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The Court of Appeal for British Columbia has affirmed that the holder of a registered judgment against title under the Court Order Enforcement Act obtains that interest subject to the equities, including a pre-existing beneficial interest.

In 2014 judgment creditors registered their judgment against title to a family home held solely in the name of the judgment debtor but in which his spouse asserted a one-half beneficial interest. When the home ultimately went into foreclosure, the proceeds of sale were used first to satisfy the interests that had been registered in priority to that of the judgment creditors. Litigation then ensued over how the remaining net proceeds of sale should be distributed. Was the debtor’s spouse entitled to receive half of those net proceeds in light of the half beneficial interest she asserted, with the judgment creditors receiving the other half of the proceeds allocable to the judgment debtor’s remaining half interest? Or were the judgment creditors entitled to all of the net proceeds of sale given that legal title was held solely in the debtor’s name? The creditors maintained that the spouse’s asserted beneficial interest ranked below their registered interest in view of the statutory presumption of indefeasibility found in subsection 23(2) of the Land Title Act. The judge at first instance accepted that submission, and directed that the net proceeds of sale be paid in their entirety to the creditors – without a need to determine whether the spouse had established the beneficial interest she asserted. The spouse appealed.

The Court of Appeal reversed, holding that the statutory presumption of indefeasibility operated for the benefit only of bona fide purchasers for value of interests in land – and subsection 86(7) of the Court Order Enforcement Act expressly provided that judgment creditors are not bona fide purchasers for value. A judgment creditor generally does not acquire an interest in land in reliance on the state of title, but rather holds an unsatisfied judgment obtained in other proceedings. The Court of Appeal emphasized the longstanding legal principle that a judgment creditor cannot take an interest greater than that of the judgment debtor, and rejected the creditors’ submission that that principle had been modified by the statutory presumption of indefeasibility. The Court of Appeal held that the trial judge misapplied the Land Title Act by effectively equating the position of a judgment creditor to that of a person who has relied on the register of titles in acquiring an indefeasible interest in the land. Counterintuitively, this misapplication of the law would allow a judgment creditor to obtain greater recovery from the land than even the judgment debtor could derive. Although this result could be legislated, the Court of Appeal concluded that the current legislation did not reach this far. The Court of Appeal allowed the spouse’s appeals, set aside the orders at first instance, and remitted the proceedings back to the Supreme Court of British Columbia for determination of the spouse’s claim to a beneficial interest.

Eyford Partners LLP represented the successful appellant in the Court of Appeal for British Columbia.

Chichak v. Chichak, 2021 BCCA 286.

Associated
People
 
  • Angus M.
    Gunn QC

    Partner

    Angus M.
    Gunn QC

    Partner

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JURISDICTION: British Columbia LEVEL OF COURT: Court of Appeal for British Columbia
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