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IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: Pan Canadian Mortgage Group Inc. v. 679972 B.C. Ltd.,

2013 BCSC 1078 Date: 20130619

Docket: H090932 Registry: Vancouver

Between:

Pan Canadian Mortgage Group Inc. Petitioner

And

679972 B.C. Ltd., B.C. Collateral Loan Brokers Ltd., Gopal Singh Gill, Jaspal Singh Lalli, Nathan Jarman,

Serin Investments Ltd., E & J Management Ltd., Lynn Elisabeth Wong, Steven Kern, Monica Kern

Maple Leaf Disposal Ltd., and The Crown in the Right of British Columbia

Respondents

Before: The Honourable Madam Justice M. Koenigsberg

Reasons for Judgment

(In Chambers)

Counsel for the Petitioner: No appearance

679972 B.C. Ltd., B.C. Collateral Loan Brokers Ltd., Gopal Singh Gill, Jaspal Singh Lalli, Maple Leaf Disposal Ltd., and The Crown in the Right of British Columbia:

No appearance

Counsel for the Respondents Nathan Jarman, Serin Investments Ltd., E & J Management Ltd., and Lynn Elisabeth Wong:

D.W. Donohoe

Counsel for the Respondents Steven Kern and Monica Kern:

J. A Miner

Pan Canadian Mortgage Group Inc. v. 679972 B.C. Ltd.

Counsel for Interested Parties: G.D. Taylor H.L. Jones P.K. Johal

D.A.T. Moseley Dr. S. Bubra

Place and Date of Hearing: Vancouver, B.C. January 28-30, 2013

Written submissions of Serin Investments Ltd., and Associated

Parties received January 30, 2013

Written submissions of the Respondents Steven Kern and

Monica Kern received January 30,2013

Written supplemental submissions of

Serin Investments Ltd. and Associated Parties received

February 6, 2013

Written supplemental submissions of the Respondents Steven Kern and

Monica Kern received February 7, 2013

Place and Date of Judgment: Vancouver, B.C. June 19, 2013


Introduction

[1] The applications before the court raise questions of the definition and scope

of a purchaser’s lien. The court has before it seven applications. These applications

are all from interested parties who are seeking an order for the payment of funds

held in trust pursuant to an order of the court arising from a foreclosure proceeding.

[2] The applications arise as a result of seven separate claims that have been

initiated by the applicants. All of the claims relate to one piece of property (which will

be defined below).

[3] The proceeding herein, initiated by Pan Canadian Mortgage Group Inc.

(“Pan Canadian”), concerned the same piece of property. Pan Canadian was a

mortgage holder over the property. It initiated foreclosure proceedings. The lands

were sold, Pan Canadian was fully paid and after paying the usual costs, a

remaining balance of $2,533,890.94 (the “Balance") was paid into court.

[4] The issue before the court is what right of priority do the parties to these

applications have to the Balance.

[5] The parties before the court can be divided into two groups. The first are

those who claim purchaser’s liens against the land (collectively the “Purchasers”);

the second are those who have registered judgments against the lands

(“Judgment Creditors”).

[6] There are a total of forty-seven Purchasers before the court who claim an

aggregate sum of approximately $6.2 million. This sum represents the aggregate of

the principal purchase price that each of the Purchasers paid for a townhouse that

was to be built on the Property and does not include any interest, costs, or other

amounts that might be claimed.

[7] The Purchasers commenced the following actions:

a) Lockhart Group (25), Action No. 105926 Vancouver Registry, principle

claim amount $3 million;


b) Rob Parker, Action No. S120962 New Westminster Registry, principle

claim amount $250,000;

c) Rob Parker and Rob Angco, Action No. S120961 New Westminster

Registry, principle claim amount $250,000;

d) O’Hara Group (15), Action No. H091945 Vancouver Registry, principle

claim amount $1.25 million;

e) Johal Group (3), Action No. S120691 New Westminster, principle claim

amount $650,000; and

f) Carlyle Group (2), Action No. S20215 Chilliwack Registry, principle

claim amount $760,000.

[8] The facts involving the Purchasers are the same or very similar to each other.

[9] The Judgment Creditors are:

a) Serin Group, Action No. S092214 Vancouver Registry, claim amount

between $806,535.36 and $1.1 million;

b) Steven and Monica Kern, Action No. S19830 Chilliwack Registry, claim

amount as of January 31, 2010 ($250,000 plus interest) $340,342.47.

[10] The parties determined that it would be best to hear all of the claims together

as they all deal with the same subject matter and priority issues. It was agreed that

the applications should be brought in the foreclosure proceedings under which the

Balance was paid into court.

[11] Some of the Purchasers have received default judgments against some of the

defendants. The defendants have not been active in the defence of the claims

against them. They are represented by counsel and did not appear before the court.


The Parties Positions

Purchasers

[12] The Purchasers are seeking a declaration that they have a purchaser’s lien. It

is agreed between the parties that the request for the declaration is squarely before

the court in these applications.

[13] The Purchasers are also seeking an order that their purchaser’s lien claims

be paid and that they be paid in priority to the Judgment Creditors.

[14] The Judgment Creditors application is for a dismissal of the applications of

the Purchasers on three grounds:

1) That the agreements signed by the Purchasers conferred contractual

rights only and not an interest in land and therefore were not capable

of specific performance which the Judgment Creditors say is a specific

requirement for the court to find a purchaser’s lien.

2) The Judgment Creditors say that in any event the contracts relied upon

by the Purchasers are not legally valid and binding on two separate

grounds:

i) The agreements are void for uncertainty. There are several

issues raised regarding this ground.

ii) The purchase agreements, if they are interpreted to transfer any

interest in land … would then contravene s. 73 of the Land Title

Act, R.S.B.C. 1996, c. 250, which sets out various restrictions

on subdivision of land.

3) Acquiescence, equitable estoppel and laches.

[15] And the Judgment Creditors seek that their judgments be paid in priority to

the purchaser’s lien.


Factual Background Not in Dispute

[16] I have taken most of the undisputed factual background from the

Lockhart Group’s counsel’s submissions.

[17] The petitioner, Pan Canadian, was a first mortgagee over lands legally

described as:

PID: 027-769-437 Lot 1 Section 10 Township 2 New Westminster Land Title District Plan BCP39459 (the “Property”).

