In Ontario real estate and civil litigation, a Certificate of Pending Litigation (“CPL”) can be a powerful litigation tool. When granted, it effectively encumbers title to property, restricting its sale, refinancing, or transfer until the dispute is resolved. For plaintiffs, a CPL can preserve assets and provide leverage in litigation. For defendants, however, it can operate much like an injunction, significantly impairing their property rights.
The recent decision in Roopchan v. Abeywardena et al. offers a detailed and instructive analysis of when a CPL will and will not be granted. The case highlights the strict legal threshold for establishing an interest in land, the evidentiary burden on plaintiffs, and the importance of demonstrating real prejudice when seeking this extraordinary remedy.
Assignment of a Condominium Purchase at Centre of Dispute
The dispute arose from a pre-construction condominium purchase in Mississauga. The plaintiff initially entered into an agreement of purchase and sale (“APS”) in 2018 for approximately $572,900.
Over time, she paid deposits totalling roughly $85,936. However, when her original intention to use the property for her son no longer applied, she chose instead to assign her interest in the APS to another purchaser.
In 2022, the plaintiff entered into an assignment agreement with the defendant, under which:
- The property was assigned for a total price of $770,000;
- The assignee agreed to pay the plaintiff over $283,000;
- A portion was paid upfront as a deposit; and
- The remainder was to be paid upon final closing.
The assignment was completed with the builder’s consent.
However, problems arose when the assignee later attempted to terminate or renegotiate the agreement. Ultimately, the assignee’s parents completed the purchase directly with the builder, without paying the remaining balance owed to the plaintiff. The plaintiff then commenced an action seeking damages, declarations of trust, and an order permitting registration of a CPL against the property.
The Legal Framework for a Certificate of Pending Litigation
Under Ontario law, a CPL may be granted where a plaintiff demonstrates a reasonable claim to an interest in land. The threshold question is whether there is a triable issue regarding that interest. If that threshold is met, the Court then considers equitable factors to determine whether granting a CPL is appropriate in the circumstances.
Importantly, the Court does not assess credibility or resolve disputed facts at this stage. Instead, it determines whether the claim is sufficiently grounded to justify encumbering the property.
No Resulting Trust: A Commercial Transaction with Consideration
The plaintiff argued that a resulting trust arose because she contributed funds toward the purchase of the property.
The Court rejected this argument. A resulting trust typically arises where:
- Property is transferred without consideration; or
- One party provides the purchase funds, but title is placed in another’s name.
However, the Court emphasized that the assignment was a commercial transaction conducted at arm’s length with clear consideration flowing both ways. Once the assignment was completed, the plaintiff transferred all rights, title, and interest in the APS. She received significant consideration, including a deposit exceeding her original contribution, and her earlier deposits could no longer be characterized as ongoing contributions to ownership.
The Court concluded that there was no gratuitous transfer and therefore no basis for a resulting trust.
No Constructive Trust: Juristic Reason Defeats Unjust Enrichment
The plaintiff also relied on unjust enrichment to support a constructive trust. To succeed, she needed to establish:
- Enrichment of the defendants
- Corresponding deprivation
- Absence of a juristic (legal) reason
While the Court acknowledged potential enrichment and deprivation, it found a clear juristic reason: the assignment agreement itself. The contract explicitly transferred all rights in the property and did not provide for reversion of interest upon default. Further, it reflected a negotiated exchange of value.
As a result, the plaintiff’s claim sounded in contract, not property. This distinction was critical. A CPL is designed to protect proprietary interests, not to secure payment of a contractual debt.
Fraudulent Conveyance: A Potential Path, But Not Enough
The plaintiff also alleged that the transfer of the property to the assignee’s parents constituted a fraudulent conveyance intended to defeat creditors.
The Court acknowledged that fraudulent conveyance claims can support a CPL, even where no direct interest in land is established. However, the Court applied the more stringent test from Grefford v. Fielding, requiring:
- A high probability of success in the main action;
- Evidence of intent to defeat creditors; and
- A balance of convenience favouring the CPL.
The Court in Roopchan found a strong likelihood of success against the original assignee for breach of contract, and a triable issue regarding intent to defeat creditors, based on factors such as timing, family relationship, and anticipated litigation. Despite this, the motion ultimately failed.
The Decisive Issue: Balance of Convenience
The case turned on the balance of convenience, which the plaintiff failed to establish.
The Court emphasized several key deficiencies:
1. Lack of Evidence of Prejudice
The plaintiff did not provide evidence that the defendants intended to sell the property or that the assignee lacked assets to satisfy a judgment. Further, she failed to prove that she would be unable to recover damages without a CPL.
Therefore, her concerns were characterized as speculative.
2. Presumptive Prejudice to Defendants
By contrast, the Court noted that a CPL inherently prejudices property owners by restricting sale or refinancing and by acting as a de facto injunction on title.
This prejudice is presumed and significant.
3. Availability of Damages
The plaintiff’s primary claim was for a fixed sum under the assignment agreement. The Court found that the damages were easily quantifiable and that there was no evidence they would be unrecoverable. Further, the Court noted, a CPL should not be used as pre-judgment security for a damages claim.
4. No Evidence of Unique Property
The plaintiff failed to demonstrate that the property had unique value to her, particularly given that she had chosen to assign it.
Application of the Dhunna Factors
The Court also considered the traditional Dhunna factors, which further weighed against granting a CPL:
- The property was not shown to be unique
- The plaintiff had an adequate damages remedy
- There was no evidence of imminent sale
- The harm to defendants outweighed speculative harm to the plaintiff
Ultimately, the Court concluded that the equities did not support granting the CPL.
Court Exercises Caution Before Encumbering Property with CPL
The decision in Roopchan v. Abeywardena reinforces the cautious approach Ontario courts take when asked to encumber real property through a CPL.
Even where a plaintiff has a strong underlying claim and raises legitimate concerns about asset transfers, the Court will not grant a CPL without clear evidence of a proprietary interest or compelling equitable grounds.
For litigants, the message is clear: a well-drafted contract, supported by evidence and properly framed claims, remains the strongest foundation for success, while equitable remedies like CPLs require a high and carefully scrutinized threshold.
Campbell Litigation: Real Estate Litigation Lawyer Serving Waterloo, Kitchener and Surrounding Areas
If you are involved in a residential or commercial real estate dispute, assignment agreement conflict, or suspect a fraudulent conveyance, obtaining timely legal advice is critical.
At Campbell Litigation, our real estate litigation lawyer, Richard Campbell, has extensive experience advising clients on complex property disputes, contractual enforcement, and equitable remedies. We provide strategic guidance to help you protect your rights, preserve assets, and navigate the litigation process effectively. Contact us online or call 519.886.1204 to schedule a consultation.
