Executive Summary: Key Legal and Evidentiary Issues

• The appellants challenged a chambers judge's dismissal of their summary judgment application to strike a constructive trust claim and cancel a certificate of pending litigation (CPL).
   
• Central to the appeal was whether the respondents' pleadings disclosed a valid claim to an interest in land under section 215(1)(a) of the Land Title Act.
   
• Justice Willcock examined whether the elements of a substantive constructive trust, as set out in Soulos v. Korkontzilas, were satisfied.
   
• A key evidentiary gap was the absence of any allegation of gainful wrongdoing or breach of contract by the appellants.
   
• Different standards of review applied: correctness for the pleadings-based legal question and deference for the evidentiary summary judgment ruling.
   
• Ultimately, the Court of Appeal allowed the appeal, dismissing the constructive trust claim and cancelling the certificate of pending litigation.
   

Facts of the case

In 2006, a group of investors, the respondents in this appeal, contributed funds to a land development project in Chilliwack and Langley, British Columbia, under a participating loan agreement (the "Agreement") between the Investors and Rogers Management Ltd. (the "Developer"). Trackside Holdings Ltd. ("Trackside") and JC Land Corp. were the borrowers and legal owners of the properties involved, with legal title held by bare trustee subsidiaries, including the appellant 0720305 B.C. Ltd. ("072"). The properties were acquired in 2005 and subdivided for the project. The project ran into financial difficulty, and the income generated was insufficient to repay any of the investors' capital. One remaining lot in Chilliwack (the "Land") went unsold and remained registered in 072's name. On December 2, 2022, the respondents filed a notice of civil claim asserting that 072 held the Land in trust for Trackside and, by way of constructive trust, for the respondents to the extent of their invested capital, which they pleaded totaled $3,550,000. The same day, the respondents registered a certificate of pending litigation against the Land. Trackside and 072 applied for summary judgment to dismiss the constructive trust claim and cancel the certificate, arguing the pleadings and evidence did not support a claim to an interest in land.

Policy and legislative provisions at issue

The application to cancel the certificate of pending litigation engaged section 215(1)(a) of the Land Title Act, R.S.B.C. 1996, c. 250, which sets the threshold for registering such a certificate on the basis of a claimed interest in land, and section 252(1), which allows cancellation where a claimant has taken no step to advance a claim within a specified period. The summary judgment application itself was brought under Rule 9-6 of the Supreme Court Civil Rules. Substantively, the Agreement set out a strict order of priority for distributing project income: repayment of project expenses, loan finder's fees, guarantee fees, third-party debt, a preferred 9% rate of return, a Developer Fee, and only then return of the investors' capital, with profit-sharing between the Investors and the Developer occurring last, after full capital repayment. The Agreement also contained a clause stating that investors would have "no recourse" against the developer or other project participants if there was insufficient cash to return their capital in full, and it provided that the project would end only with the sale of the last property and distribution of remaining net assets.

Reasoning and analysis

Writing for the court, Justice Willcock distinguished between the two questions raised on appeal: whether the pleadings disclosed a claim to an interest in land, reviewable for correctness, and whether the evidence supported a genuine issue for trial on a constructive trust, reviewable for palpable and overriding error absent an extricable legal error. Drawing on Soulos v. Korkontzilas and the framework in Waters' Law of Trusts in Canada, the court explained that a substantive constructive trust generally requires gainful wrongdoing, such as breach of fiduciary duty or fraudulent misrepresentation, connected to the property in question. The pleadings here alleged neither wrongdoing nor a breach of contract or trust, and did not plead a direct link between the funds invested and the specific Land at issue, a gap the court found significant given the requirement established in Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd. and Virk v. Singh. The court also found the Agreement, read as a whole, showed that 072 held the Land as bare trustee for Trackside, not for the investors, and that the investors' entitlement was to a contingent share of net assets only if the project produced a surplus after higher-priority claims were satisfied. Comparing the case to Goel v. Dhaliwal, the court concluded that an agreement defining an investor's interest in purely monetary terms does not create a proprietary interest in land, even where property is nominally held in trust for a borrower. The court further noted that the ambiguity the chambers judge found in the Schedule "B" organizational chart could not, on its own, support a triable issue given the clear wording of the Agreement's operative provisions.

Ruling and overall outcome

The Court of Appeal allowed the appeal brought by Trackside Holdings Ltd. and 0720305 B.C. Ltd. It held that the respondents' pleadings and evidence did not establish a basis for an interest in the Land arising from a constructive trust, and accordingly dismissed the respondents' constructive trust claim and cancelled the certificate of pending litigation registered against the Land. The judgment does not identify any monetary award, costs order, or damages granted to either side; the $3,550,000 figure pleaded by the respondents represented their claimed invested capital, not an amount ordered or awarded by the court.