Executive Summary: Key Legal and Evidentiary Issues

• Central dispute over a cost-plus construction contract for major chalet renovations, including whether the contractor proved its claim for unpaid work and materials.
• Validity and conservation of a construction legal hypothec and the timing of the pre-exercise notice, tied to the legal notion of “fin des travaux” and possible abandonment or suspension of works.
• Legality of the contractor’s unilateral termination, examining if the non-payment by the owner amounted to a “motif sérieux” under article 2126 C.c.Q. or merely an accessory default.
• Allegations of malfaçons, incomplete work and overbilling, tested against competing engineering expert evidence and the owner’s own (largely theoretical) calculations.
• Claims for loss of rental income and moral damages, with the Court limiting recovery to direct, foreseeable consequences and rejecting moral damages for the corporation and its administrator.
• Issues of alleged procedural abuse and special costs, where the Court found no abusive conduct or “manquements importants” sufficient to justify extra-judicial fee shifting.

Factual background and parties

Construction et Rénovation ITEM inc. (ITEM) is a contractor specializing in residential renovation. Les Placements Bernard Rodrigue inc. (PBR) is a corporation that owns a chalet at 6, chemin Alpin in Stoneham-et-Tewkesbury, Québec, acquired in 2015 for short-term rental near a ski resort. Over time, PBR considered the property’s occupancy and return unsatisfactory and, in 2020, entrusted rental management to a professional agency, Les Chalets Alpins, under a written management contract. Les Chalets Alpins was expressly appointed as PBR’s mandatary, with powers to rent the property, provide maintenance and minor repairs, and, for major repairs or renovations, act with PBR’s prior authorization. In order to make the chalet more attractive and increase rental income, PBR, through its representative Bernard Rodrigue and its mandatary François Couture of Les Chalets Alpins, decided to undertake a significant renovation project. A designer, Julie Rouleau, who had previously worked with both Couture and ITEM on a similar Stoneham project, was brought in to help conceptualize and follow the work. Her role included preselecting and coordinating finishes, materials and furnishings with Rodrigue, modernizing the look, and monitoring the evolving construction schedule to ensure completion for a December 2020 re-launch.

The construction contract and scope of work

Following a June 2020 site meeting with Rodrigue, Couture, Rouleau and Ian Méthot (ITEM’s representative), ITEM prepared an initial estimate dated 20 June 2020 for 89,795.49 $. Given uncertainties in the exact extent of demolition and reconstruction, the parties agreed this price was approximate and that the work would proceed on a cost-plus basis, with a formal written contract to follow. The estimate was modified twice at Rodrigue’s request as the project evolved. On 9 July 2020, the parties signed a cost-plus contract: PBR undertook to pay the actual cost of labour and materials plus 15% profit and applicable taxes. The contract also fixed a schedule, with work to start around 5 August 2020 and be substantially completed by about 15 September 2020, in time to resume short-term rentals by December 2020. PBR later accepted that a cost-plus structure was justified due to unknowns in the extent of work. PBR expressly agreed to pay for work actually done, not for work never performed, but did not contest the agreed hourly labour rates or the very high contractual interest rate of 3% per month (36% per year) on unpaid accounts. The contract provided that invoices were payable upon receipt, with weekly Friday payments and a 15-day grace period before amounts became due and exigible.

