252 Cancellation Of Certificate Of Pending Litigation

FORMS

Forms of Application for Cancellation of a Certificate of Pending Litigation

Submissions

On the Form 17 Cancellation of Charge, Notation or Filing, select Nature of Interest, Certificate of Pending Litigation, and attach an image of the original court certified court order.

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

See Di Castri, Registration of Title to Land, vol. 2, paras. 655, 665, and 668.

CASE LAW

Notes on Case Law: The 1989 re-enactment of this section provides that an applicant must apply to court by interlocutory application if the applicant is a party to the proceeding. For a sample of case law interpreting this section when the interlocutory procedure was not available, see Boicey v. Boicey, 1964 CanLII 781 (BC SC); Hugh M. Fraser Ltd. v. Midburn Holdings Ltd., 1970 CanLII 758 (BC CA); Manatec Enterprises Ltd. v. Rikki’s Investments Ltd., [1975] W.W.D. 142 (B.C. Co. Ct.); Janzen v. Maselli, 1977 CanLII 364 (BC SC); Saunders v. Multi Builders Ltd., 1981 CanLII 768 (BC SC); and Pacific Savings and Mortgage Corp. v. Can-Corp Development Ltd., 1982 CanLII 463 (BC CA).

Note: The case annotations that follow, many of which predate the 1989 re-enactment, are only a sample of a decisions made under s. 252. They are not intended to be a comprehensive review of decisions made under this section.

Interpretation

Within the context of s. 252, an examination for discovery is a “proceeding” (Anchor Ventures Inc. v. Doney, [1984] B.C.D. Civ. 2203-02, [1984] B.C.W.L.D. 2202 (S.C.)).

Court’s Discretion

There is nothing in s. 252 that takes away a judge’s discretion to do what is fair and equitable as between the parties. The court in this case refused to order cancellation of a lis pendens filed in fraudulent conveyance proceedings which commenced two and a half years earlier. The holder of the lis pendens had obtained judgment against the defendant in other actions, had been endeavouring to realize on property by other means, and had discussed settlement of all outstanding matters in the process of an examination in aid of execution (Tomczyk v. Toronto-Dominion Bank, 1982 CanLII 546 (BC SC)).

Section 252 clearly provides for the exercise of judicial discretion through the use of the word “may” in subsection (1). The court exercised that discretion in favour of the lis pendens holder, even though the holder commenced the action founded on a claim of fraudulent conveyance more than three years before the date of the s. 252 application. There was no evidence that the delay was prejudicial to either party in prosecuting their actions (Surfwood Developments Ltd. v. Auzin, [1985] B.C.J. No. 1471 (QL) (S.C.)).

Under a separation agreement, a husband agreed to pay his wife cash for her interest in the matrimonial home in settlement of their matrimonial dispute on the condition, among others, that she release her lis pendens. When he failed to make the final payment contemplated in the settlement, she filed new certificates of lis pendens against the matrimonial property and some business properties. The husband sought removal of the certificates 17 months later. As to the business properties, the separation agreement governed, and the wife no longer had an interest in them. With respect to the matrimonial home, the separation agreement contemplated that the lis pendens filed against it would remain until the husband made final payment. This indicated that the wife might still have an interest in the matrimonial property. Section 252(1) gives a court discretionary power to cancel a lis pendens. Accordingly, the court ordered removal of the lis pendens against the business properties but not those registered against the matrimonial home (Baker v. Baker, 1985 CanLII 840 (BC SC)).

The court exercised its discretion under s. 252 and allowed an application for cancellation. Six years had passed between the time the holder filed the lis pendens and the time of the application. During that time, there had been some correspondence between counsel, but there had been no communication for a year and a half (Tod Mountain Development Ltd. v. Candido, [1982] B.C.J. No. 2360 (QL) (S.C.)).

