Forsythe et al v Labossiere et al, 2022 MBCA 28

Citation: Forsythe et al v Labossiere et al, 2022 MBCA 28 Date: 20220329 Docket: AI21-30-09632 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Christopher J. Mainella Madam Justice Jennifer A. Pfuetzner Madam Justice Lori T. Spivak BETWEEN : CARRIE LUCE FORSYTHE, JC CREATIVE ) F. J. Trippier and ENTERPRISES INCORPORATED and ) I. Vakurova 6509666 MANITOBA LTD. ) for the Appellants ) (Plaintiffs) Appellants ) M. D. Jodoin and ) P. F.

Reimer - and - ) for the Respondents ) DANIEL LABOSSIERE, OAKLEY ) Appeal heard: CONSTRUCTION LTD., NORMAN ) November 5, 2021 BOULET, 6838236 MANITOBA LTD. and ) 10058612 MANITOBA LTD. ) Judgment delivered: ) March 29, 2022 ( Defendants) Respondents ) SPIVAK JA [ 1 ] The plaintiffs appeal an order directing the district registrar (the district registrar) of the Winnipeg Land Titles Office (the WLTO) to cancel and discharge a caveat filed by the plaintiffs and dismissing the plaintiffs’ motion for a pending litigation order (the PLO). [ 2 ] This decision deals with the preliminary issues, raised by the panel, of whether the motion judge had jurisdiction to discharge the caveat under The Real Property Act , CCSM c R30 (the Act ) and whether it was appropriate in the circumstances to dismiss the plaintiffs’ motion for a PLO when it had not been scheduled for hearing by the plaintiffs.

For the reasons that follow, I would grant the plaintiffs’ appeal. Background [ 3 ] In 2014, the defendants Labossiere and Boulet, through their respective companies, Oakley Construction Ltd. (Oakley) and 6838236 Manitoba Ltd. (683), invested $1.6 million in a condominium project to be developed on three parcels of land on St. Mary’s Road in Winnipeg (the property), which were owned by the plaintiffs at the time. The investment was secured by a second mortgage in favour of Oakley and 683 (the second mortgage). Carpathia Credit Union Limited (Carpathia) held the first mortgage on the property.

Disagreements arose between the parties and, in 2015, Oakley and 683 took steps to foreclose on the basis of default on the second mortgage which was then halted as the plaintiffs attempted to secure new investors. [ 4 ] In 2019, Carpathia began to foreclose for default on its mortgage and obtained orders for sale. In March 2020, Carpathia was in the process of selling the property to a third party for $2.7 million which, given that the first mortgage was for $2.6 million, would have resulted in Oakley and 683 only receiving $100,000 in satisfaction of the second mortgage.

As a result, in June 2020, Oakley and 683 reached a deal with Carpathia to buy the property for roughly the amount of the first mortgage and the defendant 10058612 Manitoba Ltd. (1005), controlled indirectly by Labossiere and Boulet, became the registered owner. [ 5 ] On September 8, 2020, the plaintiffs commenced an action against the defendants claiming an equitable interest in the property and damages on the basis of the joint venture agreement entered into with the defendants in 2014 (the joint venture agreement) in relation to their investment.

The plaintiffs alleged that, by virtue of the joint venture agreement, the defendants obtained the property

in breach of their fiduciary duties and were unjustly enriched to the plaintiffs’ detriment. The plaintiffs filed a motion for a PLO in tandem with the statement of claim. The motion for a PLO was initially set down by the plaintiffs before the master, but then was adjourned sine die and never re-scheduled. On November 9, 2020, the plaintiffs registered a caveat against the property.

In their amended statement of defence and counterclaim, the defendants asserted that the joint venture agreement was terminated in 2015, and denied any breach of fiduciary duty, unjust enrichment or constructive trust created by their purchase of the property. [ 6 ] The defendants filed a motion to discharge the caveat and dismiss the plaintiffs’ motion for a PLO on March 9, 2021. The plaintiffs had not scheduled the PLO motion for hearing.

Among the grounds listed in the notice of motion, the defendants asserted that the plaintiffs do not have a good and valid claim upon the property and are not entitled to file a caveat. The motion referred to section 176(1) of the Act , which provides that the court may order the district registrar to cancel any instrument registered on title to give effect to a judgment or order.

