Paro Enterprises v. Murphy, 2015 NLCA 33

Date: 20150715 Docket: 14/23 Citation: Paro Enterprises v. Murphy , 2015 NLCA 33 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN: PARO ENTERPRISES LIMITED APPELLANT AND: ANNETTE MURPHY RESPONDENT Coram: Welsh, White and Hoegg JJ.A. Court Appealed From: Supreme Court of Newfoundland and Labrador Trial Division (G) 201401G0022 2014 NLTD(G) 39 Appeal Heard: April 8, 2015 Judgment Rendered: July 15, 2015 Reasons for Judgment by Welsh J.A. Additional Concurring Reasons by Hoegg J.A. Dissenting Reasons by White J.A. Counsel for the Appellant: Gregory J. French Counsel for the Respondent: Sandra M. Burke Q.C.

Welsh J.A.: [ 1 ] At issue in this appeal is whether the applications judge erred in refusing to vacate a notice of lis pendens registered against property claimed by Annette Murphy as a matrimonial home. BACKGROUND [ 2 ] On January 15, 2013, Annette Murphy separated from her husband, Rodney Murphy. On July 25, 2013, she registered a lis pendens in respect of a property which she alleges was a matrimonial home under the Family Law Act , RSNL 1990, c. F-2.

On August 26, 2013, she filed an originating application for division of the matrimonial property. [ 3 ] Title to the property against which the lis pendens was registered is held by Paro Enterprises Limited. By application dated February 10, 2014, Paro applied for an order vacating the lis pendens to facilitate sale of the property. That application was denied ( 2014 NLTD(G) 39, 348 Nfld. & P.E.I.R. 248 ). [ 4 ] In filing the lis pendens and in responding to Paro’s application, Ms.

Murphy relied on section 6(3) of the Family Law Act which deals with a matrimonial interest in property held by a corporation: The ownership of a share or an interest in a share of a corporation entitling the owner to the occupation of a dwelling unit owned by the corporation shall be considered to be an interest in the dwelling unit for the purposes of subsection (1). Subsection (1) defines “matrimonial home”: (b) “matrimonial home” means the dwelling and real property occupied by a person and his or her spouse as their family residence and owned by either or both of them … . [ 5 ] Paro alleged that Ms.

Murphy did not comply with relevant legal requirements, having registered the lis pendens about a month before filing her originating application.

Further, she named Shoal Investments Limited, the sole shareholder of Paro, but not Paro, in her originating application. [ 6 ] The lis pendens states: Re: All that piece or parcel of land located at Main Road, Thorburn Lake, in the Province of Newfoundland and Labrador, and registered in the name of PARO Enterprises Limited and/or Shoal Investments Ltd. and/or Rodney Murphy Take Notice That an action is pending in the Supreme Court of Newfoundland and Labrador, Trial Division (Family) Between: Annette Murphy Applicant And: Rodney Murphy First Respondent And: Shoal Investments Ltd.

Second Respondent And that in the aforesaid action the Applicant claims, inter alia , a one half interest in the matrimonial home located at Main Road, Thorburn Lake, Newfoundland and Labrador as more particularly described in

Schedule “A” attached hereto. Dated at St. John’s, in the Province of Newfoundland and Labrador, this 24 th day of July 2013. [ 7 ] The applications judge set out the basis for Paro’s application: [10] Paro bases its application to vacate the lis pendens on the following: It is the legal owner of the property at Main Road, Thorburn Lake. Annette Murphy and Rodney Murphy sold the property to Paro Enterprises in 2008 and confirmed the sale in 2010. Paro Enterprises paid the Murphys $185,000 for the property. Annette Murphy has not attacked the sale as yet.

Annette Murphy named only Rodney Murphy and Shoal Investments Limited as respondents in her originating application and neither of them holds title to the property. Annette Murphy has applied to join Paro and NuVision as other respondents to her originating application but she should not be allowed to “bootstrap” her proceedings now that Paro has applied to vacate her lis pendens . Annette Murphy’s claim, if it has any merit, is a claim for damages and not a claim in rem against the property.

Paro suffers prejudices and damages of its own because it cannot sell the property until the lis pendens is vacated. [ 8 ] In dismissing Paro’s application, the judge noted that: Ms. Murphy is seeking a declaration that the property was a

matrimonial home in which she has an interest and that she is not simply claiming damages; the lis pendens was directed to ParoEnterprises, Shoal Investments and Rodney Murphy; and Ms. Murphy “questions if the 2008/2010 sale of the Thorburn Lake property toParo was a bona fide transaction” (paragraph 15). The applications judge concluded: [18] The Family Law Act gives this Court well-recognized curative and tracing powers to deal with the property of separated anddivorced parties; some of which may be relevant to these proceedings.