Factors relevant to the exercise of the court’s discretion in a s. 252 application were summarized in Wiest v. Middelkamp, 2005 BCSC 1626 (at paras. 12 and 13):

In an application of this kind, where the applicant shows that no step has been taken in the proceeding for a period of one year, the court retains a discretion to disallow the remedy. However, prejudice to the owner of the land will be presumed, and the respondent bears the onus of proving that the prejudice is not serious or is outweighed by other factors which would make it unjust to cancel the certificate of pending litigation. See Kal West Mechanical Inc. v. Bush, [1999 CanLII 6941 (BC SC)] (Cole, J.) and Wilson v. Hrytsak, [1997 CanLII 3396 (BC SC) (Master)] (Master Joyce).

In my opinion, the factors relevant to the exercise of the court’s discretion in this type of application include the following:

• (a) Whether the respondent has given an acceptable explanation for the delay in prosecuting the claim;
• (b) Whether, despite the presumed prejudice, no actual prejudice would be incurred by the applicant if the order was not granted; and
• (c) Whether the respondent’s claim for an interest in the land has at least a reasonable prospect of succeeding.

The court in Lawn Genius Manufacturing (Canada) Inc. v. 0856810 B.C. Ltd. Inc., 2016 BCSC 1915 summarized the principles applicable to the exercise of discretion (at paras. 11 to 13):

It is common ground: (a) that the granting of the relief is discretionary; (b) that “step” in s. 252(1) means a formal step either required or permitted by the Supreme Court Civil Rules that moves the action forward towards trial or resolution; and (c) that “one year” in s. 252(1) refers to the year immediately preceding service of the Notice of Application to cancel the CPL.

This agreement finds support in our jurisprudence. The court retains the discretion not to cancel the CPL, even where the statutory prerequisites are met, if cancellation would not be fair and equitable: see Kal West Mechanical Inc. v. Bush, [1999 CanLII 6941 (BC SC)] at para. 6; and Tomczyk v. Toronto Dominion Bank [1982 CanLII 546 (BC SC)]. Where the statutory prerequisites are met, prejudice to the landowner is presumed and the respondent must show that the prejudice is either not serious or outweighed by other factors that suggest cancellation of the CPL would be unjust: see Wiest v. Middelkamp, 2009 BCSC 1133 at para. 12 and Motz Bros. Holdings Ltd. v. McKean, 2009 BCSC 1133 at para. 12. The meaning of “step” in s. 252 of the Act is informed by case law in which the definition of that term in the analogous provisions in the Supreme Court Civil Rules, is discussed. The step must be either required or permitted by the Supreme Court Civil Rules, and it must move the action forward towards trial or resolution: see Motz Bros. Holdings Ltd. v. McKean, 2009 BCSC 1133 at paras. 9–10; Canadian National Railway Co. v. Chiu, 2014 BCSC 75 at para. 7; Easton v. Cooper, 2010 BCSC 1079 at paras. 6–13; and Khan v. Johal, 2006 BCSC 1547 at paras. 11–15. Finally, on the question of whether the “one year” in s. 252 of the Act refers to the year immediately preceding the bringing of an application pursuant to that section, in Wiest v. Middelkamp, 2004 BCSC 882 [Wiest], at para. 11, Goepel J. (as he then was) said:

Thus, a prerequisite to an application under s.252 is that no step has been taken in the proceedings for one year. The question then becomes whether there has been a step taken in these proceedings in the year before the defendants brought this application...

[Emphasis added.]

The underlying purpose of s. 252 of the Act, which is to keep property from being tied up in dormant litigation, must always be borne in mind: Wiest, at para. 15.

Statutory Preconditions to Apply under Section 252 Do Not Limit Court’s Power

In GMC Properties Inc. v. Rampart Estates Ltd., 2023 BCCA 172, the court allowed an appeal from an order to cancel a CPL without prejudice to the respondent’s right to bring a new application.

