of these observations, I myself can make no equation between the qualification "in certain respects" and the source of the exception derived from it by Professor Archambault. The Commissioners were free to propose new law and they did so elsewhere. (For example, the Code Napoléon contained no articles dealing with emphyteusis, substitutions, trusts or the registration of real rights.) The provincial legislature adopted art. 356 C.C.L.C. as proposed and its constitutionality has never been questioned. The public corporations existing in England at the time were subject to the common law, which did not then make any distinction between the private law applicable to corporations and to individuals. A distinction was necessary here, since under the Quebec Act property and civil rights came under the jurisdiction of the civil law. The common law of England applied to both public law and private law. The quotation borrowed from Lord Denning, M.R., (O'Reilly v. Mackman, [1982] 3 W.L.R. 604 (C.A.), at p. 619) by Nichols J.A. confirms that this distinction is of very recent origin:

In modern times we have come to recognise two separate fields of law: one of private law, the other of public law. Private law regulates the affairs of subjects as between themselves. Public law regulates the affairs of subjects vis‑à‑vis public authorities.

The Commissioners certainly understood this and indeed expressed themselves very clearly in the passage from their report cited above.

Though I have no wish to become embroiled in a controversy between academics, I think it is worthwhile to summarize my conclusions on this point.

The function of art. 356 C.C.L.C. is to determine the law applicable to municipal corporations, whether public law or private law. In deciding what law applies, the nature of each area, and not the sources of the law, is the criterion. As Professor L'Heureux notes (16 R.G.D., at p. 136):

[TRANSLATION] In determining the applicable law, what is important is to look at the nature of each area, not the origins of a particular provision.

The general rule is that municipal corporations are governed by public law. However, they are governed by civil law "in certain respects", and the phrase "civil law" is to be given its widest meaning. It can be concluded from the second paragraph of art. 356 C.C.L.C. that the civil law covers "laws affecting individuals". The rules of civil liability are in this category. These rules will apply to municipal corporations, unless amended or excluded by public law.

In this connection Beetz J., Attorney General of Quebec v. Labrecque, 1980 24 (SCC), [1980] 2 S.C.R. 1057, at p. 1081-82, in a case involving a public servant and the Crown where the Court had to determine whether public law or civil law applied, and the civil law applied, formulated this caveat:

On the other hand, it is important not to lose sight of the principles and spirit of Anglo‑Canadian public law. It is a matter of substantive law.

It must be remembered that in Anglo‑Canadian law, administrative law does not constitute a complete and independent system, separate from the ordinary law and administered by specialized courts. On the contrary, it is the ordinary law, administered by the courts of law, which is made a part of public law and the provisions of which cover the public administrative authority, unless they are replaced by incompatible legislative provisions, or supplanted by rules peculiar to the royal prerogative, that group of powers of privileges belonging only to the Crown. [Emphasis added.]

Before concluding on this point, I would add two observations. It is not inconceivable that the Commissioners responsible for codifying the civil law intended, even with respect to public bodies, to affirm the authority of the civil law in Quebec in the area reserved for it by the Quebec Act.

However, regardless of the phraseology of art. 356 C.C.L.C., it seems to me that the Commissioners instead recognized that in their public, legislative, jurisdictional and administrative (policy‑making) functions, public corporations are governed by public law, while in their private management function and their relations with individuals, they would be subject to private law. What is characterized as exceptional and as the subordination of civil law to public law is in my opinion only a reflection of the public policy‑making function of corporations, which in principle is wider than that of private management. It is accordingly the functions, public or private, which are subordinate one to another, not the law applicable to either of these functions: two areas of government activity to which two areas of law apply, each autonomous in its own area, in so far as the rules of public law permit recourse to the private law.

The explanation of the words "in certain respects" lies in this context. They are restrictive only to the extent that charters and special or general statutes have altered private law, as is the case for example with prescription, notice and so on, and in some respects with liability. The same is true of the word "individual", which governs the activities of persons, artificial or otherwise, in their relations with public corporations. While public corporations do not generally, apart from exceptions, have individual relations with individual persons, the latter do have individual relations with public bodies. This in my opinion is what art. 356 C.C.L.C. was meant to resolve.

To conclude on this point, I consider that, subject to the rules of public law, art. 356 C.C.L.C. places public corporations under the civil law of Quebec in everything affecting property and civil rights, except in the case of a provision to the contrary in their charters or in a special or general statute. In my view, this follows from the very wording of art. 356 C.C.L.C., the comments of the Commissioners, the sources of the article, the state of the law and the weight of academic commentary and case law then and now.

As to the liability of a public body for fault by its employees in the course of their duties, the case law and doctrine have with few exceptions consistently recognized the authority of the civil law in this area (McLeave v. City of Moncton (1902), 1902 73 (SCC), 32 S.C.R. 106, at p. 110; Vallières v. Cité de Montréal (1908), 33 C.S. 250 (C. rév.), at p. 254; Harper v. Cité de Montréal (1908), 16 R. de J. 229 (Sup. Ct.), at p. 231; Levinson v. Cité de Montréal (1911), 39 C.S. 259, at p. 261; Chevalier, supra, at p. 109). It is the ordinary rule of delictual civil liability which applies (Brown, supra; Doolan, supra; Mignault, op. cit., at p. 335; Archambault, loc. cit., 41 R. du B., at p. 28, note 81). I see no need to dwell at any length on this aspect of the matter, which does not appear to present a problem. Similarly, I shall touch only briefly on the question of the immunity of public bodies, which is the basis of the immunity applicable to public corporations. This immunity has its origins in the maxim "The King can do no wrong" at a period when all power resided in the monarch. The consequence of recognizing the rule of law as a check on the acts of government officials has brought about the erosion of the principle of the Crown's absolute immunity. It is now recognized that the state is subject to supervision of the legality of its acts and to extra‑contractual liability to compensate for its wrongful acts (Garant, Droit administratif (2e éd. 1985), at p. 883; Dussault, Traité de droit administratif canadien et québécois (1974), t. 2, at pp. 1468 et seq.; art. 94 C.C.P.) According to Dussault (pp. 1468‑69):

[TRANSLATION] Our system of liability in fact recognizes no difference between a wrongful act by the state and one by an individual. As Professor Garant points out, "In Quebec, the problem of public liability has traditionally been regarded as bound up with the civil law195."

And in his note 195:

[TRANSLATION] This statement is even more true with regard to municipal corporations. The courts have held many times that the delictual civil liability of such corporations is governed by arts. 1053 et seq. of the Civil Code and that the fundamental principles of such liability are those of French civil law. See Chevalier v. Corporation de la Cité de Trois‑Rivières (1913), 20 R. de J. 100 (C. rév.); Larivière v. Cité de Montréal (1941), 1941 219 (QC CS), 47 R.L. (n.s.) 505 (Sup. Ct.) Municipal corporations are regarded by the Civil Code as "political [bodies] . . . governed by the public law, and only [falling] within the control of the civil law in their relations, in certain respects, to individual members of society" (art. 356 C.C.); but then they are regarded as civil persons when their liability is in question. See André Nadeau, Traité de droit civil du Québec, p. 65; Magario v. Cité de Montréal, 1950 208 (QC CS), [1956] R.L. 449 (Sup. Ct.)

Walton, The Scope and Interpretation of the Civil Code of Lower Canada (1980), writes (at p. 54):

In regard to the position of the sovereign and the prerogatives of the crown we have to distinguish between rights which are properly speaking constitutional and rights of a pecuniary nature which belong to the crown.

The former group of rights belong to the public law of the Empire and since the Cession are governed by the laws of England.

The latter group belong to the private law and are regulated in this Province by the French civil law.

This distinction is expressed by old writers in dividing the prerogatives of the crown into major and minor.

The Privy Council was of the same opinion in Exchange Bank of Canada v. The Queen (1886), 11 App. Cas. 157, at pp. 164 and 166:

Their Lordships think it clear, not only that the Crown is bound by the Codes, but that the subject of priorities is exhaustively dealt with by them . . .

The draftsmen of the Code were working on the existing basis of French law. They were in the main mapping out a system of French law.

This Court has moreover frequently applied the provisions of the Civil Code to government officials (Bank of Montreal v. Attorney General of Quebec, 1978 173 (SCC), [1979] 1 S.C.R. 565; J. E. Verreault & Fils Ltée v. Attorney General of Quebec, 1975 179 (SCC), [1977] 1 S.C.R. 41; Joseph Investment Corp., supra).

In conclusion on this aspect of the question, the civil law applies regarding the liability of a municipality in Quebec, in so far as public law has not excluded it. The common law, as interpreted in Anns and City of Kamloops and in the later decisions on the subject, does not exclude the extra-contractual liability a municipal corporation might incur in the exercise, at an operational level, of its duties to maintain and inspect the firefighting service. Similarly, the enabling legislation, in this case the Cities and Towns Act, does not exclude municipal liability in this regard.

Since the Quebec Act, private law in the province of Quebec has been derived from the civil law. The common law criteria of civil liability set out in Anns and City of Kamloops are therefore not applicable. The private law principles involved here are to be found in the Civil Code of Lower Canada, in the chapter on delict and quasi-delict (arts. 1053 et seq.) These provisions provide for civil liability on the part of any person who causes damage to another by his fault, liability which may be excluded only by agreement (which is not contrary to public order and good morals under art. 13 C.C.L.C.) or by legislation, as in the case with which we are concerned.

As Vallerand J.A. puts it with admirable clarity (at p. 1005):

[TRANSLATION] To determine . . . if he owes (a) duty to them . . . we must leave the civil law and move to public law.

Note, however, that once the public law problem has been resolved, we must return to the fold immediately without stopping to consider the legal effects on liability at common law or under the statutory law of other jurisdictions.

This conclusion is in keeping with the provisions of art. 356 C.C.L.C., the Commissioners' report and the prevailing judicial and academic opinion in Quebec since the adoption of the Civil Code in 1866.

This leads to consideration of the second ground of appeal, concerning the fault found to exist by the Superior Court, fault on the basis of which the city of Beauport could be held liable, but which a majority of the Court of Appeal neither found to exist nor regarded as causal.

II. Fault

A summary of the most relevant facts will give a better understanding of what follows.

The appellants operated a hotel, a restaurant and a shop in a group of buildings located in the city of Beauport. On the night of February 24‑25, 1972 a guest at the motel, Gérard Tremblay, went to sleep leaving his cigarette burning. The occupants of an adjoining room, noticing the smell of smoke, forced open the door of Tremblay's room and tried to extinguish the flames in his mattress. The reception clerk was notified and, at about 2:45 a.m., a city of Beauport fire truck arrived on the scene. As soon as they arrived, the firefighters sprayed water from the fire truck onto the fire, working from the outside in. It was then that the water ran out, owing to the impossibility of connecting with the hydrants. These were difficult to reach and covered with snow. Two of them were frozen and one was broken. At about 3:00 a.m. the fire chief called the Giffard brigade, and soon after, that of Courville. The former arrived after about 20 minutes and emptied the contents of its water truck onto the fire, but was unable to control the blaze. It was not until about 3:40 a.m. that water was finally obtained from the hydrants, after an interval of some 40 minutes. A working fire hydrant was discovered across the street after the fire was over. The fire ravaged a large part of the hotel complex.