It is quite early in these proceedings, and I will not say withoutfull disclosure being made by all parties involved or who may be joined in the family proceedings that Ms. Murphy may avail of some ofthose powers to present her claim for an interest in the Thorburn Lake property; but it is possible. [19] Overall, Paro Enterprises has not shown on a balance of probabilities that the lis pendens Annette Murphy registered on July 25,2013 against the Thorburn Lake property should be vacated. … [9] I note that the applications judge accepted Ms.

Murphy’s submission that she is not seeking damages, but an interest in theproperty as a matrimonial home under section 6(3) of the Family Law Act. Whether she may wish to retain that home upon division ofthe matrimonial property and the possible effect of Paro’s holding title to the property are properly left for consideration at trial based onall the evidence.

The judge did not accept the proposition that damages would be an adequate remedy which would result in vacating thelis pendens, and Paro has provided no basis on which to set aside the judge’s decision on that point for purposes of this appeal. (See alsoparagraphs 22 to 24, below.) ISSUES [10] The first issue is whether leave to appeal is required and, if so, whether leave should be granted.

The issue on appeal iswhether the applications judge erred by refusing to vacate the lis pendens on the basis that it was registered before an action wascommenced in court and because Paro Enterprises, which held title to the property, was not named as a respondent in the originatingapplication filed by Ms. Murphy. ANALYSIS Leave to Appeal [11] Appeal of an interlocutory order requires leave of the Court (Rules of the Supreme Court, 1986, rule 57.02(1)(a)).

An order willbe interlocutory, rather than final, if its effect “is such that the real matter in dispute between the parties remains to be determined in thevery proceeding from which it issued” (Newfoundland Government Fund Ltd. v. Hickman, 2008 NLCA 56, 287 Nfld. & P.E.I.R. 13, atparagraph 7). [12] This appeal does not fall within that definition and, therefore, cannot be characterized as interlocutory. While the appeal relatesto an originating application brought by Ms.

Murphy for the division of matrimonial property, at the time relevant for purposes of thisappeal, Paro was not named as a party to that litigation. (See paragraphs 25 and 26, below.) In the circumstances, this appeal willdispose of the issues as between the parties to Paro’s application. [13] In the result, rule 57.02 is not engaged and leave to appeal is not required. The Appeal [14] I begin with the

summary of legal principles on which the applications judge relied: [4] My brother, Leblanc, J. discussed the general law on filing and the effects of lis pendens in this province in Infini-T Holdings Ltd.v. Bell Aliant Regional Communications Inc. [2010 NLTD(G) 205, 2010 NLTD 205 , 310 Nfld. & P.E.I.R. 67]. In particular, hefound that: A lis pendens is a notice of pending legal action involving an interest in land, and is intended to preserve rights up to and during thelitigation; it involves an action in rem. A registered lis pendens does not constitute a lien or a charge on land but merely clouds the title.

Registering a lis pendens must coincide with filing an action in court claiming an interest or estate in land. If damages can provide an adequate remedy for the party filing a lis pendens it should not be allowed to stand. English common law up to December 31, 1832 applies to lis pendens in this province. Coincidence of Lis Pendens and Cause of Action [15] I would agree with the above

summary, with a clarification to the third point. I agree that a lis pendens becomes effective onlyafter an action has been filed in court claiming an interest in land. That is, if a lis pendens is registered, but no action has beencommenced, there is no pending litigation to which the lis pendens can attach and it has no effect.

Accordingly, where an action has notbeen commenced, an application to vacate a lis pendens must succeed. [16] On the other hand, if a lis pendens has been registered before an action has been commenced, but an action is commencedbefore the lis pendens has been vacated, the lis pendens will have become effective once the action is commenced. What is required foreffect at law is that the lis pendens and cause of action coincide, regardless of which of the two may be first in time.

This conclusion isconsistent with the purpose of a lis pendens which is to “give notice” to interested parties that there is a pending legal action involving aninterest in land (paragraph 14, above). [17] In practice, a lis pendens should be registered only after an action has been commenced. This follows from the application of

the Registration of Deeds Act, 2009 , SNL 2009, c. R-10.01, in force as of December 13, 2010. Section 7(1)(

e) provides for the registration of a lis pendens : The registrar shall register in paper format or electronically, … (

e) notices of pending lawsuits, … Section 27(2) (25.1) of the

Interpretation Act , RSNL 1990, c. I-19, defines “ lis pendens ” as “pending lawsuits”. [ 18 ] Applying this section, it could be expected that the Registry of Deeds would only accept a notice of pending lawsuit for registration if there is confirmation that an action has been commenced in court.

However, if a notice of pending litigation is accepted for registration without such confirmation, the error may be rectified when the action is, in fact, commenced because, at that time, the lis pendens and court action coincide and the notice, which is the purpose of the lis pendens , becomes effective. [ 19 ] In this case, had Paro applied to have the lis pendens vacated before Ms.

