29 Effect Of Notice Of Unregistered Interest

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

Application to Family Matters

This section applies to the interest of a spouse in land under s. 103 of the Family Law Act and s. 64 of the Family Relations Act, R.S.B.C. 1996, c. 128 (repealed March 18, 2013 by B.C. Reg. 131/2012). Consequently, a spouse’s interest in land is not enforceable against a person contracting or dealing with or proposing to take a transfer of land or charge on land from a registered owner, except in the case of fraud in which that person has participated. See the transitional provisions in s. 252 of the Family Law Act at chapter 41 (Family Matters) with respect to proceedings in relation to the division of property commenced under the Family Relations Act before its repeal on March 18, 2013.

No Application to Court Order Enforcement Act

This section does not apply to s. 86 of the Court Order Enforcement Act with respect to the priority of unregistered interests. See the annotations regarding the Court Order Enforcement Act under s. 23 of this Act (General).

Actual Notice

For a discussion of the issues determining when there is actual notice affecting a purchaser’s interest, see Di Castri, Registration of Title to Land, vol. 2, paras. 664 and 763; vol. 3, paras. 797, 879, 881, and 886, and Ghikas, “The Effect of Actual Notice under the British Columbia Torrens System” (1980) 38 Advocate 207.

CASE LAW

The cases below are a consolidation of cases addressing the issues of notice and fraud, not only from the perspective of s. 29, but also with respect to various other sections involving the indefeasibility of titles such as ss. 23 and 25. Because the priority of interests, the definition of fraud, and the provision of notice are all common issues in the majority of these cases, the cases have been categorized primarily on the basis of the unregistered interests involved.

Notes on Case Law: The key issue in the following cases is typically whether “a person contracting or dealing with or taking or proposing to take” a transfer of land or charge on land from a registered owner has participated in fraud, and to that end the cases tend to focus on whether that person had knowledge of the unregistered interest at issue. The relevant time in this respect is generally considered to be the date of completion of the transaction rather than the date of registration. See, for example, the annotation below for March v. Drab, 1977 CanLII 265 (BC SC).

The question of whether notice of an unregistered interest alone constitutes fraud when a person attempts to invoke s. 29 to defeat the unregistered interest is still the subject of some debate. On the one hand, the courts recognize that findings of fraud are not to be made lightly, as in Re Saville Row Properties Ltd., 1969 CanLII 822 (BC SC), in which the court stated:

The law presumes against fraud and impropriety and in favour of honourable conduct unless the contrary be shown, and it follows, then, that findings against a person’s integrity should not be lightly made …

A similar view was expressed in Jager the Cleaner Ltd. v. Li’s Investment Co., 1979 CanLII 329 (BC SC), in which the court stated that fraud is never lightly to be inferred, but rather must be established by the particular facts of the case. According to Jager, the question in every case must be whether a fraud would be committed if the purchaser were to claim the protection of the Act.

Notwithstanding these cautious statements on findings of fraud, in many cases the courts have made broad statements about presumptions of fraud. For example, in Royal Bank of Canada v. Szovek, [1989] B.C.J. No. 586 (QL) (S.C.) (Chambers), the court held that a mortgagee who has actual notice of an existing unregistered interest of another in land against which the mortgagee registers a mortgage will be presumed fraudulent if it attempts to use the Land Title Act to avoid the unregistered interest. The rationale for such a presumption is explained as follows in Gyger v. L’Arrivee, 1977 CanLII 380 (BC SC):

These sections embody the pith and substance of the Torrens system, designed to protect the bona fide purchaser for value of land or an interest in land against claims arising from transactions unregistered in the Land Registry Office. He is entitled to rely conclusively, subject to minor exceptions, on the state of the title as disclosed in the register. But a bona fide purchaser is not one who has actual notice of a prior unregistered instrument, still less one who has benefited from that instrument.

The related question of whether fraud necessarily involves deceit, dishonesty, or some other immoral ingredient has similarly been subject to varying conclusions. For examples, see the annotations below for Woodwest Developments Ltd. v. Met-Tec Installations Ltd., 1982 CanLII 3944 (BC SC), and BCorp Holdings Inc. v. Goldstream Place Holdings Ltd., 1991 CanLII 1737 (BC SC), in which the courts held that these were not necessary elements of fraud, and Nicholson v. Riach, 1997 CanLII 2081 (BC SC), in which the court held that an element of dishonesty was necessary to a finding of fraud.

Unregistered Conveyances

Notes on Case Law: Several of the following cases involve unregistered conveyances of a portion of a parcel of land and a subsequent sale which is, on the face of the conveyance, a sale of the entire parcel of land. When considering these cases, as well as cases involving unregistered leases of a portion of a parcel of land, refer to s. 73 of the Act regarding restrictions on subdivision.

No Notice of Unregistered Interest

The plaintiff purchased property and registered it in the name of the defendant, his wife. During the course of a separation, the wife reconveyed the property to the plaintiff, who did not register the conveyance. Shortly thereafter, the wife sold the property to a third party, who learned of the earlier unregistered conveyance two days after an indefeasible title to the property was issued in his name. The wife’s solicitor also acted for the third party, but the solicitor’s knowledge of the unregistered conveyance could not be imputed to the third party in the circumstances. The third party, having neither actual nor imputed knowledge of the unregistered conveyance when he purchased the property, was a bona fide purchaser for value and was not affected by subsequent notice of the instrument (Greveling v. Greveling, 1949 CanLII 233 (BC CA)).