[18] The Property was subdivided from a larger parent parcel of approximately

fifteen acres legally described as:

PID: 012-136-174 Lot 44 Section 10 Township 2 New Westminster District Plan 1361 (the “Parent Parcel”).

[19] The Property consisted of an undeveloped vacant five acre parcel located on

or about 60th Avenue and 148th Street, in the City of Surrey, in the Province of

British Columbia.

[20] The civic address for the Property was 6070 - 148th Street, but was later

changed by the City of Surrey to 14838 - 61st Avenue.

[21] Several of the Purchasers visited the Property and the plans provided to the

Purchasers clearly identified the Property.

[22] By a Form A Freehold Transfer registered on July 28, 2004, title to the

Parent Parcel was transferred to the respondent, 679972 B.C. Ltd. ("679972") as

registered owner.

[23] 679972 remained the registered owner of the Property when the

Parent Parcel was subdivided under Land Title Document Number BB7742047


registered on January 19, 2009, thereby creating the Property as separate and

distinct from the Parent Parcel.

[24] At all times material to the applications being considered by the court, 679972

was the registered owner of the Property.

[25] At all material times 679972 had two directors, Mr. Paul Lalli (“Lalli”) and

Mr. Kaldip (Kal) Gill (“Gill”). Lalli and Gill were cousins. Currently Lalli is the sole

director.

[26] At the material times Lalli was a director of a company called Lallico

Investments Ltd. (“Lallico”) with his wife Manjit Lalli. In addition to being a director of

679972, Lalli was also a director of 671532 B.C. Ltd. (“671532”) with Gill.

[27] It was held out to the parties that Lallico, who signed the agreements at issue,

was to become an equal shareholder (owner) with Landco (679972) upon the

completion of certain transactions. This representation is included in the Investment

Agreement which was part of the package of documents signed by the Purchasers.

It is not disputed that this 50% shareholding was acquired sometime in early 2006.

[28] 679972, Lalli and Gill are three of the defendants in each of the actions

commenced by the Purchasers and are respondents in these proceedings.

[29] The Property was to be developed into a residential townhouse development

of approximately 78 townhouses (the “Development").

[30] 679972 as the mortgagor defaulted on the construction mortgage granted in

favour of Pan Canadian. Pan Canadian brought the within foreclosure proceedings

by petition on July 6, 2009.

[31] On August 28, 2009 an order nisi and an order for conduct of sale of the

Property was granted to Pan Canadian. On September 15, 2009 Serin, in the

Pan Canadian proceedings, applied for and was granted conduct of sale.


[32] Several sealed bids for the purchase of the Property were received by the

court. On January 20, 2010 Master Taylor ordered that the Property be sold for the

sum of $7,684,516.

[33] On February 5, 2010 the court-approved sale of the Property completed and

after payment of the mortgage the Balance was paid into court.

Purchaser’s Facts

[34] Most of these facts are not specifically disputed. Where there is a specific

dispute I will note it. Each of the Purchasers entered into the same or similar

agreements for the purchase of townhomes in the Development. The agreements

were partially oral and partially written. The three written agreements were an

agreement of purchase and sale, an investment agreement and a promissory note

(collectively the “Contracts”). Not all Purchasers received a promissory note.

[35] The Purchasers paid the full purchase price for their prospective townhouse.

[36] Lalli was the Purchasers’ primary contact for the vendor, although from time

to time Gill participated in information meetings with Lalli and the Purchasers.

[37] Throughout Lalli’s dealings with the Purchasers he never made a distinction

between representing Lallico or 679972 by the time most of the Purchasers signed

their contracts. It was understood by the early Purchasers that Lallico would become

an owner in the near future and had the authority to bind 679972 in any event. He

was a director of 679972 and Lallico became a 50% owner of 679972. He always

spoke on behalf of both companies which were inextricably linked in the matters

associated with the Property. The Purchasers were meant to understand and they

understood that Lalli had the authority to act on behalf of all parties involved, to

accept payment and to execute agreements on behalf of the owner of the Property.

[38] Lalli himself confirmed in affidavit and cross-examination on affidavits that

when he was speaking to the Purchasers and when signing the Contracts he

believed he had the authority to do so for 679972.


[39] The Judgment Creditors challenge that Lalli confirmed that he acted on behalf

of 679972 or was authorized to do so. I will deal with this evidence later in these

reasons.

[40] The Purchasers asserted before the court that Lalli provided the Purchasers

with information and documents to review relating to the townhouse purchases. In

particular Lalli made the following representations about the Development project

(the “Representations”):

a) Gill was an experienced property developer, was and would remain a

director of 679972, and was and would remain an investor in the

project;

b) 679972, Lalli, Gill and other related companies promised and intended

that all of the money advanced by the Purchasers was to stay in the

Property and would not be used for any purpose other than the

completion of the Development;

c) The Property did not have any charges against it and 679972, Lalli and

Gill promised and intended that no charges would be put against the

Property other than a construction mortgage to facilitate the completion

of the Development;

d) 679972, Lalli and Gill promised and intended that 679972 was and

would be the only company involved in the Development, would own

all lands or other assets in relation to the Development and that,

therefore, any assets they acquired in relation to the Development

would enhance the value of the Development for the benefit of the

Purchaser and would be available to satisfy any claims that the

Purchasers might have;

e) The purpose of the Contracts was to enable the Purchasers to

purchase an interest in the Property and that the Purchasers could


instead elect to be paid monies equivalent to their purchase price plus

10% under a promissory note.

[41] But for the Representations the Purchasers would not have entered into any

agreement for the purchase of a townhouse in the Development.

[42] All payments made by the Purchasers to Lallico were transferred to the

vendor or the vendor’s holding company.

[43] The Judgment Creditors challenge as unproven that the funds so transferred

went into the Property. I will deal with this challenge in the discussion of the

applicable law.

[44] Between 2005 and 2009 the Purchasers attended a number of meetings

arranged by Lalli for the purpose of providing updates as to the progress of the

Development. Both Lalli and, at times, Gill attended the meetings and provided the

updates. There was never any distinction as to what companies they were speaking

for; they were speaking for those involved in the Development. At these meetings

Lalli confirmed the Purchasers purchase of a townhouse and confirmed that they

could sell their interest at any time.

[45] Both before and after entering the Contracts, Lalli made representations to

the Purchasers at group meetings that the Property was free and clear of charges

and that the equity in the Property would be available as security or protection for

the purchase monies they paid.