Murphy had commenced her action, which she did by filing the originating application on August 26, 2013, the application would have succeeded since the lis pendens would not have coincided with a cause of action that had been commenced. I note that inappropriate conduct by a party in registering a lis pendens without first or coincidently commencing an action may be dealt with by an appropriate order as to costs when the lis pendens is vacated. [ 20 ] When Paro brought the application to vacate on February 10, 2014, the lis pendens and cause of action coincided.

At that time, the lis pendens was effective to give notice to interested parties that the land in question was the subject of litigation. Accordingly, the applications judge did not err in refusing to vacate the lis pendens because it was filed a month before the cause of action was commenced. It is necessary, then, to consider whether the applications judge erred for some other reason. Party to the Litigation [ 21 ] The second ground on which Paro relies is that, while Paro is identified in the lis pendens notice that was registered against the property, Ms.

Murphy’s originating application names Shoal Investments, but does not name Paro as a party. After noting that an application to join Paro to Ms. Murphy’s originating application had been filed but not yet heard, the judge explained the contextual framework: [8] In the event, Ms. Murphy wants to amend her application by relying on these details to support her claim to the two properties that she says are matrimonial homes: “Shoal Investments is a corporate body duly incorporated under the laws of Newfoundland and Labrador and is the sole shareholder of Paro and NuVision.

Rodney Murphy has purportedly transferred all of the assets and/or shares of Paro and NuVision (which are/were solely owned by Rodney Murphy) to the Shoal Investments. Paro and NuVision held properties, of which at least three were properties in which Annette Murphy and Rodney Murphy resided as husband and wife, and which properties Annette Murphy claims are ‘matrimonial homes’. The alleged sale of Paro and NuVision to Shoal Investments and the resulting transfer of the matrimonial homes occurred without the consent of Annette Murphy”. [9] In effect, if I allow Ms.

Murphy to amend her originating application , she will claim that at least three real properties were affected when Rodney Murphy sold his shares in Paro and NuVision and/or transferred the assets from those companies to Shoal Investments (if either actually occurred); that she and Mr. Murphy formerly occupied the three properties during their marriage as matrimonial homes; that one of those properties is located at Main Road, Thorburn Lake, and that it is subject to the lis pendens she filed on July 24, 2013. (Emphasis added.) [ 22 ] The judge went on to explain: [12] It is true that Ms. Murphy only included Mr.

Murphy and Shoal Investments as respondent parties when she issued her originating application on August 26, 2013; but she clearly had Paro and NuVision in her contemplation as is evident from the paragraph I quoted above from her application; and it is equally clear from the same quotation that she was concerned about any transactions in shares or properties that occurred amongst Rodney Murphy, Shoal Investments, Paro Enterprises and NuVision Foods that might affect title to the property. I also note that Ms.

Murphy directed the lis pendens she filed in the Registry of Deeds on July 25, 2013 to Paro Enterprises, Shoal Investment[s] and Rodney Murphy. [13] From that I discern that Ms. Murphy is not simply claiming damages but seeks an interest in property …; and that she has taken that position from the beginning and that she notified all actual or potential parties, including Paro, of her intention. [ 23 ] The applications judge went on to identify issues that may arise with respect to the Thorburn Lake property for purposes of the division of the matrimonial assets.

As noted above, in paragraph 18 of his decision, the judge made reference to the curative and tracing powers that apply under the Family Law Act . [ 24 ] It is clear that the applications judge intended that the lis pendens should remain in effect to give notice of Ms. Murphy’s possible interest in the property pending a determination regarding the distribution of matrimonial assets. However, at the time, there was a lack of factual context within which to define the proper parties to the originating application.

Further difficulty arose from the ordering of the applications, with Paro’s application to vacate the lis pendens being heard before the application Ms. Murphy had filed to add Paro as a party to the matrimonial action. [ 25 ] As it turned out, by order dated June 19, 2014, the judge ordered, among other things, that Paro Enterprises be added as a third respondent to the originating application. However, at the time the judge considered Paro’s application to vacate the lis pendens , Paro was not named as a party to the litigation.

I note that, since Paro was the registered holder of title to the property, it would have been

prudent for Ms. Murphy to name Paro in the originating application. [ 26 ] Nonetheless, because the judge dealt with Paro’s application before Paro was added as a party to the litigation, the lis pendens and cause of action were not coincident insofar as the registered title-holder must be named as a party to the action. One of the issues that may be relevant in the disposition of Ms. Murphy’s originating application is whether Paro or Shoal Investments owned the property.

In light of the judge’s discussion of the issues and the manner in which the matter proceeded, the judge should have considered the effect of failing to deal first, or at the same time, with Ms. Murphy’s application. [ 27 ] As it was, since the judge had dismissed Paro’s application to vacate the lis pendens , it was unnecessary for him to consider whether Ms. Murphy’s application to add Paro as a respondent should be heard before a decision was rendered regarding the lis pendens . However, the timing of the decisions becomes important as a result of this appeal.