A) Judgments

1. Superior Court

At trial, Roberge J. first found the municipality liable for its negligence in checking and maintaining the fire hydrants: (1980), 9 M.P.L.R. 184. He considered that the city had failed in its duty to ensure, as would a bon père de famille, that its fire hydrants were able to provide the services for which they were intended. He concluded from the evidence (at pp. 202‑3):

[TRANSLATION] The Court accordingly concludes on this point that there was fault, negligence and lack of care in this regard by Beauport: this is not a matter of an imperfection in the system but a major deficiency in maintenance and vigilance.

The trial judge further blamed employees of the city, in particular its fire chief, for a number of faults in the performance of their duties, faults which he considered were causal. He identified, inter alia, the failure to make a fire break in time, hosing contrary to rules of caution in the circumstances, an unwarranted delay in calling the fire brigades from neighbouring cities and his lack of foresight and negligence in the use of the hydrants. He said the following (at p. 204):

[TRANSLATION] All these failures indicate a lack of care and skill on the part of Chief Côté; it also shows that his firefighters were not trained as they should have been; all these failures, especially on the part of Chief Côté, are not errors in judgment.

As well, his attitude to Loupret, to Keet, Pouliot and O'Brien, indicates a large measure of arrogance; he was master and no one was to give him orders or even advice.

The trial judge concluded (at pp. 204‑5):

[TRANSLATION] The Court concludes overall that Beauport must bear definite liability for this fire: improper maintenance of the water and hydrant systems; incorrect decisions by Chief Côté; improper hosing procedure; serious indecision.

. . . in any case, the Court must seek to identify, in light of all the circumstances of time and place, the determining cause or causes of the fire and its spread; the causes identified have been mentioned above.

2. Court of Appeal

Only Vallerand J.A. undertook to analyse the evidence of fault against the city of Beauport. However, Nichols J.A. briefly discussed fault in the maintenance of the hydrants.

Vallerand J.A. did not find the municipality at fault for its failure to maintain its water system primarily because he came to the conclusion in law that, in the absence of a duty to maintain otherwise imposed on the city of Beauport, s. 442 of the Cities and Towns Act conferred on it a complete immunity for insufficiency or lack of water: [1986] R.J.Q. 981. In his words (at p. 1014):

[TRANSLATION] It is thus not impossible that the fire could have been put out using the hydrants. Only a careful analysis of the evidence on the point might perhaps suggest such a conclusion: but, as I have said, water was not available at the hydrants until forty‑five minutes later, and for reasons of law which I have explained at length the city cannot be held liable for this.

On the question of fault by the firefighters, Vallerand J.A. considered either that this was not causal or that it was simply not established by the evidence. In particular, he reassessed the evidence regarding the hosing method and accepted the testimony rejected by the trial judge, concluding that the method used created [TRANSLATION] "only a possibility" of the fire spreading, which [TRANSLATION] "is not taken into account by the law" (at p. 1011). On the failure to cut a fire break, he noted the contradictions between the testimony of various witnesses and stressed the uncertain outcome of such a step. On the fire chief's obstinacy regarding the frozen hydrants, Vallerand J.A. considered that the failure to attempt to obtain water from the working fire hydrant on the other side of the street did not constitute fault. He concluded (at p. 1014):

[TRANSLATION] It should be remembered that it is for plaintiffs, here the respondents, to establish that it was certain or probable that the fire would have been brought under control if it had not been for the negligence of the firefighters. In view of the undisputed facts I have just mentioned, I cannot for my part conclude that, whatever may have been the negligence of the firefighters and their chief, they would probably, when they were finally able to obtain water from the hydrants, have controlled the fire, which, it must be said, in all probability had already spread into the attic and elsewhere. As to the various indications of the fire's progress, the particular time of each, the nature and effect of each person's actions, virtually anything could be concluded from the evidence, and this is understandable. Plaintiff‑respondents had a duty to establish why only the testimony supporting their argument should be accepted. The judgment a quo does not indicate, on many of the essential points and in particular that of causality, which it hardly deals with, that the trial judge believed certain witnesses and not others. Sitting in appeal, without the aid of seeing the witnesses in person, we can only say that the evidence supports defendant‑appellant's argument as much as that of plaintiff‑respondents.

His conclusion overall is particularly concerned with causality (at p. 1014):

[TRANSLATION] I have accordingly come to the conclusion that the appellant city cannot be legally held liable for the breakdown of the hydrants and that, as regards its fire department, the least one can say is that if indeed there was a breakdown, despite an obligation to act competently, the respondents have not discharged the burden upon them of establishing that it was causal.

B) Analysis

I feel it should be mentioned at the outset that the trial was a lengthy one, as noted by the trial judge (at pp. 186‑87):

[TRANSLATION] The hearing in fact began on March 7, 1977, continuing at different times and actually ending on April 9, 1979; the argument began on April 30, 1979 and concluded on May 7, 1979; unless there has been an error in computing the dates on which the Court sat, the hearing lasted for forty‑eight days and the argument six days.

The evidence was divided into two major parts, both by plaintiff and by defendant, and in rebuttal, to cover first all liability and then the entire question of the quantum: the translation of the transcript of the evidence on liability fills forty‑six volumes, and the translation of the submissions on quantum covers forty‑three; the oral arguments were also transcribed and translated and make up five volumes.

In a case of this magnitude, it is impossible for the Court to summarize the testimony of each witness or to follow the progress of the evidence step by step; in its choice of methods, the Court opted for that of raising all types of questions which it felt were relevant and attempting to answer them, based of course on the evidence heard; using the same method, the Court will raise certain questions of law to which it will give answers, and then discuss the evidence applicable to the answer given. [Emphasis added.]

I consider that the method adopted by the trial judge in the circumstances is not only adequate but consistent with the approach taken by the courts on several occasions (Joseph Brant Memorial Hospital v. Koziol, 1977 6 (SCC), [1978] 1 S.C.R. 491, at pp. 502‑3). When a trial judge is assessing facts in terms of the law, what matters is that his conclusions be based on the evidence, that is, consistent with the evidence, and that no evidence essential to the outcome of the case be ignored (Maryland Casualty Co. v. Roland Roy Fourrures Inc., 1973 141 (SCC), [1974] S.C.R. 52; Chartier v. Attorney General of Quebec, 1979 17 (SCC), [1979] 2 S.C.R. 474; Schreiber Brothers Ltd. v. Currie Products Ltd., 1980 11 (SCC), [1980] 2 S.C.R. 78; to the same effect in doctrine, see M. Morin, "La Cour suprême et les motifs d'intervention d'une cour d'appel sur des questions de faits," [1985] R.D.J. 121, at pp. 131‑34).

As regards determination of the facts, which is the sovereign right of the trial judge, an appellate court, and a fortiori a second appellate court, will intervene only when it has been shown that there is a manifest or palpable error by the trial judge. It is now almost axiomatic to say that determining the facts is the province of the trial judge, who has seen and heard the witnesses and is in a position to assess the credibility that the testimony of each should be given. Recently, in Lensen v. Lensen, 1987 4 (SCC), [1987] 2 S.C.R. 672, Dickson C.J. reiterated the limits governing intervention by an appellate court in this regard: palpable and overriding error. The Chief Justice wrote (at p. 683):

It is a well‑established principle that findings of fact made at trial based on the credibility of witnesses are not to be reversed on appeal unless it can be established that the trial judge made some "palpable and overriding error which affected his assessment of the facts": . . .

This principle has often been reiterated by this Court: Pelletier v. Shykofsky, 1957 65 (SCC), [1957] S.C.R. 635; St‑Pierre v. Tanguay, 1958 72 (SCC), [1959] S.C.R. 21; Dorval v. Bouvier, 1968 3 (CSC), [1968] S.C.R. 288; Métivier v. Cadorette, 1975 2 (SCC), [1977] 1 S.C.R. 371; Beaudoin‑Daigneault v. Richard, 1984 15 (SCC), [1984] 1 S.C.R. 2.

It is in light of these principles that we must now examine the appellants' objections to the intervention of the Court of Appeal in the trial judge's determination and assessment of the facts. In the appellants' submission, the trial judge made no palpable error and did not fail to take into account any relevant evidence. Similarly, they argue, his findings are based on the facts which he regarded as established, and in so doing he made no error that would have a bearing on the outcome of the case. The Court of Appeal was thus not justified in substituting its opinion for that of the trial judge, whose judgment should be restored.

I have also examined the evidence in light of the objections made by the respondent to the way in which the trial judge determined the facts and the conclusions he drew from them. I refer here to the grounds of error listed in the respondent's factum. On fault by the municipality, the respondent objected to the trial judge's findings regarding the snowed‑in and frozen condition of hydrants BF‑2 and BF‑3 and the difficulty of opening hydrant BF‑3. On fault committed by the firefighters, the respondent argued that the trial judge drew erroneous conclusions as to the consequences of hosing from the outside of the motel, and, as well, as to the decisions of the fire chief on the need to make a fire break with a bulldozer, to call the other brigades sooner and to open hydrants BF‑2 and BF‑3 instead of going to BF‑5. The respondent further objected that the trial judge misinterpreted the evidence as to the part that could have been played in the spread of the fire by the design of the hotel complex, the defective condition of a fire door, the actions of staff and guests and the weather.

In the guise of merely challenging the trial judge's findings, the respondent is actually disputing his determination of the facts. My review of the evidence readily convinced me that in this great amount of conflicting evidence, the determination of the facts was based essentially on the trial judge's view of the credibility of the testimony given by witnesses for either side. He indeed said so plainly on several occasions (at pp. 200‑4):

[TRANSLATION] The Court must mention that the Beauport police officers, who testified, spoke of certain problems they had with the hydrants and no one would categorically admit that they were covered with snow except Leblanc; the Court is prepared to accept, with no hesitation or question, the testimony of independent persons such as Forest Keet and Edmond Loupret: these individuals have no interest in this entire matter.

Grenier, Pascal's superior, took the trouble to call him on the morning of February 25 and question him regarding his work of clearing snow from around the hydrants: did he have any doubt as to whether they were snowed in? -- had anyone told him they were? ‑‑ had the situation been discussed? -- this request and these questions indicate that the testimony accepted by the Court on this point is more than plausible.

Seeing this, Chief Côté ordered the firefighters to go to BF‑3, with the same result: hard to open and no water; one of the firefighters, Magella Prévost, frankly admitted that one hydrant was broken, that it was frozen;

We must refer to the testimony of the expert witness David Matte, an engineer who has had great experience with fire prevention, as he has worked in the provincial fire commission, with installing firefighting equipment, as he actually participated himself in the installation of hydrant systems; moreover, he has some experience with the hydrants in question.

It is thus not surprising that the Court finds, with the assistance provided by this expert witness, that BF‑3 was frozen; it was moreover not used throughout the disaster because they could not use it.

. . . in the view of the expert witness Matte and of Charles Blinkstead, a fire prevention expert and a retired officer of the city of Montréal, this could have been done safely at this point; the chief replied to Keet that he was in charge of the fire and was capable of controlling it; Loupret was there at this time.

It was not until later, when the fire had spread to the units adjoining unit fifteen (15), that Patrick O'Brien, the Laurentide superintendent, ordered Keet to break it down regardless of the chief; but it was too late; they were not successful; the fire had gone too far for demolition to be done without danger to human life, especially that of the person doing it.

In the Court's opinion, the chief showed a lack of competence by not taking an affirmative decision in this regard; he preferred to procrastinate and take a chance.

As well, his attitude to Loupret, to Keet, Pouliot and O'Brien, indicates a large measure of arrogance; he was master and no one was to give him orders or even advice.

As well, during the hearing, the trial judge made certain remarks which support his findings on the credibility of certain witnesses. I shall give two examples.

