In Urbacon Architecture inc. c. Urbacon Buildings Group Corp., the Quebec Court of Appeal has recently held that an architectural firm that was unlicensed in the Province of Quebec is not entitled to file a legal hypothec, the Quebec law equivalent of a construction or builders lien. The court so found notwithstanding the cross-Canada reciprocal arrangements that allow architectural firms from one province to become licenced in another. It so held because the architectural firm, which was registered in Ontario, had not taken the steps to become licensed in Quebec. This decision raises issues about the status of the unlicensed architects and other professions under the construction and lien legislation in other provinces or under building contracts generally.

Background  

Urbacon Architecture was an architectural firm that was licensed to practice architecture in Ontario. It did not employ any Quebec architects but its sole shareholder had been licensed in Quebec between 1968 and 1984.

Urbacon Buildings entered into a contract with Bell Canada for the design and construction of a building. The principal of Urbacon Buildings was the son of the principal of Urbacon Architecture. Originally the building was to be built in the Ottawa region, but finally the building was built in Gatineau, Quebec. That building contract stipulated that Urbacon Architecture would be the consultant.

In the preliminary stages of the project, Urbacon Architecture prepared architectural, structural, electrical and mechanical drawings. The drawings were then approved by architectural and engineering firms in the province of Quebec.

Due to its dis-satisfaction with the work that had been done, Urbacon Buildings terminated its dealings with Urbacon Architecture. Urbacon Architecture demanded payment for its work from Bell Canada, and when it was not paid it filed a legal hypothec in the province of Quebec. Urbacon Buildings applied to the Quebec Superior Court for an order setting aside the legal hypothec and that order was granted. The Court of Appeal upheld that decision.

Articles 2724 (2) and 2726 of the Quebec Civil Code

Articles 2724(2) and 2726 of the Quebec Civil Code read as follows:

  1. 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;

  1. 2726. A legal hypothec in favour of the persons having taken part in the construction or renovation of an immovable may not charge any other immovable. It exists only in favour of the architect, engineer, supplier of materials, workman and contractor or subcontractor in proportion to the work requested by the owner of the immovable, or to the materials or services supplied or prepared by them for the work. It is not necessary to publish a legal hypothec for it to exist.

In the application of these articles, Urbacon Architecture argued that the court should have regard to the reciprocity agreement between the architectural profession in Quebec and those in other provinces of Canada, known as the l’Accord sur le commerce intérieur and the l’Accord de commerce et de coopération entre le Québec et l’Ontario.

Decision of the Quebec Court of Appeal

The Court of Appeal held that the statutory regulation of the architectural profession in Quebec is for the protection of the public and a matter of public order. Articles 2724 and 2726 contain extraordinary protections for architects and others to recover their fees and other amounts due to them in respect of a building project. Accordingly, those articles should be strictly interpreted. If unregistered firms could use those provisions to recover their fees, then the protection of the public would be undermined. For these reasons, the word “architect” in Article 2726 should be interpreted to refer only to a firm that is registered as an architectural firm in Quebec.

The court did not accept the argument of Urbacon Architecture based upon the interprovincial accords between the architectural professions in Canada. The court did not agree that the licensing of a non-Quebec firm under those accords was simply an “administrative” formality.” Rather, having failed to register as an architectural firm in Quebec, Urbacon Architecture, and any other non-Quebec firm that did not become licenced in the province of Quebec, was simply not entitled to the benefits accorded to the architectural profession in Quebec, including Articles 2724 and 2726.

Discussion

Two aspect of this decision are notable.

First, in its decision the Court of Appeal did not refer to two more recent decisions of the Supreme Court of Canada dealing with the issue of illegality of contracts. The most recent Supreme Court decision that the Court of Appeal considered was the 2001 decision in Fortin v. Chretien. Since then, the Supreme Court has decided KRG Insurance Brokers (Western) Inc. v. Shafron, [2009] 1 S.C.R. 157 and Transport North American Express Inc. v. New Solutions Financial Corp., [2004] 1S.C.R. 249. In those decisions, the Supreme Court has tended to alleviate against the harshness of the traditional doctrine of illegality of contracts. Presumably, the Quebec Court of Appeal considered that those cases from common law provinces did not affect its interpretation of articles of the Quebec Civil Code or the particular amendments to the statutes relating to building contracts and legal hypothecs in Quebec.

Perhaps, also, the Court of Appeal was of the view that the present case did not deal with the alleged illegality of a contract –but rather the alleged unenforceability of a statutory right or privilege. But the Court of Appeal did refer to and rely upon Fortin v. Chretien, which was concerned with the alleged illegality of a contract made by a non-licensed person (a former lawyer). The Court of Appeal did not analyze the exact inter-relationship, if any, between the doctrine of illegality of contracts, and the unenforceability of statutory rights and privileges.

Second, one wonders about the limits and application of this decision. Will it be applied to construction and builders lien statutes outside Quebec, so as to invalidate liens filed by professionals, or indeed any firm, that are not properly licensed in the applicable province? Could it have an effect upon building contracts, so that if a professional firm is not registered in the applicable province, then its functions as “architect” or “engineer” under a contract will be invalidated if the firm is not properly registered?

See Heintzman and Goldsmith on Canadian Building Contracts, 5th ed., chapter 1, part 3(c) and chapter 16, part 4(a)(i()II.

Urbacon Architecture inc. c. Urbacon Buildings Group Corp., 2016 CarswellQue 2972, 2016 QCCA 620

Building contracts –legal hypothecs, and construction and builders liens –illegality

Thomas G. Heintzman O.C., Q.C., FCIArb                                     May 29, 2016

www.heintzmanadr.com

www.constructionlawcanada.com

This article contains Mr. Heintzman’s personal views and does not constitute legal advice. For legal advice, legal counsel should be consulted.