Actual Notice of Unregistered Interest

Actual notice, and possibly constructive notice, of a prior unregistered instrument can constitute fraud within the meaning of s. 23(2)(i). In this case, the plaintiff corporation purchased property from the vendors following the vendors’ improper termination of a purchase and sale contract with the defendants for the same property and then commenced an action for possession against the defendants. The defendants counterclaimed for registration of title to the property in their names. The beneficial owner of the plaintiff corporation was the vendors’ real estate agent, who had acted to terminate the defendants’ agreement and who knew or should have known that the defendants had an interest in the land which had not been properly terminated. He acted fraudulently by taking advantage of the situation and the plaintiff was thus not a bona fide purchaser for value. Judgment was granted in favour of the defendants (Danica Enterprises Ltd. v. Curd & Curd, 1976 CanLII 1524 (BC SC)).

A purchaser with actual notice of a prior unregistered interest, especially one who benefits from that instrument, cannot use the Land Title Act as an instrument of fraud to disentitle a plaintiff holding an unregistered interest. Here the defendant purchased property knowing that the plaintiff had purchased and continuously occupied a portion of that property but had not registered her interest. The court held that the defendant was not a bona fide purchaser for value. Not only did he have knowledge of the prior unregistered interest, but he had also accepted payment from the plaintiff for a portion of the property taxes. The defendant’s rights and title were impressed with a trust in favour of the plaintiff and he was ordered to do all necessary acts to convey title to the plaintiff after surveys of the property were completed (Gyger v. L’Arrivee, 1977 CanLII 380 (BC SC)).

Knowledge amounting to fraud can be express, implied or constructive. Whether or not s. 29 grants immunity depends on the circumstances of the particular case. In this case, the defendant purchased property in full knowledge of the plaintiff’s occupancy and claim to ownership of a part of the property pursuant to an unregistered conveyance. In the circumstances, the defendant was not entitled to the statutory protection of s. 29 (Palfenier v. Cech, [1982] B.C.J. No. 1016 (QL) (S.C.)).

The plaintiff purchased a lot in a proposed subdivision that formed part of a developing ski resort. The subdivision plan was never registered, but the developer gave the plaintiff a perpetual right to improve and occupy the lot. The plaintiff constructed and occupied a cabin on the lot. The resort was subsequently purchased by the defendant, who knew of the plaintiff’s interest, and allowed him to remain in possession for nine years. Although the plaintiff never had a property interest in the lot, he had a personal right arising out of the doctrine of proprietary estoppel. Section 29 of the Act does not protect a purchaser with notice of an unregistrable irrevocable licence to occupy land. It would be fraudulent for a purchaser in these circumstances to deny the equity of the plaintiff in the land (Stiles v. Tod Mountain Development Ltd., 1992 CanLII 2340 (BC SC)).

Unregistered Leases

No Notice of Unregistered Interest

The occupation of land by tenants under an unregistered lease for a term exceeding three years did not amount to constructive notice to a purchaser who was an assignee of an agreement for sale. The purchaser was not bound by any provisions in the lease (Granco Hotel Ltd. v. Aceman (1973), 37 D.L.R. (3d) 632 (B.C.S.C.)).

The plaintiffs were the lessees under an unregistered lease from the first defendant which provided for a five-year term, a right to renew for five years, and a right of first refusal to purchase. The first defendant sold the leased property to the second defendants, who knew the plaintiffs were tenants of the property but were unaware that a lease existed until the day after their conveyance was executed and their purchase money was paid. The conveyance was registered three days later. The plaintiffs sued for enforcement of the terms of the lease. The court held that the second defendants were not bound by the terms of the unregistered lease. The words “No person contracting or dealing with or taking or proposing to take from the registered owner” in s. 44(1) of the Act (now, s. 29(2)), indicate that the determinative date should be the date of the completion of the transaction rather than the date of registration. The second defendants were unaware of the unregistered lease on the completion date (March v. Drab, 1977 CanLII 265 (BC SC)).

A purchaser who takes with knowledge of an unregistered interest may be guilty of fraud if he thereafter seeks protection of the Land Title Act so as to defeat the claim of the holder of that interest. However, this result must not follow in every case so that, in effect, the courts have repealed s. 29 of the Act. The various decisions in which it is stated, even in unqualified terms, that notice of an unregistered interest before closing bars the purchaser from protection of the Act, like all other decisions in the courts, are authorities only in relation to the facts of a particular case. While the language may in some instances be broad, they cannot be said to lay down a rule of universal application. The question in every case must be whether a fraud would in fact be committed if the purchaser were to claim the protection of the Act. Fraud, which is never lightly to be inferred, must be established by the particular facts of the case and cannot be presumed. Here it was not certain that the defendant purchaser had actual notice of an unregistered five-year lease (Jager the Cleaner Ltd. v. Li’s Investments Co., 1979 CanLII 329 (BC SC)).

The respondents, owner and tenant, entered into a lease for office space in a building under construction. The lease was not registered. The petitioners were registered holders of a second mortgage and an assignment of rents. When the owner defaulted on the mortgage, the tenant agreed with the owner to advance the funds necessary to complete construction and to set off these expenses against future rents. The petitioners applied for an order requiring the tenant to pay rent under the assignment. The court found that the petitioners could not be deemed to have had notice of the tenant’s set-off rights given that the lease was not registered, but even if the petitioners had notice prior to the registration of their second mortgage and assignment of rents, a plain reading of the lease document gave no reason to believe that the parties contemplated the set-off of amounts as large as those in question or of other obligations incurred for purposes such as completion of the building. The owner could not deal with the property in a manner that would make the assignment of rents of limited or no value. If priority were given to the set-off agreement, it would have the effect of varying or invalidating the priorities established by the land registry system. Accordingly, the tenant’s set-off rights could not take precedence over the assignment of rents. The court ordered payment of the rents (Baade v. 397205 B.C. Ltd., 1996 CanLII 2030 (BC SC)).