[46] In discussions with the Purchasers, Lalli stated and agreed that the purpose

of the contract of purchase and sale and the payment of the purchase monies were

to enable each of the Purchasers to purchase an interest in the Property. The

purpose of the investment agreement was to provide additional protection to the

Purchasers.

[47] On September 11, 2006 the Purchasers first made their selections of the

townhome units they were purchasing. These selections were noted on their


Contracts. These selections did change given requirements of the City but the

selection confirmed the Purchasers’ contracts.

[48] On December 14, 2008 the Purchasers met again to confirm their choice of

townhouse in the Development from what Lalli expressed were the final plans and

again the chosen units were noted on their Contracts. The detailed development

plans were filed in 2005 and thereafter approved by the City of Surrey. There were

detailed plans that were circulated as early as 2005.

[49] Throughout 2005 to 2009 the Purchasers received a series of group emails

from Lalli giving updates as to the progress of construction of the townhouses (the

"Investor Group Emails”). These emails were understood to be updates from the

developers of the Property.

[50] The Investor Group Emails confirmed the Purchasers interest in the Property

and that they were to own a townhouse to be built on the Property.

[51] Examples of some of the emails that referenced the delivery of a townhome

include:

a) September 13, 2005: “... you all should get your units by Christmas 2006”;

b) January 17, 2006: “all of you will get your townhouse unit this year”;

c) March 28, 2006: “if any of you wishes to sell your townhouse, I can get you $250K within a week or two.”

d) July 13, 2006: "... you will receive your completed townhome units in the spring of 2007. ... We are in the process of ordering a dozen large flat screen TVs for our show homes. As a token of our esteem for you, we have decided to purchase extras ... and will place one into each of your townhomes as a bonus.”

e) March 28, 2008: “These [promissory] notes were written for one purpose only ... to protect the investor ... not to protect the developer. ... ”


f) At no time does Lallico have any right to decide it would rather pay the Investor a cash return rather than delivering title. The option resides solely with the Investor.

[52] Lalli also provided by email periodic updates on the development process:

a) September 13, 2005: Evening everyone. We are in final negotiations with the city re. Density. ... All of this is taking a bit longer than originally anticipated, but as you can imagine, it is in our best interest to get this improved zoning. Thus, we will delay the clearing of the land for a few weeks. However, you all should still get your units by Christmas 2006.

b) October 7, 2005: ... Our architects have made all of the changes that have been required of us by city staff. Thus we have been given permission to submit the drawings to city council for approval.

c) December 5, 2005: ... On December 21, we hope to clear what is traditionally one of the biggest hurdles in developing raw land ... Federal Fisheries approval. … After we have council approval, we will apply to clear our property.

d) January 11, 2006: ...Our proposal is on the agenda for the next Surrey city council meeting. After we have our first and second reading (which will both happen at the same time), we will apply to clear the property.

e) July 13, 2006: … I have the final plans for phase one. I’ll forward a PDF version to each of you in the next few days. We will gather for a social at the end of the summer -- September 10 -- at our home. We can make final selections of units at that time.

f) September 11, 2006:

A. Time Frames… We will begin construction in November and we’ll begin delivering units to you in the spring/summer. Everyone should have taken delivery of their units by the end summer/fall 2007.

B. Final retail pricing will be between $340K to $380K.

C. Interior Finishes:

1. Entrance: Granite entry tile.

2. Flooring: Kitchen: Ceramic tile or hardwood. Bathrooms: Ceramic tile. Living and dining room: Hardwood.


3. Bathroom: Fixtures: American Standard or equivalent. Counters: Granite.

4. Kitchen: Counters: Granite. Appliances: G.E. upgrade: 1. dishwasher, 2. fridges, 3. Stove, 4. in-sinkarator, and 5. microwave oven.

5. Entrance: Entercom / Picture security.

g) November 14, 2006: The City of Surrey design panel was reviewing the plans and first and second reading were to follow shortly.

h) June 13, 2007: Development cost charges deadlines were being met and if anyone would like to sell their unit to please let them know.

i) July 20, 2007: [W]e have: filed our subdivision application, our development and building permit application, and our on-site work permit application. In an effort to expedite the building phase, we are in final negotiations to hire M & R Construction of Langley to do all of the construction on site.

j) August 14, 2007: ... Townhouse Update

-- We will begin our on-site servicing on August 27.

-- We have an agreement in principle with M & R Construction Ltd. to complete the entire phase of townhomes (all 75 units in phase one). M & R’s principal -- Ray Neeld -- has a tremendous resume, ...

-- In a few weeks, we will end up with 18 large holes in the ground, one for each of the blocks of townhomes.

-- ... the framers will begin their work. ... From the time one breaks ground, projects of this size take from 6-12 months to complete ...

-- … Your units will cost us about $10,000 more because of the promised upgrades (granite countertops, real hardwood floors and stainless steel appliances).

k) August 30, 2007: Construction Progress: By the end of the week, the entire 15 acres site will be cleared of the old homes and out buildings. (Please see attached pictures)


Next Step: The following week, in phase one, we will begin clearing the land and start installing French drains which are used to manage the rainwater runoff.

Change of Address: The civic (street) address for your units has been changed by the city. The new address will be 14838 61 Avenue, Surrey, B.C. Your contracts will need to be adjusted accordingly and we'll do this when we gather for an upcoming investors social.

l) December 24, 2007: “I look forward to handing each of you keys to your beautiful new townhomes.”

m) December 4, 2008: Good news everyone. Filing of our subdivision plan took longer than expected. ... The good news is, it has been completed. As we have already received our servicing agreement, the registration of the subdivision plan will mark the end of this chapter -- the civic approval process of this project.

[53] By email dated June 3, 2009, Lalli advised the Purchasers that the

Development would not be going ahead. Lalli stated that he had discussed with Gill

that they should liquidate properties that they co-owned and pay back all of the

Purchasers.

[54] By way of email dated June 14, 2009 Lalli advised the Purchasers that the

Property would be sold to an outside purchaser and the proceeds would be

distributed to the Purchasers.

[55] The Property was subject to a mortgage and foreclosure proceedings resulted

in the sale of the Property.

[56] It was well known that the Purchasers were involved in the Development. The

fact of the Purchasers involvement was much touted by those responsible for the

Development.

