HOW TO DEAL WITH TITLE FRAUD

Once upon a time around February 12, 2005 I woke up and was advised title to property, which our officehad recently transferred to my clients, was no longer in their names. Wonder ofwonders, there was even amortgage for over $150,000.00 in favour ofCrnC Mortgages Inc. Our clients madea sale, after twolengthy listings, ofa home they inherited from their parents. Obviously, the first thing we did was try andfind out what happened. We have described the situation in an article the writer had prepared for thepublication ofthe Saskatchewan Trial Lawyers Association. A copy of it is attached as Schedule "A".

You will also find our Notice ofMotion, which is attached. You will find the Style of Cause later changed.We also are enclosing our BriefofLaw, which we prepared, and a copy ofa Consent Order whereby theStyle of Cause was changed and our clients were excused. We have obtained permission and are enclosinga copy of the BriefofLaw on behalfof the Land Registry Solicitor. Unfortunately, we were requested notto include the Brief ofLaw from the Lender as Judgment had not, at the time of writing, been issued and itwas preferred not to have same.

We also are enclosing, for your understanding, ofother Vesting Orders, which we had previously obtained.In view ofthe new legislation, these Orders would need to be modified. Nevertheless, they can provideyou with an indication as to how you might deal with Title Fraud or an error on title. This could be madeeither by yourself, a mortgage company, or another solicitor.

We trust this material will be helpful and would not hesitate to answer questions, should you have problemswith these matters.

I must also thank the organizers of this seminar for encouraging the privilege ofmy explanation of thismost interesting problem.

I must also state that I appreciate the co-operation received from the Ms. Catherine Benning, the Registrar,Solicitor for the Registrar, Mr. Dale Beck, of the Department of Justice, Mr. Carson Demmans, Solicitorfor crnc Mortgages Inc., the real Trent Doerksen (who had nothing to do with the fraud), Mr. BrentBarilla, whose name was used by the fraudster, Mr. Bradley Jamieson who placed the mortgage, my clientas well as Cam Dreaver of the City Police, Don Junor, Jr., who had done the appraisal at the request of thefraudster, AI Jacobson of the Real Estate Board, Tom Schonhoffer of the Law SocietyInsurance Group,and my secretary, Mrs. Pat Hartery, who .did much of the hard work in getting things prepared, as well asthe people at the Court House who were very co-operative.

I must add that we obtained co-operation from the Court as well as the solicitors for the Registry and the.Bank in obtaining a Consent Order to permit our clients to make the sale and provide a clear title.

I always have believed that, where practical, it is beneficial to have good relations and co-operation withother counsel.

I am enclosing also a copy of an outline, which appeared in September in the Saskatoon Star Phoenix..

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·The mortgage funds He ;.'. tHen;' withckw,~the AOI:ineheS,J,'0F·:~stall{y.-OOild; .were·thendeposited·int<;> money. between Feb. 8 and' and anunkelDpt appearance.

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:'.:....... ....:,:.._•••••••__....._ ••__• .:,~ __.,._'•• d ..... d www;931tip$;Cb .' .. . e-:Stoppers wUt'pay .··-a~cash·uward"up,.t(f$2;aO(J'f{jf-iii.J(JTtrtdtio1i.·ffi.dt·le'iitJ.S"to<-airCUTestof"

: case being clep.red. Grime Stoppers .is a provert,progr.am th.a,t9~tsi, ...:'. results. When:' you call Crime Stop'persgou'don't ha'iJe'fogivfFyolifridmeand you won't have to appear in court You Can alSo eall·Ciitrl.t;! Stopperstoll-free anywherein'Banadci--at-l-"800·222"TIPSii·Cell phorreusers·:···'·'·'may dial *TIPS free oj charge. '" ,. '. :. I, ..:.: '. ...' .

Crime Stoppers Is a community.basedprogram operated In conjunction with police. Its affairs are contro/li!(fby a.liolunteerboard.· I I .

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Proposed Draft ChecklistWhere Title Fraud Is Suspected ·Or Occurs

The best way to deal with Title Fraud is avoiding it ifpossible. However, if something seems wrong and title fraudappears to have occurred, we suggest the following steps:

(1) Check the documents and verify no mistake in legal description or similar problem;

(2) Search title and back-up documents;

(3)" Check facts to verify there is indeed a fraud.