Actual Notice of Unregistered Interest

The tenant leased premises under an unregistered five-year lease with an option to renew. The plaintiff purchased the premises with actual notice of the unregistered interest. The purchaser was not free from the tenant’s option to renew because this would be fraud on the purchaser’s part (Toy v. Sevigny (1977), 5 B.C.L.R. 128 (Co. Ct.)).

The plaintiff, which had express notice of the defendant’s unregistered five-year lease before signing an interim agreement, purchased the property and tried to defeat the defendant’s lease within days of registration being completed by invoking the provisions of the Act. No overt act or dishonest intention on the plaintiff’s part was required beyond that implicit in his seeking the protection of the statute to defeat what would otherwise be a prior claim. Fraud under s. 29 need not be actual, intentional fraud, positively proven. Fraud could be, and was, inferred from the circumstances (Woodwest Developments Ltd. v. Met-Tec Installations Ltd., 1982 CanLII 3944 (BC SC)).

Under an unregistered 20-year lease, the plaintiff leased land on which it built a parking lot. The defendant purchased the land with knowledge, before the registration of the transfer, of the unregistered lease. The defendant could not rely on s. 29. The title of a transferee may be encumbered by an unregistered interest of which the transferee has actual notice before the time at which the transferee registered his own interest (Anglican Synod of the Diocese of British Columbia v. Tapanainen, 1990 CanLII 1922 (BC SC)).

The respondents entered into unregistered leases for terms of more than three years with a hotel owner for the purpose of providing food and beverage operations in the hotel. At a later date, the hotel owner granted mortgages to the petitioners. After the hotel owner defaulted on the mortgages, the petitioners commenced foreclosure proceedings and obtained Orders Nisi. In this action, the petitioners applied for a declaration that their mortgages ranked in priority over the leases and a declaration that the lease agreements between the hotel owner and the respondents were unenforceable against them. The petitioners were aware of the existing tenancies at the time their loans were made. However, before a finding of equitable fraud could be made, the court held that there must be evidence of actual notice coupled with some act of dishonesty or deceit on the part of the person seeking the protection of s. 29 of the Land Title Act. The party acquiring a registered interest in land, in this case the petitioners, must have had sufficient actual knowledge of a conflicting interest in the property to cause a reasonable person to make inquiries as to the terms and legal implications of the prior interest. In addition, there must be some other circumstance to take the matter out of the ordinary course of business or to show some clear intention to use s. 29 to defeat the respondents’ interests. In this case, the court confirmed the priority of the mortgages over the leases as it found no evidence to suggest that the petitioners intended to interfere with the respondents’ leases at the time the mortgages were granted or registered and no evidence that the loans were made for any improper purpose or outside the ordinary course of the lenders’ businesses (Vancouver City Savings Credit Union v. Serving for Success Consulting Ltd., 2011 BCSC 124).

Registered Owner’s Course of Conduct

A registered owner whose conduct is such that it is obvious to the world that the registered owner has accepted an unregistered interest in land cannot plead s. 29 to cut off the interest. In this case, the registered owner purchased property with knowledge of a lease for a term exceeding three years, collected rent from the lessee, and assigned the lease to a creditor. The owner effectively took an equitable assignment of the lease and, having accepted the benefits of the lease, was bound by the burdens of the lease which included a right of registration (Me-N-Ed’s Pizza Parlour Ltd. v. Franterra Developments Ltd., 1975 CanLII 907 (BC SC)).

The petitioner registered a mortgage against the respondent’s land. At the time of registration, the petitioner knew that a third party had made application to register a lease of the respondent’s property and that the application was pending. However, the pending status of the application to register the lease expired before some changes required by the land title office were made to an accompanying plan, and a new application for registration of the lease had to be submitted. In the result, the lease was registered after the mortgage. In subsequent foreclosure proceedings, the petitioner alleged that its mortgage had priority over the lease based on order of registration. The court found that for the petitioner to insist on priority would amount to fraud in equity. Not only did the petitioner have knowledge of the lease, but it had previously waived its right to priority over the same lease in the interest of registering an earlier mortgage. Fraud does not necessarily involve deceit, dishonesty, or other immoral ingredients. Rather it is the taking advantage of a situation which equity would prevent (BCorp Holdings Inc. v. Goldstream Place Holdings Ltd., 1991 CanLII 1737 (BC SC)).

Leaseholder’s Course of Conduct

The plaintiff leased premises from the first defendant under an unregistered five-year lease which gave the plaintiff an option to purchase under certain circumstances. The first defendant advised the plaintiff of the price he wished to sell the property for and the plaintiff advised that the price was too high. The first defendant thereafter proceeded to list and show the property and eventually sold it to the second defendant, all with the plaintiff’s knowledge though the plaintiff took no apparent interest in the process. The second defendant had knowledge of the plaintiff’s unregistered option. After the sale, the plaintiff paid rent to the second defendant, but eighteen months later commenced proceedings for specific performance or damages. The plaintiff alleged that its option had entitled it to notice of the second defendant’s offer to purchase and the opportunity to match that offer. By implication, the plaintiff had waived its option both before and after the first defendant sold the property to the second defendant. The plaintiff was not entitled to damages or specific performance to enforce its option because of its waiver, as well as ss. 26 and 29 (Vancouver Key Business Machines v. Teja Karipis, 1975 CanLII 1000 (BC SC)).