[57] The Contracts were created entirely by 679972 and Lallico and were drafted

by 679972 and Lallico’s lawyer. The Purchasers did not make changes to the

Contracts and did not obtain independent legal advice with regard to the same.

[58] I find that the weight of all of the evidence before the court confirms the facts

set out as Purchaser’s facts herein and confirms that the Representations set out in


para. 40(a-e) were made in good faith and with the exception of (c) were true.

Further, the weight of the evidence (uncontradicted) supports para. 41.

Serin’s Facts

[59] Serin’s claim to the Balance arises by virtue of the fact that it is a

Judgment Creditor.

[60] Serin loaned funds to 0724010 B.C. Ltd. (“0724010”) and 0730971 B.C. Ltd.

(“0730971”), companies not involved with the Property, and received a mortgage

over lands owned by these companies. These companies were owned at least in

part by Gill.

[61] Serin’s mortgage BA286609 was filed May 9, 2006 and charged lands legally

described as:

PID: 000-911-267 Lot 30 Except: Part on Statutory Right of Way Plan NEW88249 Sections 9 & 16 Block 4 North Range 4 New Westminster District Plan 45249

PID: 009-599-070 Lot 11 District Lot 379 Group 1 New Westminster District Plan 20914 (“Lot 11")

PID: 008-037-159 Lot 12 Except: Part Subdivided by Plan BCP11526 District Lot 379 Group 1 New Westminster District Plan 20914

(collectively, “Serin’s BA286609 Mortgaged Lands”).

[62] The mortgagors were 0724010 and 0730971, while Gill, Bhajan Singh

Hundal, Kuldip Singh Gill, 642943 B.C. Ltd. (“642943”), 679972, 671532 , Pepin

Brook Estates Ltd., Landpower Developments Ltd. and B.C. Collateral Loan Brokers

Ltd. were covenantors.


[63] Serin’s BA286609 mortgage did not charge the Property and had no

connection to the Property.

[64] Serin requested that 679972 be one of the covenantors for Serin’s BA286609

mortgage.

[65] The mortgagors defaulted and Serin obtained judgment pursuant to a Form B

mortgage, which secured the amount of $1.61 million.

[66] Serin commenced foreclosure proceedings against Serin’s BA286609

Mortgaged Lands by petition in the Vancouver Registry under Action No. H070114

on February 17, 2007.

[67] On January 13, 2009, an order nisi was pronounced against the borrowers

and the covenantors under Serin’s mortgage BA286609, (including 679972), in the

amount of $1,597,965.60, plus costs with interest to continue to accrue

(“Serin’s Judgment”).

[68] At some point in time, Serin received partial payment(s) totalling $561,602.37

from 679972, leaving a balance of $1,036,363.23, plus costs and interest owing

pursuant to Serin's Judgment. Serin also received further payments, however, from

whom the payments were made and the amounts are not determined.

[69] On February 20, 2009 Serin’s Judgment was registered on title to the

Property.

[70] Serin commenced proceedings by petition in the Vancouver Registry of the

Supreme Court of British Columbia under Action No. S092210 to enforce

Serin's Judgment pursuant to the Court Order Enforcement Act R.S.B.C. 1996,

c. 78, to have the Property sold on March 23, 2009.

[71] By order dated May 13, 2009 the court in proceeding No. S092210 made the

first order in the process to sell the Property under the Court Order Enforcement Act,

being an order that there be a reference to the Registrar.


[72] On July 8, 2009 the reference took place. The Registrar recommended that

Serin may apply to sell the registered interest of the respondent 679972.

[73] In July 2009 Pan Canadian commenced foreclosure proceedings with respect

to the Property. An order nisi and conduct of sale was granted on August 28, 2009.

[74] On September 15, 2009 Serin applied, not pursuant to the Registrar's

recommendations but within the Pan Canadian proceedings, for conduct of sale of

the Property.

[75] It is stated that on December 18, 2009 0859811 B.C. Ltd. took an assignment

of Serin’s Judgment.

[76] On January 20, 2010 Serin sought court approval of an offer to sell the

Property in the amount of $5,250,000. After several sealed bids were received by

the court an order was made approving the sale of the Property for $7,684,516.

[77] On February 5, 2010 a court-approved sale of the Property completed.

[78] By notice of motion dated February 24, 2010 Serin made application in these

proceedings for payment of its judgment plus costs out of the Balance.

[79] It is unclear whether Serin has taken any steps to pursue any of the other

borrowers or covenantors against whom judgment was obtained pursuant to Serin’s

mortgage No. BA286609.

[80] The parties agreed at the case management conference held on

November 9, 2012 that an accounting related to the amounts claimed by Serin would

be determined at a later date.

Kerns’ Facts

[81] Steven Kern and Monica Kern (collectively, the “Kerns”) were Purchasers.

They entered into the Contracts with the vendors and paid $250,000 towards their

townhouse.


[82] They, however, elected under the Contracts, to convert their interest from a

townhouse to a debt through their promissory note. They then sought to demand

payment and realize upon their promissory note debt. This occurred approximately a

year before the announcement that the project would not go ahead.

[83] In or about September 2008 the Kerns were provided with and accepted a

cheque from 679972 for their $250,000 plus interest pursuant to the promissory

note. The payment, however, was not honored by the bank.

[84] The Kerns initiated proceedings on March 11, 2009 which included a claim for

a purchaser's lien, and/or an equitable mortgage and a claim under the promissory

note. They also filed a certificate of pending litigation against the Property.

[85] On June 22, 2009 the Kerns were granted judgment against 679972 for

$250,000 plus interest for a total of $340,342.47, based on the dishonored payment

by 679972.

[86] On June 25, 2009 the Kerns filed a judgment against the Property.

Other Issues

[87] In addition to the primary positions of the Judgment Creditors set out above

they raise several other issues which I will enumerate and deal with briefly later in

these reasons beginning at para. 122.

Law

[88] These cross-applications raise significant definitional questions. First, what is

a purchaser’s lien? Second, what are its essential features and its scope?

[89] There are many other issues raised by the respondent Judgment Creditors in

this case. However, almost all of them are subsidiary to those questions. These

reasons attempt to place some clarity on the definitional issues set out above.


What are the Essential Features or Requirements for a Purchaser’s Lien?

