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Law Column

January 2012 Law Column

Can work carried out for speculative purposes lead to a legal construction hypothec?

André Morin, attorney

 

Ruling in the matter 9272-7892 Québec inc. (Pro-Co Beauce) v. Marc Vallières (200-17-011996-097 and 200-17-011622-099), the Honourable Suzanne Ouellet, J.C.S., answered this interesting question in the negative.

Contractor Pro-Co Beauce carried out infilling and levelling work for land owner Marc Vallières, as set out in a service agreement signed by both parties. Pro-Co Beauce was never paid for the work and therefore published four notices of legal construction hypothec beginning in November 2008. In the interim, in a mortgage foreclosure ruling handed down by the Honourable Justice Jacques R. Fournier, J.C.S (judicial district of Laval), one of Marc Vallières’ hypothecary creditors took possession of the properties for which Pro-Co Beauce had published legal hypothecs.

At issue was the question of whether Pro-Co Beauce, through its infilling and levelling work, had taken part in the construction of the immovables under sections 2724 and 2726 of the Civil Code of Québec:
 

    2724. Only the following claims may give rise to a legal hypothec: (…)

    2° claims of persons having taken part in the construction or renovation of an immovable; (…)

    2726. A legal hypothec in favour of the persons having taken part in the construction or renovation of an immovable (…)

 

After assessing the service agreement and certain legislative provisions, especially with regards to the meaning of taking part in the construction of an immovable, the Honourable Justice Ouellet concluded that the work carried out by Pro-Co Beauce was not part of a planned and definite construction project. The work rather aimed to service the vacant lot for resale in a speculative context. In fact, the agreement between the parties specified that certain amounts would be paid out once the lot was sold.

The ruling states that (section 26):

[Translation] The work carried out by Pro-Co Beauce was therefore not part of the construction process of the immovable and nor was it incidental. It is important to note that Marc Vallières had not set out any construction plans.

Justice Ouellet also drew an interesting parallel between the work carried out by Pro-Co Beauce and architectural plans, on which there can only be a legal construction hypothec if the work outlined in the plans was carried out. The judge reasoned that there can only be a legal construction hypothec on work to service a lot if the work provider builds on the land.

Excavation contractors and especially firms that carry out earthwork and levelling must therefore be aware of the context in which their services are engaged.

 

9072-7892 Québec inc. (Pro-Co Beauce) c. Vallières, 2011 QCCS 4310. Under appeal.