The first comes from the testimony of Roger Pascal. This was the labourer who, on orders from his boss Armand Grenier, was responsible for clearing snow away from the hydrants. When cross‑examined at the hearing, he was unable to say how long ago his last visit to the motel's hydrants had been. An extract from the cross‑examination shows this most clearly (c.a., vol. V, at pp. 891‑93):

[TRANSLATION]

GRATIEN BOILY:

On Exhibit P‑29 (twenty‑nine).

Q.Mr. Pascal, if your recollection is that the fire -- the event in question you were told of -- happened on Tuesday, then it would be on Monday that you did your work of removing snow from the hydrants, is that right?

A.No.

Q.Well, if it was the day before the fire, and if you recall the fire as having been on a Tuesday . . .

THE COURT:

According to him.

GRATIEN BOILY:

Q.So far as you can recall, then, you shoveled on Monday?

A.I shoveled on Monday morning.

Q.You shoveled on Monday morning? You remember because it was the end of the week?

A.The beginning of the week.

Q.The beginning of the week.

A.Monday morning -- it was the beginning of the week.

THE COURT:

Q.Then, one of two things, sir. You shoveled three days before the fire or four days after it. You shoveled on the Monday morning . . .

GRATIEN BOILY:

Q.Four days before.

THE COURT:

Q.The twenty‑eighth . . . the twenty‑seventh, the twenty‑eighth . . .

GRATIEN BOILY:

Q.The Monday morning -- it was the twenty‑first.

THE COURT:

Q.The preceding Monday.

GRATIEN BOILY:

Q.And the fire occurred on the twenty‑fifth.

THE COURT:

Well, either on the morning of Monday the twenty‑first or the morning of Monday the twenty‑eighth. Make up your mind, sir.

GRATIEN BOILY:

Q.Well, Mr. Pascal, what do you say?

THE COURT:

Don't look over there, look this way or over here.

A.Well, I . . .

Q.In the winter of '72?

A.On Monday.

Q.On Monday -- what Monday? In February? There are four Mondays.

A.I can't say.

Q.In February . . .

A.I can't say, I . . .

Q.'72, and . . .

A.I don't report that.

Q.So Monday, there were four Mondays. The seventh, the fourteenth, the twenty‑first and the twenty‑eighth. I am asking you, Mr. Pascal, on which of these four Mondays did you shovel the hydrants? If you shoveled . . .

A.I told you, I don't know.

Q.You don't know.

No further questions. [Emphasis added.]

The following conclusion of the trial judge is not surprising (at p. 200):

[TRANSLATION] [O]ne need only read [Pascal's] testimony to see that he had no idea whether he had gone to that location on the days preceding the fire.

The second incident occurred in the cross‑examination of the expert witness Genest on the calculation of damages (c.a., vol. XVI, at p. 2924):

[TRANSLATION]

CROSS‑EXAMINED BY GRATIEN BOILY

for the plaintiff Laurentide:

Q.Mr. Genest, where in report D‑75 did you take into account the neon sign on the roof of the Motel des Laurentides?

A.It was not taken into account.

Q.You did not take it into account. Do you know that this sign was worth some $32,000?

A.Certainly not.

THE COURT:

Q.Mr. Genest, I just saw you give a furtive glance toward your associate at the back and a movement of the head by your associate at the back. I do not like this. You are required to testify at this time, and no one else. Right?

A.Of course, I did not know the value, that follows, I did not know it. [Emphasis added.]

In these circumstances, an appellate court which has neither seen nor heard the witnesses and as such is unable to assess their movements, glances, hesitations, trembling, blushing, surprise or bravado, is not in a position to substitute its opinion for that of the trial judge, who has the difficult task of separating the wheat from the chaff and looking into hearts and minds of witnesses in an attempt to discover the truth. If it happens that the trial judge neglects to indicate his findings in this respect or does not adequately support them, then it may be that an appellate court has to form its own conclusions. However, that is not the case here, where as we have seen the judge noted his impressions frequently and supported his findings.

I am therefore unable to agree with Vallerand J.A. when he writes (at p. 1014):

[TRANSLATION] As to the various indications of the fire's progress, the particular time of each, the nature and effect of each person's actions, virtually anything could be concluded from the evidence, and this is understandable. Plaintiff‑respondents had a duty to establish why only the testimony supporting their argument should be accepted. The judgment a quo does not indicate, on many of the essential points and in particular that of causality, which it hardly deals with, that the trial judge believed certain witnesses and not others. Sitting in appeal, without the aid of seeing the witnesses in person, we can only say that the evidence supports defendant‑appellant's argument as much as that of plaintiff‑respondents.

I consider that the respondent's argument in respect of the trial judge is, as I believe I have shown, without foundation. The trial judge ruled on the credibility of the key witnesses, he indicated why he preferred one witness rather than another, and I find nothing in my own review of the evidence to suggest that in doing so he made a palpable error in determining the facts or an error which could have a bearing on the outcome of the case in the conclusions that he drew from them. Far from being unreasonable, his findings are supported by the evidence. This is illustrated by four of the principal objections raised by the respondent in respect of the trial judge.

1. Start of Fire

The respondent challenged Roberge J.'s account of the facts. In its factum, the respondent referred to the testimony, inter alia, of Jacques Pouliot (c.a., vol. VIII, at p. 1468), Claudette Duclos (c.a., vol. V, at p. 976), Ghislaine Belisle (c.a., vol. VI, at p. 1018), Clément Cantin (c.a., vol. VI, at p. 1159) and Gertrude Lévesque (c.a., vol. VII, at p. 1199). According to the respondent, [TRANSLATION] "significant evidence" showed that the fire could have started as early as 1:00 a.m., that guests might have noticed it about 1:15 a.m. and that the motel receptionist was informed at about 1:50 a.m., so that by the time the firefighters arrived, the fire was already well under way and was no longer just a mattress fire.

However, the trial judge preferred other witnesses to these, including Edmond Loupret, whom the judge later noted had "no interest in this entire matter" (p. 200). The witnesses preferred by the trial judge contradicted the versions of the others, whom the trial judge did not ignore when he wrote (at pp. 196‑97):

[TRANSLATION] We have seen that the existence of a fire was brought to the attention of the staff at the registration desk in the lobby a few minutes after 2:25 a.m.: let us review at this point the chronological sequence of events which then occurred.

On receipt of this call, the night clerk did one of two things: either he immediately informed the waitresses in the bar that there was a fire or he immediately informed the police and the fire department; it is impossible to say which was done first, but we know that he did both things.

Additionally, the register of calls received at the police department indicates a call from Laurentide at 2:34 a.m.; the accuracy of this time was questioned because it was not entered in the register in its chronological order; the witness Fleury, who was in charge at the station that evening, explained that he had made an error, that this entry of 2:34 a.m. had been made by him on the evening in question but after an entry for 2:45 a.m.: an oversight, inadvertence, nerves? -- the Court must still accept this time of 2:34 a.m. as the actual time Fleury received the call from Laurentide; having decided this point, it must then decide that the notice to the waitresses was given before the call made to the station.

And below (at pp. 197‑98):

[TRANSLATION] We have already seen that certain Laurentide customers or guests had noticed the fire, and they tried to put it out with whatever means they had; they also tried to remove the mattress that was on fire, regardless of the smoke or flames, but were unable to do so; they also showed good judgment in quickly informing all guests, to the extent possible, unit by unit; this speed in evacuating guests continued after the first two firefighters arrived; as a matter of fact, there was fortunately no loss of life.

The trial judge concluded from this account of the start of the fire and his analysis of the evidence, that after the use of 500 gallons of water by Coulombe, at about 3:00 a.m., the fire was almost out (at p. 198):

[TRANSLATION] The Court has to say that, on the evidence, the fire had almost been put out through the efforts of LeBlanc, Coulombe and Loupret, when the water ran out in the Beauport fire truck, because it could not be connected to the hydrants;

Vallerand J.A. questioned this conclusion, after reviewing the testimony of various witnesses, including the firefighters and the respondent's expert witness (at p. 1014):

[TRANSLATION] It is thus not impossible that the fire could have been put out using the hydrants. Only a careful analysis of the evidence on the point might perhaps suggest such a conclusion: but as I have said, water was not available at the hydrants until forty‑five minutes later, and for reasons of law which I have explained at length the city cannot be held liable for this.

It is clear that the trial judge accepted a different version, given by other witnesses. Inter alia, he rejected the testimony of the firefighters, and consequently that of the respondent's expert witness, upon which Vallerand J.A. relied in part and in preference to the testimony of independent witnesses, as I have already noted. I do not see how, in view of the credibility factor which is present here, the Court of Appeal could properly arrive at different conclusions from those of the trial judge, who heard and analysed this lengthy conflicting evidence.

2. State of Building and Defective Condition of Fire Doors

Secondly, according to the respondent, the building was built in such a way as to accelerate the spread of the fire. Several witnesses were heard on this point: Olivier Larue (c.a., vol. VI, at p. 1161), Emile Turgeon (c.a., vol. VII, at p. 1354), Bernard Péclet (c.a., vol. VI, at p. 1183) and Dominique Gonthier (c.a., vol. VIII, at p. 1456). According to these witnesses, the space between the ceiling and the roof formed a kind of incendiary chimney. They further stated that in the absence of a fire door, this type of construction encouraged the fire to spread. Other witnesses indicated that one of the two fire doors had not closed automatically as it should have done: Chief Côté (c.a., vol. IV, at p. 636), André Larue (c.a., vol. VI, at p. 1069) and Paul Bélanger (c.a., vol. II, at p. 294).

This evidence was considered by the trial judge. However, he rejected it on the ground that the building had been constructed in accordance with standards and that, in any case, this construction was not shown to have been a determining cause of the spread of the fire. The judge wrote (at p. 205):

[TRANSLATION] An attempt was also made to argue against plaintiffs that the building was badly designed. The Court cannot accept this argument: as we saw at the start of this judgment, this building was built in accordance with industry practice and the standards in effect at the time. Defendant laid great stress on the fact that the attic, through which the air or ventilation pipes passed, formed a sort of horizontal chimney, and that there were no fire breaks at various places: as we know, there was a fire break between the lobby and where the rooms began; Beauport would have liked there to be fire walls at various places to divide the rooms; the expert witness Blinkstead, and even Matte, told the Court that it is not usual to do this in this type of construction; in any case, the Court must seek to identify, in light of all the circumstances of time and place, the determining cause or causes of the fire and its spread; the causes identified have been mentioned above.

I am not persuaded that this conclusion needs to be overturned.

3. Snow Covering Hydrants

Many witnesses were heard by Roberge J. regarding the fact that hydrants BF‑2 and BF‑3 were snowed in. Some of them, namely Armand Grenier (c.a., vol. III, at pp. 539 and 542), Chief Eugène Côté (c.a., vol. IV, at p. 635), Magella Prévost (c.a., vol. II, at pp. 302 and 309‑10) and Roger Pascal (c.a., vol. V, at pp. 878 and 901), stated that the hydrants had been cleared on the evening of the fire. Others, namely Ovila Leblanc (c.a., vol. II, at p. 26), Edmond Loupret (c.a., vol. III, at p. 518), Forest Keet (c.a., vol. II, at pp. 344‑48) and Pat O'Brien (c.a., vol. III, at pp. 390 and 407‑8), testified that on the contrary, hydrants BF‑2 and BF‑3 were hidden by snow when the firefighters arrived and could not be found.

