|
Real Property - Land Titles Act
MORE CASES
Part 2
. Wonderland Power Centre Inc. v. Post and Beam on Wonderland Inc.
In Wonderland Power Centre Inc. v. Post and Beam on Wonderland Inc. (Div Ct, 2022) the Divisional Court considered an issue of rectification, here in a real property registration context:[30] Rectification is an equitable remedy granted at the discretion of the motion judge. A discretionary order of a motions judge is subject to significant deference on appeal and should be interfered with only where the motion judge misdirected herself, came to a decision that is so clearly wrong that it amounts to an injustice, or gave no or insufficient weight to relevant considerations: see Penner v. Niagara (Regional Police Services Board), 2013 SCC 19, [2013] 2 S.C.R. 125, at para. 27. In addition, an appellate court may intervene where the trial judge exercised his or her discretion based on a wrong principle: see Soulos v. Korkontzilas (1995), 1995 CanLII 2074 (ON CA), 25 O.R. (3d) 257 (C.A.), at paras. 6, 15, aff'd 1997 CanLII 346 (SCC), [1997] 2 S.C.R. 217. I am of the opinion that the motion judge exercised her discretion based on wrong principles, misdirected herself, and gave insufficient weight to relevant considerations.
....
[33] The motion judge correctly identified the issue – that rectification is not available against a bona fide purchaser for value with notice. ...
....
Rectification Analysis
[39] Wonderland’s motion for rectification was brought and granted under section 160 of the Land Titles Act:Subject to any estates or rights acquired by registration under this Act, if a person is aggrieved by an entry made, or by the omission of an entry from the register, or if default is made or unnecessary delay takes place in making an entry in the register, the person aggrieved by the entry, omission, default or delay may apply to the court for an order that the register be rectified, and the court may either refuse the application with or without costs to be paid by the applicant or may, if satisfied of the justice of the case, make an order for the rectification of the register. [Emphasis added.] [40] The “estates or rights acquired by registration under this Act”, as referred to in s. 160, are generally set out in s. 78(4) of the Act, which provides that an instrument is effective when registered “according to its nature and intent”:When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register. [41] Rectification of registered interests after purchase by a third party is of particular concern because of the importance of the reliability and integrity of the land registry to all aspects of land law and conveyancing. Certainty is critical to conveyancing. As stated by the Divisional Court per curiam in 1168760 Ontario Inc. v. 6706037 Canada Inc., 2019 ONSC 4702, at paras. 13-14:13 The LTA establishes the land titles regime in Ontario. Its essential purpose is to "provide the public with security of title and facility of transfer" by setting up a register and guaranteeing that the person shown as the registered owner is the legal owner, subject only to registered encumbrances and enumerated statutory exceptions.
14 There are three principles found in the land titles regime that together embody the doctrine of indefeasibility of title:. The mirror principle, whereby the register is the perfect mirror of the state of title;
. The curtain principle, which holds that the purchaser need not investigate past dealing with the land, or search behind the title as depicted in the register; and
. The insurance principle, whereby the state guarantees the accuracy of the register and compensates any person who suffers loss as the result of an inaccuracy. [Citations omitted.] The case continues on the inefficacy of rectification if a later purchaser takes title as "a bona fide purchaser for value without notice." [para 42-69].
. Airport Business Park Inc. v. Huszti Holdings Inc.
In Airport Business Park Inc. v. Huszti Holdings Inc. (Ont CA, 2023) the Court of Appeal considered that the failure to seek and obtain a stay pending appeal of an order effecting title to real estate, where that order is sunsequently registered on title, prejudice appeal rights. This case suggests that when appealing such order, a stay pending appeal would be prudent:[50] The importance of the City of Windsor not seeking a stay of the discharge order cannot be overstated. Rule 63 of Ontario’s Rules of Civil Procedure, R.R.O. 1990, Reg. 194, no longer provides for an automatic stay pending appeal, except in certain enumerated cases, unlike the previous iteration of the rule engaged in Smith. As this court has previously noted, there is no requirement under the Land Titles Act to show that no appeal is pending, or appeal rights have not terminated. Appeal rights may be protected by obtaining a stay, which precludes registration of the order, but where a losing party does not seek such a stay, their rights of appeal might well be prejudiced: Regal Constellation Hotel Ltd., Re (2004), 2004 CanLII 206 (ON CA), 71 O.R. (3d) 355 (C.A.), at paras. 33 and 49; Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc., 2019 ONCA 508, 435 D.L.R. (4th) 416, at para. 41.