Both parties filed extensive affidavit evidence on the motion, which dealt with the parties’ obligations under the joint venture agreement, their actions during the course of their commercial relationship, and whether the joint venture agreement was terminated. [ 7 ] At the hearing of the defendants’ motion (the hearing), the defendants argued that the plaintiffs did not have an equitable interest in the property as the joint venture agreement was terminated before it was purchased and, in any event, did not give rise to fiduciary duties establishing a constructive trust.

The plaintiffs countered that the defendants obtained the property in breach of their fiduciary duties under the joint venture agreement, which was never terminated, such that a constructive trust in favour of the plaintiffs was created when the property was purchased by 1005. Also at the hearing, plaintiffs’ counsel advised that it was his understanding that the defendants’ motion to dismiss the plaintiffs’ motion for a PLO was not before the motion judge and that he was unprepared to address that aspect of the defendants’ motion.

Defendants’ counsel urged the motion judge to dismiss the plaintiffs’ motion for a PLO in addition to discharging the caveat on the basis that the plaintiffs had no interest in the property. [ 8 ] In granting the orders sought, the motion judge determined that the plaintiffs had no interest in the property. He found that (1) the joint venture agreement was terminated in November 2015, (2) the defendants did not acquire the property in breach of a fiduciary duty, (3) the defendants had not been unjustly enriched, and (4) the plaintiffs had no equitable interest in the property by virtue of a constructive trust.

In light of these findings, he discharged the caveat and dismissed the plaintiffs’ motion for a PLO. [ 9 ] The plaintiffs appeal on the grounds that the motion judge erred in finding that the joint venture agreement was terminated, that they were not equitable owners of the property and by making a decision that went beyond the scope of the motions before him and required a trial. However, it is not necessary to decide these issues. As I will now elaborate, this appeal is resolved by the determination of the preliminary issues.

Preliminary Issues [ 10 ] Prior to the appeal hearing, this Court requested counsel to address two preliminary issues: (1) whether, given the filing of the statement of claim by the plaintiffs, the motion judge had jurisdiction to discharge the caveat in light of

section 163 of the Act and this Court’s decision in Bojkovic v Rentz Bros Inc et al , 2010 MBCA 17 ; and (2) whether it was appropriate for the motion judge to hear and decide the plaintiffs’ motion for a PLO when it had not been scheduled for hearing by the plaintiffs. Counsel provided oral submissions on the preliminary issues and were permitted to provide post-hearing written submissions pursuant to r 39.1 of the MB, Court of Appeal Rules , MR 555/88R .

Standard of Review [ 11 ] Questions of jurisdiction are subject to the standard of review of correctness (see J & R Property Management et al v Kenwell , 2011 MBCA 5 at para 14 ). Issues of procedural fairness are also questions of law reviewable for correctness (see Waraich v Director of Employment Standards , 2020 MBCA 76 at para 11 ). Analysis and Decision Did the Motion Judge Have Jurisdiction to Discharge the Caveat Under

Section 163 of the Act ? [ 12 ] The plaintiffs argue that, having filed the statement of claim, the motion judge had no jurisdiction to discharge the caveat under the Act as

section 163 only allows for an application to discharge a caveat before the caveator has taken proceedings thereunder. The defendants submit that the motion judge had jurisdiction to discharge the caveat under

section 163 as it was filed after the statement of claim and, therefore, the plaintiffs’ action was not a proceeding under the caveat. [ 13 ] As I will now explain, the motion judge had no jurisdiction to summarily discharge the caveat pursuant to

section 163 of the Act , because proceedings under the caveat have been commenced. The Act and Caveats [ 14 ] The authority to file a caveat is found in section 148(1) of the Act which provides that “[a] person claiming an estate or interest in land or in a mortgage, encumbrance, or lease . . . may file a caveat . . . forbidding the registration of any person as transferee or owner of, or of any instrument affecting the estate or interest, unless the instrument is expressed to be subject to the claim of the caveator.”

