TCC Mortgage Holdings Inc. v. Rohland

2020 BCSC 420 TCC Mortgage Holdings Inc. v. Rohland

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: TCC Mortgage Holdings Inc. v. Rohland, 2020 BCSC 420 Date: 20200320 Docket: S1811991 Registry: Vancouver Between: TCC Mortgage Holdings Inc. Plaintiff And Gregory Rheinhard Rohland and Inga Zane Defendants Before: The Honourable Mr. Justice Hori Reasons for Judgment Counsel for the Plaintiff: S. Batkin C.J.A. Rempel Counsel for the Defendant Inga Zane: M.D. Carter No other appearances Place and Dates of Trial/Hearing: Vancouver, B.C. December 20, 2019; January 31, 2020 Place and Date of Judgment: Vancouver, B.C. March 20, 2020 Nature of the Application [1] The defendant, Inga Zane, applies to cancel the registration of a certificate of pending litigation ("CPL") against property she owns on Bowen Island, British Columbia. The application is made pursuant to s. 256(1) of the Land Title Act, R.S.B.C. 1996, c. 250, on the basis that Ms. Zane is experiencing or is likely to experience hardship and inconvenience by the registration of the CPL. [2] The plaintiff's application for disclosure of documents was adjourned. Background [3] The defendant, Inga Zane, is the registered owner of property on Bowen Island, British Columbia, with a legal description as follows: PID 028-883-934, Strata Lot 5, District Lot 2958, Group 1, New Westminster District, Strata Plan BCS4476 (the "Property"). [4] Ms. Zane purchased the Property in 2016 with

the intention of building a house on the Property. [5] From June 2015, Ms. Zane has had a personal relationship with the defendant, Gregory Rheinhard Rohland. From June 2015 to mid‑2017, Ms. Zane dated Mr. Rohland. In 2017, they had a falling out but they continued to be friends. [6] Mr. Rohland is indebted to the plaintiff, TCC Mortgage Holdings Inc. ("TCC"), pursuant to a judgment against him and his companies. The judgment debt is a joint and several obligation in the amount of over $16 million. [7] TCC has pursued Mr. Rohland for payment of the judgment since 2009. TCC alleges that Mr. Rohland is avoiding his obligation to pay the judgment by concealing assets and carrying on business through nominees. [8] In this action, TCC claims that Ms. Zane holds the Property in trust for Mr. Rohland and, as a result, it is entitled to a judgment against the Property. The action alleges that Mr. Rohland uses other parties, over which he has control, to acquire, receive and hold assets in which he has a beneficial interest. It is further alleged that those other parties are bare trustees of the assets. [9] TCC alleges that Mr. Rohland, on his own behalf or with Ms. Zane as a partner or joint venturer, acquired the Property for development purposes. TCC further alleges that Mr. Rohland, or others on his behalf, have contributed funds and valuable services to the Property and its

development. Based on those allegations, TCC claims that Mr. Rohland is the sole beneficial owner of the Property or that he at least holds a beneficial interest in the Property. Accordingly, TCC alleges that the Property is held by Inga Zane in trust for Mr. Rohland. Therefore, by virtue of its judgment against Mr. Rohland, TCC claims an interest in the Property to satisfy its judgment. [10] Inga Zane previously made an application for an order cancelling the registration of the CPL pursuant to s. 256(1) of the Land Title Act on the basis that it was causing her hardship and inconvenience. The application was dismissed by Justice Jackson on January 30, 2019. [11] At the time of the application before Justice Jackson, Ms. Zane was involved in litigation with the Bowen Island Municipality. The Municipality had issued "Stop Work" notices against the Property as well as a "Do Not Occupy" notice. The Municipality sought declarations that Ms. Zane was in breach of municipal bylaws. [12] In the application before Justice Jackson, Ms. Zane alleged hardship and inconvenience based on the following: a) that Ms. Zane's financial institution, Coast Capital Savings Credit Union ("Coast Capital"), refused to issue draws on her construction mortgage in the face of the CPL; b) that Ms. Zane was on the verge of bankruptcy and owed money to trades people for the development of the Property; c)