[51] This court’s comments in Regal Constellation fortify Huszti’s submission that the unexpired right to appeal held by the City as of the deadline did not affect title without a stay. In Regal Constellation, the owner of the hotel sought to set aside a vesting order of the Superior Court of the property following its approval of the sale of the property in the receivership process. Blair J.A. quashed the appeal brought by the owner on the basis that it was moot because the appellant had not sought a stay of the vesting order. Blair J.A. explained at para. 33 that once a vesting order is registered on title, the change of title has been effected.
[52] He went on to add:[38] Upon registration, then, a vesting order is deemed "to be embodied in the register and to be effective according to its nature and intent". Here the nature and effect of Sachs J.' s vesting order is to transfer absolute title in the hotel to 203, free and clear of encumbrances. When it is "embodied in the register" it becomes a creature of the land titles system and subject to the dictates of that regime.
[39] Once a vesting order that has not been stayed is registered on title, therefore, it is effective as a registered instrument and its characteristics as an order are, in my view, overtaken by its characteristics as a registered conveyance on title. In a way somewhat analogous to the merger of an agreement of purchase and sale into the deed on the closing of a real estate transaction, the character of a vesting order as an "order" is merged into the instrument of conveyance it becomes on registration. It cannot be attacked except by means that apply to any other instrument transferring absolute title and registered under the land titles system. Those means no longer include an attempt to impeach the vesting order by way of appeal from the order granting it because, as an order, its effect is spent. Any such appeal would accordingly be moot.
[40] This interpretation of the effect of registration of a vesting order is consistent with the purpose of the land titles regime and the philosophy lying behind it. It ensures that disputes respecting the registered title are resolved under the rubric of that regime and within the scheme provided by the Land Titles Act. This promotes confidence in the system and enhances the certainty required in commercial and real estate transactions that must be able to rely upon the integrity of the register. [Footnote omitted.] [53] Blair J.A. emphasized the importance of seeking a stay to protect an appellant’s remedies, at para. 49:I do not mean to suggest by this analysis that a litigant's legitimate rights of appeal from a vesting order should be prejudiced simply because the successful party is able to run to the land titles office and register faster than the losing party can run to the appeal court, file a notice of appeal and a stay motion and obtain a stay. These matters ought not to be determined on the basis that "the race is to the swiftest". However, there is no automatic stay of such an order in this province, and a losing party might be well advised to seek a stay pending appeal from the judge granting the order, or at least seek terms that would enable a speedy but proper appeal and motion for a stay to be launched. Whether the provisions of s. 57 of the Land Titles Act (Remedy of person wrongfully deprived of land), or the rules of professional conduct, would provide a remedy in situations where a successful party registers a vesting order immediately and in the face of knowledge that the unsuccessful party is launching an appeal and seeking a timely stay, is something that will require consideration should the occasion arise. It may be that the appropriate authorities should consider whether the Act should be amended to bring its provisions in line with those contained in the Alberta legislation, and referred to in footnote 2 above. [54] Although Heeney R.S.J.’s discharge order in this appeal is not a vesting order, it operated in the same way by discharging the Easement immediately from title. There was no stay of this order. The fact that the effect of the discharge order when registered was the equivalent in all respects of the release of the Easement required under the VTB Mortgage is a complete answer to the Divisional Court’s concern about title being uncertain or contingent. There is no basis to find that the City’s appeal rights impacted on ABP’s good and marketable title in any meaningful way and the Divisional Court was wrong to find that the Application Judge erred in failing to consider the City’s appeal rights without first considering the significance of those appeal rights in the context of this case.[4] . Airport Business Park Inc. v. Huszti Holdings Inc.
In Airport Business Park Inc. v. Huszti Holdings Inc. (Ont CA, 2023) the Court of Appeal considers the 'mirror principle' of the land titles system:[42] The fundamental principles of a land titles regime were described by Epstein J. (as she then was) in Durrani v. Augier (2000), 2000 CanLII 22410 (ON SC), 50 O.R. (3d) 353, at para. 42:The philosophy of a land titles system embodies three principles, namely, the mirror principle, where the register is a perfect mirror of the state of title; the curtain principle, which holds that a purchaser need not investigate the history of past dealings with the land, or search behind the title as depicted on the register; and the insurance principle, where the state guarantees the accuracy of the register and compensates any person who suffers loss as the result of an inaccuracy. These principles form the doctrine of indefeasibility of title and [are] the essence of the land titles system[.] [43] This court has repeated and adopted Epstein J.’s description of the fundamental principles on many occasions. See for example: Re Regal Constellation Hotel (2004), O.R. (3d) (C.A.), at para. 42; Stanbarr Services Ltd. v. Metropolis Properties Inc., 2018 ONCA 244, 141 O.R. (3d) 102; 2544176 Ontario Inc. v. 2394762 Ontario Inc., 2022 ONCA 529; and Martin v. 11037315 Canada Inc., 2022 ONCA 322.