That is, commencement of an action in court against the proper party is a requirement for maintaining a lis pendens . The applications judge did not deal directly with whether it was sufficient to name Shoal Investments as a party where Paro held title to the property, though he appears to have proceeded on that assumption. That question involves issues of fact and law which would properly be determined at trial. [ 28 ] For purposes of this appeal I cannot ignore the above considerations particularly considering that Ms.

Murphy’s originating application, constituting an action before the court, was in place so as to coincide with the lis pendens . Paro was named in the lis pendens which was registered against the proper property. The names of the parties to the originating application were also included on the lis pendens . This information would serve notice to a potential purchaser regarding the litigation in which the property was at issue. In the circumstances, the purpose of a lis pendens to give notice of pending litigation to any interested party was satisfied.

This situation may be contrasted with the circumstance where no litigation had been commenced. [ 29 ] In the result, I conclude that the information contained in the lis pendens together with the originating application naming Mr. Murphy and Shoal Investments as respondents was adequate to maintain the lis pendens . It would have been preferable for Ms. Murphy to have named the registered title-holder, Paro, as a party in the originating application, but failure to do so is not determinative of Ms.

Murphy’s right to maintain the lis pendens . [ 30 ] Accordingly, I would dismiss the appeal, though I reach that conclusion for reasons different from those of the applications judge. BEST PRACTICE [ 31 ] Finally, a

summary of principles and procedures regarding registering and vacating a notice of lis pendens is apposite. 1. A lis pendens should not be filed until after litigation has been commenced by means of an originating application or statement of claim; 2. The title-holder of the property as listed in the Registry of Deeds should be named as a party in the litigation; 3. A copy of the originating document commencing the litigation should be included when the lis pendens is registered; 4. The lis pendens should clearly identify the litigation to which it attaches; 5.

If a lis pendens is registered and litigation has not been commenced, application to the court will result in the lis pendens being vacated with an appropriate order for costs; 6. As discussed above, if a lis pendens is registered before litigation is commenced, but litigation is subsequently commenced before an application is made to vacate the lis pendens , the coincidence of the lis pendens and commencement of litigation operates to make the lis pendens effective as of the date of coincidence. 7.

Proper operation of the Registry of Deeds and reliance on the registry is maintained on the basis that: If a lis pendens is registered against a property, notice is given that the property is the subject of litigation, but if litigation has not been commenced as required, an application may be made, and dealt with expeditiously, to have the lis pendens vacated, with an appropriate order for costs; That said, where a lis pendens is registered before litigation has been commenced, a person who proceeds to deal with the property without the lis pendens having first been dealt with does so at the risk of the lis pendens becoming effective by the subsequent commencement of litigation.

SUMMARY [ 32 ] In

summary, leave to appeal is not required given that this is an appeal of a final order as between Paro and Ms. Murphy. The lis pendens became effective when the originating application was filed, though it had no effect prior to that time. While it would have been prudent to name Paro as a party to the originating application for the division of matrimonial property, in the particular circumstances, failure to do so does not render the lis pendens ineffective. [ 33 ] Accordingly, I would dismiss the appeal with party and party costs to Ms. Murphy. ________________________________ B. G. Welsh J.A.

Additional Concurring Reasons by Hoegg J.A. [ 34 ] I agree with my colleague Welsh J.A. for the reasons she stated that this appeal should be dismissed with costs to Ms. Murphy.

Nevertheless, I add the following comments. [ 35 ] I agree with my colleague White J.A. that it would be beneficial for all users of the registry of deeds that a person filing a lis pendens be required to file an affidavit or certificate setting out that one or more of the parties to a lawsuit, clearly identified by a court filing number and particulars, is the registered owner of real property described in a registered document and that the described real property is involved in the lawsuit.

Such a requirement is a simple measure that would prevent disputes such as this one. [ 36 ] In this case, Paro at no time asserted that it had been prejudiced either by Ms. Murphy’s matrimonial litigation being filed one month after her lis pendens was filed or by her initial failure to name Paro. Neither has Paro suggested that Ms.

Murphy deliberately misrepresented her position or acted in bad faith in her conduct of the litigation. [ 37 ] The rationale for filing a lis pendens , aptly described by my colleague White J.A. at paragraphs 65 and 66 of his judgment, is to give notice of “the parameters of the claim” to the registered owner of the land and to enable a potential purchaser to “assess the risks of a transaction”. This rationale was satisfied in this case and Paro does not argue otherwise. In other words, Paro was not left uncertain about the cloud on title which Ms.

Murphy’s lis pendens created, and there is no suggestion that a potential purchaser was either. [ 38 ] If this Court were to vacate the within lis pendens , Ms. Murphy could seek to protect her interest in the property by other means or by filing a new lis pendens . Perhaps she would succeed.

