2018 BCSC 2387 Chilliwack Hop Farms Ltd. v. Briner

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:	Chilliwack Hop Farms Ltd. v. Briner,
	2018 BCSC 2387

Date: 20181220

Docket: S34388

Registry: Chilliwack

Between:

Chilliwack Hop Farms Ltd.

Plaintiff

And

John David Briner, Elizabeth Michelle Briner, and
Northwest Hop Farms Inc.

Defendants

Before: The Honourable Mr. Justice N. Brown

Oral Reasons for Judgment

In Chambers

Counsel for the Plaintiff:	M. Thornton P. Thornton
Counsel for the Defendants (Applicants):	B. Grootendorst
Place and Date of Hearing:	Chilliwack, B.C. December 10, 2018
Place and Date of Judgment:	Chilliwack, B.C. December 20, 2018

[1] THE COURT: The defendants, John David Briner, Elizabeth Michelle Briner, and Northwest Hop Farms Inc. (the “Applicants”) seek an order for cancellation of a certificate of pending litigation CA6840302 (the “CPL”) registered against the properties known and described as:

PID: 006-262-961
Lot 123 District Lot 83 Group 2 New Westminster District Plan 48547
(the “Property”)

[2] The defendant and Applicant, Elizabeth Briner, is the sole registered owner of the Property located at 42302 Knox Avenue, Chilliwack, B.C. She is married to the co-Applicant and defendant, John David Briner.

[3] The plaintiff, Chilliwack Hop Farms Ltd. (“CHF”), is a British Columbia incorporated company. The production and distribution of hops is its business. On May 31, 2018, CHF filed a notice of civil claim naming the aforementioned parties as defendants. The defendants filed a response to civil claim and counterclaim on July 9, 2018. The plaintiff filed a response to counterclaim on July 11, 2018.

[4] I will turn now to the connection between the parties.

[5] In about 2014, John Briner began to work for CHF. More recently, pursuant to an oral contract made in January 2016, he had begun working as a sales manager. The plaintiff, as defendant by counterclaim asserts the defendant, John Briner, resigned from his employment; or alternatively, was terminated for just cause. Virtually all the facts related to John Briner's employment, the plaintiff's treatment of him, and expenses he allegedly incurred, are contested.

[6] On September 28, 2017, the defendants/Applicants in this matter say CHF terminated John Briner's employment. As noted, the plaintiff asserts he resigned from the employment; alternatively was terminated for just cause. After Mr. Briner's employment ended, he started operation of a company called Northwest Hop Farms, also in the business of selling and distributing hops. The plaintiff's civil claim alleges that John Briner breached his contract, his fiduciary duty, and “confidence” owed to CHF. Mr. Briner denies this.

[7] CHF claims an interest in the property based on the following denied allegations:

(a) John Briner wrongfully converted approximately $92,841.87 [which I will refer to as the "Expense Funds"], for his benefit and [for] the benefit of Elizabeth Briner by [allegedly] using the Expense Funds to [do the following]:

(i) Purchase, maintain, repair, or enhance the Property;

(ii) Make payment towards a mortgage in favour of National Holdings Ltd., registered against title to the Property; [and]

(iii) Make payments towards a mortgage in favour of Canadian Western Trust Company, registered against the Property.

...

[Para. 9; NOA, 19 Nov 2018.]

[8] Further in this vein, the plaintiff alleges:

...

(c) Elizabeth Briner holds the Property, and all the other property and assets subject to a constructive trust in favour of CHF; and

(d) The Applicants have been unjustly enriched.

[9] Of course, those two are linked; that is, unjust enrichment and a constructive trust.

[10] No privity of contract or of a contractual relationship exists between CHF and Elizabeth Briner; and none is evident from the materials provided by the parties.

[11] The defendants/Applicants maintain:

(a) they do not hold or have in their possession any assets or property belonging to CHF;

(b) at no time wrongfully converted any funds of CHF for their own use;

(d) the plaintiff has not led evidence to trace the Expense Funds back to the Property or to payments made on either the National Holdings Ltd. mortgage or the Canadian Western Trust Ltd. mortgage registered against the Property. In essence, the defendants denied each and all of the plaintiff's allegations against them.

[12] The Applicants' core position is that they have not improperly taken money from CHF, and that the Expense Funds received by John Briner were at all times legitimate payments made during the course of employment with CHF.

