Walker Law was recently successful in obtaining a court order for the issuance of a lien called a Certificate of Pending Litigation (“CPL”). To read the decision, please click here.
A CPL is a notice to the public, which is registered on title, that (the interest or title to) the land is currently subject to a legal dispute. Practically, a CPL restrains any dealings such with the land such as any sales, mortgages, or financing until the litigation is resolved.
This matter concerned a partnership dispute, where in 2019, the parties entered into a partnership agreement to jointly purchase a pre-construction home. It was agreed that each of the three partners would hold a one-third interest in the subject property. However, on the day of signing the agreement of purchase and sale (“APS”) one party, the Plaintiff, was not included as a purchaser because he was not available to sign the purchase agreement. The remaining parties (Defendants A and B) agreed the Plaintiff would later be added to the APS via amendment, and all three partners made equal contributions towards the deposit payments under the APS (despite the Plaintiff not technically being listed as a purchaser).
Prior to closing, there was a breakdown in the relationship between the Plaintiff and Defendant A. When the Plaintiff requested that Defendant A and Defendant B sign the amendment to the APS to add the Plaintiff as a purchaser, Defendant B agreed, while Defendant A objected to sign. Therefore, in March 2022, the Plaintiff commenced the main action for a Certificate of Pending Litigation, a declaration that Defendant A held his 33.3% interest in the subject property in trust, and damages. Defendant B cross-claimed against Defendant A to also have their 33.3% interest in the subject property recognized, while Defendant A claimed that neither of the other parties held an interest in the subject property.
In the interest of closing the sale transaction, the parties agreed title would be taken solely in the name of Defendant A, with a binding promise, which is called an “undertaking) that Defendant A would not sell or otherwise encumber the property for a period of two years while the parties’ interests in the property could be litigated. However, this undertaking was set to expire before the outcome of the litigation, with Defendant A not willing to agree to extend the undertaking until after trial. Walker Law, on behalf of the Plaintiff, brought a motion for (among other issues) an order that the undertaking would not expire until after trial, or in the alternative, an order authorizing the immediate issuance of a CPL with respect to the subject property.
To decide whether to issue a CPL, the court first undertakes a threshold inquiry of whether there is “a triable issue in respect of the moving party’s claim to an interest in the property.” That essentially means that the there is somewhat a feasible case. The evidentiary bar at this step is low, and was met easily by the Plaintiff. Once the threshold test is met, the court then assesses whether a CPL should be issued by considering non-exhaustive factors such as whether the Plaintiff is a shell corporation, whether the land is unique, the intent of the parties in acquiring the lands, whether there is an alternative claim for damages, the ease or difficulty of calculating damages, whether damages would be a satisfactory remedy, the presence or absence of another willing purchaser, and the harm done to the parties if the certificate is allowed.
At this stage, the court found that the issuance of a CPL was warranted. It accepted the Plaintiff’s arguments that the subject property was purchased with equal contributions based the understanding that all parties would have an equal interest, the undertaking given by Defendant A was prepared in a manner that reflected the interest all parties retained in the subject property, and that there remained a risk that Defendant A could sell the subject property and dissipate the assets/equity.
Congratulations to our clients on this favourable outcome! If you have a partnership dispute or property dispute which may engage the issuance of a CPL, contact a Walker Law Property Litigation Lawyer!
Tags: Commercial Litigation, Contract Disputes, Residential Real Estate Disputes, Commercial Real Estate Disputes