Equitable Estoppel

The petitioners owned 10 of the lots in a residential subdivision. The subdivision was part of a District Lot, the balance of which was owned by the respondent developer. Access to the lots by a dedicated public road was inconvenient and even difficult but not impossible. Practical access to the lots had always been by an unregistered lane which was constructed, then maintained and improved by the respondent until the early 1980s. The lane provided the only vehicular access to the lots. The court granted a petition for an equitable licence, revocable on reasonable notice, on the grounds of proprietary estoppel. The petitioners incurred expenditures of money or performed acts to their detriment based on their belief in their continued ability to use the lane. In addition, the petitioners were encouraged by the respondent to rely, and did rely, on their rights of access, and there was no bar to equitable relief. The court ordered that the parties negotiate an agreement on a reconfiguration of the lane to minimize the amount of land alienated from the respondent, that the lane be registered as an easement, and that the petitioners be responsible for the costs of the reconfiguration and the costs of maintenance and upgrading (Ellis v. Eddy Holdings Ltd., 1996 CanLII 445 (BC SC)).

The plaintiffs owned Blocks B and C, two lots without highway access. The defendants owned Lot 1, which was adjacent to Blocks B and C and which had access to an adjoining highway. The former owners of Blocks B and C entered into an agreement with the former owners of Lot 1 whereby, in exchange for building a road on Lot 1, the plaintiffs were granted free use of the road in perpetuity subject to renegotiation in the event of a sale by either party. The defendants purchased Lot 1 with knowledge of the agreement and then claimed that the plaintiffs were trespassing on their property every time they used the access road. The court dismissed the plaintiffs’ claim that an easement arose by implied grant, because there was no grant of Blocks B and C from which the intention to grant an easement over Lot 1 could be implied. The plaintiff’s claim in proprietary estoppel was also limited to the expectation which the defendants encouraged and upon which the plaintiffs relied. In this case, the plaintiffs were granted a right to use the access road, but both the plaintiffs and the defendants understood that this right was something less than an easement. In granting an injunction prohibiting the defendants from interfering with the plaintiffs’ use of the access road, the court found that the agreement created a contractual licence and that once the plaintiffs expended money building and maintaining the road in reliance on the licence, the personal rights of the plaintiffs became proprietary and irrevocable. These rights were held to be enforceable against the defendants as the defendants had actual notice of the plaintiffs access rights before they took title to Lot 1 and a fraud would be committed if the defendants were to claim the protection of s. 29 (Pilcher v. Shoemaker, 1997 CanLII 982 (BC SC)).

The respondent entered into a contract to purchase property from the appellant’s sister. The property was intended to form part of a larger development scheme. Before completion of the sale, the appellant obtained an order granting him an equitable interest in the property by resulting trust. The respondent then applied for and obtained an order for specific performance of the contract. On this appeal from the order for specific performance, the court found that the respondent had relied on the sister’s apparent authority to its prejudice before it became aware of the appellant’s interest in the property. The appellant had concealed his contribution to the purchase of the property and his interest in it for 20 years. The appellant knew that his sister became the sole registered owner of the property after the death of their parents. He was content to have his sister look after the property, to represent his interests in it, and to let her manage the property as if she were the only owner. The respondent dealt with the appellant’s sister as the apparent owner in good faith and entered into the contract to purchase the property at fair market value. Although the appellant had no special interest in the property, the respondent spent considerable time, effort, and money in pursuing the development and in obtaining development approvals from local government. In these circumstances, the court held that the appellant was estopped from denying the authority of his sister to enter into a binding contract with the respondent and that the appellant’s interest in the property could be converted to an interest in the proceeds of sale (Willoughby Residential Development Corp. v. Bradley, 2002 BCCA 321).

The defendants, L and S, had been friends and business partners for several years. On a number of occasions in the past they entered into real estate transactions involving the purchase and renovation of properties for resale. In 2007, L and S agreed to purchase a new property. L was registered on title as sole owner. He provided the down payment and registered a mortgage in his name against title to the property. Shortly thereafter, L and S entered into a joint venture agreement providing that L and S each held a 50% undivided interest in the property and that L held legal title subject to S’s 50% beneficial ownership. By 2009, S had not completed the renovations as planned. L discovered that the work did not comply with the British Columbia Building Code and that S had not obtained the necessary building permits. L listed the property for sale and accepted an offer from the plaintiffs. S then registered a certificate of pending litigation against title. On the closing date, the plaintiffs were unable to complete the purchase because of the certificate. The plaintiffs commenced this action for specific performance. Following the decision of the Court of Appeal in Willoughby Residential Development Corp. v. Bradley, the court found that the plaintiffs were unable to rely on s. 29 of the Act because S had registered his interest in the property, through the certificate of pending litigation, prior to the completion of the purchase and the transfer of title. However, the court also found that S was estopped from denying L’s authority to enter into the sale agreement with the plaintiffs because S had clothed L with apparent authority to deal with the property. L insured the property, paid the taxes, contracted with third parties for utilities, and took care of the maintenance costs. Furthermore, S did nothing to make his beneficial interest in the property known to anyone, including the plaintiffs. The plaintiffs invested time, effort, and money in the property—retaining a surveyor, applying to the municipality for water and sewer connections, hiring an architect to complete plans for their new home, and renting an apartment in the neighbourhood to oversee the demolition and construction. In granting the plaintiffs’ application, the court found that the plaintiffs acted on L’s apparent authority to their prejudice before they became aware of S’s interest in the property. Further, the property met the plaintiffs’ specific needs and, therefore, the plaintiffs were entitled to an order for specific performance. S’s interest in the property could be adequately converted to an interest in the proceeds of sale (Sihota v. Soo, 2010 BCSC 886).

Other Unregistered Instruments

Options to Purchase

In the absence of evidence to the contrary, a purchaser of land from a registered owner is presumed to be a bona fide purchaser and is entitled to rely on this section and have title registered. In this case, despite the existence of an unregistered option to purchase of which the purchaser was aware, the purchaser was entitled to an order under s. 309 directing registration of the deed (Re Saville Row Properties Ltd, 1969 CanLII 822 (BC SC)).