[44] Section 78(4) of the Land Titles Act, R.S.O. 1990, c. L.5, is one of the main legislative mechanisms to achieve the mirror principle. Subject to limited exceptions that must be narrowly construed, s. 78(4) establishes a deferred indefeasibility of title regime that guarantees that a transfer in favour of a subsequent purchaser is effective once registered: Martin, at para. 59. Put another way, everyone is entitled to rely on the land titles system to deal with land in accordance with what is shown on the registered title. The system establishes that title is what the registry says and changes to title, such as transfer or discharge of mortgage, are effective once registered: Stanbarr, at paras. 13-26.
[45] One exception to the mirror principle is for fraudulent instruments: see s. 78(4.1) of the Land Titles Act; Waimiha Sawmilling Co. v. Waione Timber Co., 1925 CanLII 550 (UK JCPC), [1926] A.C. 101 (P.C.), as cited in Stanbarr, at para. 14; and Lawrence v. Maple Trust Company, 2007 ONCA 74, 84 O.R. (3d) 94. Fraud is not an issue in this case.
[46] The other exception is actual notice of an unregistered instrument to a third party purchaser for value: United Trust Co. v. Dominion Stores Ltd., 1976 CanLII 33 (SCC), [1977] 2 S.C.R. 915, although this court has questioned whether this exception remains good law: Stanbarr, at paras. 22, 25 and 53.
[47] In any event, this second exception has no applicability here because an unexpired right to appeal (which is all that existed at the deadline) is not an instrument recognized for the purposes of registration. Although the Land Titles Act does not define “instrument”, it identifies which interests are capable of registration, such as: a transfer of freehold land in s. 86(1); a charge in s. 93; a transfer under power of sale in s. 99; a transfer of charge and a cessation of charge in ss. 101(1) or (6) and 102; a transfer of leasehold land in s. 105; a notice of lease in s. 111; conditions, restrictions and covenants in ss. 118 or 119; and a caution in s. 128: see also O. Reg. 430/11 “Forms” and Donald H. L. Lamont, Lamont on Real Estate Conveyancing, 2nd ed. (Thomson Reuters looseleaf, 1991) at § 1:15. An appeal of an order is not such an instrument. . Martin v. 11037315 Canada Inc.
In Martin v. 11037315 Canada Inc. (Ont CA, 2022) the Court of Appeal considers the role of s.78(4) of the Land Titles Act in 'deferred indefeasibility'. As I am unfamiliar with this real estate concept, I link this Toronto lawyers' website on the issue: deferred indefeasability:(2) Does s. 78(4) of the Land Titles Act preclude the court from interfering with 267’s title?
[57] On appeal, 267 argues that, under s. 78(4) of the Land Titles Act, it acquired absolute, indefeasible title to the subject property when 1103 transferred the property to it on January 8, 2020. 267 claims it did not have actual notice of any defect in 1103’s title at the time of the transfer and therefore submits that its title cannot be defeated. Accordingly, even assuming the application judge was entitled to set aside 1103’s default judgment for foreclosure, 267 asserts that its title cannot be impeached, and that it was not open to the application judge to order the sale of the property.
[58] Section 78(4) of the Land Titles Act reads as follows:78(4) When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register. [59] In Stanbarr Services Limited v. Metropolis Properties Inc., at paras. 13-26, this court explained that, subject to limited exceptions, s. 78(4) of the Land Titles Act establishes a deferred indefeasibility of title regime that guarantees that a transfer in favour of a subsequent purchaser such as 267 is effective once registered. In the result, contrary to Ms. Martin’s submissions, if none of the exceptions to the deferred indefeasibility of title regime apply, a court order setting aside the default judgment for foreclosure could not defeat 267’s title. Statements to the effect that a foreclosure judgment can be set aside at any time in various decisions relied on by Ms. Martin do not alter this conclusion. None addressed setting aside a foreclosure judgment where a transfer to a subsequent purchaser was registered under the Land Titles system.
[60] One exception to the deferred indefeasibility of title regime is the fraudulent instruments exception set out in s. 78(4.1) of the Land Titles Act. There is no suggestion that this exception applies to the facts of this case.
[61] The actual notice exception recognized by the Supreme Court of Canada in United Trust Co. v. Dominion Stores Ltd., 1976 CanLII 33 (SCC), [1977] 2 S.C.R. 915 may be another exception.
