Décision

[1]           The factual background to this appeal is simple. The Respondents-Defendants Laurent Nathan and Jennifer Benakoun (the Vendors) own a vacant lot in Dollard-des-Ormeaux. On March 4, 2021, they accepted an offer to purchase made by the Appellant Poonam Tanwani. On March 17, the Respondent-Intervener Vikas Sharma (the Respondent) submitted an offer to purchase the lot from the Vendors at a higher price. On March 19, the Vendors declared that the Appellant’s offer was null and void because she failed to meet the financing condition in her offer, and they accepted the Respondent’s offer.  

[2]           The procedural background is more complicated. On March 22, the Appellant instituted an action against the Vendors to pass title of the lot. She registered her action at the Land Registry Office on the same day. On March 30, the Appellant and the Vendors agreed in an exchange of emails between their respective attorneys to proceed with the sale and to settle the action. Unaware of this agreement, the Respondent sought to intervene in the action on April 1 by filing a demand in voluntary intervention and registering it on the same date at the Land Registry Office. The Appellant opposed the intervention and the Respondent filed a motion for permission to intervene on April 9. On April 15, the Appellant filed a motion to homologate the March 30 transaction. Finally, on April 22, the Respondent filed an action to pass title against the Vendors in a new court record (500-17-116451-215), and he registered that action the next day.

[3]           The motion for permission to intervene and the motion to homologate the transaction were heard together by Justice Synnott of the Superior Court on April 23. No proof was made at that hearing. In an oral judgment rendered séance tenante, he granted the motion for permission to intervene and deferred the motion to homologate to the judge who will hear the merits of the dispute among the parties.

[4]           The Appellant appealed. She asks the Court to dismiss the motion for permission to intervene, grant the motion to homologate and radiate the advance registrations made by the Respondent. Leave to appeal was granted by a judge of this Court on June 11, 2021.[1]

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[5]           Generally, where the owner of a property has accepted competing promises to purchase, each competing purchaser brings an action to pass title or intervenes in the action to pass title brought by the other. The Superior Court hears both actions and decides which of the two competing purchasers will be allowed to purchase the property, based on the dates of the promises and whether the purchasers complied with the conditions of their offers.

[6]           However, if the owner sells the property to one of the competing purchasers before judgment is rendered, that sale effectively puts an end to the other’s attempt to become owner. Pursuant to Articles 1397 and 2946 C.C.Q., and unless the sale can be set aside under Article 1631 C.C.Q., the sale can be set up against the other competing purchaser and he is left only with a recourse in damages.

[7]           The other competing purchaser can avoid this outcome by obtaining an injunction to prevent the sale or by registering his action to pass title before the sale to the other purchaser. If he registers his action to pass title, his rights are safeguarded in that, if he is ultimately successful in his action, his title will be deemed published on the date of his advance registration and the subsequent sale to the other competing purchaser will be invalid.[2]

[8]           This case largely follows that pattern. 

[9]           The Appellant brought an action to pass title on March 22. The Respondent sought to intervene in that action on April 1 and brought his own action to pass title on April 22. Each of the three proceedings was registered.

[10]        The Appellant reached an agreement with the Vendors to buy the lot and settle her action on March 30. The Appellant contests the intervention on the ground that it was made only after the action had been settled and she seeks to homologate that agreement as a transaction. She also asks to radiate the advance registration of the Respondent’s intervention and his action.

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[11]        There are two procedural issues.

[12]        First, the Respondent served his memorandum three days late as the result of a mistake by his attorney. His motion for permission to file the memorandum late will be granted.

[13]        The second issue is that, prior to the hearing, the Respondent made a motion to present certain new evidence, namely the proof of financing provided by the Appellant to the Vendors on March 18, an updated version of the index of immovables for the lot and copies of the two advance registrations made by the Respondent.

[14]        The Appellant objected only to the first document, which is relevant to the debate as to which promise has priority but is not necessary for the purposes of this appeal.

