249 Power Of Court To Order Cancellation Of Charge

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

See Di Castri, Registration of Title to Land, vol. 2, para. 543.

CASE LAW

Rights of First Refusal

A lease gave tenants a right of first refusal only if they duly and regularly paid rent and performed the covenants of the lease, which they failed to do. The tenants also frustrated a proposed sale by purporting to exercise the right of first refusal and then failing to complete the transaction. It was not an unfair inference to draw that more problems would occur which could well include the frustration of further sales. The landlord obtained a court order under s. 246(1) removing and cancelling registration of the right of first refusal (Laakmann v. C.C.W.C. 1982116 Holdings Ltd. (1984), 34 R.P.R. 36 (B.C.S.C.) (Chambers)).

Note: The reference in the text of this case to s. 225(1) of the Act (now s. 246(1)) appears to be an erroneous reference to s. 228(1) (now s. 249(1)).

A right of first refusal clause must, at a minimum, set out the procedure by which the price will be determined and a mechanism by which an offer can be made and a time within which it can be accepted. Where these minimum requirements are not present, the clause is unenforceable and the court will order the registrar to discharge the right from the title to the land (Baykey v. North West Office Furniture, 1992 CanLII 568 (BC SC)).

Orders for Security

Where the Supreme Court has made a declaration under s. 249(1)(a) of the Land Title Act, the court does not have jurisdiction to subsequently allow the lodging of a substitute security mortgage. The section contemplates an application for substituted security before the court’s declaration as to either the validity of such a charge or the amount owing under such a charge (Armadoris Holdings v. C-1300 Holdings Ltd., [1992] B.C.D. Civ 2768-01, [1992] B.C.W.L.D. 721 (S.C.), leave to appeal refused 1993 CanLII 2763 (BC CA)).

Special Circumstances for Payment of Mortgage Proceeds into Court

In a foreclosure proceeding, the court approved the sale of a property and ordered cancellation of the registered charges on payment into court of an amount sufficient to secure payment of a second vendor take back mortgage in favour of the defendant. The value of this mortgage had been subject to negotiation between the parties. An initial amount, based on an appraisal value, had been increased by a further amount based on the defendant’s assessment of rental value. Apparently, the plaintiffs accepted this at the time. The plaintiffs claimed that the defendant had misrepresented both himself and the condition of the property and therefore that they had exercised their right of rescission and had ceased making payments under the mortgage. They claimed that they should be required to pay into court only the original principal of the second mortgage plus interest and not an additional amount they were induced to add to the second mortgage by the defendant. The plaintiffs said that they would suffer financial hardship should they be required to pay the full amount into court and that, in the circumstances of their claim against the defendant, this amounted to “special circumstances” under s. 249(2) of the Act. The court disagreed. It found that s. 249(2) does not empower the court to consider the merits of a mortgagee’s claim and does not make the mortgagor’s hardship or inconvenience a ground for cancellation. While there was clearly a dispute about the validity of the mortgages and the amount owing, the court found that s. 249(2) makes it clear that the existence of a dispute does not, in itself, justify payment into court of anything less than the full amount claimed (Froese v. Sharif, 2017 BCSC 635).

Matrimonial Proceedings

Notes on Case Law: The following cases were decided under the Family Relations Act, R.S.B.C. 1996, c. 128 (repealed March 18, 2013 by B.C. Reg. 131/2012). See the transitional provisions in s. 252 of the Family Law Act at chapter 41 (Family Matters) to determine whether the Family Relations Act or the Family Law Act applies in specific circumstances.

Although the court can order that encumbrances on family assets be discharged out of the assets of the spouses, it cannot order that a holder of a registered charge divest itself of its interest. Consequently, a judgment for legal fees registered against the one-half interest of the applicant’s spouse in the matrimonial home before a consent order transferring the spouse’s interest to the applicant could not be cancelled upon application to the court under s. 249 of the Land Title Act. A lis pendens had not been filed before the registration of the judgment, but a lis pendens would not have had any significance given that the spouse’s interest was being transferred rather than reapportioned under s. 65 of the Family Relations Act. Furthermore, a mutual restraining order which restrained and enjoined the parties from further encumbering the property did not invalidate the subsequent registration of the judgment because the order only applied to the parties, not the judgment debtor (Domirti v. Domirti, 1996 CanLII 1619 (BC SC)).