[13] As for a constructive trust having being created, the defendants/Applicants deny this, maintaining as follows:

(a) all money received by John Briner or Elizabeth Briner from CHF was legitimate money paid pursuant to the employment agreement between CHF and John Briner; therefore, contending there has been no unjust enrichment;

(b) at no time was any money provided to the Applicants in contemplation of improving the Property;

(d) at no time did CHF provide any services to the Property; and

(e) CHF holds no interest in the Property.

[14] The Applicants' legal basis for removal of the CPL is that:

1. CHF has no right to a CPL on the Property, as it cannot demonstrate an interest in land; and

2. if there is an interest in land involved, which is specifically denied, that the CPL should be removed on the basis of hardship.

[15] Further in this vein, the Applicants argue that CHF has no right to a certificate of pending litigation because it has failed to demonstrate any interest in the Property and has not raised a triable issue on that point. The Applicants refer to De Cotiis v. De Cotiis, 2004 BCSC 1658 [DeCotiis].

[16] In De Cotiis at para. 35, Justice Sigurdson refreshed the well-established principle that to maintain a certificate of pending litigation or to succeed in its application to refile the certificate, the plaintiff must advance a claim to an interest in land.

[17] As to whether a constructive trust based on unjust enrichment can give rise to an interest in land, in Samji (Trustee of) v. Chatur, 2013 BCSC 1915 [Samji], Justice Grewal also noted at paras. 53-54 that parties are:

[53] … not entitled to register a CPL unless the party is claiming an interest in land. The purpose of a CPL is not to provide pre-judgment security.

[54] The Chatur defendants accept that a claim for a constructive trust can, in certain circumstances, give rise to an interest in land in favour of the plaintiff and therefore found a CPL. ...

[18] The Chatur defendants further submitted, however, that:

… even if an arguable claim for a constructive trust exists, the constructive trust is not in favour of the plaintiff or the Bankrupts.

[19] In Peter v. Beblow, [1993] 1 S.C.R. 980, Madam Justice McLachlin, as she then was, speaking for the majority, emphasized at para. 22 that “for a constructive trust to arise, the plaintiff must establish a direct link to the property which is the subject of the trust by reason of the plaintiff's contribution.” Further in this vein, the Applicants submitted that CHF has no trial issue and no interest in the property because:

(a) it has a claim regarding personal property, that is, money, and not real property;

(b) at no time did it provide services to the Property, and at no time did CHF provide money to the Applicant in contemplation of the Property or to pay mortgages on the Property;

(c) the Property is the personal Property of Elizabeth Briner, who at no time played any role nor was related in any way to the employment relationship between CHF and John Briner;

(d) there has been no breach of trust which, of course, is a bare assertion;

(e) in regard to the Property, CHF cannot show that even if the money paid out to John Briner was improperly paid out that the money was used to enrich the Property; and

(f) CHF has no special interest in nor direct link to the Property and therefore a constructive trust based on unjust enrichment should be unavailable to CHF.

[20] In essence, since CHF allegedly has no interest in the Property, the CPL should be cancelled forthwith. Alternatively, the Applicants rely on s. 256 of the Land Title Act, R.S.B.C. 1996, c. 250 [LTA], which provides:

(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

apply for an order that the registration of the certificate be cancelled.

[21] Elizabeth Briner deposed at para. 22 of her first affidavit, sworn November 6, 2018, that the Applicants “need[ed] to refinance the Property in order to pay [their] legal fees to defend this action and cannot do so while the CPL is still registered against title to the Property.”

[22] On the subject of determining whether parties have an interest in the property for the purposes of a CPL, the plaintiff submitted the test is whether there is an arguable case or a triable issue on that point. Accordingly, the plaintiff submitted the issue is whether the plaintiff claims an interest in and not whether they can prove an interest in the liened property: Samji, para. 60. Further, the issue of whether the plaintiff has an interest in a property is determined based on the pleadings, not by a summary determination of the actual issues between the parties: Tiwana v. Rai, 2018 BCSC 1893 [Tiwana], para. 29.