[15]        The motion will therefore be granted in part.

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[16]        The appeal with respect to the motion for permission to intervene can be resolved fairly easily.

[17]        The Respondent sought to intervene in the action to pass title instituted by the Appellant against the Vendors in order to claim that he, and not the Appellant, had the right to purchase the lot. His intervention included conclusions in passing of title in his favour. He clearly had a sufficient interest to intervene.[3]

[18]        However, the transaction put an end to the litigation on March 30.[4] It was therefore too late on April 1 for the Respondent to intervene. The Respondent cannot intervene in litigation which has been settled, particularly since he does not contest the existence or validity of the transaction settling the litigation.[5]

[19]        The Court will therefore grant this part of the appeal and dismiss the motion for permission to intervene.

[20]        It follows that the advance registration of the intervention should be radiated: if permission to intervene is refused, the advance registration of the intervention has no object.

[21]        The Court notes that dismissing the motion for permission to intervene and radiating the advance registration of the intervention has little practical effect on the litigation. The Respondent filed a separate action to pass title in a new court record three weeks after he filed the intervention. This new action included all of the conclusions of the intervention. Moreover, he registered the new action three weeks after he registered the intervention. The Respondent’s attorney recognized that nothing occurred in those three weeks that was of consequence to the issue of who has the right to purchase the lot, such that the later registration is just as effective as the earlier one.

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[22]        The motion to homologate the transaction raises more difficult issues.

[23]        The purpose of homologation is to have the court recognize the existence of a transaction and to render it enforceable as between the parties.

[24]        In that sense, the motion to homologate in the present matter is somewhat unnecessary. There is no issue between the parties to the transaction. Both the Appellant and the Vendors recognize the existence of the transaction and both intend to respect it. That being said, the Appellant is nevertheless entitled to ask for its homologation.

[25]        The role of the court hearing a motion to homologate is limited:

[4]        Le juge était donc bien fondé de s’en tenir à l’étude des éléments fondamentaux d’une requête en homologation, soit : (1) déterminer qu’il s’agit bien d’une transaction au sens de l’article 2631 C.c.Q., (2) vérifier que la transaction n’est pas nulle et (3) s’assurer qu’elle ne contrevient pas à l’ordre public. Comme ces questions n’étaient pas contestées, il n’existait donc aucun obstacle en droit empêchant le juge de procéder à l’homologation recherchée par l’intimée.[6]

[26]        The Vendors consent to the motion to homologate. The Respondent, according to the Appellant, is not a party to the motion to homologate and has no standing to contest it. Nevertheless, his lawyer was present at the hearing in Superior Court because of the motion for permission to intervene. He did not contest the existence or validity of the transaction, but only the effects of the homologation. He takes the same position on appeal.

[27]        The judge chose to defer the motion to homologate to the judge who will hear the dispute on the merits on the basis that the transaction might be illegal :

[23]      Sans en faire une question de détermination finale, le juge du fond pourrait peut-être conclure que les défendeurs ont joué sur deux tableaux, qu’ils n’ont pas les mains propres et que la transaction intervenue avec le demandeur n’est pas conforme, c’est-à-dire qu’elle est illégale.

[24]      Or, au niveau de l’homologation, le Code de procédure civile est clair : le Tribunal ne peut l’homologuer s’il considère que la transaction est contraire à la loi, voire illégale. Cette question appartiendra au juge saisi du mérite de cette affaire et ne doit pas être tranchée à ce stade-ci des procédures.

[28]        With respect, there is no issue of illegality, much less public order. The parties have the right to enter into a transaction and settle their litigation. Nobody was contesting the existence or validity of the transaction. There was no reason not to homologate the transaction. Moreover, it is not clear what the judge meant by “[le] juge saisi du mérite de cette affaire”. He was seized with the merits of the motion to homologate. If he thought he needed additional evidence, he could have postponed the hearing for that reason, but that is not what he did. The action between the Appellant and the Vendors had been settled such that there would be no hearing on the merits of that action. The Respondent’s action was in a separate court record and had not been joined.

