In Save-A-Lot Holdings Corp. v. Christensen, 2021 BCSC 2540 (Save-A-Lot), the Supreme Court of British Columbia (Court) provided a helpful overview of the requirements for filing a certificate of pending litigation (CPL) – and the circumstances in which a CPL may be cancelled. The Court’s decision illustrates the importance of properly claiming an interest in land when seeking to register a CPL, and the ways in which property owners can seek to attack a CPL.
A CPL (sometimes referred to as a lis pendens) may be registered against title to lands in certain circumstances. Once registered, a CPL generally prevents any sale, transfer, or further charge being made against the property until the CPL is cancelled. A CPL can provide a plaintiff with significant leverage since it effectively prevents a land owner from dealing with their property. It is therefore important for property owners faced with a CPL to carefully consider whether there is any potential basis for having the CPL cancelled.
Save-A-Lot involved a dispute regarding a business focused on the selling, repairing, and cleaning of vehicles. One of the defendants was a 25% shareholder of the company, a director, and served as the general manager for several years before his employment was terminated.
The plaintiff alleged that the general manager wrongfully misappropriated assets from the company and used them for his own benefit and for the benefit of his family members, who are the other named defendants in the lawsuit. In particular, the plaintiff alleged that the general manager wrongfully used company assets to pay the mortgage and make improvements to the defendants’ family home. On that basis, the plaintiff claimed a constructive trust over the family home and registered a CPL against title to the property.
The defendants brought an application to cancel the CPL on the basis that the plaintiff did not properly assert a claim to an interest in land, which was a pre-requisite for the filing of the CPL.
The Court reviewed the law surrounding the cancellation of CPLs and summarized the two scenarios in which a CPL can be cancelled on the basis that the plaintiff has not properly claimed an interest in land:
- No Triable Issue: If the defendant can demonstrate that the plaintiff’s case is clearly bound to fail, the court may make an order for summary judgment dismissing the lawsuit, resulting in cancellation of the CPL.
- Deficient Pleadings: A CPL must be cancelled where the pleadings filed in support of the CPL are incapable of supporting a claim for an interest in land.
The first scenario arises where it can be clearly shown that the plaintiff cannot succeed on the merits of their claim, for example if the claim is prohibited by statute. The second scenario arises where a plaintiff may well have a claim against the defendant, but the claim does not give rise to an interest in land. That is a threshold issue. If a defendant can show that the plaintiff has not properly claimed an interest in land, the CPL must be cancelled because it was not lawfully registered in the first place – the plaintiff never had CPL rights to begin with.
The Court carefully considered the plaintiff’s pleading and determined that it did not properly claim an interest in land and therefore the CPL had to be cancelled. In particular, the Court determined that the plaintiff failed to claim that a monetary award would be insufficient thereby justifying an award of a constructive trust over the land. That technical deficiency with the pleading meant the plaintiff did not meet the threshold requirement of properly asserting an interest in land capable of supporting a CPL.
As noted by the Court in Save-A-Lot, “a CPL can have a very significant impact on a registered owner’s ability to deal with their property.” As a result, a properly registered CPL can be a powerful tool. Plaintiffs should be mindful to carefully consider whether their dispute gives rise to a claim for an interest in land, and if so, ensure that the claim is fully set out in the lawsuit.
Conversely, property owners confronted with a CPL should consider whether there are any possible grounds to seek a cancellation of the CPL. In some circumstances, there may be technical or substantive grounds upon which to attack a CPL. In addition to the grounds for cancellation discussed above, the British Columbia Land Title Act provides other grounds upon which a court may order that a CPL be cancelled, either with or without the posting of security.
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