[ 15 ]

Section 163 of the Act , which provides for the discharge of a caveat, reads, in part, as follows: Application to discharge caveat 163(1) Except in the case of a caveat filed by the district registrar, the applicant or owner may, at any time before the caveator has taken proceedings thereunder, apply to the court calling upon the caveator to show cause why the caveat should not be discharged. . . . Court order 163(3) On hearing an application under this section, the court may make any order that the court considers just, including an order (

a) dismissing the application; (

b) discharging or withdrawing the caveat; (

c) directing security or payment into court of an amount equal to the claim of the applicant and any additional money payable with respect to that claim and ordering the caveat to be discharged or withdrawn from the certificate of title to the affected land; (

d) directing that any money paid into court or any security given under clause (

c) stands in place of the land against which the caveat was registered; or (

e) directing a party to commence proceedings. . . . [ 16 ] Also relevant to understanding the scheme of the Act is section 150(1) , which provides for circumstances where a district registrar may also lapse a caveat. Under section 150(1), the district registrar will give notice to a caveator that its caveat will be discharged if it does not take proceedings under the caveat within 30 days or otherwise obtain a court order. [ 17 ] Under section 163(1), an owner may apply to the court to require the caveator to show cause why a caveat should not be discharged (show cause hearing).

Section 163(3) provides that the court may make any order it considers just including dismissing the application, discharging the caveat, vacating the caveat upon the posting of security or directing any of the parties to commence proceedings. [ 18 ] It is helpful to recall the purpose of a caveat which provides context for these provisions allowing for a caveat to be discharged. [ 19 ] Victor Di Castri, Registration of Title to Land , (Toronto: Thomson Reuters, 1988) (loose-leaf updated 2022, release 2) (online: WL Can (date accessed 22 March 2022)), ch 14 , explains (at

section 14:1): The caveat plays an important role in [the] Torrens system and is one of its unique features. . . . . . . To take a middle course, as it were, between practically nullifying rights under unregistered or unregisterable instruments and permitting their actual registration, the caveat machinery was devised to enable these equitable estates and rights to be protected. The machinery was intended as a substitute for the equitable doctrine of notice. . . .

. . . Insofar as the caveat machinery prevents any registered disposition of the land except with the caveator’s consent or as otherwise provided by the Act , there is a corresponding curtailment of the rights of the registered owner. To ameliorate this statutory impediment, the Acts provide a speedy procedure whereby a registered owner can get a caveat set aside in those cases where the caveator’s claim is baseless, frivolous or vexatious.

Absent this procedure, the Torrens system’s claim to assuring certainty of title for the registered owner would, in fact, leave him in a more precarious position in respect of his powers of disposition than an unregistered owner. . . . [footnotes omitted] Bojkovic [ 20 ] In Bojkovic , this Court considered sections 150 and 163 of the Act and the court’s jurisdiction to discharge a caveat. [ 21 ] The issue in Bojkovic was the jurisdiction of a motion judge to discharge an unpaid vendor’s caveat (agreed to be a valid caveat), on condition that monies be paid into court as security pending trial.

The caveat was filed several months before the statement of claim. At that time, section 163(3) of the Act did not provide for discharge of a caveat upon the posting of security (as presently contemplated by sections 163(3) (c)- 163(3) (

d) of the Act ), but limited the remedies to either dismissing the application, discharging the caveat or directing that proceedings be commenced (see para 9). This Court held that the motion judge erred when he relied on the inherent jurisdiction of the court to discharge the caveat and order the posting of security in the face of the specific statutory regime set out in the Act . [ 22 ] In Bojkovic , Hamilton JA explained that the Act sets out two methods by which an owner can seek to have a caveat discharged: the 30-day notice procedure under

section 150 and the show cause application under

section 163 (see para 7). Further, the remedies under sections 150 and 163 of the Act are the only circumstances provided where a caveat may be discharged summarily and are only available until proceedings under the caveat are commenced (see paras 53, 71). Absent an abuse of process, the inherent jurisdiction of the court does not permit the court to discharge a validly registered caveat once proceedings thereunder have been commenced. The Court stated (at paras 50, 53, 69, 71): By its wording, s. 163(3) contemplates two options.

They are “either” to deal conclusively with the caveat by dismissing the application or discharging or withdrawing the caveat or to direct a party to commence proceedings. The court is to determine which of these options “seems just and proper” in the circumstances. . . . [T]he remedies available under ss. 150 and 163 are only available until proceedings are commenced. . . . [Section] 163(1) expressly states that it may only be invoked “before the caveator has taken proceedings” under the caveat.

