Two decisions were rendered recently by the Superior Court of
Québec concerning legal construction hypothecs. These
decisions highlight the importance of respecting the conditions for
the validity of any claim made regarding this type of security,
whether they be procedural ones or those that give rise to the
right to register such a charge.
A fatal procedural defect
7162936 Canada Inc. et al. were the owners of a building whose
construction was entrusted to Magil Construction Inc.
("Magil"). Magil entered into a subcontract with Gamma
Murs et Fenêtres International Inc. ("Gamma") which
undertook to supply products and perform the work for the
installation of walls, drapes, glazing and aluminum siding.
Not having been paid, Gamma registered a legal hypothec in the
amount of $4,471,463.98 against the lots covered by the
The owners thereupon filed a motion asking the Court to reduce
the amount of Gamma's hypothec, maintaining that it was
exaggerated. Gamma argued that the motion should be dismissed, on
the basis in particular that it was procedurally defective.
The owners' motion was based on Article 804 of the Code
of Civil Procedure (the "CCP") and on Article 2731
of the Civil Code of Québec (the "CCQ").
Coincidentally with that motion, they also filed a motion to
institute an action seeking to have the legal hypothec reduced,
based on those same legislative provisions.
On July 9, 20151, the Superior Court sided with Gamma
and dismissed the first motion. In doing so, it confirmed a long
line of cases holding that a motion seeking the cancellation of the
registration of a hypothec, as provided in Article 804 CCP, must be
in the form of a motion to institute proceedings. Thus, this
article does not permit a preliminary motion challenging the
validity of a secured claim, including its amount.
It must thus be borne in mind that Article 804 CCP allows the
amount of a legal hypothec to be challenged pursuant to a motion to
institute proceedings accompanied by reliable and irrefutable
evidence. A motion simpliciter under Article 804 CCP can be used to
challenge only the formal compliance or validity of the
registration of a legal hypothec.
Not having the right contractor's licence can be
The owners of a plot of land decided to source, from a supplier
in Estonia, a "wooden house kit" with components to be
assembled. In order to do so they retained the services of
Aménagement Jonathan Tessier Inc. ("AJT") to
purchase and import the kit. They then retained the services of
Entrepreneur Général T & T Construction Inc.
("T&T") to assemble and erect the structure on their
On July 8, 20152, the Court ruled on a motion filed
by the owners for the cancellation of two legal construction
hypothecs in a combined amount of $133,550.91 that had been
registered against their property by the aforementioned contractors
for the balance due on work they had performed on the owners'
Had the contractors fulfilled the conditions for the validity of
a legal construction hypothec?
First of all, the beneficiaries: at the outset, Justice Jacques
Babin endorsed the case law recognizing that the supplier of a
pre-fabricated house can benefit from the legal hypothec in favour
of a supplier of materials under Article 2726 CCQ. Thus, while the
construction of the owners' house was not traditional and
consisted of assembling pre-fabricated wood components, the sale of
those components by AJT to the owners entitled it to a legal
Next came the increase in value: Justice Babin found that the
entirety of the work performed by the defendants had added value to
the owners' property, as it had resulted in a brand new
building. In obiter, however, he stated that the amount secured by
AJT's hypothec was clearly exaggerated.
Nevertheless, AJT's legal hypothec was found to be valid.
The same was not true, however, for that of T&T, which ended up
being cancelled due to a technicality.
Invalid contractor's licence: T&T held only a
contractor's licence "for small buildings". While the
owners' house was assembled from a kit of pre-fabricated
components, the Court nonetheless concluded that a licence for
small buildings was not sufficient and that T&T should have
held a contractor's licence "for new buildings covered by
a guarantee plan".
On that basis, the owners succeeded in having T&T's
legal hypothec cancelled pursuant to section 50 of the Building
1. 7162936 Canada inc. v. Gamma Murs et
fenêtres international inc., 2015 QCCS 3192
2. Gérard v. Aménagement
Jonathan Tessier Inc., 2015 QCCS 3326
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