Executive Summary: Key Legal and Evidentiary Issues

• Interaction between a mortgagee’s statutory power of sale and a certificate of pending litigation (CPL) registered by a non-party claimant with an equitable interest in land.
• Scope of the court’s discretion under s. 103(6)(c) of the Courts of Justice Act to discharge a CPL “on any other ground that is considered just,” including at the request of a mortgagee who is not a party to the underlying action.
• Practical gap between “good title” in law under the Mortgages Act and Land Titles Act and the Land Titles Office’s practice of refusing to delete a CPL without consent or a court order.
• Priority of interests under the Land Titles system where a first-ranking mortgagee exercises a private power of sale over a subsequent equitable ownership claim secured by a CPL.
• Evidentiary function of statutory declarations under s. 35 of the Mortgages Act and the evidence specified by the Director of Titles under s. 99 of the Land Titles Act to conclusively prove compliance with power-of-sale requirements.
• Effect of changed circumstances (aborted sale, respondent becoming beneficial owner, pending redemption proceedings) on whether the CPL should ultimately be discharged in the Superior Court’s discretion.

Facts and parties

The case arises from a dispute over a residential property in London, Ontario, municipally known as 1117 Byron Baseline Road and registered under the Land Titles Act. Steven Nurse was the registered owner, and on May 16, 2022 he granted a first mortgage over the property to MCAN Home Mortgage Corporation (MCAN), securing repayment of $410,000 plus interest, costs and expenses, with periodic payments and a maturity date of June 1, 2023. At the time of purchase and mortgage, Nurse lived with his common law spouse, Melissa Lacey Broad. According to Ms. Broad, they decided jointly to acquire the property and she contributed substantially to the down payment, renovations and mortgage payments. Despite this, legal title was taken in Nurse’s name alone, leaving her without registered ownership, but with an alleged equitable interest based on her financial contributions and the parties’ intentions.

Breakdown of the relationship and mortgage default

The couple separated in May 2023. Around the same time, Nurse stopped making mortgage payments. Previously, Ms. Broad had been providing funds to Nurse for the mortgage. After the separation and payment default, MCAN’s mortgage fell into arrears. Under its rights as mortgagee, MCAN elected to proceed under its private power of sale. On October 13, 2023, MCAN served a Notice of Sale Under Mortgage, stating the property would be sold if the arrears and amounts owing were not paid by November 20, 2023. The notice was served on Nurse as mortgagor and on Ms. Broad as a person shown by the parcel register or otherwise understood to have a potential interest.

The respondent’s equitable claim and certificate of pending litigation

In August 2023, before the power of sale notice, Ms. Broad commenced an action against Nurse. She claimed that her substantial financial contributions gave rise to an equitable ownership interest in the property, notwithstanding that title was in Nurse’s name alone. The essence of her case was that she was not a mere contributor to household expenses but had directly funded acquisition, improvements and mortgage payments, entitling her to a beneficial share. In that proceeding (to which MCAN was not a party and against which no priority claim was made), she obtained leave to issue and register a certificate of pending litigation (CPL) on title. The CPL served to notify the world that the beneficial ownership of the property was in dispute and to prevent dealings with the land that might defeat her equitable claim without notice.

Attempts to redeem and interim relief efforts

After receiving the Notice of Sale, Ms. Broad attempted to negotiate with MCAN to bring the mortgage back into good standing. She sought time to arrange financing to pay out MCAN in full, but the parties disputed whether MCAN was obliged to accept the terms or timing she proposed. MCAN emphasized that the mortgage had matured on June 1, 2023 and the full amount of principal, interest, costs and expenses was due, not merely arrears of periodic installments. In December 2023, within her action against Nurse, Ms. Broad brought a motion seeking an interim order declaring her to be an “encumbrancer” of the property under s. 2 of the Mortgages Act, which might have clarified her status among those entitled to notice or redemption rights. That interim relief was denied. Shortly thereafter, on December 29, 2023, MCAN obtained default judgment against Nurse for the amount due under the mortgage and for possession of the property.