The parties have not identified any provision in the Act permitting the court to discharge a caveat once proceedings have been commenced. . . . [T]he Act sets out a regime by which a caveat may be discharged. The legislature did not see fit to provide the court with a broad discretion to discharge a caveat. . . . Unless the caveat falls within one of the circumstances where it may be discharged summarily . . . , the legislature contemplated that proceedings be commenced.

In my view, the inherent jurisdiction of the court does not permit the court to exercise its discretion beyond that afforded to it by the Act , unless there has been an abuse of its own process. It cannot be called upon to provide a remedy to discharge a caveat that is validly registered and the subject of pending proceedings in court. [ 23 ] In Bojkovic , the Court also endorsed the nature of a show cause hearing under

section 163 , as outlined by Menzies J in City of Brandon v Barcellona , 2000 MBQB 191 at para 16 (at paras 51-52 ): . . .

The Act provides a

summary procedure for the removal of a caveat filed against a title to real property. On such an application ( s. 163 ) the Court must decide if the caveator has established his/her interest in land. Once the interest is evident, that party cannot be compelled to remove a caveat indicating evidencing . . . that interest. See Dansal Ventures [ Dansal Ventures Inc v Leslie , 1993 CarswellMan 206 (QB) ] . . ..

In circumstances where the caveator has established a valid interest, the court may order one of the parties to commence proceedings. . . . [ 24 ] Barcellona is an example of a show cause hearing prior to proceedings being taken under the caveat.

In that case, this Court held that the motion judge was correct in ordering the discharge of the caveat, as there was no basis for it on the facts (see Brandon (City) v Barcellona , 2001 MBCA 65 ; see also Dansal Ventures Inc v Leslie , 1993 CarswellMan 206 (QB) ). [ 25 ] Previously, in Mellco Developments Ltd v Portage la Prairie (City) , 2002 MBCA 125 ( Mellco ), this Court confirmed that, on a show cause hearing, the threshold test with respect to whether caveators are entitled to maintain their caveat is if they have made out a prima facie case for the claimed interest in land (see para 93).

The Plaintiffs’ Statement of Claim Was a Proceeding Under the Caveat [ 26 ] As earlier mentioned, the defendants argue that the fact that the caveat was filed after the statement of claim means that the motion judge had jurisdiction pursuant to

section 163 of the Act since there was, therefore, no proceeding under the caveat. They assert that this case is different from Bojkovic , where the caveat was filed before the statement of claim. In my view, the timing of the filing of the caveat does not provide a valid basis for distinguishing Bojkovic . [ 27 ] To begin with, prior to filing the motion to discharge the caveat, the defendants filed a thirty-day notice to caveator at the WLTO pursuant to section 150(1) of the Act .

The district registrar found that, by virtue of the filing of the plaintiffs’ statement of claim, proceedings had been taken under the caveat. [ 28 ] Moreover, here, the caveat is based upon the alleged joint venture. The statement of claim seeks a declaration that the plaintiffs have an interest in the property based on the joint venture agreement. This is unlike the case of MWG Apparel Corp v Shelter Canadian Properties Ltd , 2018 MBQB 30 ( MWG ) , where McKelvey J found that she had jurisdiction to discharge the caveat pursuant to

section 163 even though a statement of claim had already been filed (see para 24). In MWG , McKelvey J found that neither the statement of claim, (which only sought a declaration regarding the enforceability of an agreement and not a caveatable interest), nor the notices to arbitrate, were “proceedings” within the meaning of section 163(1) of the Act (at paras 24, 29). The Motion Judge Did Not Have Jurisdiction to Discharge the Caveat Under the Act [ 29 ] On the basis of Bojkovic and the wording of the Act , the motion judge had no jurisdiction under

section 163 of the Act to summarily decide the defendants’ motion as he did since the caveat was registered after the plaintiffs took proceedings thereunder by filing the statement of claim. (I add parenthetically that this Court’s decision in Laba et al v 4027183 Manitoba Ltd et al , 2014 MBCA 107 , does not assist the defendants as, in that case, it was undisputed that the basis for the interest in the land, as claimed in the caveat, was not established and the court’s jurisdiction under