[90] A purchaser’s lien is a well-established equitable charge over property that

arises at the time a purchaser of property provides a deposit or funds to the vendor

or their agent in part or whole payment of the purchase price. A purchaser’s lien is

created by equity not by contract. The law establishing a purchaser’s lien has a long

history stretching from at least the mid-1800’s to today. A case similar to the one at

bar is Whitbread & Co., Limited v. Watt, [1902] 1 Ch. 835 at 838. In this case the

purchaser was purchasing a freehold public-house plot on a building estate. The

purchase was to complete as soon as 300 houses had been built on the estate. The

300 houses were not built. The purchaser sued for a return of their monies based

upon a purchaser’s lien. Lord Justice Vaughan Williams stated at 838:

…

The lien which a purchaser has for his deposit is not the result of any express contract; it is a right which may be said to have been invented for the purpose of doing justice. …

[91] One of the first cases to discuss purchaser's liens is the oft cited case of

Rose v. Watson, [1864] 10 H.L.C. 672. The House of Lords found that when a

portion of the purchase price for property was paid the payor obtained a security

interest, similar to that of a mortgagee, equivalent to the funds paid. Lord Westbury

stated at 682:

…

.... It was money advanced upon the faith that the land, the subject of the contract, would become the property of the Respondent; and being so paid as part of the purchase-money under the contract, and being paid in advance, on the faith of the vendor’s performance of the contract, I think that your Lordships will have little difficulty in coming to the conclusion that those sums of money thus paid formed principal sums, in respect of which there became a lien from the time of the payment of them; ... [Emphasis added]

[92] As stated by Di Castri in the Law of Vendor and Purchaser, 3rd edition,

Volume 3 at para. 913, p. 18-20:

…

… The lien is decreed independently of the contract, which does not give it, but furnishes the reason for the decree. ...


…

…

[93] At the time any payment on account of the purchase price is made, a

purchaser obtains an equitable right to security in the land to the extent of their

payments. This right is immediately vested to secure repayment of the purchase

monies so paid in the event the contract is not completed through no fault of the

purchaser. (Whitbread; Rose; Capital Plaza Developments Ltd. v. Counterpoint

Enterprises Ltd., [1985] B.C.J. No. 321 (S.C.) at paras. 9-11).

[94] Put another way, the courts have found that the payment on account of the

purchase price (whether as a deposit or otherwise) is not just a partial payment but

is security for the completion of the purchase. If the purchaser fails to perform their

part of the contract, the vendor has security against the funds; if the vendor fails to

perform, the purchaser can recover the funds and is entitled to a lien on the subject

matter of the contract. By virtue of the lien the purchaser is a secured creditor. (Levy

v. Stogdon, [1898] 1 Ch. 478 (C.A.) at 486; J.A.R. Leaseholds Ltd. v. Tormet Ltd.

and Kaye (1965), 48 D.L.R. (2d) 97 (Ont. C.A.))

[95] Di Castri has described the nature of a purchaser's lien at (Law of Vendor and

Purchaser, 3rd edition, Volume 3, at para. 913, pp. 18-20):

…

Where a contract goes off without any misconduct or default on the part of the purchaser, he acquires an equitable lien, on the subject land, in general commensurate with the purchase money paid. To put this another way, in order to do justice between a vendor and a purchaser under a contract for the sale of land, equity gives the latter a lien on the estate by way of an equitable charge in respect of all payments made on account of the price, interest, and costs.

While there is no doubt that an action to enforce a purchaser’s lien is based on an affirmance of the contract, there appears to be some technical legal question as to the affirmative right of a purchaser to claim his lien, where he has rescinded the contract. It is submitted, however, that whether the transaction falls through by reason of the inability of the vendor to convey as agreed or whether the contract is rescinded before completion by reason of the vendor’s misrepresentation of a material fact, in either event, the purchaser’s right to a lien cannot be affected. The objection is urged that,


assuming the right of a purchaser to a lien, it is abandoned where the contract is rescinded. The argument is that

…

In order to ascertain the real nature of the exercise of equitable power, it may be considered in relation to its basis and to the result of its operation. The basis is the promise of the vendor to convey the land, as and when agreed, and that meanwhile he is a trustee of the legal title for the purchaser to the extent of the purchase moneys paid. The extent of its operation is to subject the land to the execution of a trust, either to convey, where there has been full performance by the purchaser or to return him his moneys, where the contract has failed and ceases to be binding through no fault of the latter. It supplies a remedy where the law falls short of accomplishing full justice. If equity lays hold of a pretext, or adopts a fiction, in such a case it is not more than it does in many other cases, in order to enforce a natural right and to affect a just result.

…

[96] The enforcement of a purchaser’s lien can be sought when there is no ability

to enforce specific performance or where the purchaser does not want specific

performance. If specific performance is available to a purchaser title can be

transferred or the purchaser can elect to claim under the purchaser's lien. In the

circumstances where specific performance is not possible, the purchaser’s equitable

interest in the land remains which is enforceable through the lien. (Rose; Levy;

Cornwall v. Henson, [1899] 2 Ch. 710 at 714; Law of Vendor and Purchaser,

3rd edition, Volume 3, at para. 919, pp.18-26; J.A.R. Leaseholds Ltd. at para. 28).

[97] The court found that upon paying the monies the purchaser obtained a

purchaser’s lien over the property as a whole (Whitbread). The principle that the lien

will apply to the property as a whole rather than to the particular portion of the

property for which the funds were advanced was reiterated in the British Columbia

case of Lehmann v. B.R.M. Enterprises Ltd. (1978), 88 D.L.R. (3d) 87 (B.C.S.C.). In

this case the plaintiff was the purchaser of a strata unit in a planned strata

development. He had paid the entire purchase price for the unit to the vendor. The

vendor went bankrupt and did not complete the development and did not file a strata

plan. The court found that the right to the purchaser’s lien was not affected by the

fact that the strata plan had not been registered. The right to the lien was not


dependent upon the ability of the vendor to convey title and the purchaser was

entitled to a lien over the entire development property for the amount paid

notwithstanding that the lands that were the subject of the contract did not exist and

specific performance could not be ordered.

[98] All parties agree that if the Purchasers have a purchaser’s lien that lien ranks

in priority to the other secured judgments.