Project execution and evolving roles on site

Work began as planned around 5 August 2020, confirmed by a 7 August email from designer Rouleau noting that demolition was nearly complete. Over the following weeks, Rouleau maintained frequent communications with Rodrigue about material selections, cabinetry fabrication and overall progress. However, by September 2020, communication with Rodrigue became difficult: he was slow to respond to proposals and failed to make timely choices, which delayed the project. At the same time, Couture, as the manager for Les Chalets Alpins, became heavily involved day-to-day. Evidence showed he made or implemented some material choices himself, was present on site giving instructions to workers and sometimes acted in Rodrigue’s place. Both Rouleau and Méthot confirmed this in their testimony. On 22 October 2020, ITEM produced a supplemental estimate at PBR’s request, including new items such as replacing the interior staircase. PBR also sought this document to support a loan application due to cash-flow issues. Rodrigue’s own on-site presence decreased to roughly once every two weeks, with supervision largely left to Couture and remote coordination by Méthot by phone, email and text. Up to early December, Rodrigue generally expressed satisfaction with the progress, though he voiced intermittent dissatisfaction with aesthetic choices, especially colours, despite not providing timely feedback to the designer.

Design choices, communication breakdown and the designer’s withdrawal

Disputes arose around certain aesthetic decisions, particularly cabinetry colours. On 3 December 2020, Rouleau presented bathroom colour options and expressly invited Rodrigue to voice objections or meet the cabinetmaker to consider alternatives. Rodrigue’s only response—“c’est foncé”—was brief and non-directive. Interpreting his silence as tacit approval, Rouleau confirmed the colour choices to the cabinetmaker, who began production. The next day, the cabinetmaker complained to Rouleau that Rodrigue had personally appeared at the shop and demanded multiple changes to the already-approved selections. Under cross-examination, Rodrigue admitted he did not provide the timely, clear follow-up expected to his own designer, while acknowledging that Couture, as mandatary, could make recommendations and some decisions, though he could not clearly define their scope. Under tight deadlines, and frequently unable to get answers from Rodrigue, Rouleau made certain decisions with Couture’s supervision and otherwise applied the principle that lack of objection meant consent. The Court found no fault in her approach. Any dissatisfaction with colours, furniture or cabinetry selection was allocated squarely to PBR’s own design team (Rouleau and Couture), not to ITEM, which was not involved in aesthetic choices. By 8 December 2020, frustrated by repeated criticism and lack of cooperation from Rodrigue, Rouleau withdrew from the project, advising him in writing of her decision.

The December 10 meeting and partial consensus

After Rouleau’s departure, Couture proposed a site meeting to address Rodrigue’s criticisms and plan completion. On 10 December 2020, Rodrigue, Couture and Méthot met on site. The Court found that at the end of this meeting Rodrigue expressed satisfaction with the overall work, except for the colour of some cabinetry. The parties agreed that certain purely aesthetic elements, such as a table, would be re-worked, while others, like benches and some cabinets, would remain. Couture undertook to finish painting, plastering and cleaning, while ITEM retained responsibility to complete electrical, plumbing and carpentry work, estimated at roughly 10,000 $, to be billed under the existing cost-plus contract. ITEM also agreed, at its own cost, to replace one patio door because the subcontractor had mistakenly installed a door different from what had originally been agreed. Importantly, at this meeting PBR did not raise any of the alleged construction defects (malfaçons) later pled in the counterclaim.

Non-payment and ITEM’s termination

During the 10 December meeting, Méthot demanded payment of overdue invoices, including those dated 13 and 16 November 2020, in line with the contract’s weekly payment terms. On 13 December 2020, before settling these invoices, Rodrigue wrote to Méthot denying him further access to the property, stating that no one was to enter the residence without his presence, given the holiday season. That same day, Méthot replied by email. He recalled that at the last site meeting all three—himself, Couture and Rodrigue—had agreed the work was well done apart from cabinetry, and that a process had been agreed to find a solution for the armoires. He pointed to the contract clause requiring weekly Friday payments and noted that for over a month no payment had been made despite continuous reminders. He cited the relevant contract clauses placing Rodrigue in default and allowing ITEM to suspend and terminate the contract. Méthot then advised that ITEM was withdrawing definitively from the project and would take legal action to recover the unpaid sums. The Court accepted that it was PBR’s persistent non-payment that led ITEM both to suspend work and to later secure its claim through a construction legal hypothec, having already warned PBR that work would remain suspended until contractual payment obligations were honoured.

