PROPERTY LITIGATION IN BC
A Practical Guide to CPLs, Constructive Trusts, and Protecting Your Interest in Property
George Lee | George Lee Law | Vancouver, BC | 604-681-1611 | info@gleelaw.com | gleelaw.com
Introduction
If you are involved in a legal dispute in British Columbia and believe that someone else’s property was acquired or improved using money that rightfully belongs to you, one of the most powerful tools available is a Certificate of Pending Litigation (“CPL”). A CPL, registered under section 215 of the Land Title Act, R.S.B.C. 1996, c. 250, effectively freezes the property title, preventing the registered owner from selling, mortgaging, or otherwise dealing with the land while your claim is resolved.
But not every claim entitles you to register a CPL. The law draws a clear line between a pure debt claim—where someone simply owes you money—and a genuine claim to an interest in land. Understanding that distinction can mean the difference between protecting your position and watching a defendant sell or encumber the very property your money helped acquire.
This article explains the legal framework governing CPLs in BC, outlines the key cases that define when a CPL is available, and provides practical guidance on how to establish a claim that the courts will sustain.
What Is a Certificate of Pending Litigation?
A CPL is not a judgment, a lien, or a form of security. It is a notice—registered against a property’s title at the Land Title Office—that tells the world the land is subject to a live court proceeding. Once registered, it prevents the registered owner from dealing with the property in a way that would defeat the claimant’s interest.
Section 215(1)(a) of the Land Title Act provides that a party to a proceeding who claims “an estate or interest in land” may register a CPL against that land. The registration must be accompanied by a copy of the pleading (typically a Notice of Civil Claim) by which the proceeding was commenced.
The practical effect is significant. Under section 216, once a CPL is registered, the Registrar must not make any entry that has the effect of charging, transferring, or otherwise affecting the land until the CPL is cancelled. In plain terms, the property is locked down.
Not Every Claim Qualifies: The “Interest in Land” Requirement
This is where many litigants—and sometimes their lawyers—run into trouble. A CPL is not available simply because a dispute is connected to property. If your claim is essentially a claim for money owed, a CPL will be challenged and likely cancelled.
The classic distinction works as follows. If you entered into a contract to purchase a property and the seller refuses to complete the transaction, you have a direct claim to an interest in the land. A CPL is clearly available. But if you lent money to someone and they used it to buy property, your claim is a debt. The property is merely the place where your money ended up. Without more, a CPL is not justified.
The “without more” is the critical phrase. BC courts have recognized that in certain circumstances, a monetary claim can give rise to a genuine interest in land—specifically, where the claimant can trace misappropriated or wrongfully obtained funds into the property and establish a basis for a constructive trust.
The Constructive Trust: Turning a Money Claim into a Property Claim
A constructive trust is an equitable remedy. Where a defendant has been unjustly enriched at the plaintiff’s expense and retains property that is attributable to the plaintiff’s contribution, the court may declare that the defendant holds some or all of the property in trust for the plaintiff.
In the CPL context, the constructive trust does essential work. It converts what might otherwise be a pure debt claim into a proprietary claim—a claim to an actual interest in land—thereby satisfying section 215’s threshold requirement.
However, establishing a constructive trust sufficient to support a CPL requires more than simply alleging one. The pleadings must contain material facts showing two things, as the BC courts have clarified through a series of significant decisions.
The Key Cases: What the BC Courts Require
1. Jacobs v. Yehia, 2015 BCSC 267 — The Foundation
This is the leading BC Supreme Court decision on the intersection of CPLs, tracing, and constructive trusts. The court established several foundational principles that continue to govern CPL applications in the province.
First, a CPL may be registered where the claimant asserts an equitable interest in land, including an interest arising from a constructive trust. Second, where funds are obtained through wrongful means and can be traced to the acquisition or improvement of land, the court may impose a remedial constructive trust sufficient to sustain a CPL. Third, and critically, the court clarified (citing Masuhara J. in Drucker, Inc. v. Hong, 2011 BCSC 905) that tracing is a “process, not a claim or remedy.” If the plaintiff establishes a proprietary entitlement to misappropriated funds, it may trace those funds into other property.
