Supreme Court of Canada

Armor Ascenseur Québec Ltée v. Caisse de dépôt et placement du Québec, [1981] 1 S.C.R. 12

Date: 1981-01-27

Armor Ascenseur Québec Limitée Appellant;

and

Caisse de dépôt et placement du Québec Respondent;

and

Registrar of the Registration Division of Montreal Mis en cause.

1980: October 30; 1981: January 27.

Present: Dickson, Estey, McIntyre, Chouinard and Lamer JJ.

ON APPEAL FROM THE COURT OF APPEAL OF QUEBEC

Civil law—Contractor’s privilege—Whether privilege originates on the date of the work contract or when work begins—Civil Code, arts. 2013 et seq.

The question here is as to when the builder’s privilege originates under arts. 2013 et seq. of the Civil Code. On August 19, 1970, appellant’s predecessor, a contractor, concluded a contract with respondent’s predecessor, an owner of buildings, to build four elevators. On October 16, 1970, respondent became owner of the buildings but transferred them to the seller by an emphyteutic lease and made the seller a loan on mortgage accompanied by a giving in payment clause. On March 14, 1974 respondent was declared to be the owner by the giving of the buildings, in payment, free and clear of any privileges retroactive to October 1970. In the interval, appellant caused to be registered a builder’s privilege, on March 29, 1972. Respondent seeks to have the privilege struck out. Appellant argued that the privilege goes back to the date of the work contract, on August 19, 1970, or alternatively to a date prior to October 19, 1970, before which the preliminary plans were completed and orders given to suppliers. Respondent, on the other hand, maintained that the privilege can only go back to a date subsequent to October 19, 1970, the date when the work of installation began, or when appellant delivered part of the supplies to the job site. The Superior Court and the Court of Appeal ordered the privilege to be struck.

Held: The appeal should be allowed.

There is no need to decide whether the work of the contractor, appellant, began before October 19, 1970, the date on which the right of ownership was acquired by respondent, since appellant is correct in its proposition that the privilege originated on the date of the work contract, namely August 19, 1970. Although it is the

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additional value given to the immovable which justifies making the latter subject to a privilege, this does not mean that the creditor’s right did not originate before work began. In the case of the supplier of materials who has concluded a contract with the builder, the point of origin of the privilege is when the owner is notified of the subcontract, and the privilege applies only to materials supplied and work done after such notification. In the case of the supplier of materials and the builder dealing directly with the owner, however, no notice is required and the point of origin of the privilege in that case must be the date of the contract, if the privilege of those not dealing directly with the owner originates on the date of notification. Appellant’s privilege thus originated before respondent became owner of the buildings by giving in payment, and it can be set up against respondent.

Assistance Loan and Finance Corporation v. Bourassa, [1972] C.A. 631; Munn & Shea Ltd. v. Hogue Limitée and H. Davis, 1928 CanLII 70 (SCC), [1928] S.C.R. 398, aff. (1927), 44 K.B. 198; Craft Finance Corp. v. Louis Belle-Isle Lumber Inc. and Fernhill Homes Ltd., 1966 CanLII 73 (SCC), [1966] S.C.R. 661; Nineteenhundred Tower Ltd. et al. v. Cassiani et al., [1967] S.C.R. vi; [1967] Q.B. 787; Sofinec Inc. v. Amico Inc., [1969] Q.B. 941; Roger Landry Ltée v. Place St-Gabriel Inc., [1973] C.S. 12; Ascenseurs Leclerc Ltée v. Sinotal Inc. et al., [1975] C.S. 1027; Val-Mar Swimming Pools Ltd. v. Richelieu Industrial Leasehold Inc., [1978] C.S. 877; New York Life Insurance Co. v. Glenbarr Development Ltd. et al., [1979] C.S. 572; Lumberland Inc. v. Nineteen Hundred Tower Ltd., 1975 CanLII 196 (SCC), [1977] 1 S.C.R. 581; Concrete Column Clamps Ltd. v. City of Quebec, 1940 CanLII 61 (SCC), [1940] S.C.R. 522, aff. (1939), 67 K.B. 537; Alppi v. Hamel (1939), 66 K.B. 448; Desrosiers v. Léger (1923), 1923 CanLII 365 (QC CS), 29 R.L.N.S. 435; Henri Gadbois et al. v. Armand Boileau et al. and Stimson‑Reeb Builders Supply Company, 1929 CanLII 80 (SCC), [1929] S.C.R. 587; Clairment DeIisle Inc. v. I. & S. Construction Corporation et al., C.S. Montreal, No. 609-512, May 21, 1965, referred to.

