The Ontario Court of Appeal has confirmed in a recent decision that vesting orders, once issued, may be registered in the land titles register and relied upon by third parties prior to the expiry of any applicable appeal periods. The Court may in fact have gone further than some might have anticipated in holding that an appeal of a vesting order is moot once the order has been registered on title. The decision provides receivers and others with clear authority for the proposition that a vesting order is effective when made, and in the absence of a stay can be acted upon immediately, notwithstanding that the applicable appeal period has not expired and establishes a clear onus on any interested party to apply for a stay concurrently with the granting of a vesting order if it intends to appeal the order.
Re Regal Constellation Hotel Ltd.
In the case of Re Regal Constellation Hotel Ltd.,1 the sole shareholder of a bankrupt hotel operator brought a motion to set aside orders of the Ontario Superior Court of Justice of Justice (Commercial List) approving the sale by the court appointed receiver and vesting title in the hotel to the purchaser. The vesting order was registered on title to the hotel property on the date on which all conditions to the transfer were satisfied and the property conveyed was encumbered by the purchaser to secure its financing for the acquisition. The purchaser brought a separate motion to quash the shareholder’s appeal of the vesting order on the basis that it was moot.
In a unanimous decision written by Justice Blair, the Court of Appeal dismissed the shareholder’s motion and granted the relief sought by the purchaser. The Court held that a vesting order has a dual character in that it is both a court order and a conveyance of title.
In its capacity as an order, a vesting order is subject to appeal. However, in Ontario, the filing of an appeal does not result in an automatic stay of the order. When a vesting order has been registered on title, its attributes as a conveyance prevail and its attributes as an order are spent. Once registered, a vesting order can only be attacked in accordance with legislation governing title conveyance, in this case the Land Titles Act. The Court noted that the effect of that conclusion is consistent with the purpose and philosophy of Ontario’s Land Titles Act which, as a general rule, is intended to permit third parties, including purchasers and their lenders, to rely on the register.
Justice Blair made clear that the Court’s conclusion does not imply that a vesting order registered on title is absolutely immune from attack. Instead, the decision confirms that any such attacks are confined to the remedies provided for under the applicable real property regime. Solicitors acting for purchasers ought therefore to be able to rely on the registration of a vesting order, together with the affidavit of the vendor’s solicitor that the order has not been stayed or appealed, and complete their title searches in accordance with the normal procedure for Land Titles or Registry searches, as applicable.
While not entirely surprising, the Court of Appeal’s decision in Regal Constellation provides receivers and purchasers with a clear, well reasoned and authoritative statement of law on which to structure sale transactions involving real property. The decision also protects the legitimate interests of third parties by confirming their entitlement to rely on the state of title as disclosed by the real property registers, subject only to the limitations of the Land Titles Act or Registry Act, as the case may be.
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