However, new and different considerations would apply and could quite possibly thwart her efforts. [ 39 ] Accordingly, it is my view that vacating the lis pendens in the unique circumstances of this case would be to apply the law in a rigid and technical manner to a pointless or possibly unjust end. ________________________________ L. R. Hoegg J.A.

Dissenting Reasons by White J.A.: [ 40 ] This is an appeal of an order dismissing an application to strike a lis pendens registered in the Registry of Deeds by the respondent in relation to real property at Main Road, Thorburn Lake (the property). [ 41 ] Leave to appeal is not required as the order of the applications judge is clearly final in nature.

BACKGROUND [ 42 ] By deed dated November 24, 2010 (accepted for registration on November 30, 2010), the respondent, Annette Murphy and her spouse Rodney Murphy conveyed the property to the appellant Paro Enterprises Limited (Paro). [ 43 ] A document styled “Notice of Lis Pendens” dated July 24, 2013 was accepted by the registrar of deeds and registered on title on July 25, 2013.

This document purports to give notice that: .… an action is pending in the Supreme Court of Newfoundland and Labrador, Trial Division (Family) BETWEEN: Annette Murphy Applicant AND: Rodney Murphy First Respondent AND: Shoal Investment Ltd. Second Respondent and that in the aforesaid action the Applicant claims … At the time of registration of the “Notice of Lis Pendens” no lawsuit whatsoever had been commenced by Ms. Murphy, despite the very

clear, specific and misleading impression left by this document. Referring to the “aforesaid action” and the use of a typical style of causeif not abuse of process certainly verges on it. [44] In fact, it was not until August 26, 2013 that an interlocutory application was issued by Ms. Murphy seeking divorce, spousalsupport and division of matrimonial assets. Rodney Murphy and Shoal Investments Limited were named as respondents.

Paro was notnamed as a respondent. [45] In January of 2014, Paro entered into an agreement to sell the Property. [46] The applications judge dismissed Paro’s application to strike the lis pendens: [22] … Overall, Paro Enterprises did not prove on a balance of probabilities that Annette Murphy’s lis pendens is unperfected orgroundless. [47] In reaching this conclusion, the applications judge referred to the analysis of Leblanc J. in Infini-T Holdings Ltd. v.

Bell AliantRegional Communications Inc., 2010 NLTD 205 , 2010 NLTD(G) 205, 310 Nfld. & P.E.I.R. 67, in summarizing the lawrelative to lis pendens in this jurisdiction: [4] … • A lis pendens is a notice of a pending legal action involving an interest in land and is intended to preserve rights up to and duringthe litigation; it involves an action in rem. • A registered lis pendens does not constitute a lien or a charge on land but merely clouds the title. • Registering a lis pendens must coincide with filing an action in court claiming an interest or estate in land. • If damages can provide an adequate remedy for the party filing a lis pendens it should not be allowed to stand. • English common law up to December 31, 1832 applies to lis pendens in this province.

ISSUE [48] In my view, this appeal can be disposed of by an analysis of whether or not the conclusion of the applications judge that the lispendens is not “unperfected or groundless” is correct at law. ANALYSIS [49] While the common law as set out by the applications judge fully reviews the nature and effect of a lis pendens, he fell into errorin its application to the factual situation before him. [50] In the matter under appeal, the lis pendens was filed before the action was commenced and no action had been commencedagainst Paro when the application came before the applications judge.

That was improper either at common law; under the oldRegistration of Deeds Act, RSNL 1990, c. R-10 (the Old Act); or under the new Registration of Deeds Act, 2009, SNL 2009, c. R-10.01(the New Act). Common Law [51] At common law, a lis pendens without a lawsuit was a contradiction in terms. The rule was that anyone who bought a disputedproperty in mid-suit was bound by the results of the litigation: see for example Worsley v. The Earl of Scarborough (1746), 3 Atk. 392,26 E.R. 1025.

The lis pendens was a consequence of the lawsuit and could have no separate existence. [52] A common-law lis pendens is not a charge or encumbrance on the land itself: see Penner's Construction Ltd. v. Ancel (1979), (MB CA), 106 D.L.R. (3d) 634 (Man. C.A.). It is a cloud on the defendant’s title and lies personally against thedefendant and the defendant’s successors in title. [53] The lawsuit is the mechanism for creating the lis pendens, but also the reason for it. As Cameron J. said in Newfoundland andLabrador Housing Corp. v. Ennis (1987), (NL SC), 64 Nfld. & P.E.I.R. 22 (Nfld.