In its factum, the respondent noted the contradictory nature of the evidence, doubtless in order to induce this Court to consider the state of the hydrants on the evening of the fire. Here as elsewhere, the proper function of the trial judge was to assess the testimony on this point as well as all the facts presented in evidence, few of which were not the subject of opposing argument. The trial judge assessed this evidence when he said (at pp. 199-200):

[TRANSLATION] . . . the Court is prepared to accept, with no hesitation or question, the testimony of independent persons such as Forest Keet and Edmond Loupret: these individuals have no interest in this entire matter.

It would appear that even before Chief Côté arrived, Marcel Coulombe went in search of BF‑3 and, at least in the opinion of LeBlanc, had difficulty finding it.

The same thing occurred with BF‑2: Patrick O'Brien, the maintenance supervisor, saw people shovelling when he arrived at about 3:00 a.m. around BF‑2; Chief Côté sent for a Beauport bulldozer; this bulldozer was used to locate BF‑2 and remove the hardened or frozen snow around it; this was established by Forest Keet in particular; it may be noted that Forest Keet was owner of the adjoining motel, Motel Hélène, and was on the scene even before Chief Côté; Ovila Leblanc himself, a Beauport police officer at the time, testified that the hydrants were buried or snowed in; it was mentioned by Edmond Loupret.

In my opinion this is sufficient to show that the respondent's argument on this point cannot succeed any more than its argument relating to the use of the hydrants by hotel employees, which it claims made them unusable.

The trial judge properly rejected this argument, and explained why (at p. 202):

[TRANSLATION] An attempt was made to attribute the difficulty of opening the hydrants to the fact that Laurentide and La Bastogne employees had used them during the summer, and opened them not with the regular key provided by Beauport but with other jagged tools, such as a monkey wrench or pipe wrench, and in so doing damaged them; if in fact the adjusting screw or nut was damaged by this type of wrench, the Beauport employees would have seen this when they made their inspections, as they were required to do; if that were the case, and they had been alert, after seeing the damage they should have changed the adjusting screws or nuts; according to the evidence, they did not do this; the Court rejects this claim by Beauport.

The respondent submitted that the trial judge erred in requiring from the municipality [TRANSLATION] "round‑the‑clock supervision". In my opinion, this objection is groundless. The trial judge correctly identified the object and intensity of the maintenance obligation on the municipality, referring to the criteria in art. 1053 C.C.L.C., when he wrote (at p. 202):

[TRANSLATION] The systems for supplying water and preventing fire through the hydrants were therefore not in good working order and could not provide the services expected of such a system; the Beauport authorities were required to act in this regard as bon père de famille; Beauport and its employees were responsible for seeing that these hydrants were always visible and free of snow and also for ensuring that the hydrants were not frozen.

The evidence, in particular the testimony of the employee responsible for clearing snow from the hydrants, Roger Pascal, showed that there was a period of at least four days before the fire during which the municipality did not verify whether the hydrants were snowed in or not in working order. This employee was not able to say on what date in February he had inspected the hydrants. There was no evidence of any schedule or inspection register. In my opinion, in these circumstances it was not "round‑the‑clock supervision" which was lacking, as the respondent maintained, but the supervision that would have been provided by a person seeking to exercise reasonable care in checking and maintaining the hydrant system.

4. Employee Negligence

The respondent relied in this Court on the testimony of the witnesses Paul Bélanger (c.a., vol. II, at p. 292), David Matte (c.a., vol. X, at p. 1897) and Roger Potvin (c.a., vol. VIII, at p. 1558), to indicate that the employees could have put out the fire when it started with the chemical extinguishers that were on the premises. Other testimony was cited by the respondent to show that the employees did not know where the extinguishers were.

The trial judge drew the following conclusion from this evidence (at p. 205):

[TRANSLATION] Defendant would like to shift responsibility for this fire, at least in part, to the employees and even the guests of Laurentide, because they did not know where the chemical extinguishers in the corridors were located; it is not surprising that a guest would not know where the extinguishers were; this is not necessarily the responsibility of patrons, and yet a guest, Loupret, tried to find one in the corridor, though he was unsuccessful because of the smoke; if the reasoning is taken to its logical conclusion, we should say that the firefighters themselves, who were responsible for fire protection, should have known that there were fire extinguishers and been able to use them.

Vallerand J.A. implicitly rejected this conclusion when he wrote (at p. 1004):

[TRANSLATION] Even before the intervention by the respondents' service, did the appellants not have a duty to attempt to avoid the catastrophe? -- can we presume, in the face of the evidence I have mentioned, that if they had tried to do this they would still have failed, and can the city be blamed for these same faults of omission which they allegedly committed themselves earlier, and without which the fire might have been put out well before the city of Beauport's actions were in question?

With respect, the trial judge's assessment of the evidence does not show any error.

After examining the thirty volumes of transcript reproduced and filed in this Court, and after reviewing the objections raised by the respondent to the trial judge's actions, I rest convinced of the correctness of his conclusions on liability, inasmuch as I respect his decision on the credibility of the witnesses, as an appellate court must. I therefore conclude that the respondent has not been able to demonstrate to my satisfaction that the Court of Appeal's intervention in the trial judge's findings of fact was justified or that the trial judge made a palpable error in his determination of the facts, or an error likely to affect the outcome of the case, in the conclusions he drew from the facts he took to have been proven.

However, one cannot conclude that the city of Beauport is liable without dealing with the question of the causal link between the fault and the damage suffered.

III. Causal Link

As we know, and this no longer has to be elaborated upon, for fault to be a basis for civil liability it must have been the determining cause of the damage, that is, the damage must have been the direct and immediate consequence of the fault (Volkert v. Diamond Truck Co., 1940 62 (SCC), [1940] S.C.R. 455; Morin v. Blais, 1975 3 (SCC), [1977] 1 S.C.R. 570; Baudouin, La responsabilité civile délictuelle (1985), Nos. 336 and 353).

Although, as Vallerand J.A. noted, the trial judge does not appear to have discussed this aspect of the case at any great length, he did not ignore it when he wrote (at pp. 205‑6):

[TRANSLATION] [T]he Court must seek to identify, in light of all the circumstances of time and place, the determining cause or causes of the fire and its spread; the causes identified have been mentioned above.

In a case of fire, like that before the Court, a distinction has to be made between the fault that created the fire and the fault that caused it to spread; this distinction was made some months ago in a judgment of Jacques Boucher J. of the Superior Court for the District of Hull; the judgment was rendered on January 25, 1979, in a case before the Hull District Superior Court having No. 17115, Sabourin v. Jahno; Boucher J. noted this distinction to be made between fault causing a fire at its origin and fault causing the fire to spread; he cited in this regard the judgment of the Supreme Court of Canada in DesBrisay et Al. v. Canadian Government Merchant Marine Ltd. et Al., (1941 27 (SCC), 1941 S.C.R. 230). . . .

This, in my opinion, is what matters.

The trial judge in any case clearly concluded that the fire was almost put out by the discharge of water from the first fire truck (at p. 207):

[TRANSLATION] We know from the evidence already analysed above that the intensity of the fire had diminished appreciably after all the water contained in the fire truck had been discharged . . . the evidence disclosed that there were no longer any flames in unit 15, though there was still smoke; we also know that there was a lack of water.

Once we accept that the trial judge was right to arrive at this conclusion of the evidence, as I do, the causal link between the lack of water and the spread of the fire becomes inescapable. It is possible that subsequent measures could have halted the progress of the fire and so broken the causal link for all or part of the damage. The failure to take proper measures, as found by the trial judge, did not have this result: quite the contrary.

As regards the faults committed by the firefighters, Vallerand J.A. criticized the trial judge for his choice of words, which in his view seemed to indicate that, in arriving at his findings, the trial judge had relied simply on a possibility, not a probability. This led Vallerand J.A. to state that the appellants had not met the burden of proof on a balance of probabilities. While it is true that the trial judge could have expressed himself differently, in my opinion this objection cannot stand when his remarks are taken in context, and one considers the firm conviction of the trial judge when he concluded that the lack of water coupled with other faults he felt had been committed by city employees in all probability caused the remainder of the damage. Although the judge wrote that [TRANSLATION] "it is also plausible to conclude, for another reason, that these hydrants were snowed in or at least covered with some snow which made access to them difficult" (emphasis added) (p. 200), and that [TRANSLATION] "It is quite clear that the use of a bulldozer to control a fire is not an ordinary procedure but in circumstances such as those in which Chief Côté was, he may have had to take the decision to try this experiment" (emphasis added) (at p. 204), his conviction emerges from the following passage (at p. 204):

[TRANSLATION] The Court concludes overall that Beauport must bear definite liability for this fire; [Emphasis added.]

If Vallerand J.A. had held the city partly liable for maintaining the hydrants, as I do, his conclusion might perhaps have been altered judging from this passage from his opinion (at p. 1014):

[TRANSLATION] It is thus not impossible that the fire could have been put out using the hydrants. Only a careful analysis of the evidence on the point might perhaps suggest such a conclusion: but, as I have said, water was not available at the hydrants until forty‑five minutes later, and for reasons of law which I have explained at length the city cannot be held liable for this.

In any case, in view of my conclusion that the trial judge was right in his finding of negligence by the city of Beauport in maintaining its water system, including its fire hydrants, as the determining cause of the spread of the fire, subsequent fault by the firefighters in the course of their duties could only contribute to increasing the damage that resulted.

The negligence of the city of Beauport and its employees in the course of their duties, both wrongful and causal, makes the city liable for the damage sustained by the appellants. Roberge J. set the share of this damage attributable to the city of Beauport at $2,542,732.83. The appellants did not object and, as the Court of Appeal dismissed the action, it did not have to rule on this aspect of the case.

The respondent now raises certain objections in this respect in this Court, and these must accordingly be considered.

IV. Quantum of Damages

As this point was not raised by the appellant's appeal, the respondent obtained leave from this Court to file a factum on this aspect of the question. The appellants in due course responded without objection. The respondent's interest in presenting its arguments in this regard is readily understandable, as the Court of Appeal, since it dismissed the action, did not have to discuss the point. Since the argument on damages does not appear to have taken the parties unawares or to have given either of them an undue advantage, and since they indicated they were prepared to argue the point in this Court, I would treat this aspect of the case as having been brought before the Court in the usual way.

What I have said about an appellate court's power to intervene in the determination of facts is doubly true when it comes to intervening in the estimation of damages, especially in view of the measure of discretion enjoyed by the trial judge in this area.

The rule is that an appellate court should not alter the quantum of damages set by the trial judge simply because it would have awarded a different amount if it had itself been sitting at the trial level. For the quantum to be altered, an appellate court must be shown that the trial judge applied an erroneous rule of law or that the amount awarded was palpably incorrect compensation for the damage suffered. If there is no such error of law or palpable error in the compensation, there is no basis for intervention by an appellate court (Nance v. British Columbia Electric Railway Co., 1951 374 (UK JCPC), [1951] A.C. 601, at pp. 613‑14 (P.C.); Proctor v. Dyck, 1953 6 (SCC), [1953] 1 S.C.R. 244; Watt v. Smith, 1967 48 (CSC), [1968] S.C.R. 177; Industrial Teletype Electronics Corp. v. City of Montreal, 1975 197 (SCC), [1977] 1 S.C.R. 629; Hamel v. Brunelle, 1975 1 (SCC), [1977] 1 S.C.R. 147; Andrews v. Grand & Toy Alberta Ltd., 1978 1 (SCC), [1978] 2 S.C.R. 229; Hôpital général de la région de l'amiante Inc. v. Perron, 1980 2419 (QC CA), [1979] C.A. 567; Woelk v. Halvorson, 1980 17 (SCC), [1980] 2 S.C.R. 430; Snyder v. Montreal Gazette Ltd., 1988 66 (SCC), [1988] 1 S.C.R. 494).