The legal hypothec and pre-exercise notice

ITEM filed an action in forced surrender and sale under judicial control of the immovable to recover what it then claimed to be a 19,281.41 $ balance, later reduced to 17,508.63 $ after recognizing billing errors totaling 1,772.78 $. To secure its claim, ITEM registered a legal hypothec on the property and later a pre-exercise notice of its hypothecary rights. PBR argued that the hypothec had extinguished because the pre-exercise notice was registered more than six months after the “end of the work” within the meaning of article 2727 C.c.Q. The Court carefully reviewed the statutory scheme governing construction legal hypothecs, including requirements for publication of a notice within 30 days of the end of the work and the six-month extinction rule unless an action or pre-exercise notice is subsequently published. The Court then examined how to determine the “end of work” when the contractor has unilaterally terminated the contract. Relying on doctrinal authority, it distinguished between abandonment of the project by the owner—which can fix the end date—and mere suspension of work. The Court stressed that a serious reason for termination by the contractor (such as significant non-payment) does not itself mark the legal end of work for hypothec purposes and, conversely, that the owner’s intention is crucial: abandonment requires a clear and permanent decision to leave the project unfinished.

Determining the end of the work and the owner’s intent

In this case, PBR produced no evidence of a specific date when the overall renovation was completed by whomever finished the work. Furthermore, even if ITEM’s 13 December 2020 termination were assumed to be unjustified, that date could not serve as the legal end of work since PBR clearly intended to finish the renovations and ultimately did so by hiring another contractor, RML. The situation therefore amounted to a suspension, not abandonment. The legal end of work, for article 2727 C.c.Q. purposes, occurred only once the building was fit for its intended use as a short-term rental chalet. As that moment occurred after ITEM’s registration of both the legal hypothec (30 December 2020) and the hypothecary pre-exercise notice and even after the commencement of the court proceedings, the Court held that ITEM’s hypothecary recourse satisfied all statutory validity conditions. The legal hypothec remained in force, and ITEM could pursue a sale under judicial control if payment was not made.

Was ITEM justified in unilaterally terminating the contract?

The Court then considered whether ITEM’s unilateral termination complied with article 2126 C.c.Q., which permits an entrepreneur to terminate only for a serious reason and not “à contretemps”. It contrasted the entrepreneur’s more restrictive right of termination with the client’s broader right under articles 2125 and 1604 C.c.Q. (including resolution or “résiliation-sanction” for material breach). It also considered the doctrine and jurisprudence on “exception d’inexécution” under article 1591 C.c.Q., which allows a party to refuse performance only if the reciprocal obligation has not been substantially performed and if there is proportionality between what is withheld and the default complained of. Applying these principles, the Court found that the only amount truly exigible under the contract at the time ITEM terminated—after applying the contractual payment delays—was roughly 1,418.07 $ (the amount of a particular invoice then overdue). This amount was considered minor and accessory when viewed against the total sums already paid and the overall project value. Under doctrinal guidance, such a limited default cannot serve as a “motif sérieux” justifying unilateral termination by a contractor, absent insolvency or other objective risk. ITEM therefore failed to meet its burden to show serious reasons for ending the contract. The Court held that the termination was wrongful and, given the stage of completion and rental timetable, also “à contretemps”, exposing ITEM to damages under article 2129 C.c.Q.

Consequences of wrongful termination and scope of recoverable damages

Article 2129 C.c.Q. provides that, upon termination of a contract for work, the client must pay the contractor the value of work actually done and materials provided, while the contractor must refund any unearned advances. In addition, both parties are liable for any other prejudice caused. Commentators have clarified that a contractor who terminates without a serious reason or at an inopportune time may even lose entitlement under article 2129 and face full common-law contractual liability (arts. 1607, 1611, 1613 C.c.Q.) for direct, immediate and foreseeable damages, including the extra cost to complete the work with a new contractor. The Court nonetheless noted that PBR candidly admitted that, at the time of termination, part of the work had not yet been completed and that only work actually performed was payable under this cost-plus arrangement. PBR’s expert also conceded on cross-examination that, in the circumstances, it was not appropriate to claim the cost of all uncompleted work against ITEM. Accordingly, the Court restricted attention to damages that flowed directly from the wrongful termination and from defective work, not to costs that simply reflected unperformed work that PBR would have had to pay someone to complete in any event.