section 163 was not an issue before this Court.) [ 30 ] I highlight as well, that the legislative evolution of

section 163 supports this finding. The Legislature amended

section 163 shortly after this Court’s decision in Bojkovic to add the remedy of posting security in substitution for a caveat, but chose to retain these time-limiting words. If the Legislature intended to provide a

summary procedure under the Act for addressing caveats that was always available, it could have simply removed the phrase “at any time before the caveator has taken proceedings thereunder” from section 163(1) . [ 31 ] While a show cause hearing is available in situations where no proceedings under the caveat have been commenced, once a caveator has proceeded upon the caveat in court, this

summary disposition option under the Act has not been extended by the Legislature.

Parties are therefore limited to other civil procedural avenues and sources of jurisdiction. [ 32 ] It is particularly noteworthy that, while other jurisdictions have legislative provisions for a show cause hearing to discharge a caveat, unlike Manitoba, they are not time-limited and permit such applications to be brought at any time (see, for example, Alberta’s Land Titles Act , RSA 2000, c L-4 at section 141(1) ; Saskatchewan’s The Land Titles Act, 2000 , SS 2000, c L-5.1 at sections 107 , 109 ; Yukon’s Land Titles Act, 2015 , SY 2015, c 10 at sections 140(1) - 140(3) ; Northwest Territories’ Land Titles Act , RSNWT 1988, c 8 (Supp ) at sections 148(1) - 148(2) ; and Nunavut’s Land Titles Act , RSNWT (Nu) 1988, c 8 (Supp ) at sections 148(1) - 148(2) ).

It is recognized that a show cause hearing is a more expeditious manner of reviewing caveat disputes than the procedures and remedies available once a proceeding under a caveat has been commenced. For this reason, the Legislature may wish to consider revising

section 163 of the Act to bring it in line with other jurisdictions. Until such time, other civil procedure avenues should be adapted and expedited in order to ensure that caveators do not unreasonably interfere with an owner’s interest.

This Was Not a Show Cause Hearing Under

Section 163 [33] It is important to point out as well that this was not a show cause hearing which considered whether the plaintiffs madeout a prima facie case for the claimed interest in the land. Rather, this was a decision on the merits of whether there was a continuingjoint venture, breach of fiduciary duty and unjust enrichment which created a beneficial interest in the property. In other words, themotion judge made a final decision on the underlying dispute of whether the plaintiffs have an interest in the property. There is noindication that the motion judge turned his mind to the basis upon which he could make a

summary determination of these matters andthe appropriateness of doing so. [34] Unfortunately, neither counsel provided the legal framework for the motion judge’s determination or properly identifiedthe nature of the proceeding before him. (The defendants’ notice of motion only references section 176(1) of the Act, which is not astand-alone provision and does not itself create a cause of action (see Fort Garry Care Centre Ltd v Hospitality Corp of Manitoba Inc,1997 CarswellMan 644 at para 31 (CA)).) Instead, counsel for both parties essentially argued their respective positions and sought themotion judge’s decision on the substantive issues in the action, without addressing the court’s ability to decide these matters in theprocedure before him (i.e., on affidavit evidence short of a trial).

Such an approach is not a substitute for proper jurisdiction. Alternative Sources of Jurisdiction for the Motion Judge’s Determination [35] Before this Court, the defendants now raise a number of possible alternative sources of jurisdiction for the motionjudge’s determination. They contend that the motion judge had jurisdiction to decide this matter pursuant to sections 32, 33 and 55(1) ofThe Court of Queen’s Bench Act, CCSM c C280, which provides for the exercise of powers incident to a superior court of common lawand equity and the power to grant a mandatory interlocutory injunction.

