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Real Property - Land Titles Act (2). Borozny v. Wolfsohn
In Borozny v. Wolfsohn (Ont CA, 2023) the Court of Appeal considered the effect of a 'registration' under the Land Titles Act and subsequent court proceedings, here where the parties contested whether an express extinguishment of an easement had been made:[43] The effect of registration of an instrument is set out in s. 78(4) of the Land Titles Act, which provides:Effect of Registration
78(4) When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register. [44] As a result, the legal effect under the Land Titles Act of registration of the Application on July 10, 2006 was to delete the two entries BB43907 and RO530096, the easements that benefitted Lot 17, being the pool easement and the beach easement from the parcel register. That result was also reflected by the Registrar’s action in deleting the two easements from the registered property description for Lot 17.
[45] The Boroznys applied to the court under ss. 159 and 160 of the Land Titles Act, which provide a procedure that allows the court, on application, to rectify the register in defined circumstances. Those sections provide:Court may order rectification
159 Subject to any estates or rights acquired by registration under this Act, where a court of competent jurisdiction has decided that a person is entitled to an estate, right or interest in or to registered land or a charge and as a consequence of the decision the court is of opinion that a rectification of the register is required, the court may make an order directing the register to be rectified in such manner as is considered just.
Application to court to rectify
160 Subject to any estates or rights acquired by registration under this Act, if a person is aggrieved by an entry made, or by the omission of an entry from the register, or if default is made or unnecessary delay takes place in making an entry in the register, the person aggrieved by the entry, omission, default or delay may apply to the court for an order that the register be rectified, and the court may either refuse the application with or without costs to be paid by the applicant or may, if satisfied of the justice of the case, make an order for the rectification of the register. [46] A “person aggrieved” is not defined in the Land Titles Act and the issue of who may qualify as such a person was not raised before the court.
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The application judge erred in law and misapprehended material facts in failing to find that the beach easement was extinguished by express release
[49] To determine whether there was an express release in the Application, the application judge referred to p. 86 of the Ministry of Government and Consumer Services’ Electronic Registration Procedures Guide, version 12 (Toronto: Queen’s Printer for Ontario, 2017), which states:An easement ceases to exist when one of the following occurs:
. The owner of the dominant land (or owner of the easement in gross) releases the easement to the owner of the servient land (see Transfer, Release and Abandonment and Deletion of Easement below), or
. The expiry date of the easement is reached, or other conditions have been met, or
. The servient land including the easement is expropriated, or
. The said party owns the dominant and servient lands. An application to amend the register noting the merging of title is required to remove easement from parcel register. [50] The application judge focused on the part of the Application that recited the merger of the three parcels that had formed Lot 17, and, referring to the fourth bullet point in the Guide, he concluded that the Application could only have removed any easements across those merged parcels.
[51] However, he ignored the effect of the part of the Application that plainly requested the deletion of the easements in accordance with the first bullet point in the Guide, which provides for the express extinguishment of an easement by its owner. That is what occurred here.
[52] The lawyer who drafted the statement in the Application form only referred to the merger of the three parcels of Lot 17 and not to the personal factual circumstances that more fully explained the request to extinguish both the pool and beach easements. However, contrary to the finding of the application judge, there is no requirement to provide an explanation for a request by the owner of the dominant tenement who benefits from the easement to delete it. The failure to provide a full explanation did not affect the legal entitlement of the owner of the dominant tenement, Lot 17, to expressly give up the beach easement over the servient tenement, Lot 4. She was entitled to make that request without any explanation, as bullet one in the Guide reflects.[4]
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[58] In summary, the application judge erred in law by finding that “[t]he disputed Application did not contain an express or implied release of the Beach Right.” The last part of the Statement on the form makes the request for the express release. There is no requirement to provide an explanation for a request by the owner of the dominant tenement who benefits from the easement to delete it. The Registrar acted on the express release of the pool and the beach easements by the owner of the dominant tenement. The Goldfarbs did not take the position that the Registrar had misunderstood the Application. To the contrary, he did exactly what they asked him to do and what they intended.
Conclusion
[59] The application judge erred in law by finding that the beach easement was not expressly extinguished in 2006 by the registration of the Application to delete the two easements, the pool easement and the beach easement. . Froom v. Lafontaine
In Froom v. Lafontaine (Ont CA, 2023) the Court of Appeal considered, in the context of statutory interpretation, some history of the Land Titles Act - particularly the history of s.78(4-4.1) ['Effect of registration; Exception'] regarding 'fraudulent instruments':[20] The issues in this appeal are narrow and technical, and need to be put in context. In Vavilov the Supreme Court noted a legal expectation important to statutory interpretation: “[t]hose who draft and enact statutes expect that questions about their meaning will be resolved by an analysis that has regard to the text, context and purpose”.[3] This draws on the “modern approach” to interpretation, which “requires that the words of a statute be read ‘in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament’”.[4] To analyze the issues the court must consider the text of the LTA, the context within which it operates, and the particular purpose for the provisions at issue.
