Regarding ' things going on, on the displaced portion that the pilot doesn't know about '... This would have to be covered in a notam. Any change to a runway, whether temporary displacement or otherwise, must be issued in a notam.
Also, if the area is unfit for surface movement of a/c it must be marked with X's or chevrons leading to the displaced threshold (not arrows).
I'm afraid I'm going to have to disagree with you in part ac500u. If a displaced threshold is notified - either in the AIP or NOTAM - the pilot has been made aware of the area of runway that is available (in the example we're talking about, the area for landing). If all of the relevant obstacle clearance surfaces etc. are clear/sterile, there is nothing to stop an activity that doesn't compromise the OCS going on. Say the threshold is displaced by 500m, what's the problem with a vehicle crossing the normal threshold or someone digging a hole there. It's no different - from an OCS perspective - to the same things hppening outside the aerodrome boundary. That's why there are declared distances and OCS for every runway - it tells the pilot how much runway is available for particular operations and what areas can be assumed to be free of obstacles etc.
The markings are, I think, a different issue.
Obviously you have a problem with your local authority that, on the information you have given, seems to want to make an example of your friend. I'm wary of quoting law - as you have asked for - because only a lawyer familiar with your legislation can advise you on this but your link to the Canadian AIP may not be quite the same as law. In the UK there is law (called the Air Navigation Order - ANO) that covers how aircraft are operated and other aviation things. The AIP is an information document that has no status as law. But the ANO says you mustn't endanger anyone with your aircraft and if you ignore something in the AIP you may be accused of endangering someone, maybe because you didn't follow normal aviation procedures or advice in the AIP.