As these rules are well established, the Court must review the trial judge's findings in light of the method used and the evidence.

A) Trial Judgment

Roberge J. divided the claim into three separate parts: the buildings, their contents, and the loss of profit and incidental expenses, and I shall deal with them in the same order.

1. Buildings

To determine the value of the damage caused to the motel, the restaurant and the shop, the appellants called the expert witness Paul Michaud. He used the depreciated replacement method, that is, he asked what it would cost to rebuild identical buildings, taking into account a depreciation factor for new materials and the recovery of what remained after the fire. He considered the original plans and specifications, and after consulting with contractors and merchants, determined the cost of each of the materials originally used and the cost of the work that would be required to rebuild the complex. His formula also included items for administrative costs, contractors' fees and fees for architects and engineers. Finally, he suggested two methods for assessing the loss of the buildings: the first involved reconstruction from scratch, and the second took the residue into account and envisaged reconstruction on the foundations and other parts which remained. This second amount totalled $1,315,047.93, which in view of the division of liability with defendant Tremblay gave $1,267,098.93 as compensation for damages owed by the respondent.

The city of Beauport, for its part, called several expert witnesses. The first, Germain Genest, also used the depreciated replacement method, except that instead of calculating a rebuilding cost, he suggested using the "Boeckh method". This method is used in real estate appraisal. Rather than doing the replacement "piece by piece", the Boeckh method uses a "functional" replacement allowing, not reconstruction of the destroyed motel in every detail, but the construction of a new motel of the same size and having the same function. Applying this method, the expert witness Genest considered that the loss amounted to $1,081,629. This expert witness did not stand up well to cross‑examination (c.a., vol. XVI, at p. 2898, and especially at p. 2924). The second expert witness was Gérard Burns. He used the values appearing on the valuation roll before and after the fire, and with the aid of certain projections estimated the total value of the burnt buildings in 1973 as $803,938. The other three expert witnesses for the city of Beauport, Messrs. Marcel Audisio, Jacques Gosselin and Roch Girard, used the method based on the market value of the buildings. Mr. Audisio based his estimate on real estate transactions in the market place which most closely approximated the burnt buildings, made certain adjustments and so estimated the loss suffered by the appellants at $844,302. Mr. Gosselin examined the financial statements. He estimated the highest price that a buyer would have paid for the hotel complex, deducted the value of the residue and considered that the amount of $765,000 would adequately compensate for the loss. Finally, Mr. Girard used the capitalization technique. In his submission, the sum of $695,000 was the highest price that a buyer anxious to recover his investment would have paid in order to produce the same investment income.

At the end of the hearing, Roberge J. rejected the municipal valuation and market value methods in favour of the depreciated replacement value method. The judge said the following (at p. 210):

[TRANSLATION] The economic value method is a method that does exist and is sometimes accepted by the courts, but only on an auxiliary basis; this method is also known as the method based on capitalization of the net income from real property.

Defendant Beauport also raised the question of the municipal valuation; the Court cannot take the method used for this valuation into account in the case at bar.

In the opinion of the undersigned judge, one of the most common methods is that used to obtain the replacement value when this is possible.

Roberge J. adopted in this regard [TRANSLATION] "without qualification" the valuation by the expert witness Michaud, whose expertise clearly impressed the Court, and he explained his choice as follows (at pp. 213‑16):

[TRANSLATION] Plaintiffs called Mr. Paul Michaud to establish the value of the building lost: Paul Michaud was formerly a contractor and is now an appraiser; his great experience in such matters is recognized by all; the Court indeed could appreciate his expertise from both his testimony and the work he got through in preparing these valuations, as indicated by Exhibit P‑53.

The expert witness Michaud had the advantage of some acquaintance with the hotel complex in question, as he had been there from time to time as a guest; he was thus already aware of the quality and extent of this complex, at least superficially.

The Court notes that, though all the plans requested were not filed in this case, because they could not be found or had been lost, the quality of the evidence presented by Michaud in relation to the plans, specifications and work done was impressive and this evidence must be accepted as it stands.

From these plans and specifications, Michaud took the various quantities necessary for rebuilding the complex, with materials of the same quality as those originally used; he obtained prices from various suppliers of various materials; he consulted not only these suppliers but architects, engineers and even the owners as well.

He even gave two possible methods of setting the value of the loss incurred by the plaintiffs.

First, he set a replacement value for the burnt property, as if the whole project had to be started over from scratch using a vacant lot; briefly, he constructed a new hotel complex on paper and in detail, from excavation to the time the keys were handed over to the owner; he added the percentages usually allowed for administrative expenses, contractors' fees and the fees of professionals, architects and engineers; these figures gave him the total replacement value.

Second, he gave us the replacement value, but this time he did not start from a vacant lot: his point of departure was the property as it was immediately after the fire, with the debris that had to be removed, materials that were recoverable or parts of buildings that could be recovered, allowing for certain necessary repairs before placing new construction on this debris; this replacement value necessarily gave what Michaud called the cost of damage; to this cost he also added the usual percentages for administrative expenses, contractors' and professionals' fees.

Of the two methods of obtaining figures put before the Court, it chose the one which gave the cost of damage, that is the replacement value, less the recovery value, plus the cost of repairs to recoverable property.

The expert witness Michaud prepared a depreciation index in the event the Court needed it: he set this depreciation at certain percentages depending on the condition of the part considered, the future potential and also the use made of it; in this way the oldest parts were depreciated at 12%, another at 10% and the most recent part depreciated at only 6%; this is also why the neon sign outside was depreciated at 29%.

The Court accepts without qualification the figures arrived at by the expert witness Michaud in his report P‑53, and also in the corrections to this report made in P‑58 and P‑57; the Court takes particular note of P‑58, which there is no need to summarize here; it would seem to be sufficient to indicate the total in this judgment; this total, after considering all the figures, is $1,315,047.93; that is the value of the damage actually incurred by Laurentide, which owned the buildings.

Defendant Beauport, which bears the responsibility to the extent already indicated, does not have to pay this amount; it must therefore be deducted from the stated amount of $1,315,047.93, which results in $1,267,098.93; Beauport is liable for this amount.

2. Contents of Buildings

The appellants set the value of the lost contents of the motel, the restaurant and the shop with the aid of their expert witness Alphonse Roy. He proposed the depreciated replacement method. He accordingly considered an inventory of goods that were in the premises on the night of the disaster, and after consulting with merchants, determined what it would cost to buy back these items. He applied a depreciation factor to the amount so obtained and deducted a certain amount from this for goods recovered from the wreckage. The city of Beauport objected to the testimony of the expert witness Roy on the ground that he was not personally familiar with the contents of the buildings on the night of the disaster. Roberge J. dismissed this objection, subject to allowing Laurentide to present evidence of the presence of such items by another witness (c.a., vol. XIII, at pp. 2463‑69). This evidence was in due course presented by Paul Bélanger, a former manager of the hotel. The city of Beauport, for its part, called Roch Girard, who opted for the economic value of the contents of the buildings. Using the financial statements, this expert witness arrived at the amortized cost of purchasing the contents of the buildings. Roberge J. adopted the testimony of the expert witness Roy (p. 220). Taking into account the division of liability, the latter arrived at an amount of $178,452.58 for the hotel contents, as compared with $87,093, the amount established by the expert witness Girard. Mr. Roy estimated that the losses of the contents of the restaurant and the contents of the shop totalled $296,597.15 and $22,157.17 respectively, while Mr. Girard valued the same losses at $135,661.41 and $13,904.17.

3. Profits and Incidental Expenses

On the claim for lost profits, Laurentide called the expert witnesses Gaston Blais et André Pruneau. The witness Blais based his testimony on the premise that the time for rebuilding, during which no revenue would be generated, would be 18 months. He also allowed 50 per cent of the regular income for a further six‑month period. He then calculated the income loss for this period and, deducting expenses not incurred, arrived at a value for lost profit of $481,983 for the motel, $181,745 for the restaurant and $3,700 for the shop. In his estimate of the damages, the trial judge allowed a further $64,000 for professional fees to disaster experts and accountants. These expert fees were considered necessary for the appellants to be able to determine the amount of their loss and are recoverable under this Court's judgment in Hôpital Notre‑Dame de l'Espérance v. Laurent, 1977 8 (SCC), [1978] 1 S.C.R. 605. This amount of $64,000 was divided in the following proportions: $44,800 to Laurentide, $16,640 to the restaurant and $2,560 to the shop. Finally, an amount was awarded as incidental expenses for pre‑opening publicity, namely $15,000 for Laurentide; publicity, opening reception and renewal of liquor permits; $52,000 for the restaurant; and $10,000 for training new staff in the shop.

On this item, the city of Beauport called Roch Girard, who determined lost profit using an economic projection based on the financial statements and profits made in previous fiscal years. Two witnesses had already indicated an eleven‑month period as the time required for rebuilding (Michaud, c.a., vol. XII, at p. 2169, and Roy, c.a., vol. XIX, at p. 3527). However, Roberge J. preferred the eighteen‑month period. He also accepted the method of calculation and amounts suggested by the appellants' expert witnesses. The judge wrote (at p. 221):

[TRANSLATION] It appears from this short analysis that the weight of plaintiffs' evidence is that it is reasonable to assume a period of 18 months during which the loss of income was total, without qualification; in the Court's opinion, the cross‑examination of these witnesses in this regard and the evidence submitted by the defence were not sufficient to reverse the weight of this evidence; the Court accordingly accepts this eighteen‑month period.

B) Analysis

The city of Beauport alleged several grounds of error against the valuation retained by the trial judge. I have examined them in the order in which they were raised, apart from certain groupings which I felt were necessary to dispose of the matter more effectively.

1. Depreciated Replacement Value

The city of Beauport objected to the fact that Roberge J. chose the depreciated replacement value of the loss in preference to the other methods suggested by the respondent, such as the standardized replacement value, the value appearing on the valuation roll, the market value and the capitalization value.

The rules applicable under arts. 1073 et seq. C.C.L.C. are well known. A victim of fault is entitled to monetary compensation which, once he has received it, is deemed to place him, or enable him to place himself, once again in the position he was in before the accident -- here, the fire.

Clearly, several methods are available for determining this compensation. These various methods are generally presented with the aid of expert witnesses, especially in cases as significant as the one at bar. The expert witnesses recommend the use of a particular method and indicate that in their opinion this method corresponds to the fair value of the loss suffered. When a judge, guided by the rule of restitutio in integrum, opts for one of the methods suggested, he necessarily relies on the degree of expertise of the witnesses heard, giving them more or less credibility depending on the usual various factors for weighing testimony. The testimony plays as important a part in assessing the evidence of damage as in determining the facts affecting liability. In the case at bar one of the expert witnesses heard by the trial judge, Paul Michaud, suggested an estimate based on the cost of rebuilding the portion destroyed. As I have already indicated, the judge was very impressed by the sincerity and credibility of his testimony and his previous acquaintance with the premises. Great weight was accordingly attached to his opinion that the suggested method corresponds as fully as possible to the value of the loss, and I must respect this assessment by the trial judge.