Claim for loss of rental income

PBR claimed 75,519.85 $ as damages, including 5,000 $ for personal stress and inconvenience allegedly suffered by Mr. Rodrigue, leaving about 70,519.85 $ for alleged lost rental income. The primary support was a summary statement of rental revenues and expenses prepared by Les Chalets Alpins. ITEM objected to its admission as not being the best evidence, and the Court acknowledged its lack of underlying vouchers or full explanatory detail. Although the objection was formally dismissed, the Court accorded limited probative weight to the document, particularly since PBR could not convincingly explain fluctuations in revenues for 2023 and 2024. The document showed the chalet was not re-rented before February 2023, after PBR completed additional works it considered necessary. Rodrigue testified about his serious health issues (ski accident, long hospitalization, burnout, car accident, lengthy disability leave and disputes with his own disability insurer), which delayed his ability to complete or coordinate remaining work. The Court expressed sympathy but held that these circumstances, along with PBR’s financial constraints, were external to any breach by ITEM and could not be treated as a direct and foreseeable consequence of the contractor’s termination. There was no sufficient causal link to hold ITEM liable for most of the claimed rental losses. However, the Court accepted that a wrongful and ill-timed termination did disrupt a nearly completed project and caused some delay in resuming rentals. It found that RML’s subsequent work in 2023 included about 20% of items simply completing outstanding work, done within about a month at a cost of 1,454.44 $. On that basis, it inferred that the wrongful termination likely caused about one month’s worth of net rental loss, which it fixed at 2,000 $. The Court also allowed 500 $ for urgent electrical work to connect convectors in the basement to prevent damage, for a total of 2,500 $ in rental-related and urgent remedial damages.

Claim for moral damages for Mr. Rodrigue

PBR also sought 5,000 $ for “troubles, stress, anxiety and moral damages” for the benefit of its administrator, Mr. Rodrigue. The Court dismissed this claim outright. First, Rodrigue was not a party to the proceedings; second, corporations only exceptionally recover “moral” damages, typically for defamation or prejudice to reputation, not for the subjective suffering of their officers. Here the claim truly concerned personal damages to the administrator, not the loss of his contributions to the company’s affairs. The Court also noted the absence of persuasive evidence linking any alleged emotional harm to ITEM’s conduct, as opposed to Rodrigue’s separate health and insurance difficulties.

