This blog post will review the law as it relates to a Certificate of Pending Litigation.
Having worked in commercial / construction litigation for a number of years, it prompted me to review the law as it was noted in this recent decision Chen v. Jin, 2019 BCSC 567. It does bring back great memories working with clients who required a Claim of Builders lien filed, and the resulting CPL thereafter, including of course the litigation which, often times, lasted for years.
The Defendant in this case applied to have a registered CPL removed from his property and was successful on the basis that the pleadings filed by the Plaintiff did not disclose a claim for an interest in his subject property. The Court ordered that the CPL be removed. Costs were in the cause.
The law was highlighted in this case and I will enumerate it here. There are referenced decisions that should also be reviewed that have identified key principles to be aware of but this is a great overview of the law as it relates to CPLs. I have also attached a helpful article and a site that discloses some of the key limitation deadlines to be aware of.
The Law
[8] A CPL is an extraordinary pre-judgment mechanism intended only to protect a valid claim to an interest in land until issues can be resolved.
[9] Section 215 of the Land Title Act, R.S.B.C. 1996, c. 250, which governs the registration of CPLs reads in part as follows:
215 (1) A person who has commenced or is a party to a proceeding, and who is
(a) claiming an estate or interest in land,
….
may register a certificate of pending litigation against the land in the same manner as a charge is registered, and the registrar of the court in which the proceeding is commenced must attach to the certificate a copy of the pleading or petition by which the proceeding was commenced, or, in the case of a certificate of pending litigation under Part 5 of the Court Order Enforcement Act, a copy of the notice of application or other document by which the claim is made.
[10] The key to s. 215(1)(a) is that the CPL must be grounded in a claim to an interest in land.
[11] It is improper to file a CPL as leverage to secure a financial claim: Drein v. Puleo, 2016 BCSC 593 at paras. 8-10.
[12] The correct test to be applied in an application to cancel a CPL that is alleged to be non-compliant with s. 215 of the Land Title Act is simply whether the pleadings disclose a claim for an interest in land. Where a CPL fails to properly claim an interest in land, it should be cancelled on the basis that it does not meet that precondition: Xiao v. Fan, 2018 BCCA 143 at paras. 19 and 27.
[13] The process for making this determination as set out by the Court of Appeal in Xiao is as follows:
[27] Accordingly, the correct test to be applied in an application to cancel a CPL that is alleged to be non-compliant with s. 215 of the Land Title Act is simply whether the pleadings disclose a claim for an interest in land. In such an application, no evidence is to be considered. If the merits of the claim for an interest in land are challenged, a defendant should apply for a summary dismissal of that part of the claim under Rule 9-6(4), where evidence may be considered, and the test to be applied is whether there is a bona fide triable issue of fact or law. If that part of the claim is dismissed, a defendant may then apply to have the CPL cancelled under s. 254.
[14] I pause to note that the parties differ on both whether the pleadings disclose a claim in land and on the merits of such a claim. On this application I am confining myself to the issue of whether the pleadings disclose a claim for an interest in land.
[15] The applicable analysis rests on the pleadings filed in support of the CPL, not on pleadings as amended after the fact: Bilin v. Sidhu, 2017 BCCA 429 at para. 62. In this analysis hardship is not a consideration: Bilin at para. 56.
[16] If the plaintiff has raised a triable issue, the court may still cancel the CPL on the basis of hardship and order the posting of alternate security, particularly where damages will be an adequate remedy if the plaintiff succeeds at trial: 0861695 B.C. Ltd. v. Meola, 2013 BCSC 121 at para. 10.
[17] The authority to cancel a CPL comes from ss. 256 and 257 of the Land Title Act. Section 256 allows the registered owner of property to apply to have a CPL cancelled if hardship and inconvenience are, or are likely to be experienced as a result of it. Pursuant to s. 257 the court if satisfied may, inter alia, order the cancellation of the registration of the CPL either in whole or in part on the applicant posting security.
[18] The hardship or inconvenience does not have to be significant: Enigma Investments Corp. v. Henderson Land Holdings (Canada) Ltd., 2007 BCSC 1379 at para. 24. In determining what alternate security is appropriate, the court may consider the strength or weakness of the plaintiff’s claim: De Cotiis and Others v. De Cotiis et al, 2004 BCSC 1658 at para. 40 [End]
I will also share this article by Mr. Peter J. Roberts of Lawson Lundell which was dated April 18, 2016 as it offers further information on removing a CPL:
How to Remove a Certificate of Pending Litigation
By Peter J. Roberts, QC on April 18, 2016
Posted in Civil Litigation
A certificate of pending litigation (a CPL) is a form of charge that can be registered on title to land where someone commences a legal claim in which they assert an interest in that land. CPLs are intended to protect the claimant’s interest in that land. For example, if a plaintiff asserts money they lent was used to purchase or maintain land, they will claim a CPL. Similarly, a purchaser will claim an interest in land where their vendor later tries to get out of the sale.