At several places in its factum, the respondent blames the trial judge for not taking into account evidence presented by its own witnesses. My analysis of the evidence shows that on the contrary, Roberge J. listened attentively to the testimony of the expert witnesses called by the respondent, and was entirely justified in giving their opinions less weight. The testimony of these expert witnesses was full of hesitations or incidents of which the trial judge took note. To illustrate, I have taken two extracts from the evidence which I consider to be representative in this respect. The first is a passage from the testimony of the expert witness Burns, who it will be recalled suggested the value appearing on the valuation roll (c.a., vol. XVI, at pp. 2976‑77):

[TRANSLATION]

GRATIEN BOILY:

Q.Mr. Burns, will you kindly answer my question? Will you tell me, from the breakdown in the '68 valuation roll, what price, what value in the valuation roll was assigned to each of the buildings? That is my question -- that's all. I would like you to give me a list of figures with a list of the buildings. Right. And in order! You began just now by telling me B‑1, is that right?

Do not show it to your lawyer and do not speak to your lawyer! Answer the question! You began by telling me just now Building B‑1, 86 motels in Wing C and in Wing L, for 287,032.

You then moved on to the buildings in front, $348,895, and you said, this makes a total $1,107,304.

I am asking you . . .

THE COURT:

The grand total!

GRATIEN BOILY:

The total of all the buildings.

Q.So, I am asking you to tell me whether that is the breakdown of the buildings appearing on the valuation roll, as adopted in '68?

A.You know, it may seem very simple to you. I should just say one thing here. I have not touched this file since about -- on the question of the buildings -- since 1973. Right?

Q.Yes.

A.If you will give me a little time . . .

Q.I will give you all the time you like, Mr. Burns.

A.I will answer the question.

Q.I would like you to answer me intelligently and I know you are able to do so.

A.The figures I gave -- I was wrong about the figures; I gave figures I was in the course of preparing before the fire, for the roll, to take effect on January 1, '73.

Q.Ah! Good!

A.Right? That is why I retracted; I am giving you the new figures there. I am telling you that this is on the roll. Now, you would like to have the balance?

Q.No. In detail?

A.I will give you the balance.

Q.You don't understand the question, Mr. Burns. Listen carefully to my question.

A.I am telling you that the buildings which were in the fire ‑‑ that's it.

Q.I am not asking you the value of the buildings that were in the fire! Listen to my question! I am asking you to tell me, by reference to the '68 valuation roll, the breakdown of values assigned to each of the buildings. [Emphasis added.]

The following extract from the testimony of the same expert witness is to the same effect (c.a., vol. XVI, at p. 2993):

GRATIEN BOILY:

Q.That's it -- garage and office, or warehouse, if you prefer?

A.Exactly. And then, the swimming pool.

Q.That's right. So, basically, the same items as those to which in '68 you assigned a value of $314,495, in the '72 roll you gave them a value of $523,675?

A.(Witness nods).

Q.Is that right?

A.Those were basic figures. That does not necessarily mean I would have entered these exact figures, but . . .

THE COURT:

Q.You are still not answering the question! [Emphasis added.]

The credibility of an expert witness is obviously not the only point to be considered in weighing testimony, though it is a very important one. In the case before the Court, the method of estimating the damage suggested by the expert witness must be the one most likely to represent adequately the value of the loss. The respondent made certain arguments in this regard in support of the expert witness Burns' opinion. It maintained that it would be ridiculous for ratepayers to be bound by the roll for tax purposes -- money owed to the city, but not for liability purposes -- money owed by the city.

I cannot accept the respondent's argument. The methods used to determine the value of immovable property for municipal valuation purposes include many components imposed by law which do not necessarily represent the fair value of such property for other purposes. As we are well aware, for example, the valuation for real estate and other tax purposes rarely represents 100 per cent of the actual value of immovable property. Additionally, in the case at bar the suggested value had to undergo several adjustments to take account of the time elapsed since the last valuation before the fire, the time required for rebuilding and the resulting additional loss, as well as the value of the residue of the burnt property. The value appearing on the roll might perhaps be used in other situations, but in the present circumstances, in view of the evidence, I agree with the trial judge that this is not an adequate method.

Another extract from the evidence indicates the evidentiary value placed by the judge on the testimony of the expert witness Genest, who suggested the Boeckh method, that is a standardized estimate of the replacement value (c.a., vol. XVI, at p. 2924). I have already cited this passage, but I feel it is worth repeating:

CROSS‑EXAMINED BY GRATIEN BOILY

for the plaintiff Laurentide:

Q.Mr. Genest, where in report D‑75 did you take into account the neon sign on the roof of the Motel des Laurentides?

A.It was not taken into account.

Q.You did not take it into account. Do you know that this sign was worth some $32,000?

A. Certainly not.

THE COURT:

Q.Mr. Genest, I just saw you give a furtive glance toward your associate at the back and a movement of the head by your associate at the back. I do not like this. You are required to testify at this time, and no one else. Right?

A.Of course, I did not know the value, that follows, I did not know it. [Emphasis added.]

These were not isolated incidents in the testimony, and the evidence in the record showed that the credibility of the expert witnesses played an important part in determining the most appropriate method of compensating for the loss of the buildings. Without expressing any opinion as to the applicability of the Boeckh method in other circumstances, I feel that in the case at bar the trial judge was justified in not using it because it proved unable to provide the most accurate estimate of the loss suffered.

In addition to the expert testimony, Roberge J. relied on a number of precedents which have held that the reconstruction value is frequently used as a method of arriving at fair compensation in similar cases. In Royal Insurance Co. v. Rourke, [1973] C.A. 1046, an insured sued his insurer after a fire ravaged a hotel. Though the principal question was whether the effect of a rider allowing the building to be vacant, added at the time of the policy transfer without the insurer's knowledge, had the effect of reducing the "actual value" of the building, the question of the valuation method to be used in determining the "actual value" of the building was also raised. On this point, in a concurring opinion, Gagnon J.A. wrote (at p. 1051):

[TRANSLATION] The policy issued by the appellant is an open policy, not a valued policy (art. 2480 C.C.), so that it was up to the respondents to determine the amount of their loss. I consider that the undisputed evidence for the plaintiff is sufficient to show that the loss exceeded the amount of the insurance. In particular, I accept the deposition by Masson, an experienced builder and appraiser, who set the actual value of the house using the replacement cost method and allowed for the physical depreciation and recovery value of certain debris such as foundations.

In Colomba v. Madill, [1979] C.S. 17, which also involved a claim based on an insurance policy, the Court had to determine the "actual cash value" of a barn destroyed by fire. As indicated by the following passage from the reasons, the credibility of the expert witnesses played an important part in this case and the method using the depreciated replacement value "piece by piece" was used (at p. 21):

[TRANSLATION] To determine the value of his barn at the time of the fire in September 1976, the plaintiff turned to the same appraisers, who on this occasion dispatched their president to the scene in October 1978. As he had never seen the barn himself before it was destroyed and all he observed was two‑year‑old debris, he arrived at an "insurable" value of $118,850 in 1976, using the quantities used by Lemire combined with new unit prices taken from Marshall & Swift. As we have seen, Lemire had no quantitative measurements in his notes, apart from the dimensions of the barn. The Court cannot attach any value to such evidence built up on groundless information already rejected by the Court. It must therefore rely on the estimate of damages provided by defendants.

Without going into all the details, the Court is satisfied that Mr. Daigneault's investigation was much more conscientious and realistic than those of Cooper Appraisal Limited, and gives us an adequate estimate for the cost of rebuilding the barn at the time of the fire, with new materials: for $86,079.31, plaintiff would have had a new barn. Of course, as the barn destroyed was built in around 1970‑71, Mr. Daigneault suggested depreciation of 2% per annum, which seems reasonable.

Clearly it is not possible to infer from these cases a general rule that the depreciated reconstruction or replacement value is the only valid method. First, these judgments do not apply directly to the case at bar, since an estimate of the "actual value" of the loss in the insurance contract sense does not necessarily meet the same criteria as those governing compensation for loss under arts. 1073 et seq. C.C.L.C. Second, one particular method is not a priori more appropriate than another for assessing the loss of immovable property. Of all the methods presented to him, a judge will first reject those which he does not feel are appropriate to the circumstances, that is, those which are not likely to make full compensation for the loss or which are based on considerations completely unrelated to the loss suffered. Second, the judge will decide which of the suggested methods is the most appropriate, taking into consideration the relative weight of the expert opinions and the circumstances of each case.

An example of an inappropriate method or consideration was given by the respondent. It alleged that the sale of what was left of the hotel in 1975, three years after the fire, could be used to determine the proper measure of damages. The evidence showed that on that date the land, improvements to the land, buildings and movable equipment, and the business itself, were sold together for a total price of $875,000. The respondent contends in its factum that this price is the [TRANSLATION] "best indication of the value of the property", and that Roberge J. erred in not taking it into account when he estimated the damage. I believe the respondent is wrong, as the sale in question relates only to the residue of the burned property and cannot as such represent the value of the property destroyed in the fire. Furthermore, if the argument is valid, what it actually tends to show is that the total value of the hotel complex before the fire must have been much greater than the respondent suggested. Accordingly, it seems to me that the trial judge was justified in not taking this into account.

On the question of choosing the most appropriate method, I have already stated my views as to the function of the expert testimony. As regards the circumstances of the case at bar, they seem to me to favour the solution adopted by the trial judge. The appellants were owners of a hotel complex consisting of about 100 units, a restaurant and a shop. The evidence indicated that these facilities had been profitably operated for a number of years. The evidence further showed that the residue of the hotel complex continued to be operated after the fire, even generating a certain amount of profit. What this shows is that the depreciated reconstruction value is more appropriate here than the market value of the business. The former assumes continued operation of the business, which was the case for the first three years after the fire. The latter, on the other hand, is based on the assumption of a free or forced sale, which is not what actually happened in the case at bar. The market value might have been an adequate method if, for example, the motel had been for sale or about to be sold before the fire, or if its operation was purely speculative, and so on. In this latter connection, the city of Beauport sought to establish that a number of circumstances subsequent to the fire, including the 1975 sale, showed that a short time after the fire the intention of the owners was not to rebuild. Subject to further observations below, it will suffice for the moment to note that so far as the material loss of the buildings and their contents is concerned, as contrasted with an estimate of future damage, only the facts proven at the date of the fire are relevant.

The value approved by the trial judge allows for the cost of clearing debris away and placing on the foundations and other residue a hotel identical to that which was burned down, depreciated according to accepted standards. Such compensation seems quite appropriate to me, as its purpose is to put the parties back in their original situation by allowing the property destroyed to be rebuilt. The respondent did not show to my satisfaction that the trial judge was wrong in accepting this method of estimating the loss, taking into account the evidence, especially the evidence of expert witnesses, and the particular circumstances of the case.

2. Compensation for Future Damage

The respondent challenged the amount awarded by the trial judge for lost profit and incidental expenses. It relied in this regard on certain events which occurred after the fire, events which it said indicated that soon after the fire the appellants decided not to rebuild. The evidence disclosed that the complex was not in fact rebuilt. The respondent's argument was that if there was no intention to rebuild, there was no loss of profit, and if the complex was not rebuilt, incidental expenses for reopening, advertising and the renewal of liquor permits were not incurred and so should not be the object of compensation.

On the first point, art. 1073 C.C.L.C. expressly gives the victim the right to claim from the perpetrator of the fault "the profit of which he has been deprived":

1073. The damages due to the creditor are in general the amount of the loss that he has sustained and of the profit of which he has been deprived; subject to the exceptions and modifications contained in the following articles of this section. [Emphasis added.]

As I mentioned earlier, the evidence is that the residue of the hotel complex continued to be operated for nearly three years after the fire. Profits were made during that period, profits which the respondent's expert witnesses deducted from their estimate for this item, and which the trial judge also took into account in the value he assigned to lost income (p. 222). These facts are indicative of the extent of the earnings which the appellants had every right to expect that they would receive from operating the hotel complex, if it had not burned down.