In negotiating the sale of a parcel of land, part of which was subject to an unregistered option to purchase, the owner wilfully concealed the existence of the option from the prospective purchaser. At the same time, the owner and its solicitor misled the holder of the option about the pending sale and the optionee was not alerted to the fact that the property was being sold in circumstances in which the option would be lost. As a consequence, the holder of the option was prevented from acting to protect its position by bringing the existence of the unregistered option to the attention of the prospective purchaser. In these circumstances, s. 29 does protect a vendor in an action brought by an optionee for damages caused by the loss of the option when the property was sold to a bona fide purchaser for value who took the property without notice of the option (McCaig v. Reys, 1978 CanLII 381 (BC CA); see also the annotation of this decision under s. 296 of the Act).

Easements

An “equitable easement” does not fall within any of the exceptions noted in s. 29 (Wiesner v. Blades, [1985] B.C.J. No. 182 (QL) (S.C.)).

The plaintiff and the defendant, L, owned adjacent waterfront lots developed, subdivided, and sold to them by the defendant, R. L entered into an agreement with R for an exchange of easements and permission to build an access road across Lot 30. R left the exact location of the access road to L, who then built the road within the terms of the agreement. Implied terms of the agreement were that L would pay for the costs of the required survey and that R would arrange for the preparation of the easement agreement and for the registration of the easement agreement and plan. The road was constructed in 1989, but the agreement and plan were neither prepared nor registered. In 1991, R sold Lot 30 to the plaintiff without advising the plaintiff about the pending easement over Lot 30 or the status of the survey. In so doing, R placed itself in a position where it was no longer capable of fulfilling its obligation to L. While R was in breach of its agreement with L, its failure to advise the plaintiff about the easement was due to inattention and carelessness. The plaintiff inspected the property before purchase but failed to make inquiries about the status of the road, which obviously encroached on Lot 30, and failed to examine the plan, which had been amended to accommodate a portion of the road. In these circumstances, the court concluded that the plaintiff could not plead absence of notice and that she was deemed to have had constructive notice of the encroachment and of L’s claim to the easement. The plaintiff’s failure to make further inquiries could only be attributed to carelessness. In the absence of fraud on the part of either R or the plaintiff, the plaintiff was entitled to rely on the protections against unregistered interests under s. 29(2) of the Act. L became a trespasser on the plaintiff’s land from the date the plaintiff gave notice to cease and desist. The court ordered L to pay damages to the plaintiff for L’s use of the plaintiff’s land, subject only to prescribed limitations under the Limitation Act, and ordered R to pay L for the cost of reconstructing the access road on L’s property (Rogers v. Landmark, 2000 BCSC 320).

The petitioner and the respondents owned adjoining lots. When the respondents purchased their lot, they were not aware of an unregistered claim against their lot by R, the petitioner’s predecessor in title. Subsequent to the purchase, the respondents granted R permission to cross over their land to access a garage on R’s lot as long as R maintained a licence to drive a motor vehicle. After R’s death, the petitioner purchased R’s lot and was informed by the respondents that access to the petitioner’s garage across the respondents’ lot would be cut off. The petitioner’s application for a declaration of an implied easement or an equitable licence was dismissed. The court found that the respondents were bona fide purchasers for value. At the time of the respondents’ purchase, passage across the respondents’ lot was not apparent, and while it may have been more convenient to access the garage by driving across the respondents’ lot, it was not necessary. As a consequence, the respondents acquired their lot without notice of R’s unregistered claim (Openshaw v. Bhalla, 2000 BCSC 646).

The plaintiff and the defendant, H, were neighbours who owned, respectively, adjoining Lots A and B. The defendants’ predecessor in title, D, constructed a water line across Lot B to service Lot A. An easement agreement was prepared but neither executed by D nor registered in the land title office. In this action, the plaintiff applied for specific performance of the easement agreement and a direction to the registrar to register the agreement. The court found that H’s title to Lot B was not encumbered by the unregistered easement agreement. Although H could be deemed to have had notice of the easement, there was not enough evidence to warrant the further inference that H acted dishonestly, thus depriving H of the protection of s. 29 of the Act. H knew about the existence of the water line at the time H purchased Lot B from D. H should have contacted the plaintiff and inquired about the plaintiff’s unregistered interest at that time. However, by transferring title to H without first obtaining H’s agreement to honour D’s obligation, D placed himself in the position where he was no longer capable of fulfilling his obligation to the plaintiff. Accordingly, the plaintiff was entitled to damages from D to permit construction of a new water line or to compensate H for granting an easement to allow the continued use of the existing line (Szabo v. Janeil Enterprises Ltd., 2006 BCSC 502).

A development corporation owned a large parcel of land. Part of the land was subdivided and developed as strata lots. At the time, the development corporation constructed a paved road and sewer line for the benefit of the strata lots, in part within the strata plan and in part on the remainder of the large parcel along its boundary with the strata lots. No easements were ever registered, although there was evidence that easements were clearly contemplated and that agreements were drawn up from time to time. The development corporation was foreclosed and Westshore subsequently purchased the remainder parcel from the receiver. At the time of Westshore’s purchase, one of its principals owned two of the adjacent strata lots. Over nearly 20 years, there was evidence that Westshore was aware that owners of the strata lots used the roadway for access and parking. For many of the years Westshore acted as paid manager for the subject strata. The court found that Westshore had sufficient knowledge of the development history between the strata and the remainder parcel to cause a reasonable person to make inquiries about the legal implications and the existence of the unregistered easements. Further, the court found that Westshore used its knowledge of the easement irregularities to negotiate a decreased price for the remainder parcel. The court noted that Westshore had not been diligent in advancing its claim to the disputed land. It was not acting equitably after all the years of acquiescence when it sought to block the access road that had been in use for more than two decades without complaint. Westshore did not have clean hands. Accordingly, by virtue of the doctrine of non-derogation of grant, and the equitable principle of proprietary estoppel, the court held that the unregistered easements were binding on Westshore. It found Westshore to be a “non-bona fide purchaser” of the servient property and in addition that Westshore had committed fraud within the meaning of s. 29 of the Land Title Act (Strata Plan NES33 v. Westshore Developments Ltd., 2015 BCSC 1280). (Note: A review of this synopsis might suggest an attack on the protection of purchasers from unregistered documents. In fact, the behaviour of the defendant was found to be so inappropriate that the court went to some lengths to find exceptions to the usual rule and imposed the unregistered easements upon the party with unclean hands.)