[99] The Judgment Creditors challenge the Purchasers position that there are

grounds for a purchaser’s lien. They base their position on essentially two grounds

with what could be said to be several “sub-grounds”. First, that the contract package

signed by the Purchasers cannot give rise to a purchaser’s lien because the

agreements are incapable of giving rise to an interest in the land and/or specific

performance. Second, that in any event the agreements are too vague or uncertain

to be enforceable.

Specific Performance or an Interest in Land

[100] The Judgment Creditors rely on bcIMC Construction Fund Corporation v.

Chandler Homer Street Ventures Ltd., 2008 BCSC 897, among other decisions. The

Judgment Creditors say bcIMC stands for the proposition that a purchaser’s lien

requires a valid and legally binding purchase contract that is capable of specific

performance.

[101] The short answer to the Judgment Creditors’ reliance on bcIMC is that the

case did not involve a claim for a purchaser’s lien. The discussion in the case

referred to by the Judgment Creditors revolves around claims to either specific

performance or other equitable interests in land.

[102] In each case cited by the Judgment Creditors such as bcIMC; CareVest

Capital Inc. v. CB Development 2000 Ltd., 2007 BCSC 1146; J.A.R. Leaseholds

Ltd., specific performance and the need for an equitable interest in land is

discussed. The distinction between an equitable claim for a vested security interest


over land, that is a purchaser’s lien, and an owner in equity is either not discussed or

the broader term equitable interest is used but not in relation to a purchaser’s lien.

[103] Cornwall is a helpful case in maintaining a clear concept of the difference in

the claims. In J.A.R. Leaseholds Ltd., the court in its analysis denied specific

performance. The issue of whether the plaintiff could claim a purchaser’s lien was

considered. Such a claim was denied, not because specific performance wasn’t

available but because the purchaser had elected to abandon the contract or had

repudiated the contract. Thus, the purchaser’s inability to claim a lien resulted from

the fact that the “contract” was at an end because of the actions of the purchaser.

[104] Thus, there is no basis in law to support the Judgment Creditors position that

a purchaser’s lien is not available if the contracts underpinning a lien do not create

an interest in land and/or are incapable of specific performance.

[105] The Judgment Creditors challenge, as not proven, that all of the monies

advanced by the Purchasers went to the townhouse project on the Property.

[106] In particular it is submitted that the First Purchasers were asked to provide up

to $1,600,000 to discharge two mortgages on different land, not to develop the

Property.

[107] It is not disputed that the $1,600,000 advanced by the First Purchasers was

used to discharge mortgages. However, there is some confusion about the land

which was the subject of those mortgages.

[108] The following is a description of the Property as set out in the written

submissions of the Judgment Creditor Serin. These submissions were adopted by

the Kerns at the hearing of these applications:

The subject land parcel that was sold by court order in 2009 and generated the surplus sale proceeds paid into court is PID: 027-769-437, originally known as lot 44 and later bearing a changed legal description as Lot 1 of section 10 of township 2, after the filing in 2008 of a subdivision to transfer a portion of the land to the City of Surrey for park purposes. After this subdivision, the street address also was changed by the City from 6070 148th Street, Surrey to 14838 61st Avenue, Surrey. It was vacant development land


of about 4 acres, located in the South Newton area of Surr[e]y near the intersection of 148th Street and 61st Avenue.

[109] In several of the contracts of purchase and sale the legal description is:

Strata Lot: Strata Lot J1-D, C1-D Legal Description: Lot 41 Section 10 Township 2 Plan 1361 Civic Address: 6070 -148th Street, Surrey, B.C.

It is not disputed that the civic address is correct and describes Lot 44 later changed

to Lot 1. Lalli in his first affidavit and later in his cross-examination on affidavits

testified that he was responsible for what was a typographical error by putting in

Lot 41 (which 679972 did not own) instead of Lot 44. He testified he went by the

civic address and many of the Purchasers attested in affidavits that they went by the

civic address and were not confused by the error in the Lot number on their

contracts. Dr. Bubra attested that he along with other Purchasers attended the

Property by “civic address”, walked it and were not confused as to on what land they

were buying townhouses.

[110] The email explaining the need for the $1,600,000 is dated June 2, 2005 and

states inter alia:

1. My cousin is carrying two mortgages on the property at 6070 148th Street, in Surrey, British Columbia. …

2. As you know, he has an agreement in place to purchase ten (10) acres to the north of that property/6106 and 6146 148th Street for $5M.

…

In order to ratify that agreement, on June 6, he needs to forward further funds to the owners of 6106 and 6146 148th Street. He has an agreement in place with Mandate National to loan him the funds for that acquisition. They have agreed to do so if he first clears off the $550K owed them on 6070 148th Street.

[111] The email of June 2, 2005 further confirms that the purpose of these

First Purchasers funds was to buy townhouses to be built on the Property.


[112] The investment agreement accompanying the contract of purchase and sale

of the First Purchasers states at preamble J:

J. Lallico has obtained commitments from a group of investors who have agreed to contribute to the sum of One Million Six Hundred Thousand ($1,600,00) Dollars to Lallico (the “Lallico Investors”). Lallico will advance the entire sum to LandCo to acquire a one half interest in LandCo and to assist LandCo in its arrangement to obtain financing for the Project.

[113] There is no evidence to contradict that the LandCo referred to was 679972

and that the funds so advanced were for the benefit of 679972, the vendor of the

Property.

[114] There is thus no credible evidence to allow the court to make the inference

submitted by the Judgment Creditors that the June 2, 2005 email was advising the

First Purchasers that the $1,600,000 was to be used to purchase other properties,

i.e. perhaps 6106 and 6146 - 148th Street.

[115] The First Purchasers attest that was not their understanding, nor was it the

understanding of Lalli, who sent the email.

[116] Thus, I cannot make a finding that the First Purchasers knew or should have

known -- nor that Lalli on behalf of Lallico or 679972 intended they should know that

their purchase price for future townhouses to be built on the Property (cumulatively)

$1,600,000 -- was not for the “project”, i.e. to be applied to the Property.

[117] Thus, the Purchasers submit, and I so find, that the weight of the evidence is

clear that the First Purchasers are being told that their funds (in the amount of

$1,600,000) would be used to pay off the mortgages on 6070 - 148th Street, the

civic address on which the townhouses were to be built.

[118] The Judgment Creditors assert that the Purchasers payments did not go to

the vendor of the Property 679972 but rather to 642943. The only evidence before

this court is that 642943 was a holding and operating company for 679972.


