Alberta (North Alberta Land Registration District) v Mackenzie (County), 2012 ABQB 447

Court of Queen ’ s Bench of Alberta Citation: Alberta (North Alberta Land Registration District) v Mackenzie (County), 2012 ABQB 447 Date: 20120710 Docket: 1103 11989 Registry: Edmonton Between: Registrar of Land Titles Applicant - and - Mackenzie County Respondent _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice D.A. Sulyma _______________________________________________________ [ 1 ] The Registrar of Land Titles (the Registrar) brings this reference application pursuant to

section 185 of the Land Titles Act, RSA 2000 c L-4 ( LTA ) which provides for a reference of questions to a judge of the Court of Queen ’ s Bench. The questions being raised by the Registrar in this reference application are: 1) Is a Certificate of Lis Pendens a “ charge on land ” pursuant to the definition of “ encumbrance ” in s 1(

e) of the LTA ?

2) Is an Attachment Order, a “charge on land” pursuant to the definition of “encumbrance” in s 1(

e) of the LTA? 3) Does the right to clear title pursuant to s 423 of the Municipal Government Act, RSA 2000, c M-26 (MGA) impose a duty on theRegistrar to provide clear title, or is it otherwise a matter between the Municipality, the new owner and the holder of the allegedencumbrance? [2] The respondent Mackenzie County sold land for the recovery of taxes pursuant to the MGA. The land had a Certificate ofLis Pendens (CLP) as well as an Attachment Order registered on title.

The respondent sought to have the Registrar discharge the CLPand the Attachment Order pursuant to the right to clear title as provided in the MGA. The Registrar brought this reference. [3] The Registrar is not advocating a position on the question of whether or not the CLP or Attachment Order is anencumbrance and thus should be discharged from title. However, the Registrar notes that this issue requires the Registrar to interpretwhat is or is not an encumbrance on a particular title.

That in turn places the Registrar in a position of either being in contempt of court orpotentially discharging a registration improperly.

The Registrar notes that in order to avoid any one of these positions, it becomes theobligation of the Registrar to seek clarification of another party’s court order. [4] This in turn raises the issue of whether the Registrar is obligated to make a determination of what is or is not anencumbrance or seek clarification from this court; or whether it is appropriate for the Registrar to require the party that obtained such anorder to go and seek clarification from the court on its own (i.e. by itself).

Position of the Parties Position of the Registrar [5] The Registrar reiterates that it is not advocating a position on the question of whether or not the CLP or Attachment Orderis an encumbrance that should be discharged from title. The Registrar notes the general legislative background which provides for areference to this Court (s 185 of the LTA). The Registrar further refers to s 423 of the MGA which provides a right to clear title in certaincircumstances; s 410 of the MGA which defines “encumbrance” and “encumbrancee”; and s 1(

e) of the LTA which defines“encumbrance.” [6] Although the Registrar is not advocating a position here, it does not view the CLP or Attachment Order as falling withinany of the exceptions set out in s 423 of the MGA. As such, the Registrar views the answer of whether or not the CLP or AttachmentOrder should be discharged in order to provide clear title as being determined by whether they fit within the definition of “encumbrance”as defined in the LTA. [7] The Registrar provides the following case law for the Court’s consideration: (

i) Pflueger v Alberta (South Alberta Land Registration District) (1977), (AB KB), 4 AR 279 at para 6, 1977CarswellAlta 46 (Alta SC) [Pflueger] which states that: [T]he term “charge’ signifies that land is security for the payment of a debt or performance of an obligation. (ii) Katana v Wilson, 1996 CarswellOnt 2512 (Gen Div) [Katana] in which the Court states at para 11 that: ... the certificate of lis pendens is not within the scope of the words “restrictions, charges, liens and encumbrances.”

(iii) 375069 Alberta Ltd v 400411 Alberta Ltd, 2000 ABQB 29 at para 36, 2000 CarswellAlta 51 [375069 Alberta Ltd] in which theCourt states that: A certificate of lis pendens is not an encumbrance on land as encumbrance is defined in s 1(

f) of the Land Titles Act ... (iv) Broda v Broda, 2004 ABQB 965 at para 27, 2004 CarswellAlta 1800 where the Court says that: [B]ecause an encumbrance is a contract between the parties ...

And in paragraph 28, quoting from Oosterhoff and Rayner, eds, Anger and Honsberger Law of Property, 2nd ed (Aurora, Ont: CanadaLaw Book Inc, 1985) the Court states that: Like a mortgage a charge arises by contract. [8] The Registrar further points out that usually the obligation to determine whether a registration on a certificate of title is anencumbrance, pursuant to s 423 of the MGA, originates with the Registrar being presented with the court order which usually directs theRegistrar to “discharge all encumbrances” (or words to that effect).