The appellants had at times used part of a shared driveway located on their neighbours’ property. This was the only vehicular access to their property. After the neighbours sold their property, the respondent purchasers built a fence that cut off the appellants’ use of the driveway leaving the only access to the appellants’ residence by way of 23 stairs from the road below. No easement had ever been registered. The appellants submitted that they were entitled to an implied easement based on their prior use of the shared driveway. In its earlier decision in Babine Investments Ltd. v. Prince George Shopping Centre Ltd., 2002 BCCA 289, the Court of Appeal interpreted the Land Title Act to significantly narrow the doctrine of implied grant from Wheeldon v. Burrows (1879), 12 Ch. D. 31 (C.A.). In this case, the Court of Appeal concurred with the trial judge that the evidence did not support a finding of an implied easement in favour of the appellants’ property in 1934, the date of the original grant of the appellants’ property. The court concluded that while the doctrine continued to apply to an original grantor and grantee, it did not extend to subsequent bona fide purchasers of the dominant and servient tenements. It went on to state that, even if an implied easement could be found, the unregistered interest would not be valid and enforceable against subsequent bona fide purchasers of the respondents’ property under the Land Title Act, which provides for indefeasible title against all third parties, subject only to the fraud exception in s. 29 of the Land Title Act. As there was no evidence of fraud, the court dismissed the appeal (Roop v. Hofmeyr, 2016 BCCA 310).

The plaintiff owned a 158-acre parcel of land located upland and appurtenant to a public wharf on Mayne Island. The wharf had been operating since 1960. There was a registered easement on the property in favour of the defendants and the provincial and federal governments, pursuant to which a footpath had been built connecting the wharf to a public roadway. In 2013, the plaintiff sued the defendants, seeking a declaration that the operation of the wharf facilities interfered with its riparian rights, damages for the interference, and cancellation of the registered easement. The defendants maintained the operation of the wharf was authorized by the easement or, alternatively, that the easement failed to reflect the intention of the original parties and should be rectified. The trial judge held in favour of the defendants, and the Court of Appeal dismissed the plaintiff’s appeal, with the exception of the issue of parking. The court found that the easement included an implicit waiver of the riparian rights of the upland owner, and slightly adjusted the easement area to give the public a right of access to the wharf. Nothing in s. 29 of the Land Title Act nor the principles of the Torrens system bars rectification of a registered instrument. The judge, however, erred by implying that parking on the plaintiff’s property outside the easement area was a right ancillary to the grant of the easement (Arbutus Bay Estates Ltd. v. Canada (Attorney General), 2017 BCCA 374).

Co-ownership Agreements

The plaintiffs and N owned a parcel of land as tenants in common. However, the plaintiffs and N had made an unregistered agreement by which the plaintiffs owned the east half of the parcel and N owned the west half. The agreement contemplated that a subdivision plan dividing the property into east and west halves would be registered once subdivision problems were overcome and that the new eastern parcel would then be registered in the name of the plaintiffs while the new western parcel would be registered in N’s name. The defendants subsequently purchased N’s interest with knowledge of the interests created by the unregistered agreement, and 11 years later they asserted rights as tenants in common over the whole parcel. This attempt to defeat the plaintiffs’ unregistered interest amounted to fraud. Before asserting their rights as tenants in common over the whole parcel, the defendants had acknowledged their limited interest by twice attempting to sell the west half of the parcel. Because no problems remained preventing subdivision, the plaintiffs were granted specific performance under the terms of the unregistered agreement (Dhaliwal v. Jaswal, 1986 CanLII 981 (BC SC)).

A mortgagee who has actual notice of an existing unregistered interest of another in land against which the mortgagee registers a mortgage will be presumed fraudulent if it attempts to use the Land Title Act to avoid the unregistered interest. However, in this case, the mortgagee had no notice of an unregistered co-ownership agreement between the mortgagor and B, both registered as owners of an undivided one-half interest in property at the time the mortgage of the property was granted. The terms of the agreement provided a means by which the division of ownership could be altered and B claimed that, under those terms, he in fact owned an 83% beneficial interest in the property. B could not rely on the agreement to prevent the mortgagee from foreclosing on the mortgagor’s undivided one-half interest because the mortgagee had no notice of the agreement until it attempted to register its order absolute (Royal Bank of Canada v. Szovek, [1989] B.C.J. No. 586 (QL) (S.C.) (Chambers)).

