Executive Summary: Key Legal and Evidentiary Issues

• Plaintiffs sought cancellation of a mortgage registered against title, alleging it was procured by fraud and granted without authority.
   
• Section 25.1 of the Land Title Act provides that a void instrument does not create an interest in land, but the registered chargeholder retains a deemed entitlement under section 26 absent proof of fraud.
   
• Courts require "clear and cogent" evidence to rebut the presumption that registration of a mortgage evinces a valid interest.
   
• The indoor management rule, codified in section 146 of the Business Corporations Act, entitled the realty company to assume the individual defendants retained authority to bind the corporate plaintiff.
   
• Documentary evidence consisting only of director-change filings was found insufficient to establish a lack of actual or ostensible authority.
   
• Justice Taylor found the application premature given the early stage of the underlying proceeding and the absence of cross-examination or discovery.
   

Facts of the case

The plaintiffs, 1341242 B.C. Ltd. (the "134 Company") and its director/shareholder Malkit Singh Jhand, applied for an order cancelling a mortgage registered under charge number CB2038536 (the "Disputed Mortgage") against title to a property at 11920 - 228 Street, Maple Ridge, British Columbia. The 134 Company was incorporated on January 4, 2022, and became registered owner of the property on or about May 16, 2022. Mr. Jhand and defendants Devinder Singh, Gurmeet Singh Sumal, and Sameer Sharma (the "Individual Defendants") were directors and shareholders of the 134 Company at incorporation. On or about March 17, 2023, the Individual Defendants allegedly granted a mortgage in favour of Century 21 Coastal Realty Ltd. ("Century 21") for $220,000 (the "First Mortgage"), the proceeds of which went to a separate company, 1398830 B.C. Ltd., for a Kelowna property purchase. Mr. Singh ceased to be a director and shareholder of the 134 Company on or about May 16, 2023, and Messrs. Sumal and Sharma ceased on or about September 15, 2023, allegedly without disclosing the First Mortgage to Mr. Jhand. The plaintiffs allege that on or about March 26, 2024, after he had ceased to be a director or shareholder, Mr. Singh executed the Disputed Mortgage in favour of Century 21 for $200,000. Jas Arora Notary Corporation and Gurpreet Khurana Notary Corporation were retained to finalize both mortgage transactions. Century 21 discharged the First Mortgage on March 27, 2024, but the Disputed Mortgage was not registered until May 13, 2025, for reasons unclear on the evidence. Mr. Jhand deposed that the plaintiffs received no funds or benefit from either mortgage, and that on March 26, 2026, Prospera Credit Union advised him that renewal of an earlier loan would be difficult unless the Disputed Mortgage was discharged. The plaintiffs filed a notice of civil claim on January 19, 2026, naming Century 21, the Individual Defendants, the two notaries, and 1398830 B.C. Ltd. as defendants, alleging conspiracy, deceit, and civil fraud, all of which were denied.

Policy terms or contractual clauses at issue

The application turned on provisions of the Land Title Act, R.S.B.C. 1996, c. 250. Section 23(2)(i) preserves the right of a person deprived of land to show fraud, including forgery, in which the registered owner participated. Section 25.1(1) provides that a person who purports to acquire an interest in land by registering a void instrument does not acquire any estate or interest on registration. Section 26(1) states that a registered owner of a charge is deemed entitled to the estate or interest created by the instrument, subject to registered exceptions, while section 26(2) clarifies that registration of a charge is not a determination that the instrument actually creates or evidences an enforceable interest. The court also considered section 146 of the Business Corporations Act, S.B.C. 2002, c. 57 (the indoor management rule), under which a company cannot assert against a person dealing with it that a person held out as a director or agent lacked authority, unless that person had actual or constructive knowledge otherwise. Section 421 of the Business Corporations Act further provides that no person is deemed to have notice of a corporate record merely because it was filed with the registrar.

Reasoning and analysis

Justice Taylor held the application premature, noting the notice of civil claim had only recently been filed, no discoveries had occurred, and the remedy sought duplicated relief sought in the broader action, raising the risk of "litigating in slices." The court distinguished this case from Le v. Chan (Trustee), 2023 BCSC 1654, where compelling evidence of forged consent documents existed; here, there was no evidence of forged documents or fraudulent intent, with the plaintiffs' argument resting solely on an alleged lack of corporate authority. The court identified two fundamental problems with the plaintiffs' position. First, the only documentary evidence adduced was two Notice of Change of Directors forms, with no shareholders' agreements, internal governance resolutions, or affidavits from the Individual Defendants or the notaries addressing their understanding of authority. The court also noted an unresolved direct conflict between Mr. Jhand's evidence that he was unaware of the Disputed Mortgage and Mr. Purba's (Century 21's representative) evidence that Mr. Jhand was in fact aware of it. Second, the plaintiffs' argument was inconsistent with the indoor management rule, since there was no evidence Century 21 had actual or constructive knowledge that the Individual Defendants lacked authority; Mr. Purba deposed he was not told of any change in directorship and reasonably relied on Arora Notary to finalize the transaction. The court found Century 21 was not obligated to conduct its own corporate search given section 421's no-constructive-notice provision, and that reliance on legal counsel was reasonable. The single email from Prospera Credit Union describing a loan renewal as merely "difficult" was found insufficient to establish irreparable harm.

Ruling and overall outcome

Justice Taylor dismissed the plaintiffs' application, concluding there was insufficient "clear and cogent" evidence to establish fraud or a lack of authority on a balance of probabilities, and that triable issues remained for a later stage of the proceeding with a fuller evidentiary record. The defendants were found to be the substantially successful parties and were awarded costs in the cause at ordinary difficulty, with no specific dollar amount stated in the decision.