ON THE LAW OF LIS PENDENS IN NEWFOUNDLAND AND LABRADOR.

• Author: French, Gregory
• Position: Canada

The original common-law doctrine of lis pendens has been supplanted in all of Canada by statutory provisions, except in the Province of Newfoundland and Labrador. In this province, the doctrine has been shaped by local practices of the bar with the endorsement of the Courts. The result is a doctrine of unclear rules, in spite of the wide application of the doctrine in property law. Court decisions have muddied the waters between the underlying received law and common practice. This paper hopes to clarify the law surrounding lis pendens and its practical application in the absence of statutory rules.

1. Introduction

   The idea of lis pendens is deceptively simple and straightforward. It is the notion that parties and property, being the subject of litigation, should be bound by the outcome of that litigation. The goal is to avoid frustration of litigation by transfers of property. From this simple principle, the doctrine of lis pendens emerges.

   For clarity, the common law of lis pendens will be referred to as the "Doctrine". References to registration of documentary notice of pending litigation will be referred to as "Notice".

   While the Doctrine's underlying rationale is easy to understand, its application in law can be less so, particularly in Newfoundland and Labrador, which is the lone province without statutory regulation of the Doctrine or statutory importation of Notice. Local practices have developed based upon the Doctrine to give practical effect to the intention behind it. It is important to understand the Doctrine from its first principles in order to understand its application today. Proper understanding of the Doctrine is necessary for its exercise in practice. Too liberal of an approach can invite litigation and cost consequences. Too conservative of an approach can frustrate its intended use. The Courts of Newfoundland and Labrador have grappled with the same confusion, leaving many practitioners uncertain about when and how the Doctrine actually applies and what its rules are. The result is a unique creation of common law Notice in Newfoundland and Labrador, affirming local practice but without clarifying its rules or its impact on the received Doctrine. The unique situation in Newfoundland and Labrador means that there are few resources to guide the practitioner through the maze of domestic jurisprudence, and little reliance can be made on the caselaw from other provinces.

   This paper will address the historical root of the Doctrine and distinguish its operation in Newfoundland and Labrador from that of other provinces. It is hoped that this paper will assist in clarifying how the law of lis pendens should correctly operate, by synthesizing modern jurisprudence and the received common law into a single theory with common rules.

2. The Doctrine of Lis Pendens Generally

   The lis pendens Doctrine traces its origins back centuries. It is premised on the open and public nature of the justice system, that all persons ought to be aware of matters before the courts. As stated by the Lord Chancellor in Worsley v Earl of Scarborough in 1746:

   There is no such doctrine in this court, that a decree made here shall be an implied notice to a purchaser after the cause is ended, but it is the pendency of the suit that creates the notice; for as it is a transaction in a sovereign court of justice, it is supposed all people are attentive to what passes there, and it is to prevent a greater mischief that would arise by people's purchasing a right under litigation and then in contest [...]. (1) The Doctrine, as originally conceived, did not rely upon specific notice of a dispute to be effective. The open and public nature of the Courts, and the presumption of public awareness of matters before the Court, meant that all persons were deemed to have notice of litigation, whether or not they had actual notice. The result of such was that bona fide purchasers for value were bound by the outcome of litigation, whether or not they had actual notice. In the later case of Bellamy v Sabine, Lord Chancellor Cranworth stated:

   It is scarcely correct to speak of lis pendens as affecting a purchaser through the doctrine of notice, though undoubtedly the language of the Courts often so describes its operation. It affects him not because it amounts to notice, but because the law does not allow litigant parties to give to others, pending the litigation, rights to the property in dispute, so as to prejudice the opposite party. Where a litigation is pending between a plaintiff and a defendant as to the right to a particular estate, the necessities of mankind require that the decision of the court in the suit shall be binding, not only on the litigant parties, but also on those who derive title under them by alienations made pending the suit, whether such alienees had or had not notice of the pending proceedings. (2) The potential for injustice to be done to bona fide purchasers without notice led to statutory reform of the Doctrine in the United Kingdom by the Judgments Act in 1839. (3) This statute introduced for the first time a mandatory registration provision: no buyer of land would be subject to the lis pendens rule unless it was first registered as specified by statute. (4) This created the requirement of Notice for the first time.