[119] In relation to all of the submissions made that the Purchasers have not

proven that they paid their purchase price for the development of the Property or that

in fact if they did, said purchase price did not go to the Property, even if these

allegations were true they could not defeat a purchaser’s lien absent a finding that

the Purchasers knew or intended their purchase price would not be applied to the

Property.

[120] As is made clear in all of the cases discussing the requirements of a

purchaser’s lien, it is the intent of the parties as to the purpose of the funds which is

of the essence of a purchaser’s lien. In this case the vendor represented and the

Purchasers relied on the Representations, both written and oral, that the funds

advanced by the Purchasers was to procure, after the development was complete, a

townhouse on the Property.

[121] There is no evidence and really no dispute (with the exception of the

submission regarding the First Purchasers) that the purpose of the payment of the

funds was to secure a right to a townhouse to be built on the Property.

[122] The Judgment Creditors have raised other issues as to the validity and or the

enforceability of the contracts because they say the contracts are so uncertain as to

be void or are contrary to the Land Title Act.

[123] I set out the aspects of uncertainty relied upon by the Judgment Creditors

from p. 22 of the written submissions of Serin:

55. The various contracts of purchase in this case are uncertain in the following respects:

A. The specific subject matter of the sale in terms of its siting of a strata lot in the real property was uncertain, as there were later re-selections and re-allocations of the various locations of the townhouses, with no specific evidence being presented by the lien claimants concerning the precise location of each proposed strata lot within the 4 acre parcel of Lot 44;

B. There was no closing date or completion dates stipulated for the transfer of title to the investor;


C. The correct name of the vendor as being either Lallico or 679972 B.C. Ltd. was uncertain;

D. The contract of sale was signed by Lallico as the purported seller, without any indication of its capacity to bind the owner of the land;

E. The contracts referred [to] the land being sold as lot 41 of section 10 of township 2, but also referred to a different street or civic address for an entirely different parcel of land (lot 44). However, this conflict has not been properly explained or explained at all by any officer or director of 679[972], as of the date of sale, to indicate which lot was to be the subject of the sale;

F. The detailed requirements for completion of the construction of the townhomes were not specified with the specific cost amount per square foot to be expended on construction and finishing materials -- for example, it was not enough to specify granite counters, as the cost range of granite counters can be extremely wide.

[124] The Purchasers submit that the Judgment Creditors do not have standing to

challenge the validity of the contracts.

[125] Both Judgment Creditors take the position that they have standing to

challenge the validity of the contracts between the purchaser’s lien claimants and

Lallico and/or 679972.

[126] In my view, neither of the Judgment Creditors has that standing since neither

is a party to the contract at issue and the actual parties to the contracts say the

contracts are valid.

[127] The Kerns as Judgment Creditors are in a particularly legally awkward

position since prior to obtaining their judgment they claimed a purchaser’s lien which

they subsequently abandoned in favor of reliance on contractual provisions, in

particular the promissory note, which formed part of the agreement package they

signed with Lallico/679972. They demanded, pursuant to their understanding of their

contractual rights, repayment of their purchase price for a townhouse plus interest.

Subsequently, apparently pursuant to the agreements between Lallico/679972 and

the Kerns, 679972 issued a cheque for the amount demanded and unfortunately that


cheque was dishonored by the bank for lack of funds. Even then, neither Lallico nor

679972 denied that the contracts were not valid.

[128] In these circumstances can the Kerns be heard to say their Judgment

Creditors status trumps other purchasers lien rights on the basis that the contracts

(which were similar or the same) signed by the owner of the subject lands and the

other Purchasers are invalid and otherwise unenforceable? The answer surely is no.

Serin

[129] Serin has no whisper of privity of contract with either party to the purchaser’s

lien claimants’ “agreements”. A basic rule of contract law is that a non-party cannot

seek to impugn the validity of a contract or its terms, in particular on the basis that

the contracts are unenforceable for vagueness.

[130] However, if I am wrong and that on some basis Serin or the Kerns do have

such a right to impugn the validity of the Purchasers’ contracts, and the contracts are

invalid on any of the grounds raised, such ground would not undermine the

purchaser’s lien claims as was set out succinctly in the submissions of counsel for

Robert Parker and Rob Angco, paras. 70 and 72:

70. As stated by Justice Trainor [in Capital Plaza Developments Ltd.]:

A lien thus established is only lost where the contract is not completed through some fault of the purchaser. The lien will continue to exist where the purchaser refuses to complete due to a breach of a condition by the vendor as in Rose v. Watson, or rescinds pursuant to a clause in the contract as in Whitbread v. Watt [1902] 1 Ch. 835, or rescinds because of misrepresentation by the vendor as in J.A.R. Leaseholds v. Tormet Ltd. (1964) 48 D.L.R. (2d) 97, or where the vendor is unable to obtain strata titling and so is unable to provide title to the strata lot as in Lehmann v. B.R.M Enterprises Ltd. (1978) 27 C.B.R. 271.

…

72. Specific performance is a remedy that flows from and as a result of the contract. A purchaser’s lien exists independent of the contract by virtue of the principles of equity. Thus, the ability to enforce, or even to claim specific performance, does not affect the rights of a holder of a purchaser’s lien.


[131] The evidence proffered in this case satisfies me that none of the matters

referred to in A through F is sufficient to render these contracts void for uncertainty.

A, B and F are matters which would likely be significant barriers if not complete

defences to an action for specific performance. But that is not the nature of the

declaration nor remedy sought in this case as set out elsewhere in these reasons.

The issues raised by items C, D and E in these submissions have been satisfactorily

explained; E is a fixable error, while, on the evidence C and D are not only explained

but I am satisfied are not the subject of uncertainty.

[132] Lalli on a fair reading of all of his proffered evidence both in affidavit and

cross-examination on his affidavits stated he acted at all times either with the

authority of the owner of the land or once his company acquired its one-half interest

in the vendor 679972 as an owner.

[133] Thus in my view the Contracts signed by the Purchasers created no interest

in land and likely were unenforceable in relation to creating an interest in land to

allow specific performance of the contract. Nevertheless the intention of the

Contracts to be binding on the parties to the Contracts is clear and agreed to by said

parties; that is, according to Lalli for 679972, the owner of the land at the material

times and the Purchasers, the payment was for a townhouse to be built on the

Property.