The respondent attached some importance to a resolution adopted by the Laurentide Motels Inc. board of directors on August 25, 1972, that is, about six months after the fire. This resolution, which was entered into evidence, authorized the redemption of preferred shares at their par value plus accrued dividends, and transferred all common shares to the books. According to the respondent, this resolution shows that it was decided as early as August 25, 1972 not to rebuild. The respondent added that on May 24, 1972, three months after the fire, the insurance appraiser completed his appraisal, which was accepted by the insured party. It concluded from this that on that date the appellants knew what money they would be receiving from their insurance and so were in a position to decide whether they would rebuild. The respondent therefore concluded that it was decided at that point not to rebuild. This was borne out by the sale of the residue three years later, with the result that, in their submission, the appellants are not entitled to be compensated for lost profit.

The trial judge did not accept this argument. He rejected the facts cited by the respondent on the ground that they occurred after the fire. The judge wrote (at p. 220):

[TRANSLATION] First, there is a problem which the Court must consider: we actually know that the buildings lost in the fire were not rebuilt and that part of the residue was sold; defendant Beauport submitted more or less that the calculation of the loss should not go beyond the time when it was decided not to rebuild; there is no need to spend time determining that date, in view of the following decision by the Court.

In reviewing the claim for damage to the buildings, the Court referred to Royal Insurance Company -vs- Rourke and to Delarosbil et al. -vs- La Prévoyance Compagnie d'Assurance et al.; in brief, we saw that in estimating damages the Court must look not at the owners' intent regarding the disposal of their property, but at compensating for damage in accordance with its intrinsic value; the Court accordingly believes that it should apply the same principle to calculating the loss of income; it is not important to know what the owners did or intended to do with their property; what matters is to place the owners in the position they would have been in so as to restore the equilibrium destroyed by the damaging act.

In Rourke, cited by Roberge J., as I have already said, the Court of Appeal had to decide whether a rider subsequently added to the conclusion of a policy should be taken into account when it came time to assess the "actual value" of the loss, under the terms of the policy. The Court also had to determine what importance should be given to the fact that the owners had placed a sign in front of the building stating [TRANSLATION] "for sale for demolition". Gagnon J.A. wrote (at p. 1051):

[TRANSLATION] The respondents' inclination to sell the house to a demolition company remained merely a possibility and they are entitled to the intrinsic value of their property.

Rinfret J.A., who concurred, wrote (at p. 1048):

[TRANSLATION] It is the physical value at the time of the fire that must be considered, not what might have happened, in one direction or the other, in the more or less distant future.

In Delarosbil v. Prévoyance, Cie d'assurance, [1978] C.S. 363, a claim had also been made under an insurance policy, following a fire in the insured building. Nadeau J. adopted as one of his considerations the dictum in Rourke (at p. 365):

[TRANSLATION] Whereas "in a fire it is the intrinsic value that must be considered, not the owners' intention, or even the intention to demolish";

These two cases illustrate, although in the context of an action for insurance compensation, the rule that events occurring after the date of the loss are generally not taken into account in setting the quantum of damages. This rule is no different in the case of an estimate of loss in a delictual or quasi‑delictual matter. However, the rule is not absolute and is subject to exceptions, especially in the case of estimation of loss for future damages.

The judgment of this Court in Findlay v. Howard (1919), 1919 66 (SCC), 58 S.C.R. 516, gives one illustration of the rule and of the exception. In that case, a partner had unlawfully terminated a partnership before the term stipulated in the contract. The other partner brought an action to recover the profit he would have made if the partnership had continued to the end of the term. The action was brought in 1913. The contract provided that the partnership would continue until 1915. War broke out in 1914, which had the effect of significantly reducing the level of business. The question that arose, therefore, was whether the subsequent event ‑‑ the war ‑‑ should be taken into account in estimating the lost profit, or whether on the contrary the Court could simply apply the average profit in the years preceding the breach to the term specified in the contract. A majority of the Court took the first alternative. In an opinion concurring with the majority, Michault J.A. explained (at pp. 543-44):

That is to say, Howard demands really future damages, and I cannot follow the learned trial judge when he estimates the value of the future profits of the partnership by considering only its past profits, as if they were sure to continue, and closes his eyes to events which had happened since the action, but before the trial, and which shewed that these future profits would in no wise have been comparable to those made before the date of the breach. Where future damages are claimed, future conditions must necessarily be considered, and what better evidence of conditions, which were in the future at the date of the breach, can be made than by shewing, at the date of the trial, what has actually occurred since the breach of contract? [Emphasis added.]

Davies C.J., concurring, approved the reasons of Lamothe J. in the Court of Revision, who stated (1917), 51 C.S. 385 (at p. 388):

[TRANSLATION] The action was brought in December 1913; and the Superior Court stated in principle that it was not required to take into account facts occurring after that date. This principle exists; it has to be applied in all cases where the claim is based purely on existing facts which have finally determined the liability of the parties. However, in cases where the claim is made for future damages, damages based on future and probable facts (namely the presumed continuance of a certain series of facts and circumstances), the Court must obtain guidance from facts that have occurred subsequently, and it will then have definite facts before it instead of mere probabilities. [Emphasis added.]

A second illustration is provided by Pratt v. Beaman, 1929 61 (SCC), [1930] S.C.R. 284. That case again involved future damages, specifically damages for the loss of anticipated income. The trial judge had accepted a valuation setting the plaintiff's life expectancy at sixteen and a half years, despite the proven fact that the plaintiff had died from the sequelae of the accident before the trial ended, that is a year and nine months after the accident. This Court concluded that the victim's death had to be taken into account, even though it was an event subsequent to the bringing of the action.

The Quebec Court of Appeal has held to the same effect several times. In Golden Eagle Canada Ltd. v. Ray Gas Bar Inc., [1973] C.A. 680, the Court was confronted with a claim for profits lost as the result of a breach of contract. The unexpired term of the contract was over eight years, but the evidence was that the plaintiff's business ceased to operate ten weeks after the breach. The Court awarded lost profits only for the shorter period of ten weeks.

The Court of Appeal's judgment in Procureur général du Québec v. Dugal, J.E. 82‑1169, is to the same effect. The trial judge had awarded a certain amount in view of the plaintiff's impotence, which the evidence seemed to indicate resulted directly from the accident. Proof of the subsequent birth of a child to the plaintiff and his wife was, when the case came up on appeal, held to be relevant in reducing the damages awarded at trial for non‑pecuniary losses. These judgments qualify, as regards future damage compensation, the general rule that damages are determined at the date the loss or injury occurred. These precedents apply the principle stated in arts. 1073 et seq. C.C.L.C., which is designed to compensate all, though nothing but, the loss sustained. It must be remembered that an estimate of future damage is made on the basis of predictions or extrapolations, methods which necessarily involve some uncertainty. If instead of such projections it is possible to establish the loss actually suffered, there can be no better evidence.

In the case at bar the lost profit and incidental expenses are future damages, since they had not fully taken place at the date of the fire. With respect to compensation for total loss of profits, this loss occurred from the day after the fire and extended for a period set by the trial judge at eighteen months. He awarded compensation for a partial loss of profits (50 per cent) for a further six‑month period. Profits made by operating what remained after the fire for this period tend to confirm that profits corresponding to full‑capacity operation of the hotel were lost. In my view, these proven facts take precedence over the inference which the respondent sought to draw from the report by the insurer's appraiser and the redemption resolution. The sale took place three years after the fire. The trial judge awarded compensation for lost profit only for a total period of two years. The 1975 sale does not seem to me to have the necessary nexus for it to be said that, had it not been for the fire, the appellants would have sold their flourishing business and that they intended to sell it in any case. The subsequent sale may be due to a number of quite unrelated factors such as market conditions. In my opinion, the trial judge was right to conclude as he did on this point. I do not think that the eighteen‑month period, followed by six additional months, which he used is so unreasonable as to justify intervention by this Court. This period is based on the evidence that this would be the time necessary for rebuilding and restarting operations of a hotel of this kind. This assumption is far from unreasonable in the circumstances, since the hotel continued to operate in the months following the fire.

The respondent is asking this Court to consider what it sees as an additional ground of error relating to the compensation awarded for lost profit. It alleged that Roberge J. erred in awarding compensation for loss of revenue, rather than for lost profit, and in this connection refers to the following passage from the judgment (at p. 221):

[TRANSLATION] The Court makes no distinction here between gross and net revenue;

The most superficial reading of the evidence and the judgment indicates that it is unquestionably a loss of net income, or loss of profit, that was awarded by the judgment (at p. 222):

[TRANSLATION] In the case of the Laurentide claim, these chartered accountants analysed the last three years of operation from the audited financial statements; they also had access to the ledger, which they studied and analysed; this analysis was done on a monthly basis; using this analysis, they did a projection to obtain the forecasted income for a twelve‑month period commencing on February 25, 1972; to obtain the forecasted income for the next six months, they did an analysis of the corresponding prior six‑month forecast, with an increase to reflect a normal anticipated rise . . .

However, during this period Laurentide continued to operate the rooms which still existed and certain other services; Laurentide therefore earned income; this income must accordingly be deducted; this is what the experts did, after identifying this real income by analysing the earned income, from the client's books, and excluding extraordinary income.

According to these experts, all expenses not incurred would then have to be deducted from the figure obtained, as otherwise it would be a gross, not a net loss; these expenses incurred were grouped under the headings of business expenses, administrative expenses and financial expenses.

The result of these operations was the determining of a net loss of profit for this eighteen‑month period amounting to $421,441.00. [Emphasis added.]

I would accordingly affirm the trial judgment on this point.

However, on the item of incidental expenses for the purpose of opening, I do not think the trial judge was right to award them. The same 1975 sale prospectively eliminated the assumption that the appellants would rebuild and reopen the motel. The items for pre‑opening costs, publicity and renewal are expenses that were not, and never will be, incurred. Additionally, such expenses, had they been incurred following rebuilding of the complex, would necessarily have reduced net profits by that much and would have to be taken into account in determining the lost profit, which the trial judge does not appear to have taken into consideration. Accordingly, I would deduct the sum of $77,000 awarded by the trial judge for this item, that is $15,000 for Laurentide, $52,000 for La Bastogne and $10,000 for the appellant Lévesque.

3. Admission of Hearsay Evidence

As I have already noted in summarizing the evidence, the city of Beauport objected to the admission by Roberge J. of testimony from the expert witness Roy, on the ground that he did not have personal knowledge of the inventory of property destroyed by the fire, though he based his expert testimony on that inventory.

The judge wrote (at p. 211):

[TRANSLATION] Expert witnesses have some latitude in obtaining their information and determining the worth of the lost property which they are called on to value; if for example the requirement is to determine the value of 1,000 bricks on a particular day, they may obtain information from brick sellers; . . . the Court certainly would not regard that as hearsay; an expert witness cannot be expected to be a walking catalogue; if this is hearsay evidence for an expert witness, this kind of hearsay can be allowed; the same rule must be applied when the expert witness, in order to arrive at his valuations, refers to invoices, accounts and inventories; he refers to such documents out of necessity, since the property has been destroyed and he cannot examine it physically and visually.