Unless orders specifically address specific registrations (which they usually do not) it’s then left to the Registrar to interpret what is or is not an encumbrance on thatparticular title. It notes that other than situations involving “Form 16 registrations”, which the Forms Regulation 480/1981 stipulates isan encumbrance, the Registrar is being placed in a position of performing a function which properly belongs to this Court, that being oneof statutory

interpretation where the Land Titles policies and manuals provide no guidance. [9] The Registrar seeks clarification as to whether it is appropriate for the Registrar to require a party presenting an order toseek further clarification rather than the onus being on the Registrar. Position of the Respondent Mackenzie County [10] The County refers to the legislative background that applies when municipal property taxes are in arrears for more than oneyear and the tax recovery process commences.

The County also refers to the MGA, s 412 which allows it to prepare a tax arrears listwhich is provided to the Registrar for endorsements of tax notification on each relevant certificate of title; the tax notification remains ontitle until the municipality requests removal, either upon payment of taxes or sale of lands (MGA, ss 413, 415 & 425). The respondentfurther refers to s 410 of the MGA and s 1(

e) of the LTA, both of which define “encumbrance.” [11] It is the respondent’s submission that the legislature in enacting s 423 of the MGA intended land sold through tax recoverywould be free and clear of all registered interests, notifications and caveats save for those specified in s 423 (1). And that the Registrarshould have removed the CLP and the Attachment Order from title to the Lands when registering the transfer following the publicauction. [12] The County refers the Court to the modern approach to statutory

interpretation as mandated by the Supreme Court of Canadaas requiring that “the words of

an Act are to be read in their entire context, in their grammatical and ordinary sense harmoniously withthe scheme of the Act, the object of the Act and the intention of Parliament: Rizzo & Rizzo Shoes Ltd (Re), (SCC),[1998] 1 SCR 27 at para 21, 154 DLR (4th) 193. It notes the approach taken in interpreting statutes empowering municipalities must bebroad and purposive. As stated by the Supreme Court of Canada in United Taxi Drivers’ Fellowship of Southern Alberta v Calgary(City), 2004 SCC 19 at paras 6 & 8, [2004] 1 SCR 485: [t]he evolution of the modern municipality has produced a shift in the proper approach to the

interpretation of statutes empowering

municipalities. This notable shift in the nature of municipalities was acknowledged by McLachlin J. (as she then was) in Shell CanadaProducts Ltd. v. Vancouver (City), (SCC), [1994] 1 S.C.R. 231, at pp. 244-45 ... This approach is also consistent with s. 10 of Alberta’s

Interpretation Act, R.S.A. 2000, c. I-8, which provides that every provincialenactment must be given a fair, large and liberal construction and

interpretation that best ensures the attainment of its objects. [13] The respondent County further points to the purpose of legislation relating to tax recovery as commented on by the SupremeCourt of Canada in Krumm v Shepard No 220 (Municipal District of), (SCC), [1928] SCR 487, 1928 CarswellAlta 115at paras 67-68 thus: The object of the legislation was to make provision for the distribution of the burden of the municipality’s financial obligations over thetaxable lands of the municipality according to their respective values.

To attain that object it was necessary to have a time fixed beyondwhich the legality of the assessment could not be questioned, so as to insure that each parcel of land would bear its proper share of theburden. It was also necessary once an assessment was made, that no uncertainty should exist as to the right of the municipality to obtain the taxeslevied (if unpaid) out of the land by forfeiture proceedings. That forfeiture proceedings are drastic and in some cases work hardship isbeside the question.

The Legislature in passing the Act no doubt foresaw the possibility of an owner being deprived of his land throughnon-payment of the taxes levied against it by reason of forgetfulness or inattention on his part, but it evidently concluded that a want offinality in reference to the assessment or a want of certainty as to the municipality's right to recover the taxes out of the land, with itsconsequent derangement of the municipal finances, would be a much greater evil. [14] The County notes that the MGA as referenced in the Alberta Land Titles Procedures Manual “enables the municipality toenforce its tax levies against land without the necessity of court proceedings”: Alberta Land Titles Procedures Manual, TAX-1 at 1.