Section 249 Cannot Be Used to Cancel a Certificate of Pending Litigation, Which Is Not a Charge

A certificate of pending litigation ("CPL") is not a charge. Section 249 cannot be used to cancel certificates of pending litigation (1141536 B.C. Ltd. v. Main Acquisitions, 2019 BCSC 1689 (Chambers) at paras. 8 to 9).

Factors Relevant to Exercise of Judicial Discretion to Order Cancellation of Charge

In Pollyco (Latimer) Venture Ltd. v. Allwest Development Corp., 2022 BCSC 2041 (Chambers), the defendants applied pursuant to s. 249 of the Land Title Act for cancellation of an option to purchase that was registered against title to its properties.

The parties had entered into a joint venture agreement (“JVA”) to subdivide, develop, and sell properties in Langley, some of which were owned by the defendants, whose capital contribution to the joint venture was the properties. The plaintiff’s capital contribution was payment of development costs. Under the JVA, the plaintiff’s payment of development costs was to be secured by the option to purchase the defendants’ properties until the completion date, which was defined as the date for the sale of the properties on or before December 31, 2019. The JVA also provided for project timing, including that the parties would use best efforts to accomplish a marketing schedule by which sales of the subdivided properties would begin by November 30, 2018, later amended to January 9, 2020. The parties also amended the nature of the development, including a new schedule of payment dates of management fees and for additional management fees to be paid by the plaintiff to the defendants. The defendants alleged that the plaintiff failed to pay the management fees in accordance with the schedule, and in December 2020, gave notice of termination. They brought a petition seeking cancellation of the option to purchase. The plaintiff sued for declarations that the JVA with the option to purchase remained in full force and effect.

Held, application dismissed. Section 249 clearly includes a threshold to be met before the court’s discretion to cancel the charge is engaged. Section 249 requires that the question raised be “sufficiently material”, which renders the relevant strength of the parties’ positions on the validity of the charge relevant to the exercise of discretion. Section 249 also requires the court to consider the issue of security in case a charge is invalidly cancelled. The following factors are relevant to the exercise of discretion: (1) the strength of the parties’ positions on the validity of the charge; (2) the circumstances of the application, including when the question of validity will be tried in relation to the interests of the parties; (3) whether money would be adequate compensation if a valid charge were cancelled on an interlocutory application or, if not, whether some other appropriate security can be ordered; and (4) the balance of fairness taking into account the foregoing factors.

Here, the issue of whether the option to purchase had expired was material to its validity. On the material and the submissions made, it was not advisable or appropriate to further attempt to determine the parties’ relative strengths at this time. With respect to the circumstances of the application, the encumbrance on the defendants’ real property was prejudicial per se. While the thinness of the defendants’ evidence on this point did not undermine the force of its claim, it did affect the weighing of prejudice. The pendency of the trial date weighed strongly against cancelling the charge, in light of the cogency of both sides’ arguments and the fact that the charge was registered in relation to an agreement the plaintiff sought to enforce. However, if the trial were bumped due to lack of judges, the rebooked trial could be a year or two down the road. With respect to compensation, an undertaking to pay damages would not suffice, given the positions with respect to the joint venture. Finally, the balance of fairness did not favour cancellation. Even if an amount were paid into court to secure the plaintiff’s damages, the potential mismatch between monetary security and the relief it sought, coupled with the April 2023 trial date, were factors that strongly weighed in favour of the plaintiff’s position. Against that, the defendants were deprived of the full use of their assets, but the proximity of the trial date was such that the harm to the defendants in leaving the option in place was not as great as the harm to the plaintiff if it were inappropriately removed. If the trial did not proceed in April 2023, the defendants would be entitled to renew this application.