that the construction was being delayed due to the registration of the CPL because mortgage funds could not be accessed; and d) that Ms. Zane and her two children were "essentially homeless". [13] After considering the various allegations of hardship and inconvenience, the court dismissed the application to cancel the registration of the CPL. Jackson J. was not satisfied that the CPL was causing Ms. Zane any hardship or inconvenience because: a) TCC was willing to subordinate its claim under the CPL to any advances made by Coast Capital; and b) any delay in the construction was not caused by the registration of the CPL but rather caused by the Stop Work and Do Not Occupy orders against the Property. [14] After the Court dismissed the application to cancel the CPL, TCC and Coast Capital entered into a priority agreement. The priority agreement granted Coast Capital priority over TCC for any advances made pursuant to the construction mortgage subsequent to the registration of the CPL. Counsel for TCC confirms that TCC continues to be bound by the terms of the priority agreement. [15] Counsel for TCC also indicates that TCC is prepared to enter into a priority agreement with a subsequent lender that is prepared to advance funds to complete the development of the Property. TCC is also willing to temporarily lift the CPL, on terms that protect its interests, to accommodate secondary

or subsequent financing. [16] Following the dismissal of her application to cancel the CPL, Inga Zane applied to dismiss TCC's claim that Mr. Rohland has a beneficial interest in the Property. The application was brought pursuant to R. 9‑6(4) of the Supreme Court Civil Rules for summary judgment. Justice Grauer dismissed Ms. Zane's application on November 7, 2019. In that application, Justice Grauer found that there was evidence: a) of Mr. Rohland's involvement in Ms. Zane's affairs; b) that Mr. Rohland initially intended to reside on the Property with Ms. Zane, his son and Ms. Zane's two children; c) that Mr. Rohland and his son provided significant services relating the design and construction of the house for which they were not fully compensated; d) that monies, apparently traceable to Mr. Rohland, were used to assist in the purchase of the Property; e) of questionable transfers of some sums of money from Mr. Rohland. [17] The court held that evidence of the sort summarized above was capable of supporting TCC's trust claims advanced in this action. Analysis [18] Section 215(1) of the Land Title Act provides as follows: 215 (1) A person who has commenced or is a party to a proceeding, and who is (a) claiming an estate or interest in land, or (b) given by another enactment a right of action in respect of land, may register a certificate of pending litigation against the land

in the same manner as a charge is registered, . . . [19] The Court of Appeal in Berthin v. Berthin, 2018 BCCA 57, at para. 32, describes a CPL as: [32] an extraordinary pre‑judgment mechanism intended to protect a valid claim to an interest in land until the issues in dispute can be resolved. It prevents a plaintiff's claim from being defeated by the defendant transferring the property in dispute to a third party. [20] TCC claims an interest in the Property as the judgment creditor of Mr. Rohland. It specifically sets out its claim for an interest in the Property in the notice of civil claim. Ms. Zane does not suggest that the CPL should be cancelled because the notice of civil claim does not allege a claim for an interest in the Property. Ms. Zane limits her application to s. 256(1) of the Land Title Act. She claims that the registration should be cancelled because it is causing or is likely to cause hardship and inconvenience. [21] Section 256(1) of the Land Title Act allows the registered owner of an estate or interest in land, against which a CPL has been registered, to apply for the cancellation of the registration on the basis that hardship and inconvenience are experienced or are likely to be experienced as a result of the registration. Section 256(1) of the Land Title Act provides as follows: 256 (1) A person who is the registered owner of or claims to be entitled to an

estate or interest in land against which a certificate of pending litigation has been registered may, on setting out in an affidavit (a) particulars of the registration of the certificate of pending litigation, (b) that hardship and inconvenience are experienced or are likely to be experienced by the registration, and (c) the grounds for those statements, apply for an order that the registration of the certificate be cancelled. [22] The onus is on Inga Zane to show that she is experiencing or is likely to experience hardship and inconvenience as a result of the registration of the CPL. [23] The degree of hardship required by s. 256(1) is not clearly defined. The Court of Appeal in Youyi Group Holdings (Canada) Ltd. v. Brentwood Lanes Canada Ltd., 2014 BCCA 388, at para. 28, describes the hardship necessary to engage s. 256(1) as hardship that is more than only "trifling". The Court of Appeal referred to the definition of hardship in The Shorter Oxford Dictionary (6th ed., 2007) as "the quality of being hard to bear" or "severe suffering or privation" but cautioned that the court should not be "exacting" in its analysis of hardship and inconvenience. [24] The evidence suggests that Ms. Zane is undergoing some level of hardship in completing the development of the Property. However, the question is whether any such hardship is caused by the registration of the CPL. [25] Madam