Thelegislative intent, it submits, was to avoid the necessity of the municipality commencing court proceedings each time a taxable propertywithin its municipal boundaries fell into tax arrears. However, if the Registrar’s

interpretation of MGA, s 423 is upheld, a municipalitywill indeed be forced to commence court proceedings to have these interests removed from title or a purchaser would acquire the landswith these interests on title and be obliged to commence court proceedings to have these interests removed. Such a result is in conflictwith the purpose of these provisions. [15] Further, the respondent argues that the effect of the Registrar’s

interpretation would be to give preferred treatment to certainregistered interests (such as a CLP or an Attachment Order) over registered interests that fall within the narrow definition of“encumbrance” as identified in the Applicant’s Brief. For instance, if Bateman Petroleum, the applicant under the Attachment Orderobtained a judgment and writ of enforcement and registered the writ on title, that writ is susceptible to a discharge subsequent to a taxrecovery sale. However, because of the narrow

interpretation proposed by the Registrar, if Bateman Petroleum has no writ but only anAttachment Order, that Attachment Order would remain on title after a tax recovery sale. The respondent contends that this result is anirrational

interpretation of the legislation. [16] The respondent submits that the modern approach to statutory

interpretation presumes that the provisions of

an Act are meantto work together. That a narrow

interpretation of encumbrance in s 423(1) of the MGA to exclude interests and caveats (such as a CLP)will result in several internal inconsistencies within the MGA. The County observes that both ss 423(1) and 424(3) state that a new ownerof a land parcel acquires the land free of all encumbrances save for a specified list of interests.

It argues that the wording in s 426providing for a revival of title uses a phrase that is more broad than “encumbrance.” It specifies that a certificate of title revived by theRegistrar is subject to the same “notifications, charges and encumbrances” to which it would have been subject if it had not beencancelled under s 424(2). [17] If s 424(3) did not operate to extinguish notifications, then the County submits that the legislature would not need to specifythat the title would be revived by the Registrar subject to them.

In other words, inherent in the phrase “notifications, charges andencumbrances” for the purposes of revival is the intention that “notifications, charges and encumbrances” were to have been removedfrom title upon transfer to the municipality under s 424. [18] The respondent argues that by extension, if s 424(3) operates to extinguish all registered interests on title save for those

specifically enumerated, then so does the same language in s 423(1). And that the “notifications” referenced in s 426(3)(

a) would includeregistered interests or caveats such as a CLP. [19] Further, the County urges the Court to read s 423 in context of notices respecting public auction, as referenced in s 417 of theMGA. The respondent observes that under s 417 the Legislature mandated that notice of the potential for tax sale must be provided toindividuals who have caveats (in addition to those who have encumbrances). It submits that the wider notice provision was intentionallyincluded by the Legislature. [20] The respondent County contends that the language of s 423(1) in itself suggests that the word “encumbrance” was notintended to be limited to a narrow definition. That is, the

section itself enumerates interests that do not fall under the definition of“encumbrance.” The County cites two of the listed interests (i.e. “registered easements and instruments registered pursuant to s. 69 of theLand Titles Act” ( MGA, s 423(1)(d)), and “right of entry orders as defined in the Surface Rights Act” ( MGA, s 423(1)(e)) as examples ofinterests that would not qualify as an encumbrance if narrowly defined.

It argues that if s 423(1) were intended only to apply toencumbrances that charged land as security for the payment of a debt or performance of an obligation, then the legislature would nothave found it necessary to specify other registerable interests that remain on title following a sale under s 423 of the MGA.

Thus, theCounty submits, the language of s 423(1) suggests that the exemptions listed are the only registered interests that may remain againsttitle. [21] The County also submits that the heading of s 423 which is “Right to a clear title” is further indication of the legislativeintent: R v Davis, (SCC), [1999] 3 SCR 759 at paras 51-53, 179 DLR (4th) 385; Ruth Sullivan, Sullivan on theConstruction of Statutes, 5th ed (Markham, Ont: LexisNexis Canada Inc, 2008) at 394. [22] The County states that for the purpose of this reference application, the analysis above applies equally to both the CLP andthe Attachment Order interests.

However, the County makes an alternative argument in relation to the Attachment Order. It submits thatin the event that a narrow

interpretation of the definition of “encumbrance” is applied, the Attachment Order in this reference applicationis an encumbrance under s 423 of the MGA and as such, should be removed from title to the Lands. [23] The respondent notes that s 1(

e) of the LTA defines “encumbrance” as any charge on land effective for any purpose whateverand executions against land. That in order to obtain an attachment order, an applicant must first satisfy the Court that there is areasonable likelihood that the applicant’s claim against the defendant property owner will be established.

It notes that in InterclaimHoldings Limited v Down, 1999 ABCA 329 at para 82, 250 AR 94, the Alberta Court of Appeal said that: “Attachment” has been defined as (t)he act or process of taking, apprehending or seizing a person or property by virtue of a writ,summons or other judicial order and bringing the same into custody of the court for the purpose of securing satisfaction of the judgmentultimately to be entered in the action.” The County notes that priority between an attachment order and the interest of a third person under the Civil Enforcement Act, RSA2000, c 15, s 23(1) is determined as if the attachment order were a writ.

