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When to Claim a Certificate of Pending Litigation?

Date: July 11, 2020
When to Claim a Certificate of Pending Litigation?
Can an individual or business or corporation successfully obtain an order to issue a certificate of pending litigation on an individual’s home for the reason that another party has failed to honor a debt or has breached an agreement with them? For example, (A) lent money to (B) to purchase a brand new car, a Range Rover. (B) agreed to pay (A) on (X) date after the purchase of the Range Rover. (B) failed to pay (A) on (X) date. (B) breached his/her agreement with (A), because (B) did not pay (A) by (X) date.
Rule 42.01(2) of the Rules of Civil Procedure states that “a party who seeks a certificate of pending litigation shall include a claim for it in the originating process or pleading that commences the proceeding, together with a description of the land in question sufficient for registration.” This Rule makes it clear that a certificate of pending litigation can only be sought if it is claimed, for instance, in a Statement of Claim or a Notice of Application, in which a court proceeding has been commenced. Such an order should be sought as part of the prayer of relief in the originating process. It is submitted that the Claimant must, however, plead material facts to bring about the order, which is sought from the Court.
The Claimant should bring a motion before the Court seeking an order to issue a certificate of pending litigation. In the decision of Halliday v. Bromley, 2019 ONSC 1670, MacLeod-Beliveau J. explained:
“This motion was argued with actual notice to the defendants. In those circumstances, the test in granting a certificate of pending litigation under section 103 (1) of the Courts of Justice Act is the same as if the motion were to discharge the certificate under section 103 (6) of the Courts of Justice Act. (See Access Storage Inc. v. 1321645 Ontario Ltd. et al, 2017 ONSC 6037) The test has been repeatedly held to be whether there is sufficient evidence to establish a reasonable claim to an interest in land based upon the facts, and on which the plaintiff could succeed at trial. The role of the motions judge is limited to determining whether there is a triable issue in respect of whether the party registering the certificate has a reasonable claim to an interest in land, but not to determine whether the party has or has not a reasonable claim to an interest in land which is what the litigation will determine. The role of the judge is analogous to the role of a judge on a motion for summary judgment who determines whether or not there is a genuine issue for trial, but not to decide the issues in the pending action. (See G.P.I. Greenfield Pioneer Inc. v. Moore) 2002 CanLII 6832 (ON CA), [2002] O.J. No.282 Ont. C.A. at paras 18-20)”
The hurdle faced by many litigants is trying to establish a triable issue of a reasonable claim to an interest in the land of the other party. It does not suffice to establish that the Defendant/Respondent owes the Claimant money - as in the example provided above regarding (B’s) breach of the agreement to pay (A) back for the money that (A) lent to (B) for the purchase of the Range Rover - in arguing that they have an interest in that person’s home. Moreover, the Court in the decision of Furrow Systems Int. v. Island Pools & Landscaping, 2014 ONSC 1428, said:
”There is no real interest in land that is the subject matter of the litigation between the corporate plaintiff and the corporate defendant. This case is all about an unpaid debt between the plaintiff and Island Pools. There is no basis for a claim based on an interest in land, and the motion seeking a certificate of pending litigation is also dismissed.”
It is this writer’s respectful submission that there must be a nexus to an interest in the person’s land in which the certificate of pending litigation is being sought. For example, the Claimant provided the other party half of the purchase price monies for the purchase of property, but was not named on title of the property. Here, it can be argued that the Claimant has a triable issue of a reasonable claim to an interest in the land, because he/she provided half of the purchase price monies for the property. Further, in this situation, it is submitted that a beneficial interest in the property arises in favor of the Claimant. The Court held in the decision of Andrade v. Andrade, 2016 ONCA 368, that… [W]here property is acquired with one person’s money and the title is put in the name of another, there is a presumption of resulting trust.”
In the decision of Halliday v. Bromley, 2019 ONSC 1670, the Court held, on the facts of this case, that a certificate of pending litigation shall be issued:
I am satisfied that on the evidentiary record before me that Halliday has met the test for the relief he seeks on this motion for a certificate of pending litigation. The bank records, the evidence of Mr. Macauley at the time of the transfers, the numerous e-mails between Bromley and Halliday that are in the record before the court, together with the inference that can be drawn from the acknowledgment of the alleged trust in the e-mails from Bromley in his own words, I find, when looked at as a whole, satisfy the test for an order for a certificate of pending litigation to issue.
I find that Halliday has established on the balance of probabilities that there is a triable issue of a reasonable claim to an interest in land, sufficient to warrant the issuing of a certificate of pending litigation in relation to the disputed properties.”
When the threshold requirement as to an interest in the land has been satisfied, the Court is to consider other factors on a motion for a certificate of pending litigation, which include the following:

1)   Whether the plaintiff is, or is not a shell corporation;
2)   Whether the land is, or is not unique bearing in mind that in a sense any parcel of land has some special value to the owner;
3)   The intent of the parties in acquiring the land;
4)   Whether there is an alternative claim for damages;
5)   The ease or difficulty of calculating damages;
6)   Whether damages would be a satisfactory remedy;
7)   The presence, or absence of another willing purchaser;
8)   The harm done to the defendant if the certificate is allowed to remain, or to the plaintiff if the certificate is removed, with or without the requirement of alternative security.
