25.1 Void Instruments—interest Acquired Or Not Acquired

CASE LAW

The respondent, B, was the sole voting shareholder and director of a company that owned several commercial properties. The company could not obtain mortgage financing because B had a poor credit rating. Several third parties persuaded B to resign as the sole director so the company could obtain the financing it required. The third parties took control of the company, issued additional shares, and transferred title to the properties to the respondent G. G encumbered the properties with two mortgages and subsequently defaulted. In the foreclosure proceedings, B argued, on the basis of s. 25.1 of the Land Title Act, that title to the properties should be restored to the company, clear of the two mortgages. The court found that the company, as rightful owner of the properties, could and did, in fact, convey title to G. While B might have other remedies against the third parties, B could not have the properties restored to the company on the basis of s. 25.1 as the instruments were not void. The court granted the order nisi of foreclosure (First West Credit Union v. Giesbrecht, 2013 BCSC 564). On appeal from the order nisi of foreclosure, the Court of Appeal found that the appellant B had no standing in the foreclosure proceedings to bring an application to restore the properties to the company as the company owned the properties and B never did. B was the sole voting shareholder in the company that held the land. As B had no interest in the properties within the meaning of a “person deprived of land” under s. 23(2)(i) of the Land Title Act, the chambers judge erred in proceeding as if B had standing. For these reasons, the Court of Appeal held that the foreclosure proceedings were fundamentally unsound and that it would be inappropriate to allow the trial decision to stand. In allowing the appeal, the court remitted the matter back to the trial court for rehearing (First West Credit Union v. Burton, 2013 BCCA 531).