As a practical matter, a CPL is an effective tool in tying up land and putting pressure on its owner to resolve the dispute. It is unlikely anyone else will deal with the land if there is a CPL on title. For example, no one else is likely to buy the land and no lender will take mortgage security because, if they do, their interest in the land will be subject to the yet-to-be adjudicated rights of the CPL holder.
CPLs are often used as a veiled method of leverage to secure a financial claim or a tenuous interest in land. What, then, happens if there is a CPL on title to your land and you need to get rid of it? How do you go about that?
Absent agreement with the CPL claimant, your recourse is to seek a court order removing the CPL. Section 256 of the Land Title Act grants a land owner the authority to apply to court to remove a CPL. On such an application, the court may cancel the CPL outright, do so on term that security be posted instead, or may refuse to cancel the CPL but require the CPL claimant to either post their own security or give an undertaking to pay damages if their claim ultimately fails.
On such applications, a threshold question is whether the land owner can demonstrate “hardship and inconvenience” as a result of the CPL. The hardship and inconvenience must be more than trifling or insignificant. For example, if the CPL is thwarting a sale, preventing development of the land or stalling a financing, then “hardship and inconvenience” may well exist. The next question is whether or not the land owner can establish that an order requiring security is proper and that damages will provide adequate relief to the CPL claimant rather than the land itself. For example, if the claim is only about monies owed to a contractor, damages will suffice.
However, if the claim is for specific performance of the sale of a unique parcel of land, damages will not be an adequate remedy. Where the claim is for specific performance, it must be plain and obvious that it will not succeed in order to have the CPL cancelled. However, the CPL claimant must also prove readiness and willingness to perform their contractual obligations. This includes continuing of future obligations of the purchaser that are interdependent and to be performed concurrently with obligations of the vendor that the purchaser seeks to enforce. In other words, if you needed financing to complete the purchase but have not or cannot obtain it, the specific performance claim will fail, even if the land is “unique.” In cases like this, the fight over cancelling the CPL will revolve around the issue of whether or not the subject property is sufficiently “unique” that specific performance is an appropriate remedy.
If a purchaser is not entitled to specific performance, then it follows that damages are an adequate remedy. The CPL will be cancelled. If a CPL is cancelled and replaced by posting security, then the court will need to set the amount of the security. It will not always be the amount of the claim. The amount depends, among other things, on the strength of the case.
If you seek to remove a CPL from your property, you will need to analyze the underlying claim and assemble the evidence necessary to convince a judge there is little or no merit to it. You will also need to be prepared, and should consider proposing, an amount of security to post as an alternative. [End of Article]
LIMITATION DEADLINES
Also note some noted limitation deadlines as it relates to a CPL which are noted on www.builderslienlaw.ca
Certificate of pending litigation
A lien claimant who files a court action to proceed with proving its entitlement to a lien must also file a certificate of pending litigation in the appropriate land title registry:
If a claim of lien has been filed, an action to enforce the claim of lien must be commenced and, unless the claim of lien has been removed or cancelled under section 23 or 24, a certificate of pending litigation in respect of the action must be registered, not later than one year from the date of its filing, in the land title office or gold commissioner’s office in which the claim has been filed.
(Builders Lien Act, s. 33(1)).
As noted in s. 33(1) quoted above, the certificate of pending litigation is to be filed not later than one year from the date the lien was filed i.e. the one year limitation period that applies to filing the court action to perfect the claim of lien also applies to the filing of a certificate of pending litigation. Similarly, where a 21 day notice has been issued a certificate of pending litigation must, along with the court action, be filed within the 21 day period that applies under the 21 day notice.
Failure to file a certificate of pending litigation within the applicable time period results in lien being extinguished:
[T]he Plaintiff did not register a certificate of pending litigation in the applicable Land Title Office within the one year period stipulated by s. 33(1) of the Act, with the result that its lien against the land in question has been extinguished pursuant to s. 33(5).
(Shimco Metal Erectors Ltd. v. Design Steel Constructors Ltd., 2002 BCSC 238 a para. 1).
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