Municipality of Middlesex v. McRobert et al, 2017 ONSC 4552
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Municipality of Middlesex Centre (Applicant)
AND:
Allan Lorne McRobert, Monique Michelle Lievre, the Toronto Dominion Bank and Her Majesty the Queen in Right of Ontario (Respondents)
BEFORE: Justice R. Raikes
COUNSEL: A. Shaw, for the Applicant R. Solcz, for the Respondent, Allan Lorne McRobert
HEARD: June 30, 2017
ENDORSEMENT
1The applicant municipality has commenced an application to set aside a transfer of land by the respondent, McRobert, to the respondent, Lievre, on the basis that the transfer contravenes s. 50 of the Planning Act, R.S.O. 1990, c. P. 13. That provisions effectively renders null and void any transfer of land by a party who continues to own lands abutting those transferred.
2The merits of the application are scheduled for argument in November 2017.
3The municipality moves at this stage for leave to issue a certificate of pending litigation (“CPL”) as against the remaining lands held by McRobert. The respondent, Lievre, has undertaken to the municipality that she will not dispose of her lands pending the outcome of the application. McRobert declines to give the same undertaking.
4If successful on the application, the transfer of lands from McRobert to Lievre will be undone with the result that those lands conveyed to Lievre will revert to and form part of the parcel of land held by McRobert. Regardless of the outcome of the application, the municipality will obtain no direct or indirect interest or title in the lands.
5McRobert is a farmer. On January 3, 2014, he purchased a parcel of land in the municipality comprised of approximately 96 acres (hereafter “the original parcel”). The original parcel is divided by a creek. On one side of the creek is the land sold to Lievre comprising approximately four acres. On the other side of the creek is the remaining land still held by McRobert (92 acres).
6McRobert sold the four acres to Lievre without a severance from the municipality. Prior to sale, he obtained an opinion from a land surveyor that at the date of the original Crown grant, the creek was navigable where it crossed and divided the original parcel into two distinct and separate parcels. He was advised by legal counsel that as a navigable body of water, the creek bed was owned by the Province and, as such, the creek acted as a natural severance. The four acre parcel and 92 acre parcels do not abut and, as a result, no severance was necessary. By analogy, the creek is akin to a road with McRobert owning lands on opposite sides of the street.
7The municipality disputes that the creek was navigable at the relevant time and/or that it gives rise to a natural severance that obviates the need to seek a severance from the municipality. If the creek was non-navigable, ownership of the creek bed rests in the owner of the original parcel; the creek cannot act as a natural severance. The parcel sold to Lievre abuts McRobert’s remaining lands and a severance was required. The failure to obtain the required severance renders the transfer to Lievre null and void.
8The municipality seeks additional relief as against McRobert including declaratory relief that he and his counsel knowingly and recklessly disregarded s. 50 of the Planning Act. The solicitor is not a party to the application. The declaratory relief sought could have implications as a further proceeding can be brought under s. 50(25) of the Planning Act pursuant to which the court may, upon conviction, impose a penalty not exceeding the aggregate value of the lands for knowingly making a false statement under s. 50 of the Planning Act.
9The issues before me are restricted to the availability of a CPL and whether to exercise the discretion to grant leave to issue a CPL in favour of the municipality in these circumstances. Neither side provided a case where a CPL was issued, refused or discharged in these circumstances.
10The granting and discharge of a CPL is governed by s. 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43, the relevant subsections of which state:
“(1) The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry under subsection (2).
(4) A party who registers a certificate under subsection (2) without a reasonable claim to an interest in the land is liable for any damages sustained by any person as a result of its registration.
(6) 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.
(7) Where a certificate is discharged, any person may deal with the land as fully as if the certificate had not been registered.”
11On a motion for leave to obtain and register a CPL, the test is the same as that applied on a motion to vacate or discharge a CPL: Homebuilder Inc. v. Man-Sonic Industries Inc., 1987 CarswellOnt 499 (Master) at para. 1.
12The purpose of a CPL is to provide notice to the world that there is an issue with respect to the title of the property and/or that there is an interest claimed in the property. Once registered, the CPL prevents a subsequent purchaser from asserting the defence of bona fide purchaser for value without notice. It has the same general effect on a subsequent encumbrancer. This has profound consequences for the titleholder; the CPL effectively acts like an injunction because virtually no one will complete a purchase of the property with an outstanding unresolved claim looming. This impact has been judicially recognized: see Matheson v. Gordon, 2004 CanLII 28475 (ON SC) at para. 22; Bowbriar Investments Inc. v. Wellesley Community Homes Inc., [1977] O.J. No. 66 (S.C.) at para. 9.