APPEAL from a judgment of the Court of Appeal of Quebec[^1], affirming a judgment of the Superior Court. Appeal allowed.

Nathaniel Salomon, for the appellant.

Camille Antaki, for the respondent.

English version of the judgment of the Court delivered by

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CHOUINARD J.—The question here is as to when the builder’s privilege originates under arts. 2013 et seq. of the Civil Code.

Respondent contended that on the date it acquired its right of ownership to the encumbered property, namely October 19, 1970, the privilege did not exist and that what has occurred since that time cannot be set up against it. Its action accordingly seeks to strike three registrations: (a) a privilege for $17,284.88, registered on March 29, 1972; (b) an action on a privilege in the same amount, registered on May 1, 1972; and (c) a seizure registered on July 17, 1972, in execution of a judgment of June 28 in the same year, which found the property in question to be subject to a builder’s privilege in appellant’s favour.

On August 19, 1970, Horn Elevator Ltd., appellant’s predecessor, entered into a contract with Beauharnois Holding Ltd., hereinafter referred to as “Beauharnois”, to build and instal four elevators in the latter’s buildings for the sum of $65,700.

On October 16, 1970, respondent bought the buildings from Beauharnois. By a contract concluded the same day, respondent transferred the said buildings to Beauharnois by an emphyteutic lease for a period of sixty years. By a third contract, also dated October 16, respondent made a hypothecary loan to Beauharnois accompanied by a giving in payment clause. These three contracts were registered on the 19th of the said month.

Early in March 1972, because of the financial difficulties it was experiencing, Beauharnois had to interrupt the work in progress.

On April 25, 1972, respondent registered a notice to cancel the emphyteutic lease, and the following July 12 caused to be served on Beauharnois an action to cancel the lease, which was cancelled by a judgment on August 17, 1972.

By a judgment dated March 14, 1974, respondent was declared to be the owner by the giving of the buildings, in payment, free and clear of any rights, hypothecs, privileges and charges “retroactive to the date of contract Exhibit P-1, namely October 16, 1970” (sic), in accordance with the

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giving in payment clause contained in the hypothecary loan contract. It would appear that the date should have been that of the registration, October 19, but this in no way affects the issue in the case at bar.

In the interval, as we have seen, appellant caused to be registered the builder’s privilege which respondent now seeks to have struck out.

The following facts, as set forth by respondent in its factum, are the basis on which appellant caused its privilege to be registered:

August 19, 1970:

signature of contract;

September 6, 1970:

preliminary plans submitted by Armor to Beauharnois;

October 14, 1970:

preliminary orders for rails and other supplies from Armor to its suppliers;

October 22, 1970:

approval of final plans for the elevators by Beauharnois’ architect;

later

in October 1970:

start on preparing supplies at the Armor factory for use in making the elevators;

November 1970:

new orders by Armor to its suppliers;

third week of December 1970:

delivery of part of the supplies to the site;

January 5, 1971:

work begun on installing the elevators.

Appellant argued that its privilege goes back to the date of the work contract, August 19, 1970. Alternatively, it argued that it goes back to the start of performance of its contract, which it sets at a date prior to October 19, 1970, referring to the preparation of preliminary plans which it submitted to Beauharnois on September 6 and the orders given to its suppliers on October 14.

Respondent maintained, on the other hand, that the privilege can only go back to a date subsequent

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to October 19, 1970, namely January 5, 1971, the date when the work of installation began, or at the earliest the third week of December, in which appellant delivered part of the supplies to the job site.

The trial judge ordered appellant’s privilege to be struck. He observed, inter alia:

[TRANSLATION] WHEREAS the Court agrees with the legal argument that it is in fact a builder’s or sub-contractor’s privilege, and legally this privilege cannot arise before defendant began “construction” or performance of the work on the actual job site of the buildings of Beauharnois Holding Ltd., as otherwise there could be no question of any additional value added to these buildings;

By a unanimous judgment the Court of Appeal dismissed the appeal and affirmed the decision of the trial judge. The Court of Appeal relied on its own decision in Assistance Loan and Finance Corporation v. Bourassa[^2], in which Turgeon J.A., speaking for the Court, said at p. 633:

[TRANSLATION] The article 2013 C.C. privilege affects the additional value given to an immovable by construction or renovation work. It cannot arise before such work has been begun, since this is the point at which the additional value first exists.