   In Canada, all common-law provinces except for Newfoundland and Labrador have codified the Notice provisions of the Judgments Act of 1839 in their domestic legislation. (5) The Canadian statutes are uniform, in that they confirm the requirement of registered notice on the appropriate property registry to bind third party purchasers of the property, and that such notices are issued by the Court. Newfoundland and Labrador stands alone as having no statutory equivalent. One should note that the United Kingdom's Judgments Act became law after the date of reception in Newfoundland and Labrador, being 26 July 1832. (6) Accordingly, Newfoundland and Labrador has never received any statutory amelioration of the strict common law Doctrine, which was adopted into the law of the province.

   Notice requirements arose as a statutory response to the harshness of the Doctrine. Notice is a creature of statute, not of common law. In those provinces where the 1839 Act forms part of received law, Notice has always been required from for lis pendens to have effect. Subsequent legislation in these provinces specifies the form and issuance of such Notice by the Court. Notice requirements are met by a form of a certificate from the Court, registered at the appropriate registry. Without this specific public notice, one cannot rely on the Doctrine to protect one's interest in property under litigation in these jurisdictions. However, the rules regarding registered Notice are separate from the Doctrine. As stated by the Ontario Supreme Court over a century ago:

   The certificate must be distinguished from the lis pendens itself. The phrase 'lis pendens' means precisely what its component words indicate, 'law suit pending'--and what is sometimes called the doctrine of lis pendens was well known and recognized in England many years before the organization of our Court of Chancery. [Court cites to Worsley. supra] The theory, object and extent of the doctrine are here set out with great clearness: the effect being that purchasers for valuable consideration without actual notice were sometimes defrauded of their purchase by operation of this rule of implied notice of lis pendens. (7) It is important to understand the origin of the Notice rule as a separate development from the common law Doctrine when looking at lis pendens law in Newfoundland and Labrador. Notice is a statutory response to the Doctrine, but not a part of the Doctrine itself. It is ancillary to what lis pendens actually is, and importantly, it is not part of the received law of Newfoundland and Labrador.

3. The Evolution of the Doctrine in Newfoundland and Labrador

   For many years, the Doctrine of lis pendens existed in Newfoundland and Labrador without fanfare or judicial comment. It was not until 1987 that the substance of the Doctrine was addressed in caselaw at all, in the case of Newfoundland and Labrador Housing Corporation v Ennis} The facts of that case involved a dispute regarding creditor priorities in a hotel. Of relevance to this paper was the dispute between a judgment creditor and an unregistered mortgagee. The mortgage at issue was signed in December of 1985, but never registered. The litigation involving the judgment creditor was commenced in March of 1986. The judgment creditor argued, in part, that it should have priority under the common law of lis pendens (the Doctrine), as the mortgage was unregistered at the time the litigation commenced. Justice Cameron considered the Doctrine and confirmed that "the doctrine of lis pendens is part of the body of law received into the law of Newfoundland," and further confirmed that the Judgments Act of 1839 was not. (9) On the facts of the Ennis case, the Doctrine was of limited utility: the mortgagee acquired its interest three months before the litigation had commenced. Cameron J held that the operative time for inquiry was the date at which the third party had acquired its interest, rather than the date of registration. (10) The Ennis case does little to set out the parameters of the Doctrine, except to cite to the Bellamy decision as indicative of the state of the law, and implying that there is no requirement for Notice of the litigation to be filed in order to rely on the Doctrine. (11) There is no discussion of Notice in the case, but the Doctrine is discussed at length. If Notice had been a determining factor, one would expect its presence or absence to be addressed.

   The Ennis case confirms when the Doctrine is triggered. It arises on the commencement of litigation--with or without notice to anyone else. However, Cameron J does not go into particular detail about what type of litigation gives...