[21] The LTA was originally enacted in 1885 and was modelled on the English Land Transfer Act, 1875 (38 & 39 Vict. c. 87). The “essential purpose of land titles legislation” like the Act “is to provide the public with security of title and facility of transfer”.[5] The Act embodies three basic principles, namely:. The mirror principle – i.e., that the register of title reflects accurately and completely the state of title;
. The curtain principle – i.e., that the register is the sole source of information regarding title such that a person need not search behind the title and investigate the property’s history; and
. The insurance principle – i.e., that that the state guarantees the accuracy of the register and compensates any person who suffers loss as the result of an inaccuracy.[6] [22] The LTA has been amended many times, including in 2006. Before the 2006 amendments, s. 78(4) provided:(4) When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register. [23] The bare text of s. 78(4) led to the argument that the LTA conferred “immediate indefeasibility” on registered instruments, meaning that instruments were effective and indefeasible as soon as they were registered, even if they were fraudulent. This argument was accepted in CIBC Mortgages Inc. v Chan, 2004 CanLII 66351 (Ont. S.C.), appeal dismissed by this court under the name of Household Realty Corporation Ltd. v. Liu (2005), 2005 CanLII 43402 (ON CA), 261 D.L.R. (4th) 679 (Ont. C.A.), where the mortgage obtained through the use of a forged power of attorney was enforced. The result created a furor.
[24] Sections 78(4.1) and (4.2) were added to the LTA in 2006 and create an exception for “fraudulent instrument[s]” with the effect that such instruments are not deemed to be embodied in the register despite the words of s. 78(4). The 2006 amendments provide:Exception
(4.1) Subsection (4) does not apply to a fraudulent instrument that is registered on or after October 19, 2006.
Non-fraudulent instruments
(4.2) Nothing in subsection (4.1) invalidates the effect of a registered instrument that is not a fraudulent instrument described in that subsection, including instruments registered subsequent to such a fraudulent instrument. [25] The 2006 amendments added several definitions to s. 1 of the LTA. The term “fraudulent instrument” is defined in several ways in s. 1, some of which incorporate the concept of a “fraudulent person”.1 ... “fraudulent instrument” means an instrument,
(a) under which a fraudulent person purports to receive or transfer an estate or interest in land, …
“fraudulent person” means a person who executes or purports to execute an instrument if,
(a) the person forged the instrument,
(b) the person is a fictitious person, or
(c) the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument; [26] The 2006 amendments to the LTA were passed in the wake of this court’s decision in Household Realty and before the court overruled that decision in Lawrence. The amendments were aimed at ensuring that fraudulent instruments would not be given effect in the title register. The legislative debates evidence a concern about real estate fraud and the attendant risk that a property owner might lose their property or become responsible for a fraudulent mortgage. It is noteworthy that there was no specific discussion in the legislative debates to the 2006 amendments about their impact on corporations owning land and securing financing through mortgages and charges.
[27] Based on the 2006 amendments, 128 argues that the mortgage was a “fraudulent instrument” under the LTA and that the doctrine of “deferred indefeasibility” applies to protect 128 and to deprive Seligman of protection.
[28] We make two observations as we turn to the issues: first, the LTA does not provide a remedy for all frauds; second, and relatedly, the fact that a fraud might have been perpetrated is not in itself enough to invalidate an instrument.[7] . Froom v. Lafontaine
In Froom v. Lafontaine (Ont CA, 2023) the Court of Appeal considered detailed statutory (Land Titles Act) provisions regarding whether a registered mortgage was a 'fraudulent instrument' (and the related definition of 'fraudulent person') [under s.1 and applied in 78(4.1) LTA]:[17] The motion judge then considered whether the mortgage was a “fraudulent instrument” and therefore void under s. 78(4.1) of the LTA. 128, supported by Froom, submitted that Lafontaine met the definition of “fraudulent person” in s. 1 under para. (b) (“fictitious person”) and para. (c) (“the person holds oneself out in the instrument to be, but knows that the person is not, the registered owner of the estate or interest in land affected by the instrument”). In response to para. (a), the motion judge relied on 1168760 Ontario Inc. v. 6706037 Canada Inc., 2019 ONSC 4702, 7 R.P.R. (6th) 48 (Div. Ct.), which held, at para. 37, that “interpreting ‘fictitious person’ to mean a person who does not exist is consistent with the purpose of the 2006 amendments [to the LTA], which sought to deal with title fraud committed using fraudulent instruments.” Since Lafontaine is a real person and exists, the motion judge found that she did not meet the definition of a “fictitious person” under the LTA.
[18] Addressing the impact of para. (c) of s. 1 of the LTA, the motion judge noted that “[n]o principle of law was provided by the parties for the proposition that holding oneself out as an officer or director of a corporation and granting a charge on its behalf is equivalent to holding oneself out to be the registered owner of the corporation’s land.” The motion judge favoured a narrow interpretation of the meaning of “fraudulent person” in the LTA, noting that “the 2006 amendments to the LTA did not codify the theory of deferred indefeasibility nor does the LTA address fraud in real estate transactions in general but rather, after the 2006 amendments, only address[es] certain types of fraudulent activity”.