Applying this rule to the case under consideration, Montgomery J.A. wrote for the Court:

… Appellant appears to recognize the authority of the above judgment but contends that it did effectively start the work before the Respondent and of the subsequent registration of the transfer to Respondent and of the subsequent emphyteutic lease and hypothec. It refers to the preliminary order for rails dated 14th October, 1970 (Supplementary Exhibit P-13). In my opinion, the trial judge was right in holding that this was not enough to constitute a start of the work as required by the jurisprudence.

In view of the reasons for judgment of the Superior Court and the Court of Appeal, the argument turned largely on appellant’s alternative proposition, that its work began before October 19, 1970, the date on which the right of ownership was acquired by respondent. In this regard, I note that the Court of Appeal only took into consideration

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the order placed by appellant with a supplier on October 14. It did not consider the preparation by appellant of preliminary plans which were submitted to Beauharnois on September 6, which received the latter’s approval on October 22 and which in fact were used in construction of the elevators. As to respondent, it described the acts performed by appellant before October 16 as “incidental and preliminary actions”.

Be that as it may, I do not think any purpose would be served by going into this matter, in view of the conclusion I have arrived at on the first proposition of appellant, that its privilege originated on the date of its work contract with Beauharnois, namely August 19, 1970.

Article 2013f of the Civil Code reads as follows:

Art. 2013f. The builder or the architect, has a privilege on the immoveable for the work he has done as such, provided that before the expiration of thirty days after the end of the work, he registers at the registry office of the division in which the property is situated, a statement of his claim. Notice of such registration must be given, within the same delay, to the proprietor.

Such privilege is extinguished after six months following the date of the end of the work, unless the creditor take an action against the proprietor to preserve it. In such action the registrar must be called into the case, in order to give him notice of such action, and to cause him to note the same in his index of immoveables.

In the case where the builder has had the work done, either wholly or in part, by sub‑contract, if the sub-contractor has notified the proprietor of his contract, such sub‑contractor shall have a privilege upon the immoveable for all work done after such notification, provided that before the expiration of thirty days after the end of the work he registers a statement of his claim. Such privilege is subject to the same formalities as that of the builder or architect, in so far as concerns its creation and extinction. The proprietor, in case the sub-contractor has notified him of his sub-contract, is entitled to retain, on the contract price, an amount sufficient to meet the privileged claim of the sub‑contractor; and any amount fixed by a certificate given in compliance with the formalities contained in article 2013d, shall be deemed sufficient.

The registration of these statements is effected by deposit.

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It will be seen from reading the article that the builder’s privilege is “for the work he has done as such”, that it must be registered before the expiry of thirty days after the work has terminated, and that notice of this registration must be given to the owner within the same time limit. An action is prescribed six months after the date on which the work terminated.

A subcontractor’s privilege is subject to the same formal requirements, but he must in addition notify the owner of his subcontract, and his privilege applies “for all work done after such notification”. I shall return to this latter portion of the sentence below.

It is settled law that the privilege does not originate on the date it is registered, but goes back well beyond that: see Munn & Shea Limited v. Hogue Ltée and H. Davis[^3], in which Duff J., as he then was, said for the Court, at p. 402:

… that the special office of the registration therein prescribed is not to give birth to the right, but to protect and conserve a right otherwise constituted.

It is also recognized that the existence of the privilege may go back to the start of performance of the work in the case of a builder, or the supply or preparation of materials in the case of a supplier of materials, and that they can enforce their privilege when a change of ownership occurs, if performance of their contract began before the change of ownership, even with respect to work done or materials supplied after that date: see Craft Finance Corp. v. Louis Belle-Isle Lumber Inc. and Fernhill Homes Ltd.[^4]; Nineteen Hundred Tower Ltd. et al. v. Cassiani et al.[^5]; Sofinec Inc. v. Amico Inc.[^6]; Roger Landry Ltée v. Place St-Gabriel Inc.[^7]; Ascenseurs Leclerc Ltée v. Sinotal Inc. et autres[^8]; Val-Mar Swimming Pools Ltd. v.

