216 Effect Of Registered Certificate Of Pending Litigation

PRACTICE

Common Law Doctrine of Lis Pendens

The common law doctrine of “lis pendens” holds that the title of a person who acquires land pending litigation will be subject to the outcome of the proceeding, whether or not that person has actual knowledge of the litigation.

The Land Title Act modifies the common law doctrine by introducing the principle of notice. This modification requires a litigant to file a notice of the litigation in the land title office in order to fix any potential purchaser with knowledge of the proceeding.

The Rule in Rudland v. Romilly

Rudland v. Romilly, 1958 CanLII 577 (BC SC), articulates the doctrine of “lis pendens” in the context of a title registration statute. In this case, an application to register a freehold transfer was received by the land title office, but, before registration of the freehold title, a certificate of pending litigation was received and registered. The court held that an application for registration carries a clear right to registration where:

1. the applicant is a bona fide purchaser for valuable consideration;
2. the right was acquired and registration applied for before the filing of the certificate of pending litigation; and
3. the applicant is not a party to the action.

Despite this decision, the practice of the registrar before the 1989 enactment of ss. 216 and 217 was to refuse registration of the prior application in the Rudland v. Romilly situation for two reasons:

1. It would be inconsistent with the principle of indefeasibility to register a title today that everyone knew might be set aside tomorrow (Granby Consolidated Mining, Smelting and Power Co. v. Esquimalt and Nanaimo Railway Company, 1919 CanLII 419 (UK JCPC)).
2. The rule in Rudland could not be applied, because the registrar was not in a position to pass on the bona fides of a purchaser.

The Effect of Granby Consolidated

Section 216 was enacted to overcome the effect of Granby Consolidated by allowing a potential purchaser to proceed to registration and assume the risks associated with any pending litigation that might affect the existence or quality of title.

Application of Section 216

Section 216 only applies where a certificate of pending litigation is received and registered before a subsequent application is received by the registrar. In these circumstances, the registrar refuses to register the subsequent application unless:

1. the instrument of transfer or charge is expressly stated to be subject to the certificate of pending litigation;
2. if the instrument is not stated to be subject to the certificate of pending litigation, the applicant elects, in writing, to proceed to registration subject to the certificate of pending litigation and authorizes the registrar to do so; or
3. the application is for the registration of any of the following:
   1. a priority or postponement agreement;
   2. a sublease or an assignment of a charge where the lease or charge was registered before the certificate of pending litigation; or
   3. any involuntary charge, such as a certificate of judgment, order, notice, or claim of builders lien.

Caveats

Under s. 216(2), a registered certificate of pending litigation does not prevent the subsequent lodging of a caveat.

Instrument Stated to Be Subject to Outcome of Proceeding: Section 216(2)(a)

Subsection 216(1) does not apply to the registration of an indefeasible title or a charge where the application is stated to be subject to the final outcome of a proceeding.

Placement of “Subject to” Provision

The “subject to” provision must appear in the operative part of the instrument and refer to the filing number of the certificate of pending litigation. This provision should be set out immediately after the words of grant or following the legal description, as a qualifier to the words of transfer and limitation. The fact that a “subject to” provision appears elsewhere in the instrument, for example, as a term or statement of intention in a mortgage, lease, or option, does not constitute grounds for refusal.

In the case of an instrument, the “subject to” provision may appear:

1. in an electronic Form A, in Item 1 (Additional Information field);
2. in Form B, in Item 11 (the “Prior Encumbrances Permitted by Lender” segment of the form), or in Item 1 (Additional Information field); or
3. in Form C Charge, in Item 1 (Additional Information field).

Wording of the “Subject to” Provision

The following expression or words of like effect are sufficient in the instrument for the purpose of s. 216(2)(a):

“Subject to Certificate of Pending Litigation No. ______”

Election to Register Subject to Outcome of Proceeding: Section 216(2)(b)

Subsection 216(1) does not apply to the registration of an indefeasible title or a charge where the applicant elects to proceed and authorizes the registrar to register the title or charge subject to the outcome of the proceeding.

The registrar requires that a separate written document accompany the application, clearly demonstrating the election and authorization.

Election and Authorization

A written election and authorization under s. 216(2)(b) must:

1. describe the instrument it accompanies;
2. contain words of election to proceed to registration subject to the certificate of pending litigation identified by its registration number;
3. be signed by the applicant (person entitled to registration) or, where s. 148 of the Act applies, by the applicant’s solicitor.

Electronic Submissions of Election and Authorization

An election and authorization may be described on the Declaration form or with an image of the original attached. The electronic Declaration is submitted concurrently with the Form A, B or C Charge.

Form of Election and Authorization

The following form of election and authorization is acceptable to the registrar for the purposes of s. 216(2)(b):

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

See ss. 30 and 31 of the Act regarding the priority of certificates of pending litigation.

CASE LAW

Effect of Registration of Certificate of Pending Litigation

Notes on Case Law: Sections 216 and 217 of the Act were enacted after the decisions in Rudland v. Romilly, Granby Consolidated, and Qualicum Beach.

