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CERTIFICATES OF PENDING LITIGATION

By PRADEEP CHAND, Founding Partner

What is a Certificate of Pending Litigation?

A Certificate of Pending Litigation (“CPL”) refers to a notice registered on title to a property signaling to the public that a proceeding has commenced, and a proprietary claim is at issue. This temporary shield protects a party’s interest in the land by delaying all financial transactions, such as the sale of the property, until a ruling is made.

How Does an Individual Obtain a Certificate of Pending Litigation?

According to our civil litigation lawyer in Toronto, to obtain a CPL, a party must first file a motion for an order granting leave to issue and register a CPL. This motion may be made any time after a proceeding is commenced. However, depending on the circumstances of the case, the motion should be made as soon as possible to preserve the property. If the motion is successful and the judge grants the CPL, the CPL must be subsequently registered in the proper land registry office.

A motion to request a CPL is an important measure that is only granted in specific circumstances requiring the governing two-part legal test, which was recently affirmed by the Superior Court in Rahbar v. Parvizi. First, the Court must determine whether the Plaintiff has a triable claim to an interest in land. The threshold for this first step is whether there is a triable issue regarding such interest and not whether the party will likely succeed at trial. In other words, a CPL does not create a right or interest in the land, but rather recognizes an existing interest in dispute.

Second, if the Court is satisfied that there is a triable claim to an interest in land, the Court must determine whether or not to exercise its discretion to grant leave to issue a CPL by considering all relevant factors including, but not limited to, the following:

  1. (i)       whether the plaintiff is a shell corporation;
  2. (ii)      whether the land is unique;
  3. (iii)     the intent of the parties in acquiring the land;
  4. (iv)     whether there is an alternative claim for damages;
  5. (v)      the ease or difficulty in calculating damages;
  6. (vi)     whether damages would be a satisfactory remedy;
  7. (vii)    the presence or absence ofa willing purchaser; and,
  8. (viii)   the harm to each party if the CPLis or is not removed with or without security.

 

What Happens When a Party Appeals a Judgment?

Registering a CPL is not without its limits. In Tega Homes (Attika) Inc. v. Spencedale Properties Limited, the Court of Appeal determined the CPL could be removed if Spencedale paid the Court the amount of the judgement as security pending the outcome of the appeal.

In 2013, the parties entered in an agreement of purchase of sale for two properties which did not close. As a result, Tega commenced a proceeding for breach of contract seeking specific performance or, in the alternative, damages. Further, Tega obtained a CPL registered against the properties until a final determination of damages had been reached. Spencedale brought a motion for the removal of the CPL in order to close the sale of the properties to a third party, which was the issue before the Court of Appeal.

The Court of Appeal considered various factors in balancing both parties’ interests. Notably, the parties contemplated the sale of the property prior to the final determination on damages. Given that the assessment of damages already took place and Tega did not cross-appeal, the damages were unlikely to increase. Further, requiring Spencedale to pay the full proceeds of the sale of the properties to the court would be far more security for its judgement than was reasonably required.

Bearing in mind Tega’s interest in the practical enforceability of the judgment and Spencedale’s interest in completing the sale of the properties to a third party, the Court of Appeal determined that it would be just to enable the sale of the Properties by vacating the CPL upon payment of the security to the Court. In addressing how much the Appellant was required to pay as security, the Court of Appeal added the net amount of the trial judgment, post-judgement interest and potential appeal costs.

Conclusion

A CPL may be used in a variety of legal disputes including but not limited to civil, commercial, family, and real estate law disputes. As previously stated, it is imperative that a motion for a CPL be made as soon as possible in order to preserve the applicable property. Should you wish to receive a consultation on obtaining a CPL or assistance with a litigation matter, please contact our office at 416-583-2377 or you may email us at admin@chandlitigation.com.

 

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