Where a legal proceeding seeks to establish an interest in real property, one of the risks for the plaintiff or applicant is that the land will be sold or further encumbered. A possible remedy for that concern is a Certificate of Pending Litigation (CPL) under Rule 42.01 of the Rules of Civil Procedure (the ‘Rules‘) and section 103 of the Courts of Justice Act (CJA). A CPL, if obtained, can then be registered on the title to the property. The registration serves as notice to all others that there is a pending claim by the plaintiff with respect to an interest in the land. This step makes it highly unlikely that any third party will purchase or lend money on the value of the property.
A CPL is obtained only by order of the court. The remedy must be claimed in the originating process along with an accurate and complete description of the land sufficient for registration. The subsequent motion can be brought with or without notice.
It is important to remember that the notice to others provided by a CPL is not valid until registered on title. Further, registering a CPL without having a reasonable claim to an interest in land means potential exposure to any damages suffered by a person as a result of the registration.
Order for Discharge of a CPL
Section 103(6) of the CJA sets out the statutory factors to be considered on a motion to discharge. It reads as follows:
The court may make an order discharging a certificate,
(a) where the party at whose instance it was issued,
(i) claims a sum of money in place of or as an alternative to the interest in the land claimed,
(ii) does not have a reasonable claim to the interest in the land claimed, or
(iii) does not prosecute the proceeding with reasonable diligence;
(b) where the interests of the party at whose instance it was issued can be adequately protected by another form of security; or
(c) on any other ground that is considered just,
and the court may, in making the order, impose such terms as to the giving of security or otherwise as the court considers just.
Considerations in Granting a CPL
The Threshold Test:
The first hurdle to overcome is known as the threshold issue. The court must be satisfied that there is a triable issue in respect of the claim to an interest in the land based on decisions such as 2254069 Ontario Inc. v. Kim, a decision of the Ontario Superior Court of Justice. The test is the same as for a motion to discharge the CPL, namely, is there a reasonable claim to the alleged interest in land? The test is not, ‘will the plaintiff be successful?’, but rather whether there is a plausible claim. If not, the motion will be dismissed. If successful, then the court must still consider other factors given the equitable nature of the remedy.
The onus is on the party opposing the CPL to demonstrate that there is no triable issue with respect to whether the party seeking a CPL has “a reasonable claim to the interest in the land claimed”.
The Secondary Factors:
It is unlikely that the factors set out below are exclusive. Every case will depend on the facts before the court. Some of the enumerated factors in the case law are as follows:
- whether the plaintiff is a shell corporation;
- whether the land is unique;
- the intent of the parties in acquiring the property;
- whether there is an alternative claim for damages;
- the ease or difficulty in calculating damages;
- whether damages would be a satisfactory remedy;
- the presence or absence of a willing purchaser;
- the harm to each party if the CPL is or is not removed with or without security;
- whether the interests of the party seeking the CPL can be adequately protected by another form of security; and
- whether the moving party has prosecuted the proceeding with reasonable diligence.
The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated.
At Milosevic & Associates, our team of Toronto corporate commercial lawyers regularly represent clients in complex commercial litigation matters ranging from straightforward contract and partnership disputes to complex multi-party commercial claims including dealing with claims of loss from real estate transactions. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself. Call us at 416-916-1387 or contact us online to schedule a consultation.