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Richelieu Industrial Leasehold Inc.[^9]; New York Life Insurance Co. v. Glenbarr Development Ltd. et al.[^10]

In none of these cases was it held that the privilege originated at the date of the contract. However, it was not necessary in any of the cases to decide this point, as in each case performance had been begun before the date on which the retroactive change of ownership took effect. On the other hand, none of these cases held that the privilege does not go back to the date of the contract.

To my knowledge, the aforementioned Assistance Loan case is the only one which has dealt squarely with the question of whether the origin of the privilege can date from the date of the contract, and a majority decision of the Court of Appeal held that it could not, as in the case at bar it held unanimously.

The Court of Appeal arrived at this conclusion in Assistance Loan by basing itself on art. 2013 C.C., and I think it is appropriate to reproduce again the passage quoted above from the reasons of Turgeon J.A.:

[TRANSLATION] The article 2013 C.C. privilege affects the additional value given to an immovable by construction or renovation work. It cannot arise before such work has been begun, since this is the point at which the additional value first exists.

Article 2013 C.C. reads as follows:

Art. 2013. The workman, supplier of materials, builder and architect have a privilege and a right of preference over all the other creditors on the immoveable, but only upon the additional value given to such immoveable by the work done or by the materials.

I agree that it is the additional value given to the immovable which justifies making the latter subject to a privilege. It is also only logical that the extent of the privilege should depend on the additional value, and this is provided in art. 2013 by the following words: “but only upon the additional value given to such immoveable by the work done

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or by the materials”. However, the fact that the extent of the privilege depends on the additional value does not necessarily mean, in my opinion, that the creditor’s right did not originate earlier. It goes without saying that in order to have a debt to be enforced the builder must perform his contract, and it is equally clear that for his debt to attach to the immovable the result of his efforts must be materially evident thereon.

In the case of the supplier of materials, his privilege extends to materials “for the construction of which they have been specially prepared” (C.C. art. 2013e). The article does not require these materials to be incorporated in the construction before the privilege can arise.

In Nineteen Hundred Tower Ltd. et al. v. Cassiani et al., supra, the Court of Appeal held in the submission of respondent that the supplier’s materials must in fact be incorporated in the immovable for the privilege to arise. I refer here to the opinion of Beetz J., in Lumberland Inc. v. Nineteen Hundred Tower Ltd.[^11], in which this proposition was set aside, when he observed for the Court at pp. 594, 595 and 596:

It would also seem advisable to clarify the scope of the decision of the Quebec Court of Appeal in Nineteen Hundred Tower Limited v. Cassiani, of which it was implied, without the necessary qualifications that it met with the approval of this Court: Sofinec Inc. v. Amico Inc., at p. 945, and Assistance Loan and Finance Corp. v. Bourassa, at pp. 633 and 636. A reader of the summary in the case report might think that in Cassiani the Court of Appeal held that the privilege of the supplier of materials arises when delivery of the materials begins and they begin to be incorporated into the building: which would amount to acknowledging that the materials must be incorporated into the building in order for a privilege to arise.

It seems to me that the ratio decidendi in Cassiani is to be found at p. 792 of the report:

[TRANSLATION] Considering the provision of the law and the acknowledged fact that, on March 4, 1963, the date of the loan contract with a dation en paiement clause, appellant (the lender) knew that the above-mentioned building was then under construction, it was his responsibility to protect himself, in

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particular against the possibility of privileges of suppliers of materials.

This was basically an application of the reasoning adopted by the Court of Appeal in Belle-Isle Lumber v. Craft Finance Corp. In that case it was held that the concluding by the owner of a loan contract containing a dation en paiement clause did not affect the rights of the supplier of materials with whom the owner had made a previous contract, if the delivery of the materials began before such a loan contract was entered into and registered. The latter decision was upheld by this Court, which declared itself in agreement with the reasons and conclusions of the Court of Appeal and formally adopted them: Craft Finance Corp. v. Belle-Isle Lumber et al. However, in Cassiani, when Salvas J.A., whose opinion was concurred in by the two other judges of the Court of Appeal, stated that:

