Simon's Megalomaniacal Legal Resources

Civil Litigation - Certificate of Pending Litigation

. Securitas Technology Canada v. North West Construction

In Securitas Technology Canada v. North West Construction (Div Court, 2023) the Divisional Court considered the issuance of a certificate of pending litigation:

Issue #2: Should a Certificate of Pending Litigation be Issued Against the Silkwood Property?

[39] Section 103(1) of the Courts of Justice Act and Rule 42.01(1) of the Rules of Civil Procedure permit a court to issue certificate of pending litigation (CPL) where there is a triable issue in respect of the moving party’s claim to an interest in property and the order would be “equitable in the circumstances.”

[40] The court should look at all matters between the parties. Here the interest in land claimed is based on the submission that the Eagle Defendants contributed to the expense of maintaining their family home, which is also shown as the address for the corporate entities North West Construction and the (now dissolved) Eagle Security Solutions Ltd. The property in question was purchased in 2014, before any business relationship developed between Securitas and the Eagle Defendants. The claim is quantifiable in damages, as it is based on money paid for subscriptions on alarm systems which are documented.

[41] There is no evidence that the Eagle Defendants are impecunious or are not able to pay an award of damages. Securitas terminated its business relationship with the Eagle Defendants in August of 2021 and waited for close to two years before initiating this action and the motion for a CPL. I am not satisfied that the timing or the other factors surrounding this claim establish that Securitas would suffer irreparable harm if there no CPL is in place.

[42] I dismiss the motion for a CPL.

. Tibollo v Robinson

In Tibollo v Robinson (Div Court, 2023) the Divisional Court extensively considered a test for issuance of 'certificates of pending litigation':

[13] Section 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43 governs the issuance of CPLs. It provides:

103. 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 office under subsection (2).

....

[16] As already stated, the parties agree that the test for granting leave to issue and register a CPL when the plaintiff has not yet become a creditor is set out in the decision in Grefford at para. 26:

(a) Has the plaintiff satisfied the Court that there is a high probability that it will successfully recover judgment in the underlying/main action?

(b) Has the plaintiff introduced evidence demonstrating that the impugned transaction was made with the intent to defeat or delay creditors?

(c) Has the plaintiff demonstrated that the balance of convenience favours the issuance of the CPL in the circumstances of the case?

....

[19] In granting leave to appeal, the Divisional Court panel specifically referenced the decision of Diamond J. in Jodi L. Feldman Professional Corporation v. Foulidis, 2018 ONSC 7766 as a decision that appeared to be in conflict with this motion judge’s analysis.

[20] In Feldman, Diamond J. heard an appeal on the same issue – the dismissal of a motion for leave to issue a CPL. In reversing the Master’s decision and granting leave for the issuance of a CPL, Diamond J. wrote:

With respect to the second part of the Grefford test, the Master embarked upon a detailed analysis of the evidentiary record before him and concluded that “given the higher standard of proof outlined in Grefford, he was not satisfied that there was evidence in the record from which a trial judge could conclude that there was a fraudulent intent on Lynne’s part in granting the mortgage… “at least not enough to justify CPL”.

Numerous “badges of fraud” were raised by the plaintiff, including (a) the inadequacy of the consideration for the mortgage, (b) the close relationship between Lynne and Danny, (c) the proximity and time between Lynne’s delivery of a Notice of Intent to Defend and the granting of this mortgage, (d) the fact that Lynne and Danny continued to have an involvement with one another after the mortgage was granted, and (e) the fact that the mortgage was allegedly security for “past consideration”. The Master undertook a meticulous and comprehensive assessment of these alleged “badges of fraud” which the plaintiff contended laid a foundation to support an ultimate finding at trial that the mortgage was carried out with the intent to delay or defeat creditors, including the plaintiff. The Master weighed the evidence, rejected the plaintiff’s arguments and found that there were no facts capable of permitting a trial judge to conclude that there was a fraudulent intent on Lynne’s part in granting the mortgage (see: Feldman at paras. 14, 15).

...

In my respectful view, the learned Master made an error in law. I agree with the plaintiff that in satisfying the second element of the Grefford test, a moving party must lead positive evidence to show the existence of a triable issue (see: Feldman at para. 17).

