For a hypothec to be considered valid under Québec law it
is necessary that i) it be established for a particular amount and
ii) such amount be precisely determinable in the deed of hypothec
itself. Article 2689 of the Civil Code of Québec
(“CCQ”) establishes the requirement
that a deed constituting a hypothec indicate the “specific
sum” for which it is granted. This is true whether the
underlying asset is movable (personal) or immovable (real)
The Québec courts have held that a critical nuance to the
“specific sum” requirement imposed by article 2689 is
that, in order to be considered specific, the sum of the hypothec
must be indicated in Canadian dollars. Although it is
possible to determine the exchange rate between US and Canadian
currency at any given moment, Québec courts have held that
fluctuations in such rates over time render the amount of a
hypothec indicated in a foreign currency insufficiently precise and
therefore not a “specific sum” in the meaning of
article 2689 CCQ.
In Trans-America Trade Exchange Inc. v. Haltrecht, the
Québec Court of Appeal upheld a lower court decision
invalidating a hypothec on the grounds that it was not denominated
in Canadian dollars. Similarly, in Caisse populaire Desjardins
de Baie-Comeau v. Gérald Robitaille et Associés
Ltée the Québec Superior Court held that because
the amount of the hypothec was indicated in US dollars, it did not
meet the precision requirements necessary for validity under
Québec law. Indeed, this interpretation of the
“specific sum” requirement is settled in Québec
doctrine and jurisprudence and subsists regardless of whether the
grantor of the hypothec intends or is bound to repay the amount in
a foreign currency.
Legal practitioners in Canada’s common law jurisdictions
may note that this requirement is unique to the province of
Québec. In circumstances where a Québec hypothec
must be drafted to secure an amount owed in US currency, the
generally accepted practice is to indicate a “specific
sum” equivalent of 150% to 200% of the amount owed.
Indicating a “specific sum” that greatly exceeds the
secured debt is bound to offend those unfamiliar with the civil
law. For this reason, it is important to stress that doing so
creates no additional risk or exposure for the grantor of the
hypothec: Québec hypothecs are rights that are
accessory to the secured debt and cannot be used to
collect more than what is owed.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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