Accordingly, the respondent argues, the Attachment Orderconstitutes a charge on land and thus should be discharged pursuant to MGA, s 423. [24] Regarding the issue of the Registrar’s duties and obligations pursuant to the MGA, s 423, the County notes that the provisionsof the Land Titles Procedures Manual regarding tax recovery notices do not accord with the Registrar’s obligation under MGA, s 417(1)which requires that notice be sent to, amongst others, “any person who has an interest in the parcel that is evidenced by a caveatregistered by the Registrar.” [25] The County contends that when the Registrar receives documentation to complete a sale pursuant to MGA, s 423, it shouldissue a new certificate of title in the purchaser’s name free and clear of all registered interests save for those enumerated in s 423(1).

Itsubmits that in these circumstances, the Registrar should issue a new certificate of title that is not subject to interests such as certificatesof lis pendens or attachment orders. [26] Based on these arguments and submissions, the County requests a direction from this Court that the Registrar shall in thefuture provide notice to all persons with registered interests pursuant to s 417 of the MGA; that the Registrar shall interpret s 423 of theMGA as authority to remove all registered interests against lands sold at a public auction for tax recovery purposes save for those

specifically enumerated in 432(1) of the MGA ; and that the direction extend to the application of s 424 of the MGA to avoid further references to this Court. Analysis and Decision [ 27 ] I refer to the questions raised by the Registrar and answer them as follows: 1. Is a Certificate of Lis Pendens a “ charge on land ” pursuant to the definition of “ encumbrance ” in s 1(

e) of the LTA ? 2. Is an Attachment Order, a “ charge on land ” pursuant to the definition of “ encumbrance ” in s 1(

e) of the LTA ? ? [ 28 ] The answer to both of these questions lies in the

interpretation of s 423 of the MGA providing a “ right to clear title ” consequent to public auction and ultimately, the

interpretation of s 1(

e) of the LTA which defines “ encumbrance. ” [ 29 ] Although the County has properly referred to broad principles of statutory

interpretation, principles that apply in interpreting statutes empowering municipalities (and specifically in relation to tax recovery) and has also referred to absurdities that would result from a narrow definition in the circumstances of the present reference, I do not feel able to apply those principles in the manner suggested by the County. Rather, I must presume that the Legislature in the legislative scheme chose to not specify the registrations here (i.e. a Certificate of Lis Pendens and an Attachment Order) as being part of the exempted encumbrances referred to in s 423(1).

Neither instrument can be said to fall within any of the exceptions set out in s 423 of the MGA . [ 30 ] I have had regard to the cases cited by the Registrar which hold that: the term “ charge ” signifies that land is security for the payment of a debt or performance of an obligation: Pflueger at para 6 ; that “ the certificate of lis pendens is not within the scope of the words “ restrictions, charges, liens and encumbrances ” : Katana at para 11; and that “ [a] certificate of lis pendens is not an encumbrance on land as encumbrance is defined in s 1(

f) of the Land Titles Act [RSA 1980, c L-5] ” : 375069 Alberta Ltd at para 36. [ 31 ] Given that the definition of “ encumbrance ” is “ any charge on land created or effected for any purpose whatever ” ( LTA , RSA 2000 c L-4, s 1(e)), and that a “ charge ” indicates that land is security for payment of debt or performance of an obligation, I conclude that the two instruments involved in the present reference, i.e. the Certificate of Lis Pendens and the Attachment Order, are not “ charges on land ” and do not constitute “ encumbrances. ” In the result, the Certificate of Lis Pendens and the Attachment Order were properly maintained on the title in question by the Registrar. [ 32 ] In my opinion, the Court would be going outside the task of legislative

interpretation into that of rewriting legislation if it expands the definition of “ encumbrance ” as canvassed by the respondent County in an attempt to give effect to an intention of “ clear title. ” [ 33 ] The answer to both of the questions above is that each of these registrations do not constitute a “ charge on land ” such as to fall within the definition of “ encumbrance. ” [ 34 ] The last question raised by the Registrar in this reference is: 3.

Does the right to clear title pursuant to s 423 of the MGA impose a duty on the Registrar to provide clear title, or is it otherwise a matter between the Municipality, the new owner and the holder of the alleged encumbrance? [ 35 ] Given that I have upheld the position of the Registrar in respect of the two questions above, it would be improper to impose a duty on the Registrar either to provide clear title as canvassed by the respondent County or to go to court to seek clarification.

[ 36 ] In my view, it is appropriate for the Registrar to require the party obtaining any order or wishing to address a specific registration to seek any clarification it requires for itself from the Court. [ 37 ] Costs may be addressed in the future. Heard on the 9 th day of November, 2011. Dated at the City of Edmonton, Alberta this 9 th day of July, 2012. D.A. Sulyma J.C.Q.B.A. Appearances: S.J. MacDonald for the Applicant J. Grundberg for the Respondent