(4) Notify ISC - present contact persons are: Laura Bansley - 787-8489, Solicitor for ISC and CatherineBenning 787-1687 - Registrar;

(5) Attempt to ascertain full details or facts of the fraud;

(6) Contact individuals and clients to get information for Affidavits and the relevant facts.

(7) Contact City ofSaskatoon Police or RCMP Commercial Crime Division reporting details;

(8) Review the Statute to make sure of the requirements;

(9) Prepare a Notice ofMotion keeping in mind the parties and who needs to be served including theRegistrar ofInformation Services Corporation;

(10) Prepare a BriefofLaw;

(11) Prepare Affidavits ofParties who are involved and who you can get to sign Affidavits and arrange forexecution ofAffidavits;

(12) Get copies ofany relevant documents to be exhibited along with the Affidavits;

(13) Review materials to make sure the details are properly set out in the BriefofLaw and other documentsincluding all issues - ie. Title wrongfully transferred, how; why, when, and where, and by whom, ifpossible;

(14) Prepare a draft Order;

(15) Issue documents at Court House;

(16) Arrange for service by registered mail with appropriate letters and at the appropriate addresses, ie. Findout who and where to serve them; .

(17) Review file for chambers;

(18) Contact other lawyers or relevant parties to make sure there is no problem and ifthere be prepared toconsent to a reasonable adjournment;

(19) Be prepared to negotiate with other lawyers and explain matters to Court;

(20) Review matters again and attend in Court at return date;

(21) Take out appr9priate Order and mange for registration of same - negotiating terms if appropriate.

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September 2005

The following article was originally published in the Sask. TrialLawyers Association publication "The Saskatchewan Advocate"September 2005. Reprinted with permission.

n

WHO'S ON FIRST,WHAT'S ON SECOND,I DON'T KNOW IS ON THIRD" - WHAT'S

INA NAME? -TITLE FRAUD ANDREQUIREM.ENT FOR A VESTING ORDER

EmmanuellManny" Sonnenschein, Q.C • Sonnenschein Law Office. Saskatoon

)

No longer just a problem for 'other' provinces, practition­ers are well-advised to read on, and to also consider attend­ing the STLA's fall conference on fraud to learn more.

We use the above quote from the well-known Bud Abbottand Lou Costello comedy team of which most Trial Lawyersare aware. This humorously dealt with identities. Most TrialLawyers, and lawyers in general, may not have consideredTitle Fraud and Identity Theft.

Title Fraud occasionally occurred under the former LandRegistry System. There one needed to physically deliverpaper and have a Duplicate Certificate of Title. It would bemore difficult to commit this type of fraud, which recentlyoccurred to the family home of one of our clients.

On February 10,2005, our clients sold the home which hadbelonged to their parents since 1959. Shortly thereafter, wewrote to the Purchaser's lawyer who thereafter inquired whytitle wasn't in our clients' names. Having handled the trans­fer, the writer "knew" that we had title transferred into ourclients' names (from their parents) the previous year. We alsoknew the house had been listed with a Realtor twice. Weknew that it had been "For Sale." It was in a prime location.We were non-believing when told title was not in our clients'names! We did a search. Indeed, title was in the name of anindividual whom we will call "TD." There was also a mort­gage on the title in favour of CIBC Mortgages Inc. for$150,750.00....

We immediately looked into the situation. We did various.searches and found out much information. We found that onDecember 13, 2004, the addresses where our clients (still)lived inAlberta, were changed to an address in Prince Albert,Saskatchewan. This did not require a Notice of change ofaddress (from ISC) to be sent at that time. At our suggestion,we are advised such Notices are now being sent out (to theprevious address, confirming the change of address).

We observed many problems. We spoke with the Police aswell as the office of the lawyer who prepared the mortgage~

We also noted that a document had been sent on December13, 2004, transferring the title and "supposedly" being pre~

pared by a Saskatoon lawyer: It was purportedly signed byour clients. The said lawyer did not sign the transfer. Thedocument of transfer was not like any which would likely

have come from that lawyer's office. The lawyer later sworethat on the dates when the transfers were allegedly signed byhim, he had been out of town hunting. Our clients sworethey had not signed the transfers and the signatures did notlook anything like that of the true owners, and, further, theynever lived in Prince Albert.

