Superior Court Decision Highlights Certificate of Pending Litigation Will Not be Granted Where Damages are a Satisfactory Remedy

A recent decision from the Superior Court of Justice reviews the equity principles a court may consider on a motion for certificate of pending litigation (“CPL”). In Sun Rise Elephant Property Investment Corporation v. Luu, the plaintiff sought an order granting it leave to issue a certificate of pending litigation on two properties (the “Properties”) owned by the defendants. The plaintiff used nominee purchasers to purchase several pre-construction condominiums from the developer. The nominees signed the agreements of purchase and sale and held the Properties in trust for the plaintiff pursuant to a separate trust agreement. The plaintiff paid the deposits for the Properties. Sometime in August 2016, the defendants began occupying the Properties. Each paid $2,000 a month in rent. The plaintiff alleges that it paid a monthly fee as well. In November 2016, the nominees allegedly assigned the agreements of purchase and sale they had signed to the defendants, without the knowledge or consent of the plaintiff. The plaintiff alleged in its statement of claim that the defendants knew or were wilfully blind to the fact that the nominees held the Properties in trust for the plaintiff.

In deciding whether to grant an order for a certificate of pending litigation, the Court found that there was sufficient evidence demonstrating a triable issue with respect to an interest in the Properties on the basis of a resulting and/or constructive trust. The Court then noted that the obligation to establish a triable issue as to an interest in land was just the gateway requirement on a motion for a certificate of pending litigation. Once that hurdle is met, the court must consider other factors in deciding whether it is just and equitable to grant leave to issue a CPL. Some of the factors the court may consider includes: (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security (572383 Ontario Inc. v. Dhunna). The Court held that the governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated.

The Court dismissed the plaintiff’s motion for leave to issue a CPL. In applying the test to the case at bar, the Court found that the Properties were not unique to the plaintiff and the plaintiff had purchased them solely for investment purposes. More importantly, the plaintiff had made an alternative claim for damages in the amount of the deposit and a claim for pre- and post- judgment interest on that amount. It appeared from the pleadings that damages were a satisfactory remedy. The Court noted that the initial Statement of Claim (prior to later amendments) was strictly a claim for monetary damages for the deposits. Further, in its factum in support of the motion, the plaintiff stated that if leave to issue a certificate of pending litigation is not granted, “Sun Rise would have no means of realizing on a judgment. The defendants are individuals and their evidence makes clear that they do not have significant assets….” As such, at its heart, this was still a claim for repayment of the money advanced by the plaintiff.

The case serves as a good reminder that the court must consider equitable principles in deciding whether to grant leave to issue a CPL; evidence demonstrating that there is a triable issue is not sufficient. Moreover, parties moving for a CPL should ensure that a CPL, which restrains dealing (i.e. sale, refinancing, mortgaging) with the property for the duration of the action, is an appropriate pre-trial remedy, especially where there is an alternative claim for damages.

This blog post is made available for educational purposes as well as to provide general information. The views and information in this article should not be considered legal advice.