Executive Summary: Key Legal and Evidentiary Issues

• Plaintiff claimed a constructive trust over land based on alleged misuse of investment funds by the defendants.

• The main legal question centered on whether the pleadings supported a claim to an interest in land under section 215 of the Land Title Act.

• Defendants applied to cancel certificates of pending litigation (CPLs) registered by the plaintiff on title to two properties.

• Court examined the legal standing of non-party mortgage holders to bring such an application under the Civil Rules.

• Plaintiff’s claim of constructive trust was found to lack a proprietary nexus necessary to support a CPL.

• CPLs were cancelled, and the corporate defendants were awarded costs at Scale B, payable forthwith.

Facts and outcome of the case

The plaintiff, Khaled Ayman Mahmoud, invested $3 million as a limited partner in South Street (Manitoba St) Limited Partnership (South Street LP), which was established to acquire and develop real estate in Vancouver. The investment was governed by a subscription agreement and a limited partnership agreement, which entitled Mahmoud to a 15% annual preferred return and the eventual return of his capital. A side agreement also promised a quarterly return of 5% annually until the capital was repaid.

According to Mahmoud, the defendants—including various South Street corporate entities and Brent Hanson—failed to pay these returns and misrepresented that funds from refinancing the properties would be used to repay him. Based on these alleged misrepresentations, Mahmoud registered certificates of pending litigation (CPLs) against two parcels of land held by the corporate defendants, claiming a constructive trust over the properties.

Two applications were filed to cancel the CPLs: one by non-party second mortgage holders (the “Mortgagee applicants”) and another by the corporate defendants. The Court first addressed whether the Mortgagee applicants had legal standing to bring such an application. Justice Underhill ruled they did not, as they were not parties to the main proceeding and their situation did not warrant an exception to the normal rule under Rule 8-1 of the Supreme Court Civil Rules. In contrast, Sam Hanson, a director of the corporate defendants, was granted leave to represent them on their CPL cancellation application despite not being legal counsel.

On the merits of the application, the Court considered whether the plaintiff's pleadings sufficiently alleged an interest in land to support the CPLs. The key issue was whether there was a substantial and direct link—or proprietary nexus—between Mahmoud’s investment and the properties in question. Justice Underhill concluded there was not. The plaintiff’s claim was based on a misrepresentation involving third-party refinancing funds, not the plaintiff’s own money being used to acquire or improve the property. As a result, the Court found that the plaintiff’s pleadings failed to support a constructive trust or any interest in land.

The CPLs were therefore ordered cancelled. The Court also awarded the corporate defendants costs at Scale B, payable forthwith, regardless of the final outcome of the larger case. No damages were awarded, as the decision was limited to procedural relief regarding the CPLs.