[23] The plaintiff additionally relied on Samji and Tiwana for two propositions set out at paras 61, 63-64, as follows. When the plaintiff is claiming an interest in a property by way of a constructive trust, it is sufficient for the purposes of determining a right to the CPL for the plaintiff to establish the constructive trust is a possible remedy. A constructive trust may be granted where the plaintiff can establish that the Expense Funds can be traced to the property by means of following or tracing. The issue is whether or not the property is sufficiently connected to the Expense Funds to establish a constructive trust. Further, at para. 64 of Samji, that:

[64] The use of funds to improve or maintain property can give rise to a claim for an interest in land …

[24] With respect to Elizabeth Briner's assertion that the Applicants need to finance the property in order to pay their legal fees to defend the action and cannot do so while the CPL is still registered against title to the Property, the plaintiff referred the court to Dyck v. Linton, [1995] B.C.J. No. 1411 (S.C.) [Dyck]. In that case, the defendants sought removal of the lis pendens to register a mortgage of $75,000 to $100,000 against the property in order to pay legal fees, and to provide additional income pending the conclusion of the proceedings and anticipated criminal proceedings. The defendants also sought an order to have liberty to apply to the court in the event that additional funds become required in the future for legal fees or other necessary expenses. At para. 11, Mr. Justice Harvey found that the defendants had:

[11] … failed to establish "hardship and inconvenience". In particular, he has failed to produce any income and expense statements which will prove that he is unable to live on the amount he is currently receiving in payment of rent and that he is unable to meet his legal fees from this amount. Further, he has not provided up-to-date bank records sufficient to make an assessment as to whether his savings are able to assist him in meeting these expenses.

[25] With respect to criminal charges anticipated, Harvey J. found the claim for criminal defence fees were not appropriate as no criminal charges had been laid as of the date of the application. At para. 14, Justice Harvey stated:

[14] Further, I find this defendant's argument that he needs the funds to pay his legal fees in order to challenge the plaintiffs' claim against the very property at issue to be problematic. From a policy perspective, one could see a situation where this defendant effectively squanders the entire value of the property in litigating this matter, leaving the plaintiff with a dry judgment at the end of the day.

[26] In the case at bar, however, the very Property is not at issue. Further, as I understand the parties' submissions, the necessity of renewing the mortgages on the Property, failing which foreclosure would ensue, is the Applicants' greatest concern.

[27] I do not think there is solid authority for the proposition that payment of legal fees cannot be the grounds for hardship and inconvenience. It depends on the circumstances in the case. In this regard, the plaintiff was amenable to the CPL being removed to accommodate the renewal of mortgages up to $80,000, but not agreeable to increasing the mortgage beyond that to accommodate the Applicants' ability to pay legal fees. The court was not provided with financial documents establishing the fair market value of the Property or showing the Applicants' incapacity to pay legal fees without an increase in the amount of the mortgage that has to be renewed which, if not carried out, would result in a foreclosure.

[28] Further on this subject of hardship, Justice Harvey referred to the decision of Mr. Justice Boyle in Cedarland Forest Products Ltd. v. MCM Developments Ltd. (26 July 1993), New Westminster Registry No. A891885, (B.C.S.C.) [Cedarland] at p. 16. Justice Boyle commented:

I heard no specific argument going to inconvenience beyond the [Applicant’s] remarks attributed to hardship – hard to sell with a lis pendens registered. It did not appear to me that inconvenience ranked high on the Defendant's scale of problems. After all, whether his dealings were fair and square or not, he appears to have been – as far as the evidence I have goes – the guiding hand in this development and in its misfortunes. ...

[29] Those comments do not closely align with the circumstances in the case at bar. I gather there was a development in that case that did not go well and that created some financial problems. In any event, alluding to those remarks, at para. 10, Justice Harvey commented that he found Justice Boyle's comments applicable to the case before him; where the defendant Linton found it difficult to get a mortgage on his property. Justice Harvey opined at para. 10 of Dyck, however:

[10] … that does not in and of itself constitute hardship sufficient to justify cancellation of the lis pendens.

[30] The hardship and inconvenience suffered does not have to be significant, however, to establish hardship and inconvenience as in Daum v. Meek Hotels Ltd., 2009 BCSC 373 at paras. 48-49:

[48] The first issue is whether the defendants have demonstrated "hardship and inconvenience" as contemplated by s. 256(1)(b) of the Act. As [Justice] Goepel … observed in Enigma Investments Corp. v. Henderson Land Holdings (Canada) Ltd., 2007 BCSC 1379, 78 B.C.L.R. (4th) 120, at para. 24, the Act does not require that the hardship be significant. The hardship pointed to by the defendants in that case was their inability to dispose of four strata lots valued in excess of $1.6 million. [Justice] Goepel … was satisfied that the loss of that ability, coupled with the ongoing obligations of the defendants to pay their costs associated with the lots, was sufficient hardship and inconvenience for purposes of ss. 256 and 257.