The threshold for maintaining a CPL was set at whether a constructive trust is a possible remedy—not whether the plaintiff will ultimately succeed. If a constructive trust is possible on the facts pleaded, the CPL is sustained.
| Key Takeaway: If your money was wrongfully taken and you can trace it into someone’s property, a CPL is available — even at an early stage, before you’ve proven your case. |
2. Zou v. Khatkar, 2021 BCSC 1931 — The Two-Part Test
This decision clarified and tightened the pleading requirements for constructive trust-based CPLs. The court held that beyond pleading the underlying cause of action, the plaintiff’s Notice of Civil Claim must contain material facts supporting two distinct requirements.
Requirement 1: A substantial and direct link to the property. The pleadings must demonstrate a nexus between the claim and the specific property against which the CPL is sought. It is not enough that the defendant owns property; there must be a traceable connection between the plaintiff’s funds or contributions and that particular property.
Requirement 2: A monetary award would be inadequate. The plaintiff must plead facts showing why a judgment for damages alone would not do justice—for example, because the defendant has offshore assets, has demonstrated a pattern of dishonesty, or poses a real risk of dissipating the property before judgment.
In Zou itself, the CPLs were cancelled because the plaintiff’s claim was essentially a damages claim for property defects, with no direct connection to the defendant’s other properties. The case illustrates the outer boundary: a general grievance against someone who happens to own property will not justify a CPL.
3. Oikon Developments v. Chris & Mando Ltd., 2024 BCSC 1333 — The Most Recent Authority
This 2024 decision is the most recent significant BC authority on CPLs and constructive trusts. The court upheld the CPLs registered against the properties at issue, finding that the plaintiff’s amended Notice of Civil Claim sufficiently pleaded a constructive trust claim.
The court confirmed that the analysis focuses on whether the pleaded facts, accepted as true, could support a claim to an interest in land. The court does not weigh evidence or assess the merits at the CPL stage. Where the plaintiff demonstrated a causal link between contributions and the enhancement of property value, that was sufficient.
Notably, the court in Oikon may suggest that pleading the inadequacy of damages is not invariably a strict requirement—potentially signalling some flexibility in the application of the second part of the Zou test. This is an important development for claimants.
4. Tracy v. Instaloans, 2010 BCCA 357 — Tracing Through Mixed Funds
The leading BC Court of Appeal authority on tracing funds into property. This case established that funds impressed with a constructive trust can be traced into the hands of affiliated corporations, even where the proceeds have travelled through mixed accounts and can no longer be “reliably identified” in the traditional sense.
The court applied the well-established rule from Re Hallett’s Estate (1879), under which the trustee (or wrongdoer) is presumed to have spent his own funds first, preserving the trust money. This means that the commingling of misappropriated funds with the defendant’s own money in a bank account does not necessarily defeat tracing—a principle of significant practical importance.
| Key Takeaway: Even if the defendant mixed your money with their own funds before using it to pay down a mortgage or improve a property, the tracing claim survives. The law presumes the wrongdoer spent their own money first. |
Practical Checklist: What You Need to Register a CPL
Drawing together the principles from these cases, the following elements must be present (or at minimum, properly pleaded) for a CPL to be registered and sustained in BC.
- A live proceeding. You must have commenced an action—typically by filing a Notice of Civil Claim in the BC Supreme Court. The CPL is filed with a copy of the originating pleading.
- A claim for an interest in land. Your pleadings must claim an estate or interest in the specific property. In constructive trust cases, this means expressly pleading that the defendant holds the property (or a portion of its equity) on constructive trust for you.
- A traceable connection. You must plead material facts showing that your money or property can be traced into the land. This includes the chain of transactions: how the funds originated, how they moved, and how they ended up enhancing the defendant’s property.
- Wrongful conduct. The constructive trust must be grounded in some form of wrongful conduct—fraud, breach of fiduciary duty, unjust enrichment, or breach of trust. A straightforward commercial dispute where the defendant simply has not paid an invoice will generally not suffice.
- Inadequacy of a monetary award (usually). Under the Zou test, you should plead facts showing why money damages alone would not be adequate—for instance, because the defendant has offshore assets, has shown dishonesty, or poses a real risk of dissipating the property. While the 2024 Oikon decision may signal some flexibility in this requirement, it remains prudent to plead it.