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In my view, the Master usurped the function of a trial judge, or at the very least a judge hearing a motion for summary judgment. On a motion seeking leave to issue a CPL, the Court may not avail itself of the enhanced fact finding powers in Rule 20. The court must simply be satisfied that a triable issue exists based on the evidentiary record (see: Feldman at para. 20).

...

A review of the Master’s Cost Decision supports my conclusion. While the Costs Decision may not technically form part of the Order under appeal, the Master’s reasoning in awarding Lynne her costs of the motion highlights the legal error. At paragraph 9 of his Costs Decision, the Master stated as follows (my emphasis in bold):

Second, I also accept Mr. Zeitz’s argument that an alleged fraud under the FCA and APA does not necessarily involve the kind of moral turpitude seen in cases where there are unfounded allegations of dishonesty and fraud that impugned the character and reputation of a party. That is the case here. This was a “close call.” There was evidence that appeared on the surface to point to “badges of fraud”, such as the relationship between the Defendant, Danny and George and the proximity and time between the pleadings and the Feldman Action and a settlement of Danny’s action. In the end, I found that there was not enough evidentiary substance to those apparent badges on this motion. Such a “close call” does not justify a deviation from the normal standard of costs, namely partial indemnity.

In my view, the Master exceeded the jurisdiction afforded him on a motion for leave to issue a CPL and applied incorrect principles in his assessment of the second part of the Grefford test. On the record before him, there was and remans triable issues with respect to whether the impugned transaction was carried out with the intent to defeat or delay creditors, including the plaintiff.

While it may be that a trial judge, or perhaps a judge hearing a motion for summary judgment (as that option is still available to the defendants), could conclude that there is insufficient evidence to support the plaintiff’s claims, such a determination ought not to have occurred at this preliminary stage in the absence of clear, cogent, and convincing evidence that the evidence supporting the plaintiff’s claims was devoid of merit. As the Master already found that this was indeed a “close call”, triable issues exist and the plaintiff has thus satisfied the second part of the Grefford test (see: Feldman at paras. 22, 23, 24).

[21] Decisions released after Feldman have followed the principle set out by Diamond J. - all that is necessary to satisfy the second branch of Grefford is to demonstrate a triable issue exists that the impugned transaction was carried out with the intent to defeat or delay creditors, including the plaintiff: Elitrex Plumbing Ltd. v. Cassavia Estates Homes (Maple) Ltd. 2021 ONSC 4928 at para. 28 and 36; Fewson v. Bansavatar et al., 2021 ONSC 6697 at para. 24.

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[27] The Appellant has put one case before the court, Xerox Canada Ltd. v. Baba Publications Inc. et al. 2008 CanLII 2152 (ON SC) (Master) wherein the court found that the failure to file positive evidence on the balance of convenience created an assumption of an absence of prejudice. I do not agree with this as a general principle. While there may not have been any evidence filed by the Respondents, there were uncontested facts before the motion judge that allowed her to weigh the balance of convenience in the Respondents’ favour including:

(a) This was the Respondents’ matrimonial home;

(b) There was no evidence that either of the Respondents had any involvement in Mr. Szkup’s business;

(c) There was no evidence that the Appellant had incurred any damages to rectify Mr. Szkup’s work. The only potential damages as of the motion were within the jurisdiction of the small claims court.

[28] A judge has broad discretion in examining the equities between the parties. Absent an overriding or palpable error, that discretion is entitled to considerable deference: Kampers v. York Fire & Casualty Insurance Company, 2019 ONCA 56 at paras. 12, 13 and 20. No error occurred here and the motion judge’s finding on balance of convenience stands. The motion for leave to issue a CPL fails on the third branch of the Grefford test.

. Cannon v. Gerrits

In Cannon v. Gerrits (Div Court, 2022) the Divisional Court considered the factors involved in granting a certificate of pending litigation:

[57] The respondents submit the appellants are in error in this respect and have conflated the test for granting a CPL. That is, the test on the application for a CPL is not whether the APS has been breached. Rather, the question to be answered is whether the moving party has an interest in the subject property.

[58] The court must look at all relevant matters and determine in all of the circumstances whether a CPL should be issued. The respondents submit the motion judge can consider the intent of the party selling the property as a factor in this equitable exercise: see Perruzza v. Spatone, 2010 ONSC 841, at para. 20. I agree. The motion judge did not commit a palpable and overriding error in taking the intentions of the appellants into consideration, in granting the CPL.