[49] The hardship and inconvenience to which the defendants in this matter point is their inability to complete the sale of the property to Mr. Jackson or his company. That is sufficient to meet the requirements of the Act. [Emphasis in original.]

[31] In the case at bar, based on information provided by the parties, the mortgagor has been willing to renew the mortgage. The circumstances are not akin to those in Cedarland, at p. 16. No assertion has been made that the mortgagor will not renew the mortgage due to conduct of the Applicants. So far as the evidence now stands, the only impediment to renewal is the lis pendens.

[32] See also Liquor Barn Income Fund v. Mather, 2011 BCCA 141 at para. 37.

[33] The plain language of s. 256(1)(b) of the LTA requires that evidence of the applicant’s hardship and inconvenience must be “experienced or are likely to be experienced by the registration”, [emphasis added]. This language imports a requirement 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. Evidence of hardship must be more than general allegations of inconvenience but include particulars that demonstrate real hardship: Thonger v. Palmer, [1988] B.C.J. No. 1474 (S.C.); Aviawest Resorts Inc. v. Memory Lane Developments Inc., 2004 BCSC 999; and Burns v. Kuhn, 2008 BCSC 1767.

[34] At para. 17 of his November 27, 2018, second affidavit, Marcus Lawrence, a director of the plaintiff, validly having personal knowledge of the matters to which he deposed, said that on September 12, 2017, a fire occurred at the plaintiff's main warehouse facility and office, resulting in destruction of many of the plaintiff's records. At para. 18 of his affidavit, Mr. Lawrence further deposed with respect to documents, in this instance documents listed in the defendants' list of documents, saying at paras. 18-19:

18. The Plaintiff received copies of the documents listed in the Defendants' List of Documents in September. … [T]he documents listed by the Defendants are bank account and credit card statements that the Defendants presumably assert document expenses the Defendant John Briner incurred on behalf of the Plaintiff.

19. Since receiving copies of the Defendants' documents, I have been reviewing the documents to determine whether they do indeed reflect expenses incurred by the Defendant Briner on behalf of the Plaintiff. The Plaintiff intends on conducting examinations for discovery of the Defendants in the near future to further explore the validity of the items listed in the bank account and credit card statements and how such items related to the Plaintiff's business.

[35] The Applicants had stressed during the hearing that the plaintiff had not set out any evidence of tracing or following expenses allegedly incurred by John Briner and linkable to the Property either directly or indirectly. Counsel for the Applicants further submitted the plaintiff's loss of documents will prospectively inhibit its capability of proving a connection between expenses claimed by John Briner and the Property. That remains to be seen, however, because the plaintiff may be able to reconstruct some records after examinations for discovery.

[36] In B.C. Teachers' Credit Union v. Betterly, [1975] B.C.J. No. 1158, 61 D.L.R. (3d) 755 (S.C.), at para. 17:

[17] The principle as to the equitable right of tracing is set out in Nelson et al. v. Larholt, [1947] 2 All E.R. 751 at p. 752, where Denning J., held that if property is taken from a rightful owner it can be recovered from any person into whose hands it can be traced unless the person who receives it does so in good faith, for value and without notice of want of authority. Also, where a volunteer acquires property burdened by a trust, then regardless of whether the volunteer has knowledge of the trust, he holds the property on behalf of the beneficiary: Swanson v. Smith, [1945] 3 D.L.R. 431 at p. 437, [1945] 2 W.W.R. 469, 61 B.C.R. 243 at p. 252 (B.C.C.A).

[37] Justice Harvey found at para. 15 of Dyck:

[15] … [U]ntil examinations for discovery have been conducted, there is no way of ascertaining the exact amount that will be traced into the property and, accordingly, the plaintiffs should be entitled to maintain the security they hold in the property of the defendant.