Application Made before Filing of Certificate of Pending Litigation

The registrar declined to register a prior applicant’s title in face of a certificate of lis pendens subsequently filed in his office. No attack was made on the prior applicant’s bona fides and the court held that the prior applicant’s title should be registered free of the certificate of lis pendens (Rudland v. Romilly, 1958 CanLII 577 (BC SC)).

Application Made after Filing of Certificate of Pending Litigation

A lis pendens was filed February 18, 1918, putting forward a claim that would have destroyed the title of the transferors. On the same day, they sold the land to a third party who conveyed on the same day to the applicant. The applicant applied to register the title on May 22, 1918. The Privy Council upheld the registrar’s refusal to register the applicant’s title on the grounds that the claim by the holder of the lis pendens went to the root of title. It is “contrary to common sense to hold that an interest in land which may … be found tomorrow to be non-existent, should be treated today, by one who knew of the existence of this suit, as an indefeasible fee, since that term means an estate in fee simple held under a good safe holding and marketable title” (Granby Consolidated Mining, Smelting and Power Co. v. Esquimalt and Nanaimo Railway Co., 1919 CanLII 419 (UK JCPC)).

A development permit fits within the definition of charge in s. 1 of the Act and is registrable under s. 219. However, in this case, the registrar was entitled to refuse registration of a development permit under s. 197 where a lis pendens was registered against title. If the registrar allowed registration of the development permit, registration of it would effectively discharge a land use contract on which the pending litigation was dependent (Re Qualicum Beach, 1982 CanLII 263 (BC SC), following Granby Consolidated).

General Principles on the Registration of Certificates of Pending Litigation

Notes on Case Law: The following is a summary of principles that emerge from decided cases. This summary is intended to serve as a convenient reference on registration issues that involve a certificate of pending litigation.

1. The doctrine of lis pendens evolved to preserve rights rather than create them (Robinson v. Holmes, 1914 CanLII 378 (BC SC)).
2. A certificate of pending litigation is merely a form of notice and, although registered “in the same manner as a charge”, it is not (Granby Consolidated Mining, Smelting and Power Co. v. Esquimalt and Nanaimo Railway Co., 1919 CanLII 419 (UK JCPC); Robinson v. Holmes).
3. The Land Title Act has modified the common law doctrine by requiring a certificate of pending litigation to be registered. In the absence of fraud, the filing date, as opposed to the date of actual commencement of the proceeding, is material in establishing whether or not a dealing occurred before or after litigation was commenced (Brock v. Crawford (1908), 11 O.W.R. 143 (Q.B.); Rudland v. Romilly; Syndicat Lyonnais du Klondyke v. McGrade, 1905 CanLII 21 (SCC)).
4. The doctrine affords a litigant party the opportunity to search the record in a land title office before the commencement of a proceeding to ascertain who should be properly joined in it (Peck v. Sun Life Assurance Co. of Canada (1904), 11 B.C.R. 215 (C.A.)).
5. The doctrine is forward looking and applies to future purchasers only rather than those who have acquired their interest before litigation was commenced (Peck v. Sun Life; Bellamy v. Sabine (1857), 1 De. G.J. & S. 566, 44 E.R. 842 (H.L.)).
6. A future purchaser is free to assess the validity of the plaintiff’s claim and to disregard the certificate of pending litigation if the purchaser thinks it baseless. The certificate of pending litigation does not confer rights on anyone (Brock v. Crawford).
7. For the purpose of the doctrine, as modified by the Land Title Act, a dealing does not occur before the commencement of litigation under the rule in Rudland v. Romilly unless:
   1. the applicant is a bona fide purchaser for valuable consideration;
   2. the interest was acquired and registration of it applied for before the certificate of pending litigation is received; and
   3. the applicant is not a party to the proceeding.
8. It is not for the registrar to determine the bona fides issue (Canada Permanent Mortgage Corp. v. British Columbia (Registrar of Titles), 1966 CanLII 683 (BC SC); Sibley v. British Columbia (Registrar of Land Titles), [1981] B.C.J. No. 43 (QL) (S.C.), Re Saville Row Properties Ltd., 1969 CanLII 822 (BC SC); and First Citizens Finance Co. Ltd. v. Registrar of Title, Vancouver Land Titles Office (1982), 26 R.P.R. 304 (B.C.S.C.)).
9. It is not appropriate to classify the certificate of pending litigation issue as a mere question of priorities that can be resolved on a first in time, first in place basis (Robinson v. Holmes).

Priority over Mortgage not Registered in Error

The bank, as the petitioner in foreclosure proceedings, sought a declaration that a mortgage between the bank and the respondent, T, charged four properties owned by T. At the time the mortgage was granted, the bank erred in completing its security documentation and the mortgage was registered only against one of the lots. Before the error was discovered in the foreclosure proceedings, the respondent, K, the former common-law spouse of T, had commenced proceedings in family court and had filed certificates of pending litigation against all four lots. The court found that, while K did not have a mortgage or a proven interest in the land, he had reserved a priority spot on title by filing the certificates and he was entitled to that priority if successful in proving his interest in the land. With respect to the mortgage, the court confirmed that the mortgage registered against the one lot had priority over all other charges and ordered that the registrar extend the registration of the mortgage to the remaining three lots in subsequent priority to K’s certificates (Bank of Nova Scotia v. Titanich, 2014 BCSC 1129 (Master)).