[19] Given that 128, and not Lafontaine, was the registered owner of the condominium, the motion judge found that even if 128’s allegations were true that Lafontaine misrepresented herself as a shareholder, officer or director of the company, 128 failed to demonstrate that Lafontaine, or 128 acting through Lafontaine, met the test as set out in para. (c) of the definition of a “fraudulent person” in s. 1 and thus also failed to establish that the mortgage is a “fraudulent instrument” within the meaning of the LTA. Accordingly, the motion judge granted summary judgment in favour of Seligman in the mortgage enforcement action.
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(1) Is the charge a “fraudulent instrument” under the LTA?
[29] Section 78(4.1) of the LTA creates an exception to the rule in s. 78(4) that an instrument is valid once registered for a “fraudulent instrument”, which is an essential statutory term. Section 78(4.1) provides for the invalidation of “fraudulent instruments”.
[30] Section 1 of the LTA defines “fraudulent instrument” to mean one of four kinds of instruments, only one of which 128 argues applies in this case: an instrument “under which a fraudulent person purports to receive or transfer an estate or interest in land”.[8]
[31] At base, this case is about whether the court should invalidate an instrument on the basis that a party fraudulently misappropriated corporate authority. 128 does not appear to be arguing that 128 itself forged the mortgage, is a fictitious person, or has held itself out to be the owner of the condominium when it is not. Indeed, there does not appear to be any dispute that 128 is a real corporation and owns the condominium. Rather, 128’s argument appears to be that the “fraudulent person” is 128, acting through Lafontaine, or Lafontaine herself. More specifically, 128 contends that because Lafontaine fraudulently took control of 128, she did not have authority to act for it and the actions she took in its name had the effect of transforming 128 or herself into a “fraudulent person”.
[32] To the extent 128 contends that it was itself a fraudulent person when Lafontaine acted on its behalf, this argument assumes that a corporation can be a “fraudulent person”. The term “person” is not defined in the LTA or its regulations. In contrast, s. 87 of the Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, confirms the term includes a corporation: “In every Act and regulation … ‘person’ includes a corporation.” Section 87 draws a distinction between a “person”, which “includes a corporation”, and an “individual”, which “means a natural person”.
[33] The term “person” appears more than 300 times in the LTA. Although the Act occasionally uses the term “person” to refer only to a natural person,[9] the Act overwhelmingly applies the term non-restrictively to include corporations. Indeed, liability provisions for contravening certain provisions of the Act specifically delineate penalties for a “person” that is a “corporation” as opposed to an “individual”.[10]
[34] Case law further supports the proposition that the term “fraudulent person” in s. 1 of the LTA extends to corporations. For example, on the basis that the mortgage over the condominium owned by the corporation was executed by the corporation’s director and that no signature was forged,[11] this court rejected an argument in Ontario Securities Commission v. Money Gate Mortgage Investment Corporation that a mortgage given by a corporation was a “fraudulent instrument”. There was no suggestion in that case that a “fraudulent person” could not be a corporation.
[35] Further, interpreting “fraudulent person” in s. 1 of the LTA to include corporations is also consistent with the Act’s purpose and the legislative history. As noted above, the “essential purpose of land titles legislation” like the Act “is to provide the public with security of title and facility of transfer”.[12] The 2006 amendments to ss. 1 and 78 of the Act were specifically made to address ongoing concerns with fraud in the real estate context.[13] An interpretation of “fraudulent person” that excluded corporations would undermine that purpose, allowing corporations to perpetrate frauds and escape the operation of s. 78(4.1).
[36] It is thus clear that the definition of “fraudulent person” in s. 1 of the Act can include a corporation like 128. To find that the mortgage at issue in this case constitutes a “fraudulent instrument”, it is necessary to determine whether it was given by a “fraudulent person”.
[37] As this court observed in Ontario Securities Commission v. Money Gate Mortgage Investment Corporation, at para. 52, “fraudulent instrument” is a “narrowly defined term.” It thus follows that each of the three definitions of “fraudulent person” should likewise be construed narrowly.
[38] Before turning to how those definitions of “fraudulent person” may apply in this case, it bears repeating that 128 relies on the definition of “fraudulent instrument” under para. (a) of s. 1, which refers to “a fraudulent person” who “purports to receive or transfer an estate or interest in land.” The mortgage was purportedly granted by 128, acting through Lafontaine, rather than by Lafontaine personally. Accordingly, having established that the appellant, as a corporation, can be a “fraudulent person”, the question is then whether either 128 or Lafontaine was, in fact, a “fraudulent person” at the relevant time. There are three possible types of “fraudulent person” under the LTA: (1) a person who “forged” the instrument; (2) a “fictitious person”; or (3) a person who “holds oneself out” in the instrument to be the owner but knows they are not.
[39] It does not follow that 128 or Lafontaine forged the instrument, are fictitious persons, or are persons that held themselves out in the instrument to be the owner knowing they were not. We review each definition below, explaining why none apply in this case. This explanation, exploring the specific terms of LTA s.1 "fictitious person", follows at paras 40-65.
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