Certificates of Pending Litigation: what you need to know

February 22, 2022 | Christianah

A certificate of pending litigation is one of the ways by which parties can protect their interests in a real estate transaction. Like other tools in our property law construct, several factors are considered before an order is given for a certificate of pending litigation. Additionally, the party seeking this order must do so with caution.
In today’s post, we will provide a general overview of a certificate of pending litigation and its relevance in property transactions.

What is a certificate of pending litigation?

A certificate of pending litigation is an instrument registered on title to a property, which provides notice to the general public that there is a pending claim concerning that property. Stated differently, it serves as a warning to property stakeholders like banks and prospective buyers so that they do not finance, buy, or otherwise freely deal with that property.

A certificate of pending litigation is provided for under Rule 42.01 of the Rules of Civil Procedure (the ‘Rules‘) and section 103 of the Courts of Justice Act (CJA). A certificate of pending litigation can only be obtained by court order and must be included in the originating process of pleading with a description of the land (Rule 42.01(2)). The motion for the order may be made with or without notice to the other party (Rule 42.01(3)).

Factors considered in granting a certificate of pending litigation

There are several factors the court considers before granting an order for a certificate of pending litigation. The foremost consideration is whether there is a triable issue regarding the party’s claim to an interest in the property. This test was established in 2254069 Ontario Inc. v. Kim, 2017 ONSC 5003. On the other hand, the opposing party must prove that a certificate of pending litigation is unreasonable and that there is no triable issue. For instance, in the 2020 case of Moses v. Metro Hardware and Maintenance Inc., 2020 ONSC 6684 (CanLII), the court set aside the plaintiff’s motion for a certificate of pending litigation because there was no urgency present to warrant a motion without notice. The plaintiff also failed to make full and fair disclosure of all material facts, contrary to Rule 39.01(6).

Once the triable threshold has been met, however, the court considers additional factors, including:

  • whether the land is unique;
  • the intent of the parties in acquiring the property;
  • whether there is an alternative claim for damages;
  • the ease or difficulty in calculating damages;
  • whether damages would be a satisfactory remedy;
  • the presence or absence of a willing purchaser;
  • the harm to each party if the certificate of pending litigation is or is not removed with or without security;
  • whether the interests of the party seeking the certificate of pending litigation can be adequately protected by another form of security; and
  • whether the moving party has prosecuted the proceeding with reasonable diligence.

Simplistically, if there is no interest in the property and damages would be an effective remedy, the court will most likely deny a plaintiff’s motion for a certificate of pending litigation.

In the popular Pacione decision (Pacione v. Pacione, 2019 ONSC 813, the court granted the plaintiff’s order for a certificate of pending litigation because he had a reasonable claim in the property. He had signed a promissory note against which a mortgage was to be registered on the property. In contrast, although there was a triable issue in the Bains decision (Bains v. Khatri 2019 ONSC 1401), the court considered the additional factors to dismiss the motion for a certificate of pending litigation. The court held that an award of damages was an adequate remedy and that the defendant was not a shell corporation.

Ultimately, the court will exercise its discretion in equity and look at all the relevant matters between the parties ( Perruzza v. Spatone, 2010 ONSC 841 para. 48).

At Northview Law, we would love to discuss any real estate concerns you may have. You can book a free consultation with Northview Law by following this link or contact us at 416-639-7639. We look forward to hearing from you soon.