13The respondent, McRobert, argues forcefully that no CPL can issue here because the municipality will not under any circumstances be entitled to an interest in or title to the lands in dispute. He argues that the party seeking the CPL must have a “reasonable claim to an interest in the lands” which position is consistent on its face with the language in s. 103(4) and (6)(a)(ii) of the Courts of Justice Act. A CPL is simply not available.
14McRobert asserts that the municipality seeks to enforce s. 50 of the Planning Act. Its objective is one of regulatory compliance. At the end of the day, the municipality will remain a stranger to the property with no interest or title in the property. McRobert argues that the use of a CPL to enforce compliance with s. 50 of the Planning Act is contrary to the purpose for which a CPL is appropriate, and opens the door on a slippery slope where municipalities may seek a CPL as part of enforcement of other forms of municipal bylaw infraction.
15The municipality argues that the interest in the land in question need not be claimed directly by the applicant for itself to satisfy the threshold criteria of s. 103(6). The threshold is met where the responding party’s interest in the land would be adversely affected if the claim succeeded. The municipality relies on the line of cases where a CPL has issued in favour of a creditor who seeks to set aside a fraudulent conveyance by the debtor on the basis that the claim alleging a fraudulent conveyance brings into question an “interest in land”: see Keeton v. Cain (1986), 1986 CanLII 2854 (ON SC), 57 O.R. (2d) 380 (L.J.S.C.). See also Chilian v. Augdome Corp., 1991 CanLII 7335 (ON CA), 1991 CarswellOnt 422 (ON CA) at paras. 55-56 to similar effect.
16In Chilian, shareholders brought an action seeking to set aside the grant of options on mining claims held by the company. The shareholders asserted that the options were illegally transferred contrary to the provisions of the Ontario Business Corporations Act (“OBCA”). The action asserted an oppression remedy under the OBCA. Thus, the plaintiff shareholders had no direct interest in the land or options conveyed and, if successful, would gain no direct interest or title to the lands or options. Rather, the options would revert to the company in which they held shares.
17The plaintiffs obtained a CPL. The defendants appealed and argued, inter alia, that the CPL should be discharged as the plaintiffs had no interest or title to the lands and would not have even if successful. At paras. 55-56, A.C.J.O. Morden wrote for the Court of Appeal:
“[55] I do not think that the entitlement to a certificate of pending litigation necessarily requires that the interest in land in question be claimed directly by the plaintiff for itself. This was the conclusion in Bank of Montreal v. Ewing, supra [(1982), 1982 CanLII 1794 (ON SC), 35 O.R. (2d) 225 (Div. Ct.)]. What is required is that “an interest in land [be] in question” in the proceeding. Almost invariably, I would think, this would be in the form of a claim of some kind, which, if substantiated, would adversely affect the defendant’s interest in the land. We have such a claim in this case – that the respondent’s option is of no effect.
[56] It may appear that this view of the legislation is not consistent with the implications in subss. 116(4) and (6) [predecessor provisions to s. 103(4) and (6)] that the claim asserted must be one belonging directly to the party at whose instance the certificate was issued. I think, however, that, in the context of s. 116 as a whole, the better interpretation of these provisions is that they refer to the claim to the interest in land asserted in the proceeding – which is the plaintiff’s or applicant’s claim in the sense that it has commenced and maintained in the proceeding in which the claim is made.” [italics added]
18In Keeton, the plaintiff owned shares in a company and sold those shares to the defendant, in trust for a company to be incorporated. The purchase price for the shares was guaranteed by another company which transferred lands held by it to a third company. The plaintiff brought an action to set aside that transfer of lands as a fraudulent conveyance under s. 2 of the Fraudulent Conveyances Act, R.S.O. 1980, c. 176. The plaintiff obtained a CPL and registered it against the lands. The defendants brought a motion to vacate the CPL.