[62] In United Trust Co., the day after purchasing a property, United Trust Co. locked out a tenant that had given the former owner notice of intention to exercise an option to renew its lease and had agreed with the former owner on the terms of a longer extension. Although it had actual notice of the tenant’s unregistered lease and the extension agreement, United Trust Co. nevertheless purported to terminate the tenant’s tenancy and claimed that, apart from fraud, under the Land Titles Act, “actual notice of a non-registered instrument is ineffective to put the burden of the encumbrance resulting therefrom upon a purchaser for value”: United Trust Co., at p. 948.
[63] The majority of the Supreme Court rejected United Trust Co.’s submission and held that the doctrine of actual notice was well established and that “such a cardinal principle of property law cannot be considered to have been abrogated unless the legislative enactment is in the clearest and most unequivocal of terms”: United Trust Co., at p. 953.
[64] In Stanbarr, this court noted that there may be a question whether, following the addition of the fraudulent instruments exception in s. 78(4.1) to the Land Titles Act in 2006, the doctrine of actual notice of a non-fraudulent defect continues to operate to defeat the interest of a bona fide purchaser for value who has notice of such defect. However, this court assumed the doctrine continued to apply for the purposes of that decision but found it unnecessary to decide the issue.
[65] Other decisions of this court post-dating the 2006 amendment to the Land Titles Act have held that the actual notice doctrine continues to exist: Manias v. Norwich Financial Inc., 2008 ONCA 532 and MacIsaac v. Salo, 2013 ONCA 98, 114 O.R. (3d) 226. No issue has been raised on this appeal concerning whether the doctrine continues to exist.
[66] This court has held that only bona fide purchasers for value without notice of an interest or claim that differs from what is shown on the register obtain the protection of s. 78(4): MacIsaac v. Salo, citing Durrani v. Augier (2000), 2000 CanLII 22410 (ON SC), 50 O.R. (3d) 353 (S.C.J.); and 719083 Ontario Ltd. v. 2174112 Ontario Inc., 2013 ONCA 11, aff’g 2012 ONSC 3815. . Wonderland Power Centre Inc. v. Post and Beam on Wonderland Inc.
In Wonderland Power Centre Inc. v. Post and Beam on Wonderland Inc. (Div Ct, 2022) the Divisional Court states the legal effect of registration on title:[35] Registration alone does not give an instrument force. Section 119(6) provides that: “[t]he entry on the register of a condition or covenant as running with or annexed to land does not make it run with the land, if such covenant or condition on account of its nature, or of the manner in which it is expressed, would not otherwise be annexed to or run with the land” (emphasis added). . Wonderland Power Centre Inc. v. Post and Beam on Wonderland Inc.
In Wonderland Power Centre Inc. v. Post and Beam on Wonderland Inc. (Div Ct, 2022) the Divisional Court identifies the administrative (from the "Director of Land Registration or the Director of Titles") court appeal route in the Land Titles Act:Jurisdiction
[29] There is a statutory right of appeal to the Divisional Court from an order of a Superior Court judge on issues under the Land Titles Act under s. 27 of the Land Titles Act. The Divisional Court granted Post and Beam leave to appeal the dismissal of its summary judgment motion. That appeal was consolidated with Post and Beam’s appeal of the rectification to the Court of Appeal by the order of Brown, J.A. dated June 28, 2019. The consolidated appeal was transferred to the Divisional Court by the order of Hourigan J.A. dated April 6, 2020. . Gold v Chronas
In Gold v Chronas (Ont CA, 2018) the Court of Appeal set out some brief comments on the history of the Land Titles Act:(2) The Land Titles Act
[32] Following their conversion to the system of land registration governed by the Land Titles Act, the appellants’ and respondents’ properties were classified as Land Titles Conversion Qualified (“LTCQ”) parcels.
[33] LTCQ parcels are converted to the Land Titles system without surveys or notice to owners: Marguerite E. Moore, Title Searching and Conveyancing in Ontario, 6th ed. (Markham: LexisNexis, 2010) at p. 294.
[34] Thus, LTCQ status does not guarantee boundaries: Land Titles Act, s. 140(2).[4] Further, LTCQ parcels are subject to mature adverse possession claims and prescriptive easements claims: Moore at p. 296. Under s. 44(1) of the Land Titles Act, they are also subject to any existing right of way or easement:44.(1) All registered land, unless the contrary is expressed on the register, is subject to such of the following liabilities, rights and interests as for the time being may be subsisting in reference thereto, and such liabilities, rights and interests shall not be deemed to be encumbrances within the meaning of this Act:....
2. Any right of way, watercourse, and right of water, and other easements. [35] Conversion to the system of land registration governed by the Land Titles Act from the system of land registration governed by the Registry Act is authorized under s. 32 of the Land Titles Act,[5] which was first introduced in 1972.
|