T.D.), a lis pendens operates “toprevent frustration of suits and actions in respect of land”. Until a suit is filed, there is nothing to frustrate. The Old Act [54] “It is of some interest to note”, Leblanc J. wrote in Infini-T, “that while in many provinces there is legislation to support thefiling of a lis pendens, it appears that no similar legislation exists in this province.” [55] Though the Old Act did not specifically authorize filing a lis pendens with the registry of deeds, it allowed the registrar a widediscretion to accept any “other documents in relation to land”: s. 7(1)(f).

In practice, parties often registered a lis pendens. [56] This discretionary scheme did not allow parties to file a lis pendens in the absence of any lawsuit, as Leblanc J. explained on thefacts in Infini-T: [12] In this case, notwithstanding the registration of the lis pendens by the Plaintiff on April 17, 2009, it is significant that no actionwas commenced in this court until December 6, 2010. Such must be seen as questionable as regards to the legitimacy andappropriateness of the registration of the lis pendens in question in this case.

In fact, the Defendant submitted in its application thatsuch procedure amounts to an abuse of process. I find myself unable to disagree with the Defendant in that regard. However,

that being said, there being an action now pending in this court. I do not intend to rely solely on this argument as the basis for the determination of this application. … (Underlining in original; bold added.) [ 57 ] Based on the comments of LeBlanc J., it is a reasonable inference that he would have discharged the lis pendens in Infini-T on this basis alone if no action had been commenced when the application to discharge came before him.

In the result, he did discharge the lis pendens on the basis that damages would be an adequate remedy if the plaintiff succeeded and that specific performance would not be ordered. The New Act [ 58 ] Virtually coincident with the decision in Infini-T , the New Act came into force. It specifically allows the registration of “notices of pending lawsuits”. 7.

(1) The registrar shall register in paper format or electronically, (

a) deeds, leases, assignments of leases, assignments of rents, priority agreements and other instruments; … (

e) notices of pending lawsuits , notices of mortgages, notices of transfer of mortgage, notices of release of mortgage and other notices in relation to a charge or encumbrance on land, in the form and manner and containing the information that may be prescribed by regulation; and …

(2) The registrar may register other instruments that the registrar has reasonable grounds to believe meet the requirements of this Act. … (Underlining added.) [ 59 ] The modern phrase “pending lawsuit”, according to subsection 27(2) of the

Interpretation Act , has the same meaning as lis pendens . [ 60 ] Lis pendens is defined as: 1. A pending lawsuit. … 3. A notice, recorded in the chain of title to real property, required or permitted in some jurisdictions to warn all persons that certain property is the subject matter of litigation, and that any interests acquired during the pendency of the suit are subject to its outcome. - Also termed (in sense 3) notice of lis pendens;. … “pending” is defined as: 1. Remaining undecided; awaiting decision <a pending case>. … “suit” is defined as: Any proceeding by a party or parties against another in a court of law. (All

definitions from Black’s Law Dictionary, Ninth Edition.) [ 61 ] The lis pendens in this case cannot fall inside this definition. First, it was filed before any lawsuit was commenced. Second, even if the first problem was not fatal, no lawsuit naming Paro, the registered owner of the property, had been commenced at the time the matter under appeal came before the applications judge. [ 62 ] Could the applicant file a noncompliant notice of pending lawsuit, either as an “other [notice] in relation to a charge or encumbrance on land” in s. 7(1)(

e) or as an “other [instrument] that the registrar has reasonable grounds to believe meet the requirements of this Act”? [ 63 ] These phrases are ambiguous and must be construed purposively. To begin with, the express inclusion of “notices of pending lawsuits” implicitly excludes notices of lawsuits that are not pending. [ 64 ] The legislature specifically connected s. 7(1)(

e) to the doctrine of lis pendens , which has a rich jurisprudence and a clear rationale. As discussed above, this rationale does not apply until a lawsuit has been filed against the title-holder. [ 65 ] Allowing the Registrar to accept notices of merely contemplated lawsuits or notices of lawsuits against persons other than the registered owner would interfere with private rights and cause disproportionate hardship. The requirement of an existing lawsuit is the principal protection for the registered owner of land.

It ensures that the owner is served with a copy of the claim and that the parameters of the claim are defined. The owner can seek particulars, disclosure, and discovery. If the claim is deficient or an abuse of process it can be struck; if the cause of action is too remote from the land the notice can be removed; if it is incorrect the owner can defend it and recover costs. [ 66 ] The existence of a lawsuit also offers some protection to a possible purchaser. Unless the details of the claim against the registered owner are plain, no third party can assess the risks of a transaction.

[ 67 ] Accordingly, I would conclude that no notice in the nature of a lis pendens may be registered unless there is a lawsuit (1) about a proprietary interest in land, (2) currently in progress in a court, (3) against the person whose interest is to be clouded. Application to Facts [ 68 ] As there was no “pending lawsuit” whatsoever in relation to the property at the time the lis pendens was filed, it should fail.