The appellant had registered the CPL against land on which an apartment block was situated that was the subject of a 2017 amended purchase and sale agreement it sought to compel the respondent to perform. As the defendant had terminated the agreement saying the condition removal date had expired, in June 2019, the plaintiff sued the defendant, seeking a declaration that the condition removal date had not passed and an order for specific performance requiring the defendant to provide an environmental report, and filed a CPL.

In 2020 and 2021, the parties attempted without success to negotiate a new agreement. On the defendant’s application, the chambers judge cancelled the CPL on the basis that the plaintiff was not claiming an interest in land, as required by s. 215(1), and also, pursuant to s. 252(1) that no step had been taken in the proceeding for one year.

The appellant now argued the chambers judge erred in exercising his discretion by misconstruing the nature of its claim, failing to have due regard to informal steps it had taken in the litigation, and failing to consider the fact that the certificate caused no actual prejudice to the respondent.

The Court of Appeal agreed, saying (at para. 50) ss. 256 and 257 constitute a “statutory code for balancing the rights of the parties where adverse consequences caused by the registration of the CPL prejudices the land owner”. Where the statutory preconditions provided for in s. 252 for cancellation are met, the court has a discretion to refuse to cancel a CPL based on whether, in all the circumstances, cancellation is in the interests of justice. Section 252(1), read in context, in its grammatical and ordinary sense, makes clear that the preconditions specified refer only to the entitlement to bring a cancellation application; they do not define, limit, or otherwise illuminate the extent of the court’s power once an application is brought. The legislature did not intend to exclude or limit the court’s power to refuse to cancel a CPL if an applicant establishes the statutory preconditions. Further, the objects of the scheme include, in general, fairly balancing the rights of claimants to an interest in land and those of affected property owners. The court may grant or refuse a s. 252 application to cancel a CPL based on the interests of justice taking into account the circumstances. Here, the chambers judge misconstrued the nature of the plaintiff’s claim, which, as pleaded, was for an equitable interest in the lands acquired upon the formation of the binding agreement for purchase and sale. Whether the due diligence conditions were unenforceable because they were subjective, or whether they amounted to true conditions precedent subject to a good faith obligation, as the plaintiff contended, were triable issues. The judge’s failure to analyze the merits of the underlying claim was a material error.

The chambers judge also failed to give sufficient weight to the informal steps taken after May 2020 in determining whether it would be unjust to cancel the CPL. That failure amounted to a reviewable error.

Finally, the chambers judge erred by failing to consider the absence of evidence of actual prejudice to the defendant if the CPL was not cancelled, and instead relied solely on the presumption of prejudice when exercising his discretion. He also failed to consider the substantive effect on the plaintiff of cancelling the CPL, which in effect amounted to a dismissal of its claim for specific performance. The judge made no finding that the defendant would or would not incur actual prejudice if the CPL was cancelled, and also did not attempt to balance the prejudice to the defendant, presumed or actual, with any prejudice to the plaintiff if the CPL was cancelled.