- Electronic filing by a lawyer, notary, or registry agent. CPLs must be electronically filed with the Land Title and Survey Authority by a lawyer, notary public, or registry agent. Self-represented litigants may obtain certification of the CPL from the court registry, but cannot complete the electronic filing with LTSA directly.
Common Scenarios Where CPLs Are Available
CPLs arise in a wide range of disputes. The following are among the most frequently encountered scenarios in BC practice.
Family Law Property Division
Under section 215(6) of the Land Title Act, a party to a proceeding under the Family Law Act may register a CPL in respect of any estate or interest in land whose title could change as an outcome of the proceeding. This is a distinct statutory ground that does not require pleading a constructive trust—the family law proceeding itself is sufficient.
Real Estate Transactions Gone Wrong
A purchaser who has entered into a contract of purchase and sale and is seeking specific performance has a clear equitable interest in the property. CPLs in this context are routine and well-established.
Fraud and Misappropriation
Where a defendant has obtained funds through fraud, deceit, or breach of trust and used those funds to acquire or improve property, the plaintiff can trace the misappropriated funds into the land and seek a constructive trust. This is the framework analyzed in detail in Jacobs v. Yehia and is one of the most powerful applications of the CPL tool.
Joint Venture and Partnership Disputes
Where parties have jointly contributed to the acquisition or improvement of property under a joint venture or partnership arrangement, and one party attempts to claim the property exclusively, the contributing party may seek a constructive trust and register a CPL. Oikon Developments (2024) upheld CPLs in precisely this context.
Estate Disputes
Section 215(7) provides a specific ground for CPLs in proceedings under the Wills, Estates and Succession Act, allowing parties to protect property interests during estate litigation.
What Happens After a CPL Is Registered?
Once a CPL is registered, the property owner is not without recourse. The Land Title Act provides several mechanisms by which a CPL may be cancelled.
Under section 252, if no step has been taken in the proceeding for one year, the property owner may apply to cancel the CPL on the ground that the litigation is dormant. Under sections 256 and 257, the owner may apply on the ground that the CPL is causing significant hardship or inconvenience. The court retains discretion and will balance the interests of the parties.
Importantly, the court may also cancel a CPL if, on examination of the pleadings, the plaintiff has not properly disclosed a claim for an interest in land. This is why the drafting of the Notice of Civil Claim is so critical. A poorly pleaded constructive trust claim will not survive a cancellation application.
The court may also order the posting of security as a condition of cancellation—providing the plaintiff with some protection even if the CPL is lifted.
The Risks of Misuse
A CPL is a serious instrument. It can prevent a property owner from selling, refinancing, or dealing with their own land for years while litigation proceeds. Courts are alert to the risk of abuse.
If a CPL is registered without a proper foundation—for example, to pressure a settlement in what is purely a monetary dispute—the court will cancel it, and the claimant may face adverse cost consequences. In extreme cases, a baseless CPL may constitute an abuse of process.
The lesson is straightforward: a CPL must be grounded in a genuine, properly pleaded claim to an interest in the land. It is not a substitute for other forms of security, and it is not a bargaining chip.
Conclusion
A Certificate of Pending Litigation is one of the most effective tools available to protect a party’s interest in property during BC litigation. But it is not available as of right for every claim that touches on real estate. The key question is whether you have a genuine claim to an interest in the land itself—not merely a claim for money that happens to be connected to property.
Where funds have been wrongfully obtained and can be traced into land, the constructive trust framework established in Jacobs v. Yehia, refined in Zou v. Khatkar, and most recently confirmed in Oikon Developments (2024), provides a clear path to registering and sustaining a CPL. The tracing principles from Tracy v. Instaloans at the BC Court of Appeal ensure that mixed or commingled funds do not defeat the claim.
If you believe your money has been used to acquire or improve property in British Columbia and you are considering a CPL, the most important step is to ensure your pleadings are properly drafted from the outset. A well-pleaded constructive trust claim, supported by traceable evidence, will withstand a cancellation application. A poorly pleaded one will not.
Disclaimer: This article is intended for general information purposes only and does not constitute legal advice. Every case is different, and the law may have changed since this article was written. If you are involved in a dispute involving property in British Columbia, you should consult with a qualified lawyer to obtain advice specific to your circumstances.
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