B.C. Court of Appeal Clarifies the Amount of Security That May Be Ordered When Cancelling a Certificate of Pending Litigation
The B.C. Court of Appeal’s recent decision in Wosnack v. Ficych, 2022 BCCA 139 clarifies that the amount of security a B.C. court may order a defendant to pay when cancelling a certificate of pending litigation (“CPL”) is generally limited to the plaintiff’s claimed interest in the land to which the CPL relates. When deciding how much security to order, B.C. courts must consider factors such as the plaintiff’s probability of success and potential damages, but only in relation to the plaintiff’s claimed interest in the land. This decision provides greater clarity on the amount of security potentially available in B.C. real estate litigation.
The plaintiffs claimed an interest in their stepfather’s property, which he owned as a joint tenant with his wife. Upon his wife’s death, the stepfather transferred a 50% interest in the property to his third stepchild, the defendant, and executed a gift letter stating that the defendant would receive the remaining 50% interest upon the stepfather’s death. When the stepfather died, the defendant acquired title to the property, and the stepfather’s will divided the residue of his estate among his four stepchildren.
The plaintiffs each commenced an action claiming a 25% interest in the property (which they said formed part of the stepfather’s estate), entitlement to other estate assets, and other relief. The plaintiffs also filed CPLs against the property.
The defendant then listed the property for sale. He accepted a conditional offer of $1,425,000 and applied to cancel the CPLs. The plaintiffs agreed to the cancellation but disagreed on the amount of security to accompany the cancellation: the defendant proposed between $200,000 and $400,000, whereas the plaintiffs proposed the entire net sale proceeds.
B.C. Supreme Court’s Decision
The B.C. Supreme Court ruled in the plaintiffs’ favour. It ordered that the net sale proceeds be held in trust pending further court order or agreement of the parties.
B.C. Court of Appeal’s Decision
The B.C. Court of Appeal allowed the appeal and ordered that 50% of the proceeds of sale be paid as security, and that the remaining 50% be paid to the defendant.
The Court of Appeal considered two main issues: (1) whether the amount of security that a court may order when cancelling a CPL is limited to the plaintiff’s claimed interest in land; and (2) whether the lower court gave enough weight to evidence about the plaintiffs’ probability of success, which is a relevant factor in determining the amount of security.
On the first issue, the Court of Appeal held that the lower court erred by failing to recognize that there is a limit on how much security may be ordered when a court cancels a CPL. The Court of Appeal held that the amount of security should generally be limited to the plaintiff’s claimed interest in the land to which the CPL relates, even if the plaintiff advances other claims. The Court of Appeal noted that the plaintiffs had conflated their claims to an interest in the property with their claims to other estate assets, and held that, regardless of those other claims, the plaintiffs’ claimed interests in the property were limited to 25% each (50% combined). The Court of Appeal clarified that it would not go so far as to hold that the amount of security must never exceed a plaintiff’s claimed interest in the land, and that the appropriate amount is a matter of discretion to be determined based on all relevant factors.
On the second issue, the Court of Appeal held that the lower court erred by failing to assess the plaintiffs’ probability of success, and instead requiring the defendant to establish his probability of entitlement to the sale proceeds. The Court of Appeal determined that the plaintiffs’ record was deficient, and the outcome of their claim was uncertain. Accordingly, the Court of Appeal concluded that the amount of security could be no more than 50% of the sale proceeds.
Under the Land Title Act, R.S.B.C. 1996, c. C-250 a person who is a registered owner of (or claims to have) an estate or interest in land against which a CPL has been registered may apply for a court order cancelling the CPL on grounds of hardship and inconvenience. A court may cancel the CPL and order the payment of security, but generally only to the extent of the plaintiff’s claimed interest in the land. In determining the amount of security, the court must consider all relevant factors, which may include the plaintiff’s probability of success and potential damages, but only in relation to the plaintiff’s claimed interest in the land — not other claims.
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