The proposed sale and MCAN’s application to discharge the CPL

On October 9, 2024, MCAN entered into an agreement of purchase and sale with a third-party buyer. Under the agreement, MCAN promised to transfer clear title. Although the CPL did not in law alter MCAN’s priority as a first mortgagee, it was an instrument on the parcel register signalling an ongoing adverse claim to an interest in the land. Practically, the purchaser required that the CPL be removed before closing. MCAN brought an application in the Superior Court of Justice seeking an order discharging the CPL. MCAN was not a party to the underlying action in which the CPL was granted, and no one had contended in that action that Ms. Broad’s interest had priority over MCAN’s mortgage.

The application judge’s decision

The application judge dismissed MCAN’s application. She held that the court lacked jurisdiction to discharge a validly registered CPL at the request of a mortgagee exercising a private power of sale. In her view, MCAN’s sole remedy lay in s. 35 of the Mortgages Act. That provision sets out a package of statutory declarations—relating to default, service of notice and compliance with the statutory power-of-sale regime—that, when satisfied, constitute conclusive evidence of compliance and are “sufficient to give a good title to the purchaser.” On the reasoning adopted below, if MCAN complied with s. 35, it could pass “good title” to its purchaser despite the CPL, making a court order discharging the CPL unnecessary, and leaving no judicial power to grant such relief. The judge acknowledged there were open questions about whether MCAN could properly rely on s. 35 without first giving Ms. Broad a meaningful opportunity to redeem, but she declined to decide them. She concluded instead that since s. 35 existed as a complete route to good title, there was neither the power nor the need for the court to expunge the CPL at MCAN’s behest. She also awarded some costs of the application to Ms. Broad.

The statutory framework: certificates of pending litigation and mortgagee’s title

The Court of Appeal carefully reviewed the statutory framework. Under s. 103(1)–(2) of the Courts of Justice Act, the commencement of litigation over an interest in land is not notice to non-parties unless a CPL is issued and registered. A CPL’s purpose is to give notice that an interest in land is in issue and to ensure that transfers or other dealings cannot defeat that claim in favour of a party who would otherwise be able to say they took without notice. Section 103(6) then confers on the court a broad discretion to discharge a CPL with or without terms, on specified grounds (such as absence of a reasonable claim or availability of alternative security) and, critically, “on any other ground that is considered just.” Section 103(7) provides that once a CPL is discharged, the land can be dealt with as if the CPL had never been registered. Separately, Part III of the Mortgages Act governs power-of-sale procedures. Section 31 requires prescribed notice to those whose interests will be cut off by the sale, including persons shown on the parcel register as having an interest and those of whom the mortgagee has actual notice, but not those whose interests are prior to the mortgagee’s or whose rights the mortgagee proposes to sell subject to. Sections 32–34 address timing and service of notices. Section 35 describes the statutory declarations that conclusively prove compliance and that, subject to the Land Titles Act, are “sufficient to give a good title to the purchaser.” The Land Titles Act then provides, in s. 99, that the registered owner of a charge containing a power of sale may sell and transfer the interest in the land upon registering evidence specified by the Director of Titles. That evidence is conclusive of compliance with the Mortgages Act and is sufficient to give good title to the purchaser. Section 99(2) adds that, upon registration of the transfer and satisfactory evidence, the land registrar may delete from the register the entry of any instrument or writ appearing to rank subsequent to the charge, so that such interests cease to affect the land. However, as a matter of Land Titles Office practice, a CPL will not be deleted without the consent of the person who obtained it or a court order, even if it ranks after the selling mortgagee’s charge.

The Court of Appeal’s analysis of jurisdiction under s. 103(6)(c)

The Court of Appeal held that the application judge erred in concluding there was no jurisdiction to discharge a CPL at the instance of a mortgagee completing a private power of sale. The starting point was the breadth of s. 103(6)(c) of the Courts of Justice Act, which allows discharge of a CPL “on any other ground that is considered just.” The provision does not restrict who may seek a discharge to only those who are parties to the action in which the CPL was issued. Nor does it confine the court’s discretion to scenarios where the party who obtained the CPL lacks a reasonable claim or can be protected by another form of security. Where, as here, a first-ranking mortgagee faces a CPL that gives notice of a claim ranking behind its mortgage, and no party is contesting the mortgagee’s priority, the CPL’s continued presence on title can effectively prevent the mortgagee from closing an otherwise proper sale. In those circumstances, the Court of Appeal reasoned, the CPL is operating beyond its intended purpose of preserving a disputed interest as against third parties without notice. It impedes a superior interest that is not itself in dispute in the action that produced the CPL. A mortgagee in MCAN’s position, even though not a party to that action, is plainly affected and may properly ask the court to exercise its discretion to discharge the CPL where justice so requires.