[TRANSLATION] The privilege of the mis en cause arose as soon as they started to perform their obligation to supply materials, and as soon as these materials started to be incorporated into the building; hence no formality was required by law, (at p. 792),

he went further than was necessary in order to decide the case before him. Simply stated, it seems to me that, in reference to the circumstances surrounding Belle-Isle Lumber, the fact that the building was under construction when the loan contract was concluded was only a further reason for deciding that the privileges of suppliers of materials were not affected by the subsequent entering into and registration of the loan contract containing a dation en paiement clause. Moreover, the statement that this Court upheld the judgment of the Appeal Court in Cassiani should be qualified. At page vi of the Supreme Court Reports, 1967, there is only the following: “Nineteenhundred Tower Ltd. et al. v. Cassiani, Harris Steel Corpn.; Franklin Electrical Supply et al. (Que.), [1967] Q.B. 787, appeals dismissed with costs, December 1, 1967”. However, the oral judgment of the Court as entered in the record reads as follows:

We are all of the opinion that the Court of Appeal has reached the proper conclusion. The appeal in each of the cases is therefore dismissed with costs.

In this decision, the reasons given by the Court of Appeal were not adopted as they were in Belle-Isle Lumber.

The only case I know of in which it was decided that the additional value must be acquired, at least in part, before the privilege arises is that referred

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to above, Assistance Loan, on which the decision a quo was based.

French legal theory and precedent provide us with no assistance in this regard. The applicable rules are different and, in addition, [TRANSLATION] “… the privilege has, if not fallen into disuse, become little used.” (Planiol and Ripert, Droit civil français, vol. XII, 2nd ed., No. 666, p. 693.)

In Lumberland Inc., supra, Beetz J. wrote at p. 593:

In this case, the principle intended by the legislator, and stated in art. 2013 C.C., is that those persons whose labour or materials have conferred additional value on an immoveable benefit from a surety and a right of preference in that immoveable.

In Munn & Shea, supra, in the Court of Appeal[^12], Lafontaine C.J. wrote, at p. 203:

[TRANSLATION] Otherwise, the law would be singularly ineffective if, while work was in progress, an owner who had benefited from materials supplied to him could deprive the supplier of materials of the privilege conferred on him by law by selling the immovables for which the materials were supplied and in which they were incorporated.

The case at bar concerns a builder’s privilege rather than that of a supplier of materials. Nonetheless, the elevators built by appellant were incorporated in respondent’s buildings.

In the case of an architect who is responsible only for preparing plans, it is conceivable that he may have entirely finished his work before construction begins. If, as the result of a retroactive giving in payment clause a creditor becomes owner as of a date prior to the start of construction, the architect would have no privilege even if his plans were used in construction of the building. All that would be available to him would be a rather precarious action against the original owner.

As indicated above, in the case where a subcontractor has notified the owner of his contract, “such a sub-contractor shall have a privilege upon

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the immoveable for all work done after such notification”. Similarly, in the case of a supplier of materials who contracts with the builder and has notified the owner of this contract, “His privilege is conserved for all the materials supplied after such notice”.

Accordingly, the origin of the privilege of the supplier of materials who has concluded the contract with the builder, and that of the subcontractor, is when notification of the subcontract to the owner takes place.

These provisions indicate that such creditors have a privilege for all work performed or materials supplied after notification. There is no stipulation as to the precise time when the privilege arises, provided of course that the other conditions are complied in due course: that they perform their contract, that the property acquires an additional value, that they register their privilege within thirty days after completion of the work and give notice of it to the owner, and finally that they take action within six months of completion of the work.

It is well settled that this privilege only applies for materials supplied and work performed after notification, and not before: see Concrete Column Clamps Ltd. v. City of Quebec[^13]; Alppi v. Hamel[^14]; Desrosiers v. Léger[^15]. In my opinion, therefore, this must be regarded as the point at which the privilege originates.

In the case of the supplier of materials and that of the builder dealing directly with the owner, no notice is necessary. This goes without saying, since as Mignault points out, vol. 9, p. 71: [TRANSLATION] “Such a procedure, besides not being required, would be absolutely pointless”. The owner is given adequate notice merely by the existence of the contract. In this case, the point of origin of the privilege must be the date of the contract, if the privilege of persons not dealing directly with the owner arises at the date of notification.