19Scott D.C.J. relied on the Divisional Court decision in Ewing and concluded:
“…The plaintiff has in his pleadings brought title to land in question; he need not assert for himself an interest in the land. He alleges a fraudulent conveyance, and his allegations are not merely bald allegations of fraud. He alleges further that Saville, as guarantor, is his debtor. This is a sufficiently reasonable claim to an interest in land to warrant a certificate of pending litigation, and the certificate should remain on title until the matter is resolved.”
20The case before me is somewhat unusual in that the applicant municipality seeks a CPL against only the remaining lands still held by McRobert, not the lands conveyed to Lievre. In Keeton and Chilian, the CPL related to the lands actually transferred. Here, the municipality seeks to register a CPL against the lands still held by McRobert so as to preserve the status quo pending determination of its application. If successful, the transfer of the four acres to Lievre will be set aside and the extent of the lands now held by McRobert will expand accordingly.
21I find that the municipality’s application puts in question an interest in or title to the lands in question. The application seeks to set aside the sale to Lievre and to restore the title of McRobert’s lands to the original parcel description. It potentially changes the extent of the land comprising the parcel still held by McRobert. As such, it brings into question the extent of the title held by McRobert.
22The narrow construction of s. 103 put forward by counsel for McRobert is the same as that advanced and rejected in the decisions cited above.
23I have reviewed the extensive material filed by the municipality on this motion and am satisfied that it raises a triable issue as whether the creek was navigable and whether the creek operated so as to give rise to a natural severance. Counsel for McRobert did not argue otherwise. However, that does not end the inquiry: I must still consider whether to exercise my discretion in equity to grant the CPL: 931473 Ontario Ltd. V. Coldwell Banker Canada Inc., 1991 CarswellOnt 460 (Gen. Div.) at para. 61; Clock Investments Ltd. V. Hardwood Estates Ltd., 1977 CanLII 1414 (ON SC), 1977 CarswellOnt 1026 (Div. Ct.) at para 9.
24In 572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551, Master Donkin canvassed the existing case law and listed at para. 10 the factors typically considered in the exercise of the court’s discretion on a motion to grant or vacate a CPL. The list is not exhaustive, nor does each item necessarily apply in any given case. At the end of the day, the court must have regard to the circumstances of the parties.
25With respect to the factors listed in Dhunna, I find the following:
The municipality is not a shell company. It seeks to enforce the planning regime for which it has statutory responsibility.
Whether this land is unique or not is of marginal, if any, relevance here. The issue raised is whether the transfer without a severance was lawful – was it necessary to obtain a severance? If it was required, the Planning Act operates so that no interest or title was conveyed to Lievre regardless of the uniqueness of the property.
The application puts squarely in issue whether McRobert and his counsel knowingly and deliberately contravened the Planning Act by the transfer to Lievre without a severance.
There is no alternate claim for damages, nor would damages be available to the municipality under the Planning Act. There is provision for a penalty to be levelled if the court finds deliberate misstatements, but the test for same is very high. Mere inadvertence would not likely attract a penalty. In any event, neither damages nor imposition of a penalty will fix the illegality of the transfer.
There is no evidence before me that the imposition of a CPL will cause harm or prejudice to McRobert.
There is a danger to the municipality that McRobert could sell the remaining lands making the outcome of the application and the restoration of the title more difficult to achieve. McRobert’s refusal to give the same undertaking as Lievre gives rise to this motion and the suspicion by the municipality that he will seek to sell or convey the remaining lands to thwart title to the lands being reconnected.
The return date for the application is known to the parties and is mere months away.
McRobert has available the potential to recover damages arising from the registration of the CPL pursuant to s. 103(4).
26In all the circumstances and having regard to the relative positions of the parties, I find that it is appropriate to exercise my discretion to grant a CPL to be registered against McRobert’s lands. Those lands are described at para. 1 of the applicant’s factum for this motion.
Conclusion
27I order that:
The applicant is granted leave to obtain a CPL with respect to the lands described in para. 1 of the applicant’s factum on this motion.
The Registrar shall issue a CPL with respect to those lands.
The Land Registrar shall register the CPL against the said lands.
28I have in hand a costs outline from applicant’s counsel provided at the hearing as is customary. I have not received Mr. Solcz’ costs outline. If the parties cannot agree on costs, they may make written submissions not exceeding three pages within 21 days.
“Raikes, J.”
Justice R. Raikes
Date: July 26, 2017