In the further alternative, the defendants assert that the motionjudge had jurisdiction pursuant to the ability to make determinations as to an interest in land on a

summary basis under r 14.05(2)(c)(v)of the MB, Court of Queen’s Bench Rules, MR 553/88 (the QB Rules). [36] Given the limitations of the record, it is unnecessary to address each of the defendants’ alternative sources ofjurisdiction. I do acknowledge, however, that there are cases where parties have pursued a discharge of a caveat by seeking a mandatoryinjunction (see Di Castri at

section 14:1; 80 Wellesley St East Ltd v Fundy Bay Builders Ltd (1972), (ON CA), 25 DLR (3d) 386 (Ont CA); and Kathryn FarmsLtd v 1572548 Alberta Ltd, 2022 ABCA 21). As well, North American Life Assurance Co v DME Foods Ltd, 1994 CarswellMan 565(QB), is an example of the use of r 14.05(2)(c)(

v) of the QB Rules in the caveat context. It should also be noted that caveats have beendischarged pursuant to a motion for

summary judgment (see Perfanick v Torre-De-Oro Inc et al, 2010 MBQB 171; and Kathryn Farms). [37] However, this does not assist the defendants, as none of these alternative sources of jurisdiction or procedural avenues,each of which have distinct legal criteria, were identified or argued before the motion judge. In saying this, I am mindful of the principleof proportionality, as set out in Hryniak v Mauldin, 2014 SCC 7. But simply put, the record does not allow this Court to decide thematter on any of these bases on appeal and it would be inappropriate to do so (see The Court of Appeal Act, CCSM c C240 at

section 26). [38] Since the motion judge was not properly provided with a legal framework to assess the evidence, his findings are nothelpful as he was not applying any particular legal test. To deal with this matter now on alternative grounds would be to engage in a denovo hearing on new issues.

The parties may well have chosen to present different evidence to address the applicable legal criteria and itwould be unfair to preclude the plaintiffs from doing so. [39] If the defendants wish to pursue other avenues to discharge the caveat, this should properly be identified and dealt withon a new Court of Queen’s Bench hearing. I would therefore grant the plaintiffs’ appeal of the motion judge’s order directing the districtregistrar to cancel the caveat, without prejudice to the defendants’ right to seek the discharge of the caveat as they see fit.

The Dismissal of the Plaintiffs’ Motion for a PLO [40] As I earlier mentioned, it was the defendants that put this issue before the motion judge by a “motion to dismiss amotion”.

To repeat, at the hearing, plaintiffs’ counsel advised that it was his understanding that only the defendants’ motion to dischargethe caveat was set down for hearing and he had not prepared to address the plaintiffs’ motion for a PLO, which had not been pursued. (In fact, plaintiffs’ counsel’s understanding was consistent with the disposition sheet of the judge on the uncontested list who only notedthe motion for discharge of the caveat as being scheduled for hearing at that time.) Defendants’ counsel, on the other hand, urged themotion judge to find that the joint venture was terminated, which he argued would mean that the plaintiffs had no interest in the propertyand “end it for both [the] caveat and the PLO motion” since each required such an interest. [41] It is true that, while there are differences between a caveat and a PLO, both are founded on an assertion of an interest inland (see Mellco at para 92).

Further, r 42 of the QB Rules provides a framework for obtaining and discharging a PLO following thefiling of a statement of claim. I also acknowledge that defendants’ counsel advised the motion judge that a pending PLO motion couldpotentially make it difficult for the defendants to deal with the property.

[ 42 ] That said, given that plaintiffs’ counsel had not scheduled the motion for a PLO for hearing and did not consider this to be before the motion judge, it was inappropriate to hear and decide this issue. There was no PLO registered against the property. There was no need to deal with the plaintiffs’ motion for a PLO at that time. [ 43 ] Additionally, the decision to dismiss the plaintiffs’ motion for a PLO was on the basis of the motion judge’s determination of the matter on the merits, instead of the application of the proper legal test to obtain or discharge a PLO, which has a lower threshold.

That test is whether there is a triable issue that the plaintiffs have a reasonable claim to the interest in land ( see Mellco at para 93 ). It is not for the court at this stage to determine a plaintiff’s claim, but rather only to decide whether there exists a triable issue in that regard (see Arero Corp v Erb (G &

D) Holdings Ltd et al , 2008 MBCA 88 at para 6 ; and Kirchner et al v Dielmann Holdings Ltd , 2014 MBCA 21 at para 3 ). [ 44 ] I would therefore grant the plaintiffs’ appeal of the motion judge’s order dismissing the plaintiffs’ motion for a PLO. Conclusion [ 45 ] For the above reasons, the plaintiffs’ appeal is granted with each side bearing their own costs on the appeal. JA I agree: JA I agree: JA