Locking the war chest: Certificates of pending litigation in modern practice

Section 215 of British Columbia’s Land Title Act, RSBC 1996, c 250 (the LTA) permits a party who has commenced a legal proceeding and claims "an estate or interest in land" to register a certificate of pending litigation (CPL) against title to that land. Once registered, the CPL functions as a charge: it can dissuade third-party offers, impede refinancing, and block the closing of a sale. The CPL is, in the British Columbia Supreme Court's repeated phrasing, an "extraordinary and powerful pre-trial tool”.^[1] This article examines how courts in the province are tightening the s. 215 pleading bar to prevent CPLs from being used as instruments of financial leverage.

1. The statutory framework and weaponized CPLs

British Columbia courts have regularly grappled with the question of s. 215 pleading sufficiency over the past decade. In Bilin v Sidhu, the Court of Appeal confirmed that the LTA sets out the “pre-conditions” to valid registration under s. 215 - this requirement was framed as a “threshold criterion” for a CPL's continued registration.^[2] Where the pleadings cannot support a claim to an interest in land, the CPL fails the s. 215 precondition and may be cancelled.^[3]

The Court of Appeal returned to this framework in Xiao v Fan, clarifying the standard of review (correctness, on the threshold question) and the procedural posture: a s. 215 application is determined on the pleadings alone, without evidence.^[4] There is one exception to the pleadings-based inquiry: the court may refer to a document incorporated by reference in the pleadings when considering if an interest in land is established.^[5] Otherwise, a party challenging the merits of an alleged interest in land must proceed by way of summary dismissal under Rule 9-6(4) of the Supreme Court Civil Rules, following which cancellation proceeds under s. 254.^[6]

Behind these limitations lurks a real concern: CPLs are being deployed for strategic purposes. The most enduring articulation comes from Drein v Puleo: “If the claim in essence is not for an interest in land, CPLs are not intended to be one of the weapons in a claimant’s war chest.”^[7] Following Drein, the British Columbia Supreme Court confirmed that it is improper to file a CPL to “gain a tactical advantage” or as “leverage to secure a financial claim.”^[8] Similar framing has been adopted at the Court of Appeal: in Lipskaya v Guo, MacKenzie JA confirmed that a CPL "is not to be used as pre-judgment execution for a purely financial claim.”^[9]

2. The rise of the sufficient nexus

A series of British Columbia Supreme Court decisions over the past five years has applied the s. 215 framework to a repeating fact pattern: a plaintiff alleges that funds intended for a specific purpose were misappropriated by a defendant and used towards the acquisition or maintenance of real property, the plaintiff pleads a constructive trust over the property and registers a CPL against it, and the defendant moves to cancel. The recurring question is when such pleadings clear the s. 215 threshold.

In Wai v Chung, MacDonald J cancelled a CPL where the plaintiff alleged that investment funds entrusted to the defendant had been used to purchase the property.^[10] Applying the pleadings-only approach, the court asked whether the pleadings disclosed a "sufficient connection" between the misappropriated funds and the property.^[11] They did not. MacDonald J identified a series of defects - primary relief framed as a financial judgment, trust claims pleaded in the alternative without supporting facts, and no funds linked to the purchase - and held that an interest in land requires factual underpinning, not “unsubstantiated assertions” or "mere conjecture", and the pleadings must establish a nexus between the misappropriated funds and the property.^[12] MacDonald J expressed sympathy for the plaintiff's limited access to documents, but held that this did not relieve the pleadings from meeting the s. 215 threshold.[13]

In Deol v Hans, the plaintiffs alleged that funds held in trust had been misappropriated by the defendant and applied to the maintenance of an unrelated property.^[14] Laurie J cancelled the CPL, finding that these pleadings did not disclose a “sufficient nexus” between the claim and the defendant’s property, having found the following deficiencies:

1. silence on when the defendant’s property was acquired and how long the defendant resided there;
2. failure to disclose when, how, and in what amount the defendant used the monies towards mortgage payments, utilities, preservation, or maintenance of the defendant’s property; and
3. no information provided as to mortgages on the defendant’s property.^[15]

In Sidhu v Nagpal, the Deol framework hardened into "the principles governing an application to cancel a CPL pursuant to s. 215.”^[16] Layton J applied those principles to allegations that monies owed to the plaintiff had been used to pay down mortgages on an unrelated property.^[17] The pleadings - silent on what mortgages existed, when payments were made, in what amount, and who owned the property - failed for the same reasons identified in Deol.^[18] Most recently, in 10163563 Manitoba Ltd v 1411541 BC Ltd, Lawn J applied the Deol framework to allegations that misappropriated funds had been used to acquire and maintain four unrelated properties, concluding that the pleadings suffered from the same defects and cancelling the CPLs.^[19]

3. The verbal contracts problem

The sufficient nexus approach gives defendants a meaningful basis for cancellation of a CPL, especially where the underlying interest in land arises from a written instrument. Montaigne confirms the document is available to the court, and any discrepancy between the pleaded particulars and the instrument can be argued at the cancellation stage.

Verbal contracts are a different matter. In 141 BC, the defendants sought to introduce affidavit evidence concerning documents said to "surround" an alleged verbal contract, arguing they bore on the contract's existence and terms. Lawn J declined, holding that doing so would require an interpretive exercise outside the proper role of the s. 215 court as defined in earlier cases - though Lawn J did not, ultimately, need to engage with the surrounding documents to cancel the CPLs.^[20]

The asymmetry has consequences for the weaponization concern that runs through the case law. A plaintiff alleging a verbal contract is free to plead both the agreement itself - including the specific purpose for which funds were said to be entrusted - and the Deol particulars that flow from that characterization, without any basis in fact, and without the defendant being able to introduce contemporaneous documents to test either under s. 215. On the other hand, in a written contract case, the document constrains what the plaintiff can say was agreed and the defendant can produce it to correct any inconsistencies.

A plaintiff’s war chest should not include CPLs where the underlying claim is not for an interest in land. From Drein through 141 BC, the courts have refined the s. 215 framework to keep it that way. The verbal contract problem is that pleadings in such cases fall outside the documentary check that disciplines their written counterparts, allowing a plaintiff to plead the agreement and the Deol particulars in a manner that satisfies s. 215, and arm itself with a CPL it is not ultimately entitled to. The courts are accordingly at a crossroads: they have warned against weaponized CPLs and yet, thus far, an asymmetry exists between written and verbal contracts.

4. Conclusion

The s. 215 framework has been meaningfully tightened over the past decade. A threshold pleading bar requiring a genuine claim to an interest in land — and, in misappropriation cases, a sufficient nexus shown through particulars on acquisition, mortgages, application of funds, and occupancy — keeps the CPL out of the war chest where the underlying claim is not for an interest in land. That discipline holds firmly where the pleadings can be tested against a documentary record. The verbal contract problem awaits a test case that squarely engages it.

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