Timber Rights

Before granting a mortgage to the mortgagee, the owner of property entered into an agreement with the respondent granting the respondent the right to cut and remove merchantable timber from the property. The agreement was never submitted to the land title office for registration, but the mortgagee had actual knowledge of it at all material times. After the mortgagee registered its mortgage against the property and subsequently obtained an order absolute of foreclosure, the respondent commenced an action for a declaration that the order absolute did not extinguish the respondent’s rights under the agreement. The mortgagee then brought a motion to have the respondent added as a party to the foreclosure proceedings and to have the caveat and lis pendens filed against the property by the respondent discharged. The court granted the relief sought by the mortgagee. Actual knowledge could not affect the position of the mortgagee because the mortgage took priority over the respondent’s agreement under s. 29 of the Act. The section states in clear and simple language that a person holding a registered charge is not affected by knowledge of an unregistered interest in land (Re Yorkshire Trust Co., 1979 CanLII 681 (BC SC)).

Caveats and Certificates of Pending Litigation

After the plaintiff applied to register a deed of land, the defendant filed a lis pendens based on a prior transaction with the plaintiff’s vendor. The plaintiff was a bona fide purchaser for value without notice and was unaffected by the lis pendens registered after completion of her purchase (Rudland v. Romilly, 1958 CanLII 577 (BC SC)).

The purchasers’ solicitor informed them, before completion of their purchase of the property, that a third party had abandoned its claim against the property when it allowed its caveat to lapse. The purchasers deposited their applications to register a transfer and mortgage. Before registration was complete, the third party commenced an action and filed a lis pendens against the property. The purchasers were entitled to be registered as owners of the property. Bona fide purchasers for value who have knowledge of a prior claim that has, prima facie, been abandoned should not be deprived of their title because they did not make subsequent inquiries as to title (Sibley v. British Columbia (Registrar of Land Titles), [1981] B.C.J. No. 43 (QL) (S.C.)).

Vesting Order

In summary proceedings, the plaintiffs obtained judgment and an order vesting in them two properties owned by the appellants in this appeal. The vesting orders were filed in the land title office and the plaintiffs then conveyed the properties to the respondents in this appeal. Subsequently, the Court of Appeal set aside the summary judgment and the vesting orders, and remitted the case to the trial court for further disposition. At the time the properties were transferred, the respondents had actual notice of the appeal but the vesting orders had not been stayed pending the appeal. In this appeal from the further proceedings of the trial court, the Court of Appeal affirmed that vesting orders were valid and effective from the time of their pronouncement until they were stayed or set aside on appeal. As such, the plaintiffs were entitled to act on the vesting orders and to transfer the properties to the respondents. Once the vesting orders were granted, the appellants, as former owners of the properties, had no further interest in the properties. In the absence of a stay, the pending appeal of the vesting orders did not constitute an unregistered interest in the properties. Thus, although the respondents had actual notice of the appeal from the summary proceedings, they were not precluded by s. 29 of the Act from taking title to the properties (Hydro Fuels Inc. v. Mid-Pacific Services Inc., 2000 BCCA 608).

Property Held in Trust

For almost 20 years, the respondent and her son were the registered owners of certain property. The petitioner obtained a judgment against the son for damages and registered that judgment against his half interest in the property. The court subsequently ordered the sale of the son’s interest to satisfy the judgment, approved the bid of the petitioner to purchase the son’s interest, and ordered the transfer of his interest to the petitioner. The respondent then brought an action claiming that her son obtained his interest as a result of “undue pressure and influence” and that his interest was actually hers in trust and not available for the petitioner. The petitioner could rely on ss. 22, 23, 25, 29, and 297 of the Act. While the suspicions of the petitioner were aroused, there must be an element of dishonesty combined with constructive knowledge to establish fraud, and no such element was present. The petitioner followed the approved procedures of the court and encouraged the respondent to seek legal advice. She did all that was appropriate in the circumstances and there was no further obligation to make inquiries regarding the intentions of the respondent. The certificate of title had been in existence for 20 years. Over this time, the respondent took no action to have the title registered solely in her name or to seek legal advice until much later in the sale process. Her laches and acquiescence made it inequitable to further delay or defeat the interest of the petitioner and the petitioner was thus entitled to an order for partition and sale (Nicholson v. Riach, 1997 CanLII 2081 (BC SC)).

Foreclosure of Mortgages

The bank advanced funds to a developer and registered a demand mortgage against the developer’s lands. The plaintiff entered into an unregistered agreement with the developer to purchase lots in the developer’s subdivision. Both the bank and the plaintiff had equal knowledge of their respective interests in the developer’s lands. The plaintiff made no request for priority over the bank and acquiesced in the priority of the bank’s mortgage. In equity, the positions of the bank and the plaintiff are equal and s. 29 prevails, on foreclosure, to preserve the priority of the bank’s mortgage (Wales McLelland Management Company Ltd. v. Goodland Developments Ltd., 1991 CanLII 949 (BC SC)).

In a foreclosure action, the court held that the mortgagee was not required to notify the individual investors holding unregistered interests in 130 units of a strata development. The mortgagor was trustee and agent for these investors and it was its responsibility to ensure that their interests were protected by notifying them of the proceedings. The mortgagee did not seek relief from the investors, and the court found that the doctrine of equitable fraud would afford them adequate remedy in the proper circumstances. It would be an extraordinary modification of the standard procedures in foreclosures against land to impose, on the mortgagee, the requirement that it seek out and serve all persons who are said to claim unregistered interests through the registered owner as trustee (Confederation Trust Co. v. G.H.L. Holdings Ltd., 1993 CanLII 482 (BC SC)).

A mortgagee was granted a blanket mortgage over all the strata lots in a condominium complex. At a later date, by agreement between the mortgagee and the mortgagor, the mortgage was fractured into individual unit mortgages, but in the interim the respondents entered into agreements with the mortgagor to purchase two of the strata lots and subsequently claimed that they had priority over the individual registered mortgages on their lots pursuant to s. 29. Title was never transferred to the respondents and they held no registered interest in the lots. Section 29 was not applicable in the circumstances. The fracturing of the mortgage did not affect the priority of the mortgagee’s interest. Moreover, there was no evidence of fraud on the part of the mortgagee. The respondents’ priority argument did not raise a triable issue in defence to the mortgagee’s application for an order nisi of foreclosure (Confederation Trust Co. v. Discovery Tower II Ltd., [1995] B.C.J. No. 797 (QL) (S.C.) (Chambers), supplementary judgment [1995] B.C.J. No. 1057 (QL) (S.C.) (Chambers)).