Even if this was not fatal, which I believe it is, there was no lawsuit against Paro, the registered owner of the property at the time of the hearing before the applications judge. [ 69 ] The applications judge erred in not finding that the notice of lis pendens was groundless. [ 70 ] I would make a declaration that the lis pendens is a nullity and accordingly does not cloud the title to the property.

I would direct the registry of the Court to issue a certified copy of this declaration to enable the appellant to register it in the registry of deeds. [ 71 ] As the registrar of deeds decides on what is accepted for registration and what proof of a “notice” of any type that is required to complete registration, it would be beneficial for all users of the registry of deeds if a regulation prescribed (or the registrar required) that a “notice of pending lawsuit” have with it an affidavit or certificate that one or more of the parties to the pending lawsuit (with the court number and particulars) is the registered owner of real property described in a registered document (with particulars thereof), and that such lawsuit involves an interest in the land described in the referenced registered document. [ 72 ] In any event, even if this is not done, I would declare that as a matter of law no document (whether described as a “ lis pendens ” or “notice of pending lawsuit” or otherwise described) is effective in clouding title to land unless a lawsuit has been commenced in relation to the subject land prior to the filing of such document.

COSTS [ 73 ] I would order costs to the appellant on the appeal and on the application in the Trial Division on Column 3 of the Scale. ADDITIONAL COMMENT [ 74 ] Above are the reasons I would give for finding the applications judge in error in upholding the registration of the document purporting to be a “Notice of Lis Pendens”. [ 75 ] As is apparent, my colleagues in the majority do not agree. With the greatest of respect, they have overlooked both the common law and statutory requirements for a proper “ lis pendens ”. [ 76 ] Paragraph 31 of the reasons of the majority suggests what constitutes “Best Practice”.

I have the following observations: (

a) Points 1-5 are consistent with my dissenting reasons and represent the current law in this province. (

b) Points 6 and 7 are creations of the majority and have no foundation in statute or common law as formerly applied in this province. (

c) Furthermore, even if the principle stated in point 6 did represent the law, it has no application on the facts of this case. My colleague asserts that “if litigation is subsequently commenced before an application is made to vacate the lis pendens , the coincidence of the lis pendens and commencement of litigation operates to make the lis pendens effective as of the date of the coincidence”. Here, although Ms. Murphy did commence an action against Shoal and Mr. Murphy before the application to vacate the notice was heard, it did not name Paro.

Accordingly, when the application to vacate was decided, the person who held title (Paro) was not affected. It is only when, subsequently , Paro was joined as an additional party that it could be said there was a “coincidence” of the lis pendens and the commencement of the only litigation (against Paro) that, in the circumstances, matters. There was no “coincidence” at the time the application to vacate was dealt with.

Thus, the logic of my colleague’s own principle, as stated in point 7 (“if litigation has not been commenced as required, an application may be made, and dealt with expeditiously, to have the [notice of] lis pendens vacated …”) would require the notice in this case to be vacated. (

d) And, with further respect to point 7, the inherent nature of a notice of a lis pendens is that it must give notice of a claim, through litigation, against a person holding title to the property in question. Contrary to my colleague’s assertion, a lis pendens is not “registered against a property”. To say so reveals a fundamental misconception respecting the nature of the registry system in this province. Unlike the title registers that exist in some other jurisdictions, the registry system in this province is a name register.

Unless an instrument, document or notice on its face asserts an interest or claim against the person who, according to the register, holds title, it is meaningless and should not be registered. (

e) The notice of lis pendens in this case did not name Paro, the registered title holder, as being subject to the proposed litigation. It therefore did not affect the named title holder and cannot be said to be notice of pending action against the name (Paro) on the register. At that point, there was no possibility that the asserted litigation claim could affect Paro’s interest in the title. As there was no other name on the register that currently purported to hold any interest in the property, the fact that the notice named Shoal and Mr. Murphy was also irrelevant.

Quite apart from the fact that an action had not been commenced at the time of filing, the notice did not exhibit the inherent characteristics necessary to enable it to qualify as a notice of lis pendens . [ 77 ] Thus, even on my colleague’s own reasoning the result should be an order declaring that the notice has no force and effect. Why is this Important? [ 78 ] Superficially, one might wonder why there should be so much fuss about the validity of a notice of lis pendens when it would be perfectly open to Ms.

Murphy in this case, now that an action has subsequently been started against Paro, to file another notice of lis pendens . (The property has still not been transferred out of Paro’s name.)

[ 79 ] My colleague Hoegg J.A. minimizes the significance of the decision by asserting that it is based on “unique circumstances” and stating that there is no prejudice to Paro. Of course, there clearly is prejudice to Paro and to the proposed purchaser of the property: a straightforward real estate transaction that would normally close in, say, 30 days, has been held up, forcing Paro to apply to vacate the notice thereby wasting time and causing inconvenience and expense, all of which may not be fully compensable in a costs award, no matter how generous the award.