Justice Smith in Liquor Barn Income Fund v. Becker, 2011 BCCA 141, held, at para. 37, that "the hardship and inconvenience experienced or likely to be experienced by the applicant must be causally connected solely to the registration of the CPLs." [26] In Liquor Barn the Court of Appeal held that the hardship in that case was not causally connected solely to the registration of the CPL, but was caused by the existence of the underlying litigation itself. At para. 42 of the decision Smith J.A. held as follows: [42] It may be that the lenders would not have been notified of the action but for the registration of the CPLs, but once notified of the action their refusal to complete the refinancing arrangements was expressly connected to the outstanding litigation and not the CPLs. The respondents' offer to lift the CPLs for the purpose of permitting the appellants to complete the financial arrangements provides the strongest evidence of this fact. In spite of that offer, the lenders still would not complete the refinancing until the litigation was resolved. It was clearly the nature of the allegations in the litigation that caused the lenders to maintain that position, and that has caused (and will likely continue to cause) the appellants' hardship and inconvenience. [27] Ms. Zane claims that she is suffering or is likely to suffer hardship and inconvenience because Coast Capital

will not make the final advance under the construction mortgage while the CPL is registered against title. However, Ms. Zane does not explain why the CPL would deprive her of the final draw from Coast Capital when the priority agreement with TCC continues to be in effect. [28] Ms. Zane also claims that the CPL registration prevents her from securing secondary financing to complete the construction and from arranging takeout financing after the construction mortgage is fully advanced. In support of her claims, Ms. Zane produces emails from her mortgage broker suggesting that the CPL is an impediment to securing financing. Unfortunately, the information from the mortgage broker is not direct evidence from any financial institution or mortgage lender. It is hearsay and, in some instances, hearsay upon hearsay. [29] The evidence tendered by Ms. Zane does not explain why the CPL is an impediment to securing secondary or takeout financing if TCC is prepared to give priority to a lender or to lift the CPL temporarily to allow the lender to register a charge against the Property in priority to the CPL. It is in TCC's best interests for Ms. Zane to complete the development so that the value of the Property is enhanced. An increase in the value of the Property will increase the potential for TCC to recover more of its judgment debt. It is also in the interests of TCC to keep the Property

out of foreclosure. [30] The evidence of Ms. Zane is that there is significant equity in the Property. It is unclear why a lender would be reluctant to lend funds on a property with significant equity if it can secure the loan with a mortgage in priority to the CPL. [31] In response to the evidence that lenders are reluctant to lend funds on the security of the Property, TCC tenders evidence which is also second-hand. Counsel for TCC deposes that one of the lenders approached by Ms. Zane for financing indicated to him the following: (a) the fact that a certificate of pending litigation is registered on title is only one factor to consider when assessing risk; (b) it is essential to investigate the nature of the legal claims giving rise to the certificate of pending litigation; (c) legal claims against a potential borrower which raise allegations of fraud are particularly troubling from a risk assessment perspective. [32] Since I have allowed Ms. Zane to rely on hearsay evidence in her affidavits, it is appropriate to consider the hearsay evidence submitted by TCC. However, I have considered the hearsay evidence cautiously and have given it minimal weight. [33] In this case, the evidence does not convince me that any hardship or inconvenience experienced or likely to be experienced by Ms. Zane is causally connected solely to the registration of the CPL. The onus is upon Ms. Zane