A company acquired property to develop serviced RV lots. Financing for the development was secured through two mortgages. The plaintiffs bought shares in the company and expected to own one or more of the lots once the development was completed. The holders of the second mortgage demanded full payment and threatened foreclosure if payment was not forthcoming. The defendants paid the holders of the second mortgage and secured their investment with a mortgage. Following subsequent foreclosure proceedings, the property was sold and funds paid into court. In this action, the plaintiffs alleged that, because the defendants assumed the second mortgage after the shares were purchased, they were subsequent encumbrancers and not entitled to the funds held in court. The court found that the plaintiffs knew, at the time they purchased their shares, that the property was subject to the two mortgages and that, on the basis of Coupland Acceptance Ltd. v. Walsh, 1954 CanLII 8 (SCC), the defendants acquired the position and priority of the holders of the second mortgage. In considering s. 29(2) of the Land Title Act, the court also found that there was nothing in the circumstances of the case to conclude that the defendants were in any way dishonest in placing the mortgage. Their mortgage was put in place to pay out the second mortgage and to avoid an earlier foreclosure. Accordingly, the court dismissed the plaintiffs’ claim and gave the defendants priority over the funds held in court (Worth v. Shuswap Lifestyle Developments Inc., 2013 BCSC 561).

Mortgages Not Discharged

The plaintiff held first mortgages over two properties that were sold to the defendant purchasers. The purchasers expected that, in accordance with their solicitor’s undertakings, funds from their new mortgages would be used to pay off and discharge the plaintiff’s mortgages. The solicitor breached the undertakings, failed to pay out the mortgages, and then registered forged discharges. The plaintiff applied to court for an order of rectification reinstating its mortgages as first charges against the titles to the properties. The court found that when the subsequent mortgagees registered their new mortgages and advanced monies, the land title register showed the plaintiff’s mortgages on title. The subsequent mortgagees had notice of the priority position of the plaintiff’s mortgages both at the time of registration and at the time of advancing the funds. The solicitor’s failure to honour his undertakings was not a consequence of the land title system. Accordingly, the court ordered that the prior charges be reinstated and that they retain their priority position as first charges (Vancouver City Savings Credit Union v. Hu, 2005 BCSC 712).

Fraudulently Discharged Instruments

A fraudulently discharged legal mortgage took priority over a subsequent equitable lien created when the mortgagor obtained funds from a life insurance company, also by fraudulent means, to make improvements on the land. The life insurance company did not rely on the state of title and was not a bona fide purchaser for value (Royal Bank of Canada v. Zavitz, 1989 CanLII 2664 (BC SC)).

Willful Blindness or Constructive Knowledge Not Sufficient to Prove Equitable Fraud

In 2015, the defendant property owner 104 granted a second mortgage to the plaintiff ELC. 104 also granted third and fourth mortgages to ELC. In August 2016, the first mortgagees foreclosed, and an order nisi was granted. ELC said that in February 2017 it paid the entire sum outstanding on the first mortgage in exchange for an assignment of that mortgage, but that, instead of the assignment being registered, the first mortgage was discharged. In September 2017, the three ELC mortgages were paid out and discharged, and the defendant YPI registered a mortgage against the property in the principal amount of $2.2 million. ELC sued, claiming that YPI obtained its mortgage fraudulently. YPI denied any knowledge of the prior charges when it registered its mortgage. YPI commenced foreclosure proceedings, obtained an order nisi, and in July 2020, obtained an order approving the sale of the property for $2.82 million. Those sale proceeds remained in trust. YPI applied for summary dismissal of the plaintiff’s action against it. Held, application allowed; claim dismissed. First, the matter was suitable for summary trial. The claim against YPI was a straightforward question of priority, and the evidence was sufficient to determine it. The plaintiff failed to prove that YPI participated in fraud when it registered its mortgage. The legal principles regarding the registration and transfer of charges on land are clearly set out in the Land Title Act, particularly ss. 20(1), 23(2), 26, 27, and 29(2). A registered charge is not affected by an unregistered interest unless the charge holder participated in fraud. Here, the plaintiff did not plead any material facts to support its allegations against YPI, or to support either the declaration sought or its claim that YPI was not a bona fide mortgagee for value. Its argument, that YPI “abstained” from making inquiries where its suspicions ought to have been aroused and so was willfully blind, was not enough. Willful blindness or constructive knowledge is not sufficient to ground a finding of fraud. In order to prove equitable fraud under s. 29(2) of the LTA, it must first be shown that “the party acquiring a registered interest in land had sufficient actual knowledge of the conflicting interest in the property to cause a reasonable person to make inquiries as to the terms and legal implications of the prior instrument”. Significantly, the central securities register did not disclose anything that might suggest there was a conflicting interest in the property, let alone provide “sufficient actual knowledge” of it. Further, even if the plaintiff did show that YPI had sufficient actual knowledge, it would still need to prove that YPI acted dishonestly in some way. However, there was no evidence that even hinted at dishonest conduct by YPI. Pursuant to s. 29(2), YPI was not affected by the plaintiff’s alleged unregistered interest and thus had first priority to the property. YPI was entitled to the funds held in trust (Eco-Living Construction Ltd. v. 1047320 B.C. Ltd., 2021 BCSC 122 (Chambers)).