Trust Claims Incapable of Summary Disposition, Certificates Cancelled

The parties resided together in a marriage-like relationship from early 2016 until November 2017. During that time, the respondent stated she paid all the parties’ common living expenses including utilities, day-to-day living costs, and food. Further, she asserted that it was her, not the claimant, who provided a benefit to the other by working as bookkeeper without pay for the claimant’s construction company. The respondent had sold her home in Burnaby. With the sale proceeds, she purchased two properties near Fernie (Cedar Bowl #18 and #20) in July 2016 from the claimant’s former spouse, JE (#18), and from JE and the claimant (#20). The former was bare land. The respondent purchased a third property, a vacant lot (Black Rock), in December 2016, with the intention of building a house and selling for profit. She contributed the entirety of the purchase price. The claimant asserted, and the respondent denied, that the parties had an express agreement that entitled the claimant to an equity interest in both of the Cedar Bowl properties based upon the difference in the price paid by the respondent and the assessed values of each at the time of acquisition—a difference of approximately $300,000. The respondent applied for a summary trial pursuant to Supreme Court Family Rule 11-3(2) and sought dismissal of the major portions, but not the entirety, of the action. Specifically, she sought: a declaration that the parties were not spouses pursuant to the Family Law Act followed by a dismissal of the claims for relief under the FLA; a declaratory order that she did not hold property in trust for the claimant; and the removal of CPLs placed on three properties. The CPL against Black Rock had been discharged as a condition of the court granting the claimant an adjournment. Held, application allowed in part. The court found the parties were never spouses within the meaning of the FLA and dismissed claims thereunder. However, the court was unable to conclude that the claimant’s claims in trust were capable of summary resolution given the conflict in the evidence. On first blush, it would appear that the claimant’s assertion of trust was premised wholly on contributions made by him financially and otherwise to the betterment of the properties; particularly his work in overseeing construction on Black Rock. He also said that he provided improvements to 20 Cedar Bowl, which was the home in which the parties cohabited from the early stages of 2017 until separation. However, in his evidence, he deposed that he was instrumental in the acquisition of at least two of the properties, the Cedar Bowl properties, at discounted prices below their assessed value and that the parties orally agreed that he would gain an equity position in each based upon the difference between the purchase price and the assessed values. The claimant had not pleaded an express trust, but the pleadings were still capable of amendment. The respondent denied any such arrangement, but that was a matter of credibility incapable of resolution on documentary evidence. Finally, after balancing the prejudice faced by both parties, the court ordered the CPLs registered against the two Cedar Bowl properties be removed. The respondent was presumptively prejudiced by the continued impediment to enjoy the properties. The last step in the litigation prior to the respondent’s application was in July 2018. The claimant had not asserted an acceptable reason for failing to progress with the litigation or provided any prejudice that he would face if the CPLs were removed (Rizzuto v. Grover, 2020 BCSC 1564).

Cancellation on Terms

The parties, who cohabited in a marriage-like relationship for eight years and had two children, separated in February 2016. The respondent owned the former family home in which he continued to reside. In January 2017, the claimant commenced an action claiming an interest in the home and registered a CPL against title. The parties were litigating their parenting issues in Provincial Court. The only substantive steps taken in this proceeding were two judicial case conferences. At the second, the parties agreed to jointly retain an appraiser to provide market values of the home in 2008 and 2016, with the cost to be shared equally, and to share equally the increase in the equity in the home. The respondent deposed that he obtained the appraisals in January 2020, provided them to the claimant’s lawyer, and proposed that the CPL be removed. The claimant did not respond. In August 2020, the respondent applied pursuant to s. 252 of the Land Title Act for an order cancelling the CPL. Held, application allowed on terms. The preconditions to an application under s. 252(1) were satisfied: the CPL had been registered, and no steps had been taken in the proceeding for more than one year. A CPL is an exceptional remedy offering pre-judgment security in respect of a claim for an interest in real property. It does not provide security for a claimant’s other claims, such as those asserted in Provincial Court. Prejudice to a landowner from a CPL is presumed where the preconditions under s. 252 are satisfied, and, here, the claimant failed to satisfy the onus upon her to show that the prejudice was not serious or was outweighed by other factors. She offered no explanation for her failure to address the respondent’s January 2020 proposal or to take other steps to complete the division of property. In addition, the respondent had suffered actual prejudice from the CPL on title because it hampered his ability to borrow money against his equity in the home. On the other hand, there could be prejudice to the claimant if the CPL were simply cancelled. She had an indisputable interest in the home. Therefore, the CPL would be cancelled on terms, after the respondent paid to the claimant the net value of her interest in the home determined according to the consent order less her agreed contribution to the cost of a Hear the Child Report, and the costs of this application (Lebarr v. Pearl, 2020 BCSC 1638 (Chambers)).