Alleged construction defects and quality of work

PBR’s counterclaim alleged extensive malfaçons, incomplete or poorly executed work, and a need for corrective work estimated at 48,802.62 $ plus tax. Each side called an engineering expert: David Parent Labbé for PBR, Robert Wright for ITEM. The Court examined each alleged defect item by item. Many were rejected because the work was not actually performed by ITEM, because the condition pre-dated the project, or because no true defect or code non-compliance was proven. For example, complaints regarding exterior plinth colour variations and certain stained elements failed because the evidence showed finishing work was either not ITEM’s responsibility (having been assumed by Couture/Les Chalets Alpins) or had later been remedied by PBR through repainting. Other alleged issues, such as the position of drywall corners or dust in the heating system, were dismissed for lack of causal link to ITEM’s work. The claim that interior staircase guardrails failed to meet code was rejected because the chalet is a residential building subject to the 900 mm guard height requirement, which the handrails exceeded. The expert for PBR had applied standards for commercial buildings and exaggerated an alleged floor-to-first-step level difference; this diminished his credibility. As to the patio, exterior steps and terrace, ITEM had built a new wooden terrace on screw piles and reused old stone steps for landscaping. PBR’s expert noted movement in the stones observed in 2021 but could not link this to any structural or safety defect in the terrace itself; no damages were awarded. One significant issue concerned insulation of the foundations. At PBR’s request, ITEM, through subcontractor Goliath, installed rigid insulation around the perimeter to address complaints of cold floors. Rodrigue consulted the subcontractor directly regarding various technical options and costs. ITEM’s own expert later admitted that the work as done was inadequate: for optimal performance, insulation should have risen higher up the foundation wall with appropriate flashing (solin) at the junction with exterior cladding, and a project sketch showed the proper method. In addition, a fully effective solution would have required treating the entire perimeter, which was difficult and expensive due to the need to demolish and rebuild ancillary structures such as sheds and terraces. PBR ultimately only had half the perimeter insulated, following Rodrigue’s instructions. Because the work did not meet professional standards and, at best, only partially solved the thermal issue, the Court held ITEM liable for the cost of redoing the insulation on the portion actually treated, assessed at 8,000 $, plus 1,000 $ for associated discomfort and inconvenience. Other limited sums were awarded: 60 $ for replacing the mechanical room door with a lockable one; approximately 400 $ to reposition the electrical panel for proper access; and 100 $ to refund essentially useless work on a small rear gallery. Conversely, the Court rejected PBR’s attempt to recover the full 16,000 $ cost of re-insulating the entire perimeter or to treat as damages the value of numerous incomplete items that would have generated legitimate additional cost-plus invoices if ITEM had stayed on the job.

Alleged overbilling and lack of supporting documentation

PBR’s counterclaim also included a substantial “surfacturation” component. Its expert, Wright, opined that overbilling for materials was “very probable”, but he candidly admitted that his calculations were largely hypothetical and based on Rodrigue’s own measurements. Rodrigue had also conceded he was not a construction specialist. Wright had expressly flagged in his report that his assumptions remained provisional until he could examine ITEM’s invoices, supplier tickets and subcontractor accounts. After ITEM produced detailed backup documentation, however, Wright did not revisit or refine his calculations. The Court considered this failure to update as a serious credibility problem. ITEM, by contrast, filed a sworn declaration explaining in detail the quantities of materials actually used and why Rodrigue’s theoretical computations were unrealistic given the constraints of renovation work. The Court held that PBR’s allegations of systematic overbilling were not proven on a balance of probabilities: the theory relied on abstract, idealized take-offs that ignored on-site realities, and PBR failed to demonstrate concrete discrepancies between ITEM’s invoiced quantities and the materials reasonably required. The overbilling branch of the counterclaim was therefore dismissed.

Notice of defects and right to remedial work

On the issue of malfaçons, the Court underscored that a client who wishes to recover the cost of corrective work by a third party must give the original contractor a proper opportunity to cure. Doctrinal authorities confirm that, after unilateral termination, the client still retains a right to insist on correction of defects in the work already done and can, if properly placing the contractor in default and giving a reasonable delay, recover from the contractor the reasonable cost of such remedial work. In this case, ITEM first learned of the alleged malfaçons from PBR’s expert report dated December 2021, more than a year after termination. The Court treated PBR’s counterclaim as a valid mise en demeure under article 1594 C.c.Q., putting ITEM in default as of service and giving it a reasonable time to respond. ITEM’s position, that it could not access the site, was contradicted by later correspondence from PBR’s counsel in October 2023 inviting ITEM to “take action” before further work was assigned elsewhere. The Court concluded that ITEM had simply refused to accept the alleged defects and did not meaningfully attempt to correct them after being put in default. PBR was therefore entitled to engage another contractor and claim the proven cost of justified corrective work. That assessment led to the limited allowances mentioned above: 60 $ (door), 908 $ (interior painting touch-ups already paid in 2023), 400 $ (electrical panel relocation), 100 $ (rear gallery), 8,000 $ (redoing defective foundation insulation on the treated half) and 1,000 $ (related inconvenience), for a total of 10,468 $. Together with the 2,500 $ allowance for lost rental income and urgent electrical work tied specifically to the wrongful termination, this produced a global counterclaim award of 12,968 $ in PBR’s favour.