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In Henri Gadbois et al. v. Armand Boileau et al. and Stimson-Reeb Builders Supply Company[^16], although is was obiter, Lamont J. wrote for the Court, at p. 596: “… the privilege is effectively constituted without registration at the date when the obligation of the proprietor or contractor arises …”.

In Clairment Delisle Inc. v. I. & S. Construction Corporation et al., Superior Court, Montreal, No. 609-512, May 21, 1965, André Nadeau J. wrote:

[TRANSLATION] Whereas this privilege arises out of rights which are recorded in the work contract, and goes back to the date of the agreement concluded, followed by opening of the site;

The final words mean, in my view, that of course the privilege is subject to the condition that the contract be performed, but it nonetheless goes back to the date of the contract itself. I should, however, observe that in this case there was a builder’s privilege, and the builder had begun his work the day before conclusion of the contract containing the giving in payment clause which was later given effect.

In Assistance Loan, supra, Rinfret J., as he then was, dissenting, wrote at pp. 636, 637 and 638:

[TRANSLATION] I am not persuaded that the legislator intended, on the one hand, to give materials suppliers and builders the benefit of the privilege and, on the other hand, to open the door to their being deprived of it, or that he intended to make a distinction between the materials supplier or subcontractor who contracts with the builder and those contracting with the owner.

I readily agree that a supplier or builder should be required, and be subjected to certain disadvantages if they do not, to ascertain from the registry office whether there are hypothecs which might invalidate their future privileges; however, I cannot agree that they should be required to undertake the same research before every shipment of materials or day of work.

This is all the more true as, if after such a check they find that a hypothec with a retroactive giving in payment has been registered subsequent to their contract, and they refuse to deliver further supplies or perform

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any more work, they would run the risk of an action in damages based on their contracts.

I find it hard to imagine (I am not suggesting that that is what occurred in the case at bar) an owner signing a number of contracts for the purpose of construction of his building and one week later granting a hypothec with a retroactive giving in payment.

In the event that he failed to meet his payments, whether deliberately or otherwise, after the construction had progressed substantially, the building would become the property of the hypothecary creditor, free and clear of all privileges, with the consequence that suppliers and builders would lose their privileges and the creditor would be enriched at their expense.

That surely is not what the legislator intended.

By the first paragraph of Art. 2013e, he determined the amount, the measure or the extent of the privilege; he did not include the date on which the privilege originates.

His speaking in the past: “materials supplied” or “which … have been specially prepared”, is because at the time the privilege is registered and the additional value given to the building they will be things of the past.

I think it would be inconceivable to argue that, by delivering one board before the hypothec is registered, the supplier of materials has given additional value to the building, and that this delivery is sufficient to guarantee him a privilege for all deliveries subsequent to the hypothec.

The additional value is determined later, when the materials have been incorporated and the work carried out.

The second paragraph of Art. 2013e deals with the case where a supplier of materials contracts with the owner, and the article states that the privilege is “conserved” by the registration.

For the privilege to be conserved, it must have originated.

The second paragraph does not expressly indicate the date on which the privilege arises, and as to this reference must be had to the third paragraph.

In a case where the supplier of materials contracts with the builder, he must notify the owner of the immovable in writing that he has made a contract with the builder to deliver materials. His privilege is con-

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served for all materials supplied after this notice, provided, and so on.

It seems unreasonable to conclude that a supplier of materials contracting with the builder could be entitled to a privilege over all materials delivered after the owner is made aware of the contract entered into, and a supplier contracting with the owner, who in signing the contract is made aware of its existence, would not have the same benefit.

In my opinion, it follows from the third paragraph of Art. 2013e that the origin of the privilege is determined by the knowledge of the contract by the owner.

Furthermore, his undertaking to give additional value to the immovable dates from this time.

The privilege will then be conserved in accordance with the formal requirements specified by law.

I concur in this view. The privilege is a right which by its nature originates, develops, is conserved and exercised in stages, at different times. The fact that it is subject to various conditions which must all be met for it to be exercised does not prevent it from originating. Article 2013 C.C. has been complied with if the conditions are met when the privilege is exercised and the additional value is present at that time. I therefore consider that the builder’s privilege arises or originates at the date of the contract by which the builder undertakes to perform the work.