We urged to the Police to follow the money. Indeed, ulti­mately, they located about $39,000.00 that was still in a bankaccount. We found the online Real Estate Broker, out ofCalgary, who had taken the information for the mortgage andprocessed it. The Broker had received an appraisal, whichhad been done in good faith by a local appraiser who hadentered the house using the lockbox the Listing Agent hadplaced.

The mortgagewas registered on or about February 1,2005.Toe lawyer who saw the individual who signed the mortgageasked a few questions as to how a young fellow could haveclear title to a house of that value, and received an answer.He fortunately copied a Health Card and·Birth Certificatepresented by "TD," the then "new" registered owner.

We have since met the genuine TD, whose identity appearsto have been stolen, paving the way for (or part and parcel of)the title fraud. The genuine TD signed Affidavits indicatinghe had not signed the mortgage. He personally attended inCourt. Thereafter; TD, with the writer, went to the saidlawyer's office with proper identification. The lawyer sworean Affidavit that this was not the "TD" who signed the mort­gage. It might be noted that the Birth Certificate had beenobtained on January 26, 2005.

Our immediate problem was how to obtain title in ourclients' names to permit a sale. We spoke with police, otherlawyers, real estate people, and we dealt with individualsworking in the' Land Registry System, including theRegistrar, who was understandably very concerned.

We were referred to individuals with the company, whichlooked after the mortgages and discussed various matterswith them. We early on had decided that an application for aVesting Order was necessary [Mr. Sonnenschein, Q.C., isfortunately a veteran of such applications, having made ahalf-dozen or so. Apparently his filed materials are lengthyand detailed - Ed.].

12 September 2005 AnvocXtaE

"We know, how€'Ver, that Title Fraud and Identity

Theft is occurring in our sister Provinces and theft

and larceny will probably exist until the end of time.

That doesn't mean we should paint targets on our

foreheads. "

This line would seem to say that the title fraud mortgage

"YourName.com" Registrations

Secure Online Transactions

We hope this account is helpful and of assistance to othercounsel who have faced similar situations. tl::.

We know, however, that Title Fraud and Identity Theft isoccurring in our sister Provinces and theft and larceny willprobably exist until the end of time. That doesn't mean weshould paint targets on our foreheads. We can do various·things to protect ourselves and must do so. Perhaps the LawSociety will issue an advisory to lawyers on how to obtainidentification on real estate matters. We also hope that theLand Registry System will restrict the manner in which theyreceive documents. We hope that the appraisers will helpprevent the use of their appraisal in fraudulent situations.Many things can and must be done.

Nevertheless, we are urging that there be many changes inour real estate practice and procedures in dealing with bro­kers, agents, appraisers, and others concerned with the han­dling of real estate. We hope to participate in the process.We also hope that this never happens to anyone else.

could not remain on title. In any event, the matter was setdown for chambers and adjourned by consent. The lawyerfor the Registrar, Mr. Dale Beck, was very creative and help­ful in resolving the situation. The bank's lawyer receivedinstructions from Eastern Canada and the bank, obviously,was being cautious and wanted to have a thorough airing ofthe law and argument. Mr. Beck suggested after some dis-

cussion that the bankand Registry Systemshould have a hear­ing whereby theywould deal with thematter and in themeantime, title beregistered back inthe clear names ofthe two owners.After much discus-sion back and forth,

a Consent Order to that effect wa$ presented to Mr. JusticeRobert D. Laing who issued it. He also heard the matter, byconsent, with the two lawyers presenting their positions onJune 20, 2005 and reserved the matter. As of this writing, weawait the decision of our superior Court.

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In the case at hand, we prepared a Notice of Motion andAffidavits by involved parties and the real TD, which cov­ered the situation. As well, we prepared a Brief of Law,which canvassed much of the law. We might add there weretwo conflicting interpretations as to what should happen withthe mortgage.

The indefeasibilityof title situation and

. getting title back intoour clients' names didnot seem to be anissue. The two linesof cases includedHermanson v. Martin,[1987] 1 WWR. 439,in which our Court ofAppeal seemed toindicate that a docu-ment registered in good faith was valid. The facts wouldappear to have some ability to be distinguished. This caseseems to be the leading case and most recent one in.Saskatchewan: The other interpretation, which has beenaccepted throughout most jurisdictions in Canada, is Gibbs v.Messer (1891), LJC 20.