The choice of language is perhaps not the very best, but the substance is consistent with positive law. Professor Ducharme explains (L'Administration de la preuve (1986), No. 318) that an expert's opinion may deal with facts proven by another witness, and with assumptions based on those facts. The expert may even base his opinion on hearsay, though the evidentiary weight of his testimony will be affected if the facts on which the opinion is based are not entered in evidence in accordance with the ordinary rules of evidence. In the case at bar, the appellants subsequently called the witness Bélanger on the contents of the buildings on the night of the disaster, and the trial judge properly considered that the expert opinion was based on proven facts.

4. Unjust Enrichment

Fourthly, the city of Beauport argued that the compensation awarded by the trial judge constituted unjust enrichment to Laurentide, as it had already received insurance compensation in 1972 amounting to $1,800,000, which had been invested by Laurentide and from which it received interest.

Perhaps realizing the weakness of its argument, the respondent observed in its factum (at p. 70):

[TRANSLATION] Our purpose is not to overturn the rule of the old art. 2468 C.C.L.C. . . . that "civil responsibility shall in no way be lessened or altered by the effect of insurance contracts".

It is well recognized that the fact that a victim protects himself against the vicissitudes of life at his own expense should not work to the advantage of a person causing damage. In any case, the evidence submitted by the city of Beauport on the insurance payments and subrogation is too incomplete to allow the Court to intervene, even assuming that it could do so.

5. Additional Indemnity

Finally, I note that the trial judge awarded the additional indemnity provided for in art. 1056c C.C.L.C., specifying that it should be [TRANSLATION] "calculated at 5 % per annum on this amount [of the order] from November 7, 1978". (Emphasis added). In their factum, the appellants sought to have the trial judgment upheld, [TRANSLATION] "including the additional indemnity of art. 1056c of the Civil Code to be determined". The respondent, for its part, replied briefly that [TRANSLATION] "the appellants clearly cannot ask that this indemnity be determined . . . since they have not filed any cross‑appeal in this regard". The question was not discussed at the hearing.

Article 1056c C.C.L.C. states:

1056c The amount awarded by judgment for damages resulting from an offence or a quasi-offence shall bear interest at the legal rate as from the date when the action at law was instituted.

There may be added to the amount so awarded an indemnity computed by applying to the amount, from such date, a percentage equal to the excess of the interest rate fixed according to section 53 of the Revenue Department Act (Revised Statutes, 1964, chapter 66) over the legal interest rate.

The amount by which the interest rate fixed under s. 53 of the Revenue Department Act, R.S.Q. 1964, c. 66 (now s. 28 of the Act respecting the Ministère du Revenu, R.S.Q., c. M-31) exceeds the legal interest rate, which was 5 per cent at the time the trial judgment was rendered, has subsequently fluctuated many times, being set successively at 10 per cent (from April 1, 1980, (1980) 112 O.G. II 1535), 14 per cent (from January 1, 1982, (1981) 113 O.G. II 4008), 11 per cent (from January 1, 1983, (1983) 115 O.G. II 85), 10 per cent (from May 1, 1983, (1983) 115 O.G. II 1629), 9 per cent (from January 1, 1984, (1984) 116 O.G. II 65), 7 per cent (from July 1, 1985, (1985) 117 O.G. II 2079) and 6 per cent (from April 1, 1987, (1987) 119 O.G. II 1149). Under section 250 of An Act to amend the Taxation Act and other legislation and to make certain provisions respecting retail sales tax, S.Q. 1989, c. 5, assented and having come into force on April 6, 1989, the excess retroactively becomes 7 per cent, from July 1, 1988, and 8 per cent, for the period from November 1, 1988 to December 31, 1988. In view of the large amounts at issue here, it makes a great deal of difference to calculate the additional indemnity awarded by the trial judge by applying each of these rates for the periods during which they were in effect, rather than by using the 5 per cent rate referred to in the trial judgment.

As this Court is entitled to consider that the question of compensatory damages is duly before the Court, as previously held, it naturally follows that the Court also has jurisdiction to consider the question of additional moratory damages under art. 1056c C.C.L.C.

This Court has already had occasion to rule on the nature of the additional indemnity in Travelers Insurance Co. of Canada v. Corriveau, 1982 222 (SCC), [1982] 2 S.C.R. 866. Speaking for the majority, Chouinard J. wrote that the indemnity "[could not] be anything but damages due to delay" (p. 875). Chouinard J. adopted the following passage from the reasons of Mayrand J.A., speaking for the Court of Appeal:

[TRANSLATION] The additional indemnity authorized under art. 1056c of the Civil Code is, so to speak, an incidental and secondary indemnity. It clearly does not correspond to the material or bodily injury suffered by the victim as a direct consequence of the offence or quasi-offence; rather, its purpose is to compensate the victim for the delay in paying him the primary and principal indemnity. Like the legal interest to which it is added, its amount will vary depending on the length of that delay.

([1980] C.A. 4, at p. 6)

Mayrand J.A. added (at pp. 6-7):

[TRANSLATION] If at the time of service the perpetrator of the offence had paid the victim compensation for material or bodily injury, the additional indemnity would not have been due. The legislator simply considered that the lump sum indemnity determined in art. 1077 of the Civil Code no longer corresponded to reality and that without a more realistic assessment of "damages resulting from delay", it would be in the interest of persons owing a sum of money to delay performance of their obligation as long as possible.

As the indemnity is intended to compensate for loss due to delay in paying the amount ordered, it is logical to conclude that the excess interest authorized by art. 1056c C.C.L.C. should run until the date the damages are finally paid. The Court of Appeal has in fact held to this effect in Girard v. Lavoie, [1975] C.A. 904. Bernier J.A. considered the criteria for exercising the discretion conferred on the courts and concluded that the increasing interest rates apply in principle [TRANSLATION] "from the date "the action is brought" to the date the payment is made" (p. 908). As Bernier J.A. notes, this result is consistent with the general rule applicable to interest (art. 1077 C.C.L.C.), whereby [TRANSLATION] "the day ad quem . . . is that on which the obligation resulting from the court order is extinguished" (p. 908). As indicated by the wording of art. 1056c C.C.L.C., although the trial judge has a discretion whether to award the indemnity, he has no discretion as regards the calculation of that indemnity, as this must necessarily be calculated "by applying to the amount [awarded by judgment from the date when the action at law was instituted] a percentage equal to the excess of the interest rate fixed according to section 53 of the Revenue Department Act, R.S.Q. 1964, c. 66, over the legal interest rate".

By failing to pay the plaintiff the amount awarded, the defendant is depriving the latter of the proceeds that amount could yield if invested at the going rate. Though rates of interest vary from one period to another, the legislator has taken the interest rates on Crown claims as a guide. This guide, which is not necessarily the rate in financial markets, is nonetheless an estimate of the loss suffered by the plaintiff when the person owing damages "postpones as long as possible" the payment of the award against him. Limiting the additional indemnity to 5 per cent would be depriving the appellants of full compensation for the financial loss incurred by them as a consequence of being deprived of the amount owed from the time of the trial judgment. Applying the provisions of art. 1056c C.C.L.C. to the case at bar, in view of the trial judge's decision to exercise his discretion by awarding the indemnity, I would amend the judgment of first instance by replacing the words "and the additional indemnity specified in article 1056c of the Civil Code calculated at 5 % per annum on this amount from November 7, 1978" by "and the additional indemnity calculated in accordance with the provisions of article 1056c of the Civil Code, from November 7, 1978", which necessarily implies application of the rates set by regulation pursuant to s. 28 of the Act respecting the Ministère du Revenu.

In conclusion, on the question of the quantum of damages, having regard to the principles that must govern an appellate court in this matter and to the evidence in the record, I consider that the respondent has not succeeded in establishing a basis for intervention by this Court, except as regards the items of incidental expenses totalling $77,000, which should not have been awarded. The judgment should also be varied as regards the calculation of the additional indemnity.

V. Conclusion

To summarize, my conclusions are as follows.

-- Municipal corporations in Quebec are governed by public law, which has its origin in the common law.

-- Anns and City of Kamloops, together with subsequent common law judgments, set out the principles of public law which apply in Canada and in Quebec.

-- Applying these principles, the fact that a municipal corporation makes a policy decision or refuses to do so does not entail its civil liability. If, however, the municipal corporation exercises its powers, discretionary or otherwise, so as to make its decision operational, subject to public law, it can be held liable for any damage caused to another through its fault, or through that of its employees in the course of their duties, unless the enabling legislation expressly excludes such liability or authorizes the municipal corporation to exonerate itself from liability.

-- The private law criteria set out by the common law as stated in Anns and City of Kamloops and subsequent judgments cannot be applied in Quebec. Since the Quebec Act and in keeping with the Canadian Constitution, jurisdiction over property and civil rights has been a matter for the provinces.

-- Pursuant to art. 356 C.C.L.C., subject to public law, in the absence of provisions to the contrary in their charters or enabling legislation, municipal corporations are governed, "in certain respects", by the Civil Code of Lower Canada in private law matters.

-- The Cities and Towns Act does not expressly or by implication exclude the civil liability of municipal corporations in the implementation of their policy decisions or authorize them to exonerate themselves from liability.

-- In the case at bar the city of Beauport exercised its discretionary power to create a firefighting service (a policy decision) and, in light of the by‑laws adopted in this regard and the other facts presented in evidence, the municipality undertook, at the very least by implication, to maintain this service and ensure that it was in good working order (an operational decision).

-- In accordance with the principles stated in arts. 1053 and 1054 C.C.L.C., the city of Beauport must be held liable for the additional damage caused by the fire, as this was due to its fault in maintaining its water and firefighting systems and to the fault of its employees in carrying out their duties. This fault had a causal link with the damage sustained by the appellants and was the direct and immediate consequence of it.

-- As the trial judge committed no error in his determination of the facts or in the conclusions which he drew from them regarding liability, the Court of Appeal was not justified in intervening.

-- The quantum of damages set by the trial judge in the amount of $2,542,732.83 must be varied slightly by deducting $77,000, making a total of $2,465,732.83. The additional indemnity should be calculated in accordance with the provisions of art. 1056c C.C.L.C.

I would accordingly allow the appeal, reverse the judgment of the Court of Appeal and restore the Superior Court judgment, except for deducting from the amount of the order made against the city of Beauport in favour of the appellants the sum of $77,000 as already indicated, so that the judgment would now read:

[TRANSLATION] Orders the defendant city of Beauport to pay the plaintiff Laurentide Motels Ltd. the sum of $1,972,334.51 with interest at the legal rate from the date of service and the additional indemnity calculated in accordance with the provisions of article 1056c of the Civil Code from November 7, 1978.

Orders the defendant city of Beauport to pay the plaintiff Restaurant La Bastogne Inc. the sum of $464,982.15 with interest at the legal rate from the date of service and the additional indemnity calculated in accordance with the provisions of article 1056c of the Civil Code from November 7, 1978.

Orders the defendant city of Beauport to pay the plaintiff Thomas R. Lévesque the sum of $28,416.17 with interest at the legal rate from the date of service and the additional indemnity calculated in accordance with the provisions of article 1056c of the Civil Code from November 7, 1978.

Orders the defendant city of Beauport to pay the costs of an action for $2,465,732.83, the cost of taking and translating stenographic and stenotyping notes being forty‑nine fiftieths (49/50).

the whole with costs throughout, the respondent being entitled to its costs in this Court on an appeal for $77,000.

Appeal allowed.

Solicitors for the appellants: Gagné, Letarte, Sirois, Beaudet & Associés, Québec.

Solicitors for the respondent: Jean‑Charles Lord, Beauport; Raymond Bélanger, Lévis; Gagnon, De Billy & Associés, Québec.

*Le Dain J. took no part in the judgment.