In support of their proposition that the privilege cannot arise before work has been begun on the job site, counsel for the respondent submitted:

[TRANSLATION]This material presence is indispensable for the protection of third parties. It replaces registration of the builder’s real right and serves as a means of public notification. It discloses the existence of the privilege to third parties or causes them to suspect that it exsits.

In this connection, Lamont J. wrote in Gadbois, supra, at p. 596:

… The reason for not requiring notice to be given by means of the register to intending purchasers, or others desiring to acquire an interest in the immovable, must, in my opinion, have been that notice by registration was considered unnecessary in view of the notice furnished by a building under construction or newly completed on the land sought to be dealt with. Anyone proposing to

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deal with such land would know, or would be presumed to know, that privileges might attach thereto.

The last sentence in particular, “Anyone proposing to deal with such land would know, or would be presumed to know, that privileges might attach thereto”, seems to me to apply equally to the situation before the Court, in which respondent made a loan specifically for the purpose of enabling buildings to be built. Further, in the emphyteutic lease there is the following provision:

[TRANSLATION] WHEREAS the lessee wishes to obtain possession of the said land and to use the same as emphyteutic lessee for sixty years, provided there is:

(2) An undertaking to construct a building …

Finally, clause 3.02 of the lease provides that:

[TRANSLATION] 3.02 Construction work shall begin at once and the building shall be completed on or about August 1 next (1971).

Counsel for the respondent further relied in their factum and at the hearing on another argument based on the following clause of the contract between Horn Elevator and Beauharnois, the predecessors in title of the parties respectively:

It is expressly agreed that Horn Elevator Limited shall not be in any way liable to the Purchaser in respect of any builder’s warranty or under any statute or law relating to the responsibility, liability or obligation of builders and the Purchaser shall be deemed for all purposes to be the builder and will assume, and indemnify Horn Elevator Limited against all and any obligation and liability of whatsoever nature or kind that may by any statute or law be imposed upon persons who construct or erect a building or part thereof.

They wrote:

[TRANSLATION] The question arises, in the circumstances, as to the right on which Armor is basing its claim to a builder’s privilege, since it has stipulated that it is not a builder.

I find nothing in this clause which constitutes a stipulation that appellant is not a builder, and that accordingly it could not benefit from the privilege given to the builders. Just from reading this clause, it appears to me to contain a limitation on appellant’s liability to respondent, under the law or otherwise, as a builder, and an undertaking by

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respondent to stand surety for any obligation or liability imposed on a builder, and respondent is to be regarded in this connection as the builder itself for the purpose of discharging all such responsibilities. Be that as it may, there is no need for any other interpretation of the meaning and scope of this clause for the purposes of the case at bar than to say that, in my opinion, the fact that appellant limited its liability to respondent and that the latter undertook to act as surety for appellant does not have the effect of making appellant cease to be a builder where the owner is concerned. This clause therefore cannot in any way deprive appellant of its privilege, and I do not think it is necessary or useful to consider the matter further.

For these reasons, I would allow the appeal, set aside the judgments of the Court of Appeal and of the Superior Court, and dismiss respondent’s action with costs throughout.

Appeal allowed with costs.

Solicitors for the appellant: Chait Salomon & Associates, Montreal.

Solicitors for the respondent: Drouin, Sirois & Associates, Montreal.

[^1]: [1979] C.A. 521. [^2]: [1972] C.A. 631. [^3]: 1928 CanLII 70 (SCC), [1928] S.C.R. 398. [^4]: 1966 CanLII 73 (SCC), [1966] S.C.R. 661. [^5]: [1967] S.C.R. vi; [1967] Q.B. 787. [^6]: [1969] Q.B. 941. [^7]: [1973] C.S. 12. [^8]: [1975] C.S. 1027. [^9]: [1978] C.S. 877. [^10]: [1979] C.S. 572. [^11]: 1975 CanLII 196 (SCC), [1977] 1 S.C.R. 581. [^12]: (1927), 44 K.B. 198 (C.A.). [^13]: 1940 CanLII 61 (SCC), [1940] S.C.R. 522, aff. (1939), 67 K.B. 537. [^14]: (1939), 66 K.B. 448. [^15]: (1923), 1923 CanLII 365 (QC CS), 29 R.L.N.S. 435. [^16]: 1929 CanLII 80 (SCC), [1929] S.C.R. 587.