[29]        The Court will therefore homologate the transaction.

[30]        The homologation of the transaction includes ordering the parties to comply with it. The Court will therefore grant the following conclusions of the motion to homologate:

GRANT                         the present Application to Homologate a Transaction;

HOMOLOGATE          the Transaction reached by the parties on March 30^th, 2021 as drafted in the Transaction (Exhibit P-7);

ORDER                        Plaintiff and Defendants to comply with the terms of the Transaction (Exhibit P-7);  

ORDER                        Defendants to execute the Deed of Sale prepared by Notary Jacques Znaty for the Immovable, at the offices of Notary Jacques Znaty, and thus, within five (5) days from the judgment to intervene upon the presents, upon payment of the purchase price as per the terms of Promise to Purchase by said instrumenting Notary;

ORDER                        that the instrumenting Notary Jacques Znaty be authorized, upon the execution of the aforementioned Deed of Sale to proceed to the payment of the hypothecary creditors inscribed in the Land Registry, to the radiation of said hypothecs, as well as to all necessary adjustments required, and to the payment to Defendants of the residue of the purchase price;

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[31]        It remains to consider the radiation of the Respondent’s advance registration of his action to pass title.

[32]        The judge was obviously concerned that homologating the transaction and radiating the Respondent’s advance registration would resolve the title issue in the Appellant’s favour, without any debate on which of the two promises has priority:

[20]      Le demandeur demande que le Tribunal homologue dès à présent la transaction, ce qui leur permettrait selon sa demande, de procéder à la radiation de la préinscription de l’intervenant et de passer le titre immédiatement. Bref le sort de l’intervenant serait réglé à son détriment, sans qu’un Tribunal ne se soit penché sur ses arguments.

[21]      En d’autres mots, l’on recherche ni plus ni moins un jugement ex parte et sommaire, en l’absence de procès.

[22]      Le Tribunal est d’avis que cette façon de faire serait contraire aux intérêts de la justice.

[33]        The Court shares the judge’s concern. 

[34]        As set out above, the registration of the intervention will be radiated, because permission to intervene was refused. The registration of the Respondent’s action to pass title cannot be radiated on that basis, because the Respondent’s action is still pending.

[35]        For the Appellant to have that registration radiated before the Respondent’s action is decided on the merits or settled, she must establish that her title is published prior to the Respondent’s advance registration, such that the Respondent’s advance registration is irrelevant. She must therefore demonstrate that her title will be deemed published on the date of her advance registration, pursuant to Article 2968 C.C.Q.:

[36]        For the Appellant’s title to be deemed published on the date of her advance registration, Article 2968 C.C.Q. requires that the “[r]ights which are the subject of a […] transaction terminating an action” must be “published within 30 days after […] the transaction takes place”.

[37]        This language raises two issues: what must be published and when does the 30-day delay start to run.

[38]        On the question of the delay, the language of Article 2968 C.C.Q. is clear: “within 30 days after the judgment becomes final or the transaction takes place.” Moreover, it is clear that the transaction took place on March 30. In her contestation of the Respondent’s motion for permission to intervene and in her motion to homologate the transaction, the Appellant argues, quite correctly, that the transaction was effective on March 30, before it was homologated, and that homologation only has the effect of confirming the existence of the transaction and making it enforceable. She cannot now argue that the transaction does not take place until it is homologated.

[39]        The Appellant argues that the transaction could not be registered because of its form (an exchange of e-mails) and that the 30-day delay must therefore run from the date of the judgment homologating the transaction. The Respondent counters that she could have registered a notice that the transaction had been entered into.[7]

[40]        Both arguments miss the point. Article 2968 C.C.Q. requires the publication of the “[r]ights which are the subject of a […] transaction terminating an action”, meaning the transfer of title. The exchange of e-mails that constitute the transaction do not purport to transfer title. Rather, they provide that the parties agree to execute a deed of sale. It is that deed of sale which, in principle, needed to be executed by the parties and published within 30 days of the transaction for her title to be deemed published on the date of her advance registration.^[8] Had the Appellant done so, the Respondent’s advance registration would have been radiated as being posterior to her title. Instead, the Appellant chose to seek the homologation of the transaction, which was not necessary, and thereby failed to publish her deed of sale within the 30-day delay.