to establish the causal connection. The evidence that she has presented falls short of doing so for the reasons I have stated above. Ms. Zane provides no explanation for the reluctance of the lenders to advance funds when TCC is prepared to give them priority. [34] As in Liquor Barn, if there is a reluctance on the part of lenders, including Coast Capital, to advance funds for the development of the Property, it is as likely that the reluctance is due to the nature of the allegations made in the action as it is to the existence of the CPL. [35] Having found that the defendant has failed to establish that her hardship and inconvenience is causally connected solely to the registration of the CPL, it is not necessary for me to address the plaintiff's submission that the cancellation of the CPL is res judicata or that the defendant is estopped from having this issue addressed again after the findings of Jackson J. in the previous decision. [36] A great deal of evidence was presented to address the merits of TCC's allegation that Ms. Zane holds the Property in trust for Mr. Rohland. Ms. Zane submits that the claim of TCC against the Property is weak at best. She argues that the strength of the claim should be considered in an application to cancel the registration of a CPL pursuant to ss. 256 and 257 of the Land Title Act. I am unable to accept this submission for the following

reasons: a) the strength of the underlying allegations giving rise to the CPL should no longer be a consideration in an application under ss. 256 and 257 after the Court of Appeal decisions in Bilin v. Sidhu, 2017 BCCA 429 and Berthin; and b) Ms. Zane's summary judgment application to dismiss TCC's claims to an interest in the Property was dismissed; [37] The decisions of Bilin and Berthin established the following two principles: a) the Court has jurisdiction to cancel a CPL which fails to meet the threshold requirement of being supported by a pleading that claims an interest in land as required by s. 215 of the Land Title Act; and b) where an interest in land is claimed, but the claim is contended to be without merit, the proper approach is to apply under the summary judgment rule to dismiss the claim, in which case the CPL may only be cancelled in conformity with s. 254 of the Land Title Act. [38] In Bilin, the Court of Appeal distinguished between two factual scenarios as follows: [53] The first is discussed in Kamil and De Cotiis - where there is no triable issue to support the claim for an interest in land. The proper approach in this situation is to bring an application under Rule 9‑6(4) for the summary dismissal of the part of the claim that relates to land. If that application succeeds, the successful party may apply to cancel the CPL in conformity with the procedure

set out in s. 254 of the Land Title Act. [54] The second scenario is the one presented in the case at bar, RCG Forex, and Tymira Holdings - where the pleadings filed in support of the CPL are incapable of supporting a claim to an interest in land. Indeed, as the judge below found, Mr. Bilin "cannot claim" an interest in land on the facts alleged in his Notice of Civil Claim. [39] Grauer J. dismissed Inga Zane's summary judgment application on the basis that there was evidence capable of supporting the trust claims and the claims for conspiracy advanced by TCC. Accordingly, a trial is required to decide these issues. [40] The facts in this case fit within the first scenario described in the passage quoted from Bilin above. Ms. Zane has applied for summary dismissal of that part of the plaintiff's claim that relates to the Property. That application was unsuccessful. Therefore, the registration of the CPL cannot be cancelled on the basis that the claim for an interest in the Property is weak. [41] Ms. Zane also submits that registration of the CPL should be cancelled because damages would be an adequate remedy. This submission also cannot succeed. Whether damages would be an adequate remedy arises in the context of s. 257(1) which provides: 257 (1) On the hearing of the application referred to in section 256 (1), the court (a) may order the cancellation of the registration of the

certificate of pending litigation either in whole or in part, on (i) being satisfied that an order requiring security to be given is proper in the circumstances and that damages will provide adequate relief to the party in whose name the certificate of pending litigation has been registered, and (ii) the applicant giving to the party the security so ordered in an amount satisfactory to the court, or (b) may refuse to order the cancellation of the registration, and in that case may order the party (i) to enter into an undertaking to abide by any order that the court may make as to damages properly payable to the owner as a result of the registration of the certificate of pending litigation, and (ii) to give security in an amount satisfactory to the court and conditioned on the fulfillment of the undertaking and compliance with further terms and conditions, if any, the court may consider proper. (2) The form of the undertaking must be settled by the registrar of the court. (3) In setting the amount of the security to be given, the court may take into consideration the probability of the party's success in the action in respect of which the certificate of pending litigation was registered. [42] Read together with s. 256 of the Land Title Act, a consideration of whether damages would be an adequate remedy only arises once it is determined that the applicant is experiencing or is