Reference: T.G. Appliance Group v. Legend Homes, 2016 ONSC 7802 at para [29])
In the decision of Redfox Land Co. Inc. v 770 Brookfield Properties Limited, 2015 ONSC 4153, the Court denied a motion to register a certificate of pending litigation against commercial land on the basis that the property was not unique. The Court propounded:
“While I can see how this property is desirable in the eyes of the plaintiff, I cannot find that it is unique. I agree that land purchased for investment purposes is distinct from residential housing in that it involves purely financial considerations. It seems to me that this property was attractive to the plaintiff primarily because of the financial opportunities it presented and not because of any unique features in and of itself. I do not equate commercial attractiveness with uniqueness. The fact that this was primarily a commercial opportunity and not really a deal over a unique property means that any loss can be compensated for in damages. In fact, since this was a pure business transaction, damages can easily be calculated.”
In respect of commercial property, the decision of Redfox demonstrates that a Claimant will have difficulty in trying to establish uniqueness if the property itself was purchased as an investment. This could be equally problematic in proving uniqueness if the land purchased for investment or commercial purposes was also a residential property.
Furthermore, where damages are a sufficient remedy, the Court will not issue a certificate of pending litigation. In the decision of Bains v. Khatri, 2019 ONSC 1401 (CanLII), the Court held:
“There is no evidence that the subject property is unique to the moving Plaintiffs. Their evidence is clear that they acquired the property as an investment to earn a profit. In the circumstances, damages can be easily quantified based on the cost of purchasing the property against costs incurred. Their statement of claim also includes a claim for damages, such that an award of damages would appear to be readily calculated and offer an adequate remedy. I also find that the balance of convenience favours the Defendant. While the registration of a certificate of pending litigation may inconvenience the Defendant and complicate any future sale of the subject property that may be contemplated, the certificate may be discharged when future sale proceeds are paid into court. To the extent that the moving Plaintiffs seek a certificate of pending litigation as a form of security for their claim, it bears noting that the Defendant is not a shell corporation but an individual who testified during his cross-examination that he is employed. Should the moving Plaintiffs have concerns about the dissipation of assets, it is open for them to seek relief by way of a Mareva order. A certificate of pending litigation is intended to protect an interest in land in situations where other remedies would be ineffective.”
Pursuant to Rule 42.01(3) of the Rules of Civil Procedure, a motion for an order issuing a certificate of pending litigation may be brought without notice to the party whom an interest in land is claimed. However, an order issued by the Court is subject to challenge by the other party, since the order, the notice of motion and all affidavits and other documents used at the hearing of the motion, shall be served on the party forthwith (Rule 42.01(4)) and the party can apply to the court for an order discharging the certificate via motion to the court pursuant to Rule 42.02(1) of the Rules.
The Court will order a discharge of a certificate of pending litigation issued in a situation, for instance, where the Claimant failed to disclose material facts on an exparte motion to obtain a certificate of pending litigation (Passarelli v. DiCienzo (1989)).
Moreover, in bringing a motion for an order to issue a certificate of pending litigation before the Court, the Claimant must come to court with clean hands. The Court in Asibayan v. Aghdasi, 2020 ONSC 1027, found on a motion to discharge the certificate of pending litigation that the Plaintiff produced a fraudulent invoice before the Master that granted the motion to issue a certificate of pending litigation. In ordering that the certificate of pending litigation be discharged, the Court opined:
“In considering if and how the court should exercise its broad discretion to grant or discharge a CPL, the court also considers the equities of the case. It is a long- standing doctrine that a party seeking favour in equity must come to the court with clean hands. In my view, the Plaintiff did not move before Master Jolley with clean hands. His evidence even in this motion, is questionable.”
It is this writer’s submission that the issuance and registration of a certificate of pending litigation on certain land(s) by the Court has huge practical benefits in that it prevents the sale, refinancing and mortgaging of the property pending the litigation. It further puts the public on notice that the land in question is the subject of a court proceeding. On a motion for an order to issue a certificate of pending litigation, the Claimant must satisfy the Court that the law supports the issuance of a certificate based on the evidence put before it. As shown above, the Courts will not grant orders for certificates of pending litigation willy-nilly and simply because the Defendant/Respondent owes the Claimant money or has breached a contract with them.
In this writer’s final submission that it is advisable in pursuing an order for a certificate of pending litigation to consider proceeding with notice of the motion on the party to avoid any issues later on such a facing a discharge motion challenging the issuance of the order and incurring significant legal costs by opposing the discharge motion and losing the motion to the moving party.
Anthony Rabba (Author)
Barrister & Solicitor