[38] In the case at bar, the plaintiff stressed that examinations for discovery had not yet been completed and that discovery would most likely bring to light documents and financial records whose contents could reveal links between the Property and expenses the Applicants aver are their own legitimate expenses and not appropriated from the plaintiff.

[39] This part of the case is somewhat similar to the situation in Dyck where examinations for discovery had not been completed. It is not possible to assuredly say the plaintiff will discover sufficient relevant documents to prove its assertions that the Applicants' Property benefitted from money wrongly taken from the plaintiff. I note the application before the court is neither a summary trial nor a motion to strike pleadings on grounds, for example, that they do not disclose a cause of action or because the claim has no reasonable prospect of success. If the plaintiff can trace a significant link between money allegedly taken from it and bestowed on the Applicants' property to the Applicants' unjustifiable advantage, it could be positioned to prove the Applicants were unjustly enriched and so establish a constructive trust covering a portion of the Applicants' Property.

[40] Considering the information proffered at this present stage and the state of the litigation, the relative respective strengths of the parties' cases cannot be assuredly determined and so afford a further basis for cancelling the lien or not, bearing in mind a CPL is an extraordinary remedy. It is not a final order and is usually considered to be an interim order. So it must be borne in mind the CPL is not a final instrument. Further, as discussed earlier, a CPL is not an instrument intended to secure the lienholder's possible future judgment. Elizabeth Michelle Briner is the unquestioned sole owner of the Property. The plaintiff is not seeking a property conveyance order through means such as a claim for specific performance that could vest in it an interest in a property. Were the plaintiff able to trace a link that establishes a transfer of funds for the benefit of the Applicants' unjustly enrichening them, so forming some basis for a constructive trust, the plaintiff's remedy would be for an order requiring the Applicants to return that which they illicitly took and used to benefit their property, in other words, money.

[41] Considering the information before the court and all the circumstances, including the early stage of the litigation, I find an interim order most tenable. I order that the CPL should be cancelled from title for a period of two weeks to give the Applicants sufficient time to renew mortgages registered against the Property up to a maximum of $85,000. If more time is necessary to complete that contractual process, the period of cancellation may be extended for a further week.

[42] If the plaintiff elects to file another CPL after renewal of the mortgages, the Applicants are at liberty to file a new application to cancel the CPL, to be supported by further financial information, and if pertinent, circumstances evidencing other significant sources of hardship and inconvenience. Evidence of financial hardship, at least as it was when it was at the hearing, was rather lacking. In the event of new CLPs being filed, both parties are at liberty to proffer additional evidence regarding cancellation of the second CPL.

[43] Costs shall be in the event of the matter. As for the order made today, I see it forthwith remediates one clear source of hardship, an inability to renew the mortgages on account of the CPL. Forward thinking, if a new CPL is registered against the Property preventing the Applicants from borrowing and creating a hardship, the Applicants will have to apply again and provide more extensive financial information in support of their contention.

[44] As I say, costs shall be in the event of the cause. Who is finally ultimately successful will have costs of the hearing. The ultimately unsuccessful party will not have costs, they will have to pay costs.

[45] I approached this in a balanced way, bearing in mind this is at fairly early stage of the litigation. The parties do not have all the information at hand; it also should be kept in mind that the originating hearing before me was not a summary trial. I was not asked to give judgment on the matter and could not do so anyway because there evidence is lacking. It has to be kept in mind that a CPL is an extraordinary remedy, generally speaking, an interim remedy. The orders made are interim and circumstances could change. The plaintiff could have additional information, on the one hand. On the other hand, the Applicants may be experiencing hardship and inconvenience on a different basis and they, to alleviate that, may have to draw on their equity in the Property.

[46] I see that there is a figure stipulated by the plaintiff as the amount that has been removed or taken illicitly by the defendants. That gives some guidance as to what exposure there is to a dry judgment. But one cannot really assess that without some evidence of the value of the Property. I leave off now with the clarifying note that I have not found payment of legal fees cannot form a basis for a hardship and inconvenience. It depends in the circumstances and I do not see Justice Goepel intending that to be a proposition that holds for all cases, i.e. that legal fees cannot form a basis for hardship. It depends on the circumstances, how much is required, the value of the Property, and all the circumstances.

[47] I thank both parties for their helpful submissions. Those were helpful to me and that is my decision. I will order a transcript in case you might want it down the road and save you that cost.

“N. Brown J.”