B.C. – application to cancel certificate of pending litigation granted despite stay of litigation for arbitration – #206

In 1077708 BC Ltd. v. Agri-Grow Farm Services Ltd., 2019 BCSC 977, Madam Justice Catherine Murray granted Defendants’ application to cancel and remove a Certificate of Pending Litigation despite a stay of litigation granted by consent on broad terms.  Murray J. noted that Plaintiff provided no authority requiring Defendants to first apply to lift the stay. She added that she saw “no logic or merit” in that requirement and held that Plaintiff was not prejudiced by having the court consider the application.

Plaintiff, 1077708 BC Ltd. (“1077”), as registered owner of a blueberry farm, leased the farm for four (4) years to Defendant, Agri-Grow Farm Services Ltd. (“Agri-Grow”), by way of October 1, 2016 lease (“Lease”) signed by the individual Defendant on behalf of Agri-Grow. 

Disputes over non-payment of the rent, due bi-annually on March 31 and September 30, prompted 1077 in March 2018 to file a Notice of Civil Claim (“NOCC”) for breach of lease and a Certificate of Pending Litigation (“CPL”) registered against property owned by the individual defendant.

In May 2018, Defendants contacted 1077 to object to the filing of the NOCC because the Lease contained an arbitration agreement.

9.2 DIFFERENCES. All matters of difference arising between the Lessor and the Lessee in any matter connected with or arising out of this Agreement whether as to interpretation or otherwise shall be determined by certified arbitrator selected by both the parties. In case of further dispute, the exclusive jurisdiction shall be Supreme Court of B.C.

1077 agreed to stay the NOCC and proceed with arbitration which was subsequently scheduled to be held in September 2020.  The consent to stay rested on broad wording, being granted “for all intents and purposes until further court order or agreement between the parties”.

Defendants applied to have the CPL cancelled and removed.

Murray J. relied on her earlier decision in Chen v. Jin, 2019 BCSC 567 to set out the law applicable to CPLs permitted under section 215(1) of B.C.’s Land Title Act, RSBC 1996, c 250 and their maintenance and cancellation.  Qualifying the CPL as “an extraordinary pre-judgment mechanism intended only to protect a valid claim to an interest in land until issues can be resolved”, Murray J. commented that a CLP must be ground in a claim to an interest in land and that it is “improper to file a CPL as leverage to secure a financial claim”. 

Relying on the approach taken in Xiao v. Fan, 2018 BCCA 143, Murray J. reproduced the B.C.C.A.’s statement of the correct test:

[27] Accordingly, the correct test to be applied in an application to cancel a CPL that is alleged to be non-compliant with s. 215 of the Land Title Act is simply whether the pleadings disclose a claim for an interest in land. In such an application, no evidence is to be considered. If the merits of the claim for an interest in land are challenged, a defendant should apply for a summary dismissal of that part of the claim under Rule 9-6(4), where evidence may be considered, and the test to be applied is whether there is a bona fide triable issue of fact or law. If that part of the claim is dismissed, a defendant may then apply to have the CPL cancelled under s. 254.

In addition to other statements refining the approach to take and references to key cases which either articulated the refinements or applied them, Murray J. added that the party which filed the CPL must demonstrate an arguable prima facie case for an interest in land given that the “nuisance value of CPLs should no be permitted to override the legitimate exercise of the rights of landowners”.  She referred readers to Jacobs v. Yehia, 2015 BCSC 267, paras 21 and 22.

The courts’ authority to cancel CPLs stems from sections 256 and 257 of the Land Title Act.

1077 objected to Defendants’ application, arguing that they must first apply to lift the stay of the action.  Murray J. disagreed, providing brief reasons to explain her rejection of 1077’s objection. 

[30] The plaintiff is unable to find authority to support this proposition.

[31] I see no logic or merit to this argument. Accordingly I reject it.

[32] In reaching this conclusion, I note that the plaintiff has not been prejudiced in any way.

Murray J. went on to analyse the merits of Defendants’ application to cancel and remove the CPL burdening the individual defendant’s land and granted that application.  See paras 33-42.

urbitral note – The reasons provide little insight into the nature of the agreement to arbitrate and whether that agreement included the individual defendant as an arbitral party or merely as beneficiary of a stay of the litigation pending the result in the arbitration between 1077 and Agri-Grow.  Murray J.’s analysis includes no mention of B.C.’s Arbitration Act, RSBC 1996, c 55 or case law regarding the effect of a stay and, as stated in her reasons, likely because no authority was provided in support of 1077’s objection.

On the brief facts provided, and subject to any arguments by 1077 that both Defendants were still or at one time bound individually or jointly by the arbitration agreement, the application to cancel and remove the CPL appears to deal with land (i) not subject to the Lease and its arbitration agreement and (ii) not in issue between the parties to the Lease.  That being the case, the stay applied to the litigation and not just matters subject to arbitration.  No argument was provided or recorded which set the primacy of the Land Titles Act against an agreement to stay litigation in favour of arbitration. 

Parties negotiating a stay should anticipate whether their stay will be lifted directly or indirectly, in whole or in part, by later interim applications.  Such applications may flow from legislation applicable to the substance of claims consolidated by plaintiff in the litigation but not strictly covered by the contract containing the arbitration agreement.