Rights Claimed in Proceeding Extinguished by Limitation Act

In 1915, the respondent took an assignment of mortgage covering several lots. The mortgagor subsequently conveyed portions of the lots to a railway company as rights of way. The respondent foreclosed on the mortgage, filed a lis pendens and commenced separate proceedings against the railway company. The final order of foreclosure expressly excepted all but one of the rights of way. Title to the land affected by that right of way was still subject to the assignment and lis pendens. The petitioner sought an order cancelling the assignment and lis pendens. The petitioner had no notice of the foreclosure proceedings, was not a party to them, and was therefore unaffected by the foreclosure order. Under the Limitation Act, rights under the assignment of mortgage were extinguished. The lis pendens was cancelled (B.C. Rail Co. v. Dalton, 1993 CanLII 1302 (BC SC), application for stay pending appeal refused 1993 CanLII 617 (BC CA)).

No Steps Taken within One Year

This appeal from a master’s order concerned releasing a certificate of pending litigation and cancelling two caveats. The mere filing of a certificate of pending litigation was prejudicial, and the onus was on the plaintiff to show that this prejudice was somehow outweighed by other factors. The defendants satisfied the court that no proceedings had been taken for more than one year. In the absence of further assertions from the plaintiff, the master was correct in releasing the certificate and cancelling the caveats (Kal West Mechanical Inc. v. Bush, 1999 CanLII 6941 (BC SC)).

The defendants sought an order cancelling a certificate of pending litigation on the grounds that the plaintiff had taken no steps in the proceeding for more than one year. In granting the defendants’ application, the court affirmed that, as an extraordinary legislated interim remedy which permits a plaintiff to secure a claim before it is proven, a certificate of pending litigation is prejudicial per se. The plaintiff argued without authority that the term “step” includes an informal step a solicitor or party might take in relation to an action. The court found that such a broad definition would be inconsistent with the purpose of s. 252 and that it would put the defendant in an untenable position in regard to proof of the factual underpinnings for its remedy. The court considered the plaintiff’s explanation that the matter was left in the hands of legal assistants who failed in various ways to take actions over a two-year time frame. In exercising its discretion to cancel the certificate, the court found that the plaintiff’s lapses and entirely unsatisfactory explanations were so compelling that the strength of the plaintiff’s case ought to be accorded little, if any, weight. In contrast, the defendants provided substantial evidence that the certificate was impeding their ability to obtain financing for development purposes. On these facts, the court ordered cancellation of the certificate (Khan v. Johal, 2006 BCSC 1547).

Standard on Appeal

The refusal of the court to order cancellation of a lis pendens is a decision that is interlocutory in nature. On an appeal, the test to be applied is whether the master was clearly wrong in refusing to order the cancellation (Johl v. Modar Developments Ltd., 1991 CanLII 1750 (BC SC)).

Factors in Court’s Decision Whether to Exercise Discretion

On March 22, 2019, the plaintiff in Peterson Custom Woodwork Ltd. v. Fu, 2022 BCSC 1767 filed a claim of builders lien against the defendant’s lands, seeking a declaration of entitlement to the lien and a personal judgment for the lien amount. The plaintiff filed a notice of civil claim nearly a year later on March 22, 2020 and registered a CPL on April 23, 2020.

The defendant now applied to cancel the claim of lien and the CPL, pursuant to s. 252(1) of the Land Title Act, arguing that no steps had been taken in the proceeding for a year, and that the lien became extinguished because the CPL was not registered within one year of filing the lien, pursuant to s. 33 of the Builders Lien Act.

The court, whose power to dismiss a claim for want of prosecution is discretionary, was not convinced by the plaintiff’s explanation for delay that they relied on their former solicitor to move the case forward without actively monitoring the progress. However, other factors favoured the plaintiff, including the strength of its case, the defendant’s lack of assets in British Columbia, and potential prejudice to the plaintiff if the lien claim were denied. The court ordered the case should proceed and did not exercise its discretion to cancel the claim on the first ground.

The court canceled the lien and CPL on the second ground; see annotation of this case under s. 33 of the Builders Lien Act at “33 Limitation and notice to commence an action” in chapter 36.