26 Registration Of A Charge

PRACTICE

Effect of Registration of Charges

Under ss. 26 and 197 (Registration of charges), registration of a charge constitutes a rebuttable presumption that the registered owner is entitled to the estate, interest, or claim created by the instrument in respect of which the charge is registered. Both of these sections reflect the principle in Credit Foncier Franco-Canadien v. Bennett, 1964 CanLII 449 (BC CA) that registration of an invalid interest in a land title office does not validate the interest or render it enforceable. Nor does registration constitute a determination by the registrar on validity. Thus, it is open to an interested party to determine whether or not an interest registered as a charge is a valid and enforceable interest.

Dubious Instruments

Where an instrument does not, in the registrar’s opinion, operate to create an interest in land, or creates an interest that is not recognized or permitted under the Land Title Act, the registrar will refuse registration under s. 197(2).

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

Registration of Charges

See s. 197 of the Act, which charges the registrar with the responsibility to ensure that a good safe holding and marketable title to the charge has been established by the applicant.

CASE LAW

Principle of Credit Foncier Franco-Canadien v. Bennett

Registration in a land title office of an otherwise unenforceable instrument does not validate the interest or render it enforceable (s. 26 was amended in 1989 to reflect this principle) (Credit Foncier Franco-Canadien v. Bennett, 1964 CanLII 449 (BC CA); followed in Royal Bank of Canada v. Vista Homes Ltd., 1985 CanLII 470 (BC SC), and Canadian Commercial Bank v. Island Realty Investments Ltd., 1986 CanLII 1024 (BC SC), appeal allowed on another grounds 1988 CanLII 2966 (BC CA)).

The petitioner applied for a declaration that its mortgage was a valid charge against the respondent’s property. The respondent, in turn, applied for a declaration that the mortgage was a forgery and unenforceable against the respondent or the respondent’s land. The court found that the respondent was a person of significant wealth with no need of a mortgage for any purpose. The person who applied for and signed the mortgage was not the respondent and had a different principal residence, birth date, address, physical description, telephone number, and signature. On the day the mortgage was signed, the respondent had been too ill to travel out of town to the place where the mortgage was signed purportedly in front of a lawyer. The court found that all of the evidence was consistent with the fact that the mortgage application was a forgery and that the mortgage had been secured by fraudulent means. As the mortgage was a nullity, the court awarded costs to the respondent and directed the registrar to discharge the mortgage forthwith (Homewood Mortgage Investments Ltd. v. Lee, 2008 BCSC 512).

The respondent’s nephew used a forged power of attorney to mortgage the respondent’s home without her knowledge. The mortgage proceeds were deposited into the respondent’s bank account. Her nephew told the respondent the funds were from one of his businesses and he persuaded his aunt to transfer the proceeds to his account. The nephew made no payments under the mortgage and the petitioner brought this action for foreclosure. The court found that, although the respondent should have made inquiries about where the money in her account had come from, this finding was not relevant in a foreclosure proceeding. Under s. 26(2) of the Land Title Act, registration of a charge does not constitute a determination by the registrar that a charge creates an interest in land or that the charge is enforceable. The respondent’s nephew had no interest is his aunt’s property and no valid authority to grant any interest on her behalf. Following the Court of Appeal’s decision in Gill v. Bucholtz, 2009 BCCA 137, the court held that the mortgage was void and that the foreclosure petition must be dismissed with costs (Reliable Mortgages Investment Corp. v. Chan, 2011 BCSC 1080).

Note: The learned judge in Reliable Mortgages observed that he was “bound by the British Columbia Court of Appeal’s clear interpretation of the applicable British Columbia statute in Gill v. Bucholtz, 2009 BCCA 137”. However, the facts in Gill are different from the facts in Reliable Mortgages because, in Gill, the impugned mortgage was signed by a registered owner who had acquired that interest fraudulently. An earlier decision of the British Columbia Supreme Court, Kwan v. Kinsey, 1979 CanLII 654 (BC SC), determined that a mortgage granted by a registered owner, who acquired title fraudulently, was, despite the fraud, still a valid mortgage. The Kwan decision was reversed by the Court of Appeal in Gill.

The difference between the facts in Gill and the facts in Reliable Mortgages is significant. The registered owner of the title to the land in Reliable Mortgages was the “real” registered owner of the land and her title had not been acquired by fraudulent means. Only the mortgage was fraudulent as it was signed with a forged power of attorney.

Mortgages that are obtained by fraudulent means, even from the “real” registered owner, have not been valid under the land title system in British Columbia since the decision of Credit Foncier Franco-Canadien v. Bennett. Credit Foncier continues to be authority for the proposition that mortgages obtained by fraudulent means do not constitute a valid charge on title to land in British Columbia. The court in Reliable Mortgages did not need Gill to reach its conclusion and the references to Gill as support for the decision should be viewed subject to that qualification.

Registration under the Strata Property Act

Section 254 of the Strata Property Act, S.B.C. 1998, c. 43 and s. 20(8) of the (repealed) Condominium Act, R.S.B.C. 1996, c. 64 both state that a Certificate of Strata Corporation is, as far as the registrar is concerned, conclusive evidence of the facts stated in it. The following case, decided under the Condominium Act, confirms this principle.

There is no inconsistency between the provisions of s. 26 of the Land Title Act and s. 20(8) of the Condominium Act. Section 20(8) of the Condominium Act is not intended to give easements created by a strata corporation any different status as a charge under the Land Title Act than easements created by an ordinary corporation or an individual. The use of the words “conclusive evidence” in s. 20(8) of the Condominium Act does not make an easement “an ‘indefeasible’ charge akin to the effect of a certificate of indefeasible title”. The section “provides requirements entitling an easement to be registered under the Land Title Act”, while s. 26 of the Land Title Act “provides the legal effect to be given the easement following its registration”. Under s. 26 the registration of a charge merely creates a rebuttable presumption of validity. Thus, an instrument registered under s. 20 of the Condominium Act is merely deemed to create an interest in land; the fact that the instrument has been registered is not a determination of the validity or enforceability of the charge. In this case, the presumption of validity of the registered easement was rebutted by the fact that the instruments creating it did not comply with the Condominium Act (Strata Corp. 830 v. Rhodo Holdings Ltd., 1994 CanLII 1826 (BC SC); see also the annotation for this decision under s. 254 of the Strata Property Act in chapter 58 (Strata Property Act, S.B.C. 1998, c. 43)).