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Facts[]

Lawrence owned a home and had a mortgage on the property. An imposter fraudulently pretending to be Lawrence sold the property to someone impersonating Mr. Wright (i.e. another fraudster). "Wright" registered the property in his name, and took out a mortgage on the house from Maple Trust. Maple performed their due diligence by checking the registry. When Lawrence found out about this she sued Wright and tried to have Maple Trust's mortgage negated. The trial judge overturned the land transfer to Wright, but upheld the mortgage as valid, which Lawrence appealed.

Issue[]

  1. Does the Ontario Land Titles Act create a standard of immediate indefeasibility of title, or deferred indefeasibility?

Decision[]

Appeal allowed.

Reasons[]

Section 78(4) of the Act states that it is reasonable to rely on anything in the registry as fact. However, s.155 states that a transfer that would otherwise be invalid is not validated simply because the title was registered.

One possibility is that s.78 creates a standard of immediate indefeasibility. This would mean that Maple Trust, having relied on the register, would take title free of Ms. Lawrence's prior subsisting claim. Ms. Lawrence would have the ability to seek compensation from the assurance fund while Maple Trust would have full title/the right to possession.

On the other hand, the Act could imply a standard of deferred indefeasibility; this would mean that Lawrence would get to retain her right to possess her house while Maple Trust would be compensated for their losses from the assurance fund. Under this framework, indefeasibility would apply only to another good-faith purchaser for value that relied on the register (e.g purchased title to Maple Trust's mortgage). Here, Maple Trust would be unprotected; the "intermediate owner" for whom the curtain had not yet fallen.

The court accepts that deferred indefeasibility is the standard under the Act. They hold it is contrary to public policy to force a landowner such as Lawrence to settle for damages rather than getting her property back when it was fraudulently taken from her.

The court notes that simply because Maple had their interest defeated does not preclude them from applying to the Fund created under the Act for the protection of parties who innocently lose money because of the registry system. However, he does not say that they would be successful in such a claim.

Ratio[]

  • The Ontario Land Titles Act has a standard of deferred indefeasibility of title; if the title is registered fraudulently, then the intermediate party who relies upon this information can have their title defeated by the original owner. However, if the intermediate owner sells the title to a bona fide purchaser for value without notice, then that deferred party takes good title.
  • Simply registering a fraudulently obtained title does not make the title valid

Notes[]

Note the ONCA gets deferred indefeasibility of title quite wrong in this case; if Ontario had correctly used deferred indefeasibility, the outcome would have flipped. Maple Trust relied on the register and as such should have taken clear of Ms. Lawrences' interests. This is why Ziff calls Ontario's system "hyper-deferred indefeasibility" -- indefeasibility of title is (unlike other deferred indefeasibility jurisdictions) postponed based on transacting with the fraudster.

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