[41]        In any event, whether she needed to publish the transaction or the deed of sale, she did neither before the expiration of the 30-day delay.

[42]        Finally, there is nothing in Article 2968 C.C.Q. providing for the extension of the 30-day delay. In the context of a registration system where rights are effective from the date of their publication, the notion of an advance registration giving retroactive effect to real rights is exceptional and must be interpreted strictly.[9]

[43]        As a result, the Appellant’s title will not be deemed published on a date prior to the Respondent’s advance registration of his action to pass title. The Court will therefore dismiss the Appellant’s motion to radiate the Respondent’s advance registration of his action.

[44]        This does not resolve the title issue, but that issue cannot be settled by the Court at this stage of the proceedings. In principle, the Respondent must still proceed on the merits of his action to pass title and satisfy the trial judge that his promise takes precedence over the Appellant’s promise. If he succeeds, his title will retroact to April 23, 2021 and will have priority over any title that the Appellant might acquire pursuant to the transaction. If the Respondent fails in his action, then his advance registration will fall and the Appellant’s title will be valid.

[45]        The Court recognizes that this leaves the parties in a difficult situation. The Appellant may not wish to complete the purchase of the lot from the Vendors while the Respondent’s advance registration remains in place and his action to pass title follows its course, but may prefer to wait until that action is resolved. For that reason, the Court will remove the five day delay for the execution of the deed of sale from the conclusions sought by the Appellant.

FOR THESE REASONS, THE COURT:

[46]        GRANTS the Respondent-Intervener’s motion for permission to file his memorandum beyond the delay;

[47]        GRANTS in part the Respondent-Intervener’s motion to produce new evidence and AUTHORIZES the production of an updated version of the index of immovables for the lot and copies of the two preregistrations made by the Respondent-Intervener;

[48]        GRANTS in part the appeal;

[49]        SETS ASIDE the judgment in first instance;

[50]        RENDERS the judgment that should have been rendered in first instance;

[51]        DISMISSES the Respondent-Intervener’s Demand to present an Aggressive Voluntary Intervention, without legal costs;

[52]        ORDERS the Registrar for the Land Registry for the Registration Division of Montreal to proceed to the radiation of the Avis de Préinscription d’une Demande en Justice on the Property under registration 26 183 324, relating to the Respondent’s intervention;

[53]        GRANTS in part the Application to Homologate a Transaction, without legal costs;

[54]        HOMOLOGATES the Transaction reached by the parties on March 30, 2021 as drafted in the Transaction (Exhibit P-7);

[55]        ORDERS the Respondents-Defendants to comply with the terms of the Transaction (Exhibit P-7);

[56]        ORDERS the Respondents-Defendants to execute the Deed of Sale prepared by Notary Jacques Znaty for the Immovable, at the offices of Notary Jacques Znaty, upon payment of the Purchase Price as per the terms of the Promise to Purchase (Exhibit P-2) by said instrumenting Notary;

[57]        ORDERS that the instrumenting Notary Jacques Znaty be authorized, upon the execution of the aforementioned Deed of Sale to proceed to the payment of the hypothecary creditors inscribed in the Land Registry, to the radiation of said hypothecs, as well as to all necessary adjustments required, and to the payment to Respondents-Defendants of the residue of the Purchase Price;

[58]        DISMISSES the conclusion in Appellant’s memorandum seeking the radiation of the Avis de Préinscription d’une Demande en Justice on the Property under registration 26 240 079, relating to the Respondent’s action to pass title in court record 500-17-116451-215;

[59]        Without legal costs, given the divided outcome.