Assessment of ITEM’s claim for unpaid work

On ITEM’s principal claim, the Court accepted that, after correcting billing errors identified in PBR’s Exhibit D-16.1, the unpaid contractual balance was 17,508.63 $. The Court reviewed in particular the 429 hours billed for labour at 72 $/hour (total 30,888 $), to which the 15% profit margin brought the labour subtotal to 35,521.20 $. Even PBR’s own expert conceded that, considering the scope of work and project duration, this time “made sense”. ITEM had issued detailed invoices identifying employees, hours per person and the nature of tasks, and had attached supplier and subcontractor invoices showing materials and services billed on a pass-through basis. PBR had paid prior invoices without requesting time sheets or disputing the hourly detail, which made it difficult to credibly challenge them later. The Court held that ITEM had adequately proved its hours, materials and subcontractor costs, and that PBR’s challenges based on alleged lack of time sheets or on speculative calculations of materials could not defeat the claim. Thus the Court affirmed ITEM’s claim at 17,508.63 $, plus contractual interest at 3% per month, compounded (36% annually) from the due dates of the invoices.

Abuse of procedure and special costs

ITEM also sought compensation for its legal fees, alleging abusive procedure by PBR and invoking articles 51 ff. and 342 C.p.c. The Court reviewed the modern framework developed by the Court of Appeal: not every weak or unsuccessful claim is abusive, extra-judicial costs are usually not recoverable absent clear fault and causality, and the focus of article 342 C.p.c. is on sanctioning substantial procedural misbehaviour, not on re-litigating the merits. While acknowledging that PBR’s proof was imperfect and some positions overstated, the Court found no manifestly frivolous pleading, vexatious conduct or deliberate obstruction. Delays in producing documents and meeting undertakings were explained by Rodrigue’s health and cognitive problems and did not rise to the level of “manquements importants” warranting sanctions. Nor was there evidence of a causal link between any procedural misstep and ITEM’s legal expenses beyond ordinary party-and-party costs. The claim for abuse remedies was therefore dismissed, and each party was left to bear its own extra-judicial fees.

Final orders and outcome

In its dispositive section, the Court ordered PBR to pay ITEM 17,508.63 $, representing the unpaid cost-plus balance, while ordering ITEM to pay PBR 12,968 $ in damages headquartered in limited corrective work, minor delay in rental resumption and certain urgent or useless works. It then ordered legal set-off (compensation) between the two awards and declared that PBR owes ITEM a net sum of 4,540.63 $, bearing contractual interest at 36% per year from 13 December 2020, payable within 60 days. Upon payment of this net amount, ITEM must discharge the registered legal hypothec and the pre-exercise notice within 10 days. If PBR defaults, however, ITEM is authorized to proceed with a court-supervised sale of the immovable, by private sale (vente de gré à gré) under detailed conditions, including a minimum listing price of 558,800 $, court-approved brokerage terms and detailed instructions on approval of offers and distribution of proceeds. The Court also set reasonable fees for the person designated to manage the sale and for any broker. Each party was ordered to pay its own costs, subject to ordinary judicial costs, with no award of extra-judicial fees.

In practical terms, the successful party is Construction et Rénovation ITEM inc.: it preserves the validity of its construction legal hypothec, obtains authorization for a sale under judicial control in case of default and, after compensation of the competing awards, secures a net judgment of 4,540.63 $ plus 36% annual contractual interest from 13 December 2020 in its favour, while PBR’s large overbilling and lost-rental claims are pared back to a modest partial recovery.