[134] In the case at bar all of the elements required for a purchaser’s lien are

satisfied. The Purchasers provided funds to the vendor for the purchase of land

which contract was not completed through no fault of the Purchasers.

[135] The purchaser’s liens arose as early as 2005, not as a result of contract but

through equity. They have a secured charge against the land that is independent of

the contract between the parties. Their liens vested immediately upon payment (all

of which were made prior to the Judgment Creditors’ claims) and are secured by the

Property as a whole.


[136] The Purchasers paid their purchase price to Lalli as Lallico for the

represented purpose of the vendor 679972 being able to develop the land and build

townhouses to be owned by the Purchasers. Lalli has confirmed that he accepted

payment and entered into the contracts of purchase and sale with what he believed

was the authority of the vendor. For years after the deposits were paid and right up

to the time the Contracts were terminated, the vendor, through Lalli and Gill the joint

shareholders and directors of 679972, confirmed that the Purchasers were to obtain

a townhouse as a result of their deposit.

[137] The Purchasers advanced the funds to the vendor upon the faith that the land

would be developed and become their property.

Defences Based on the Courts Exercise of Equitable Jurisdiction

[138] I set out Serin’s submissions on acquiescence, equitable estoppel and

laches. I take this directly from Serin’s written submissions:

66. The purchasers lien claimants are requesting that the court exercise an equitable jurisdiction to grant a remedy in their favour. The purchasers lien claimants have to overcome the equitable principles of acquiescence, equitable estoppel and laches. The lien claimants originally took objection to a payout from the proceeds of sale to Pan Canadian Mortgage and then acquiesced in such a payout, despite the fact that their legal position indicates that their lien claim should take priority over even a registered first mortgage that was foreclosing against the borrower. Similarly, the purchasers lien claimants have failed to move forward in any timely basis to pursue the claims against the owner and Lallico Investments in their separate proceeding seeking declarations of lien claims. The lien claimants have waited for roughly three years to make applications for declarations of purchasers lien in this case but not in their separate proceedings. In this case, Lallico Investments is not even joined as a party and the specific issue of the lien claim has not been specifically pleaded through the normal process of the filing and delivery of a notice of civil claim to the defendant owners or to Lallico. Without any reasonable excuse for delaying and pressing forward with their claims, these lien claimants expose their separate actions for declarations of purchasers liens to dismissal for want of prosecution in their original actions.


Further Defences Raised

[139] There is no merit in these submissions. There was no “acquiescence” by the

Purchasers in relation to the Pan Canadian mortgage as the Contracts signed by the

Purchasers contemplated that the security position of the Purchasers would be

subject to a construction mortgage.

[140] As to failing to pursue lien claims in a timely manner or in relation to Lallico as

opposed to 679972 there is simply no evidence to support that the Purchaser’s sat

back on their rights.

[141] These proceedings have been complex and multifaceted. The Purchasers, or

some of them, acted with relative dispatch in attempting to save their investments

when advised in 2009 that the project would not go ahead.

[142] There can be no finding that the Purchaser’s equitable rights as asserted in

this proceeding are lost for breach of any equitable principle.

Land Title Act

[143] Having found as I have that the purchaser’s liens asserted in these

proceedings are not based on an interest in land, equitable or otherwise, but rather

on an equitable right resulting in a security interest or charge on the land -- there can

be no finding that there has been a breach of s. 73 or s. 28 of the Land Title Act

which Act only applies when an interest in land is asserted.

Abandonment of a Purchaser’s Lien Claim

[144] The Judgment Creditors also raise the issue that if the Kerns have lost their

right to a purchaser’s lien by abandoning their purchaser’s lien rights and obtaining a

judgment based on contractual rights arising from execution on the promissory note

then several other Purchasers have also lost their purchaser’s lien because they

have by letter demand, at least sought repayment.


[145] The purchaser’s lien claimants before the court take the position that this

issue is moot since all those who have joined in this proceeding have agreed to

share any proceeds pro rata. And since cumulatively the purchaser’s lien claims

before the court come to in excess of $6,200,000 and the balance paid into court

against which the Judgment Creditors make their claim in priority is over $2,500,000

and as the Lockhart Group alone has claims of $3,000,000, against whom no such

allegation is made, then there can be no benefit occurring to the Judgment Creditors

if the court were to entertain and decide that some 2 or 3 of the Purchasers before

the court lost their lien rights having made a demand for repayment.

[146] I note, in addition, that the actual evidentiary basis for this issue is scanty at

best, likely factually nuanced and only tangentially before the court.

[147] In the result I decline to decide the issue of at what point a demand for

repayment -- rather than an action for a purchaser’s lien only -- would cause a

purchaser’s lien claimant to lose the right to make such a claim.

Admissibility of the RCMP Investigation Affidavit

[148] Finally, the Judgment Creditors raised and pressed the issue of the

admissibility of evidence gathered from an RCMP investigation into Lallico/679972

and the failure of this project. The evidence was proffered in the form of an affidavit

from one of the RCMP investigators setting out her understanding of various

“investors” of the bona fides of the owners of the subject lands.

[149] The criminal investigation did not give rise to any charges. The affidavit

apparently contains: the affiant’s version of statements made by investors about

their understanding or lack thereof of the contracts they signed; some investors

views of the bona fides of the project; and that several of the “investors” demanded

return of their investments in various forms.

[150] I declined to admit this evidence for several reasons. First, because the

evidence is hearsay, not reliable as fact, and thus of minimal or perhaps no weight,

leading to the conclusion it is irrelevant. Further, such evidence, even if not clear


hearsay would not undermine the purchaser’s lien claims since such evidence does

not purport to undermine any Purchasers’ purpose for having paid the full purchase

price for a townhouse to be built on the subject land. Nor does it purport to

undermine that the vendor intended for the Purchasers to understand that was the

purpose for the purchase price to be paid when it was. Thus, even if received, it

would not undermine the claims for a purchaser’s lien.

[151] For these reasons I declare that the Purchasers have established purchaser’s

liens over the Property. Further, I order that the purchaser’s liens have priority over

the Judgment Creditors claims.

[152] I dismiss the applications of the Judgment Creditors.

[153] Costs may be spoken to if there are any matters relevant to costs not before

the court otherwise the Purchasers’ will have their costs against the Judgment

Creditors.

“Koenigsberg J.”

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