likely to experience hardship and inconvenience by the registration of the CPL. Once hardship and inconvenience is established, s. 257 of the Land Title Act allows the court to decide whether or not to cancel the registration of the CPL and on what terms. Simply because damages would be an adequate remedy is not sufficient grounds to cancel the registration of a CPL without the applicant having first established hardship and inconvenience. [43] Therefore, based on the foregoing analysis, the application for an order to cancel the registration of the CPL is dismissed. [44] As part of her order on January 30 2019, Justice Jackson ordered that TCC provide an undertaking, without security, to abide by any order that this Court may make regarding damages as a result of the registration of the CPL. TCC has given the undertaking required by the order of Jackson J. TCC will continue to be bound by the terms of that undertaking. Security for Costs [45] Inga Zane submits that TCC should be ordered to post security for costs because it does not have the financial ability to pay costs if it is required to do so. Ms. Zane relies upon s. 236 of the Business Corporations Act, S.B.C. 2002, c.

57. Section 236 provides that if it appears that a corporate plaintiff will be unable to pay the costs of the defendant if it is not successful in the proceeding, the court may require security to be given by the corporation for those costs. [46] The basic principles for making an order for security for costs are established in Fat Mel's Restaurant Ltd. v. Canadian Northern Shield Insurance Co., [1993] B.C.J. No. 507 (C.A.). At para. 16, the Court of Appeal held: [16] The making of an order under s. 229 of the Company Act [now s. 236 of the Business Corporations Act] is discretionary. However, once the applicant for security has shown that the plaintiff will not be able to pay costs should the claim fail, security is generally ordered unless the court is satisfied that there is no arguable defence. [47] Therefore, the onus is upon Ms. Zane to show that TCC is unable to pay costs should they be awarded to her. Ms. Zane submits that TCC is merely a trustee of the funds it holds and invests. She submits that the assets held by TCC are beneficially owned by its investors and that TCC has no assets from which it can satisfy any order for costs. [48] Ms. Zane relies upon the comments of Justice Walker in TCC Mortgage Holdings Inc. v. Rohland, 2016 BCSC 1328. Justice Walker ordered that TCC post security for its undertaking to pay damages when it was granted a Mareva Injunction. In

deciding to order security for the undertaking, Justice Walker made the following comments at para. 65: [65] During the hearing, I learned that TCC's "assets" consist of investors' funds that it holds in trust. Part of its function is to invest or loan their funds into projects that include housing developments. When I granted the Mareva injunction, I was under the impression that TCC had viable exigible assets in which to satisfy the undertaking as to damages. On this application, TCC failed to provide any financial information in response to Vitality Utah's assertion that it is a holding company without assets. Instead, TCC provided evidence concerning its role and function as a trustee for the assets of others and its ability (through contractual provisions, including indemnities) to call on its investors to satisfy any judgment for damages. [49] Justice Walker was concerned that TCC's undertaking to pay damages for the significant waste committed to an airplane seized by TCC would be without substance. Therefore, he ordered that TCC post security in the amount of $250,000. [50] In my view, the comments of Walker J. are not sufficient to establish that TCC is unable to pay costs if they are awarded to Ms. Zane. The payment of costs is a much different obligation than the payment of significant damages. Costs are limited by the tariff, while the damages in the case decided by

Walker J. were significant. [51] In order to succeed in her application for security for costs, it is not sufficient for Ms. Zane to rely upon reasons for judgment requiring TCC to post security for its undertaking to pay damages in another action. There should be evidence that TCC is financially insolvent or that its business practices divert revenues, profits and assets away from the company. There is no such evidence in this application. The submissions made by Ms. Zane with respect to the financial circumstance of TCC are speculative. It is not possible to conclude on the evidence that TCC has no assets of its own or that it does not generate revenues for itself simply on the basis that the investments it manages are held in trust for investors. [52] Therefore, I decline to order that TCC post security for costs. Costs of the Application [53] If the parties cannot agree on the disposition of costs of the application, they have leave to make further submissions on costs. However, arrangements for a further hearing on costs must be made within 30 days. [54] The submissions on costs may be made by telephone. "Hori J."