Consistency with the Mortgages Act and Land Titles Act

The Court of Appeal emphasized that recognizing a discretion under s. 103(6)(c) to discharge a CPL at a mortgagee’s request does not conflict with s. 35 of the Mortgages Act or s. 99 of the Land Titles Act; it complements them. Section 35 identifies what evidence is sufficient to confer “good title” to the purchaser in law, but it does not compel the parcel register to be cleansed of instruments such as a CPL. Under the land titles “mirror principle,” the register is intended to be an accurate reflection of title. While s. 99(2) authorizes the registrar to delete instruments or writs ranking subsequent to the charge on a power-of-sale transfer, the registrar’s office does not as a matter of practice remove a CPL without consent or a court order. This practice creates a “practical gap”: a mortgagee can, in law, transfer indefeasible good title, yet still be unable to deliver a title register free of a CPL that no longer affects the purchaser’s interest. The Court of Appeal concluded that the discretionary power under s. 103(6)(c) is broad enough to fill that gap. In appropriate cases, the court can order the discharge of a CPL that ranks subsequent to the mortgage under which the property is being sold, once the mortgagee has established compliance with the statutory power-of-sale regime and with the evidence requirements specified by the Director of Titles. Such an order allows the register to reflect the purchaser’s good title and removes the appearance that the CPL holder still has an interest affecting the land. The court noted that such an order may be subject to terms, such as making the discharge effective only when the transfer to the purchaser is registered and requiring any surplus sale proceeds to be paid into court for later allocation among claimants.

Impact of subsequent developments and the need for a fresh discretion

After the application judge’s decision and before the appeal was heard, circumstances changed significantly. The proposed third-party sale contemplated by MCAN fell through. Separately, Ms. Broad’s action against Nurse proceeded, and she succeeded in that litigation, with the result that she is now recognized as the beneficial owner of the property. In addition, a new application in the Superior Court was commenced regarding her ability to redeem the mortgage held by MCAN. MCAN therefore altered the relief it sought on appeal. Rather than asking the Court of Appeal directly to discharge the CPL, it asked the court to correct the legal error as to jurisdiction and to remit the matter to the Superior Court so that, at the appropriate time and on current facts, a judge could decide whether and how to exercise the discretion to discharge the CPL.

The appellate outcome and costs

The Court of Appeal allowed the appeal, set aside the application judge’s order, and confirmed that a discretion exists under s. 103(6)(c) of the Courts of Justice Act to discharge a CPL on the application of a mortgagee exercising a power of sale, where the mortgage ranks ahead of the interest in dispute in the CPL action and the mortgagee has provided the evidentiary material required under the Mortgages Act and Land Titles Act. The case was remitted to the Superior Court to determine, in light of the changed circumstances and on an appropriate evidentiary record, whether the CPL should in fact be discharged and, if so, on what terms. On costs, the Court of Appeal noted that MCAN had limited its appeal to the question of jurisdiction and did not seek costs of the appeal or of the application below. The court therefore made no costs order in MCAN’s favour. Although the application judge had proceeded on an incorrect legal premise, the Court of Appeal declined to disturb her earlier costs award in favour of Ms. Broad, because MCAN had not shown it would necessarily have succeeded on the merits had the judge understood her discretion correctly. As for Ms. Broad’s successful lawsuit against Nurse (through which she became beneficial owner) and the prior costs award from the application judge, neither decision specifies the exact monetary amounts of any damages, costs or surplus sale proceeds. Accordingly, the successful party in the Court of Appeal is MCAN Home Mortgage Corporation, but the total monetary award, costs or damages ordered in favour of any party cannot be determined from the available decisions.