As well, there is nothing “unique” about this case. The registry operates according to well-understood rules. Users rely on it for the certainty of facilitating property transactions. It cannot operate successfully if there are uncertain exceptions built in for transactions which may subsequently be deemed “unique” by a court. The system either allows for the registration of a particular type of document or it does not.

Just because there may be some perception that it would be “fair” to have a broader application in a particular case does not mean that a well-understood system should be allowed to be perverted. [ 80 ] The filing of a notice of lis pendens can have pernicious effects. Depending on what is alleged in the underlying action, even if there is doubt as to its ultimate success, it can create a “cloud” on the title which a vendor may be obligated to remove in order to satisfy a prospective purchase. In EPC Industries Ltd. v.

Union Electric Supplies Co . (1985), 55 Nfld. & P.E.I.R. 186 (NFSC, TD) , Lang J. quoted with approval from Di Castri , The Law of Vendor and Purchaser: The Law and Practice Relating to Contracts for Sale of Land in the Common Law Provinces of Canada, 2nd ed. (Toronto, Carswell, 1976) at p. 240 as follows: As a corollary to his duty to make not only good title but a good registered title the vendor must also remove all ‘clouds’ on his title, including under this term any instrument registered under a Registry Act ex facie valid and which generates a claim of title and cast doubt or suspicion on the title, or is calculated to embarrass the owner in disposing of the property or in maintaining his title. (Emphasis added.) [ 81 ] It is to be noted that even claims that are ultimately considered to be baseless may still create a cloud on the title requiring the vendor to deal with or remove them, so long as they appear to be “ ex facie valid ”.

Here, the notice on its face did not appear to be valid because it did not represent that an action was, or was contemplated, against Paro, the titleholder. Nevertheless, the holding of my colleagues in this case will now have the result of affirming that an action, even if not taken against the titleholder at the time of an application to vacate the notice, may nevertheless be considered ex facie valid and can constitute a cloud on title.

This will have the effect of expanding significantly the notion of “clouds on title”, with the potential of interrupting the smooth flow of property transactions in circumstances which are not necessary, in light of the fact that another notice could be registered once the action is properly taken. [ 82 ] As a matter of principle, the scope of clouds on title should be kept as narrow as possible. Clouds created by uncertain claims are not something that the registry system contemplates.

They operate and are effective in blocking transactions not because they have any intrinsic legal effect on title but only because of the practical reason that a prudent searcher will not want to buy a potential lawsuit. The court will not force a title on a purchaser in such circumstances if reasonable people may differ as to the potential effect of the claimed interest.

If it is too easy to create a potential cloud on title, the system will be open to abuse; it will enable a person to disrupt the effective operation of the registry system and conveyancing practice by simply relying on the practical caution of a searcher in doing his job. That result should only be recognized when it is necessary to do so.

Here, it is not, because there are other effective ways to protect the claimed interest. [ 83 ] In this case, the respondent could have protected her claimed interest in the disputed property by other permissible procedures such as an application for a warrant of attachment or an application for an injunction (both of which would require the commencement of a court proceeding).

Instead, there is the conjuring up of a right to file on the property title register and cloud a registered title using (at best) misleading statements as to the existence of a court proceeding and thereby perverting the integrity of the register in a manner that is contrary to its purpose (and to common law) and which may well be abuse of process. [ 84 ] The purpose of a deeds registry system is to provide public notice of instruments purporting to transfer or otherwise affect proprietary interests in land. It is simply impossible for a non-existent court proceeding to provide such notice.

To allow for retroactive validation of the filed document, as my colleagues would do, allows a nullity to stand on the register for an indefinite period of time. No means exist to remove it.

A request to do so will be met with: “I may yet take an action and the court has endorsed my right to do so when and if I choose.” The notion of retroactive validity is inimical to the integrity of the registry system. [ 85 ] The effect of the majority judgment is that, contrary to common law (of centuries’ standing) and clear statutory provisions, it is perfectly alright to file a notice effectively stating that a court proceeding has been commenced when none has been.

A person may file a notice of pending lawsuit when merely musing about starting a proceeding (or, indeed, with no intention of ever starting one). There is considerable risk of abuse of process. [ 86 ] Such risk of abuse (and confusion) can be so easily avoided: a person who has a bona fide claim alleging a proprietary right to real property which she or he wishes to pursue need only commence action in court and then register a notice of pending lawsuit. This would be compliant with common law and consistent with the purpose of the registry system.

Any other manner of proceeding is open to abuse for strategic or tactical purposes thereby perverting one of the statutory purposes of the registry system which is to permit registration of a notice of pending lawsuit to give notice of a claim made through an existing court proceeding. It is not a purpose of the registry system to imprint on the registry imagined or possible future claims. ___________________________________ C. W. White J.A.