It is possible to claim extrajudicial fees for abuse of proceedings in a hypothecary recourse

by Adam Eidelmann
Eidelmann Law Inc.

While extrajudicial fees are explicitly excluded from hypothecary claims, they may nonetheless be claimed as part of related action for abuse of proceeding. In Florea c. Syndicat des copropriétaires du 1628 Henri-Bourassa Est (2017 QCCA 442), the Honourable Justice Mainville makes it clear that, even in the context of a hypothecary recourse, the source of the claim for extrajudicial fees will determine whether they can be claimed. In short, articles 2667 and 2762 CCQ do not exclude a claim for extrajudicial fees due to abuse of procedure under what is now article 51 CCP (formerly 54.1 CCP) in the context of a hypothecary recourse.

The Court was seized of two applications in this case. The first for permission to appeal a judgment granting a hypothecary recourse for sale under judicial authority, and a second related application for the suspension of the provisional execution of the judgment of first instance. Both applications were denied.

The Court did not consider that a failure to declare the amount of the debt by the judge of first instance was a valid motive for appeal, as the judgment was clear enough that the debt was indeed due. However, it is admittedly preferable for the judge of first instance to declare the precise amount of the debt. It also appears from Justice Mainville’s analysis that a failure by the judge to separate the debt into the amounts owing under the hypothecary claim and the amounts owing for abuse of procedure is not a valid motive of appeal.

In the same matter, the Court also clarified that permission to appeal is required under the hypothecary recourse of sale by judicial authority, but that in the case of taking in payment first instance judgments may be appealed as of right. This flows from the established principle that the value of the subject matter in dispute is determined by the amount of the claim rather than the value of the immovable. The automatic right of appeal is yet another consideration which should dissuade plaintiffs, in some circumstances, from choosing the hypothecary recourse of taking in payment.

Finally, as indicated in introduction, Justice Mainville held that articles 2667 and 2762 do not preclude a claim for extrajudicial fees for abuse of procedure:

[8]  La Requérante ajoute que la juge aurait aussi erré en droit en permettant que l’hypothèque légale du Syndicat comprenne une réclamation d’honoraires extrajudiciaires. Les articles 2667 et 2762 du Code civil du Québec semblent restreindre les réclamations hypothécaires pour honoraires professionnels encourus pour recouvrer le capital et les intérêts garantis par hypothèque. Par contre, dans ce dossier, il n’est pas acquis que les honoraires réclamés ont été engagés à ce titre. La Requérante a d’ailleurs déjà été condamnée à rembourser des honoraires extrajudiciaires au Syndicat dans un jugement de la juge LeBel (2015 QCCS 810) se fondant sur les dispositions de l’article 54.1 de l’ancien Code de procédure civile portant le caractère mal fondé, frivole et dilatoire du recours alors entrepris par elle.

Reference : [2017] ABD 158