One tool available to parties in a land purchase and sale dispute who claim an interest in land is the Certificate of Pending Litigation (CPL).

A Certificate of Pending Litigation is meant to be a notice to third parties of the pending litigation; it is not a tool by a party to exert pressure on the counterparty. In this sense, a Certificate of Pending Litigation is not a weapon to be wielded lightly.

A recent BC Supreme Court judgment released on December 9, 2024, RStyle Enterprises Ltd. v. 1308879 B.C. Ltd., provides clarifications on the proper use of Certificates of Pending Litigation in the context of breach of contract.

What is a Certificate of Pending Litigation?

A Certificate of Pending Litigation is a document registered against the title of a property, indicating that there is a legal dispute concerning an interest in that property.

It serves to protect the claimant’s interest by preventing the property from being sold or transferred to an innocent third party before the dispute is resolved.

What a CPL Is Not Used For

A Certificate of Pending Litigation is not meant to be used as a bargaining tool to pressure the other party into settling a financial claim. It is specifically designed to preserve legitimate claims to an interest in land, not to gain leverage in a purely monetary dispute.

In our practice, we have often seen improperly registered Certificates of Pending Litigation whereby a party misused them to prevent legitimate land sales or redevelopments.

When Can a Certificate of Pending Litigation Be Registered?

Under Section 215(1) of the Land Title Act, a party to a proceeding who is “claiming an estate or interest in land” can register a Certificate of Pending Litigation against the land. This means the party must have a genuine claim to a legal or equitable proprietary interest in the property.

The RStyle Enterprises Case

This case involved a contract for the purchase of land between RStyle Enterprises Ltd. (plaintiff) and 1308879 B.C. Ltd. (defendant). The plaintiff alleged that the defendant had breached the contract by failing to provide certain services as agreed. The plaintiff initially filed a Notice of Civil Claim seeking specific performance of the contract and registered a Certificate of Pending Litigation against the defendant’s land.

However, the plaintiff later amended its claim, abandoning the specific performance claim and instead seeking the return of its deposit and a purchaser’s lien against the property. The defendant sought to have the Certificate of Pending Litigation removed, arguing that the amended claim did not disclose a sufficient interest in land to justify the Certificate of Pending Litigation.

The Court’s Decision

The court agreed with the defendant and ordered the removal of the Certificate of Pending Litigation.

The court emphasized that a Certificate of Pending Litigation can only be maintained if the claim genuinely asserts an interest in land. In this case, the plaintiff’s amended claim, seeking only the return of the deposit and a purchaser’s lien, was inconsistent with a claim for an interest in land.

When a Breach Occurs: The Innocent Party’s Options

When one party breaches an agreement of purchase and sale, the innocent party has two main options:

  1. Affirm the Contract: The innocent party can insist on the performance of the contract as agreed. This might involve seeking a court order for specific performance, forcing the breaching party to complete the transaction.
  2. Accept the Repudiation: The innocent party can accept the breach as a repudiation of the contract, terminate the contract, and sue for damages.

Lessons for Land and Business Owners

The RStyle Enterprises case offers important lessons for businesses or landowners involved in property transactions:

  • Understand the Purpose of a CPL: A Certificate of Pending Litigation is a protective measure for legitimate claims to an interest in land, not a tool for financial leverage nor for litigation advantage.
  • Assess Your Claim Carefully: Before registering a Certificate of Pending Litigation, ensure that your claim genuinely supports and, therefore, asserts an interest in land.
  • Consider the Implications: Improper use of a Certificate of Pending Litigation can cause reputational damages and lead to legal repercussions.

The RStyle Enterprises case serves as a reminder that legal tools should be used responsibly and cautiously. By understanding the purpose and the proper use of a Certificate of Pending Litigation, property owners and land developers can avoid potential pitfalls and ensure that their actions are legally sound.

Contact Roland Luo in Vancouver for Experienced Advice on Land Disputes

Over the past 20 years, Roland Luo has built a reputation for robust representation in cases involving land disputes. Conveniently located in downtown Vancouver, our firm assists clients throughout British Columbia, Canada, and the US. To schedule a confidential consultation, please contact us online (the more efficient method) or call 604-800-4628.