Q.B.No. of 2005

IN THE COURT OF QUEEN'S BENCH FOR SASKATCHEWANJUDICIAL CENTRE OF SASKATOON

IN THE MATTER OF THE LAND TITLES ACT 2001Ch. L-5.1, FOR1v1ERLYR.S.S. Ch. L-5, SECTIONS'86 AND 87 AND ALL OTHERRELEVANT SECTIONS AND THE LAND TITLES AMEND1v1ENT ACT, 2004,BEING AN ACT TO AMEND CHAPTER 59, LAND TITLES 2000 AND BEING

SECTION 15 BEING AN AMENDMENT TO SECTION 109 ABOUT TITLE IN THENAME OF TRENT DOERKSEN COvaRJNG LOT 12, BLOCK 201, PLAN G779

. EXTENSION 0 AS DESCRIBED ON CERTIFICATE OF TITLE 69S24292 ANDMORTGAGE REGISTERED IN FAVOUR OF crnc MORTGAGES INC.

BETWEEN:

JACK DAVID NEUMANN and SEYMOUR LEOPOLD NEUMANN

APPLICANTS

AND:

Tl;lliNT DOERKSEN, crnc MORTGAGES INC., andCATHERINE BENNING AS REGISTRAR OF TITLES FOR THEPRUV:IN"CE OF SASKATCHE~IAN

RESPONDENTS

NOTICE OF MOTION

.TAKE NOTICE that an application will be made before the Presiding Judge in Chambers

at the Court House in Saskatoon, Saskatchewan, on Tuesday, the 29th day ofMarch,

2005, at 10:00 o'clock in the forenoon or so soon thereafter as counsel can be heard, for

the following Order under ,Sections 86 and 87 ofThe Land Titles Act, R.S.S. 1978,

Chapter L-5, as amended and The Land Titles Amendment Act 2004, Chapter 59, Section

109 ~ requiring the Registrar ofTitles for the Province of Saskatchewan to register title to

Lot 12, Block 201, Plan No. 0779, Extension 0, as described on Certificate ofTitle

69S24292 in the names ofJACK DAVID NEUMANN and SEYMOUR LEOPOLD

NEUMANN, and to remove from the title to the said property a mortgage in favour of

) crne .MORTGAGES INC. registered as Interest Register #109531773 in the amount

2

of $150,750.00 or such further Order as this Honourable Court deemsjust and

reasonable, and solicitor and client costs.

. .

AND FURTHER TAKE NOTICE that in support of this application will be read this

Notice ofMotion with proof of service, Affidavit of Jack David Neumann, Affidavit of

Seymour Leopold Neumann, Affidavit ofBrent D. Barilla, Affidavit ofBradley

Jamieson, Affidavit ofTrent Doerksen, Affidavit ofTrent Lipka, and such further and.,

other material as counsel may advise and this Honourable Court may allow.

Dated at Saskatoon, Saskatchewan, this /"btlr day ofMarch, 2005.

"

PE,,:~':t::L:...=..LC-- _

, Emanuel Sonnenschein, Q.C., .Solicitor forthe Applicants, Jack David Neumann andSeymour Leopold Neumann

This Notice ofMotion has been prepared by:

SONNENSCHEIN LAW OFFICEBarristers and SolicitorsLincoln's Inn313 - 20th Street East

.SASKATOON, Saskatchewan .S7KOA9

Whose address for service is the same as above.

Solicitor in charge oftile: EMANUEL SONNENSCHElN, Q.C.

Telephone Number: (306) 652-47.30

Fax Number: (306) 653-:-5760

TO: The Respondents,TRENT DOERKSENCIBC MORTGAGES INC., andCATHERINE BENNING AS REGISTRAR OF TITLES FOR THE PROVINCEOF SASKATCHEWAN

) Q.B. No. 0426 of2005

IN THE COURT OF QUEEN'S BENCH FOR SASKATCHEWANJUDICIAL CENTRE OF SASKATOON

IN THE MATIER OF THE LAND TITLES ACT, 2000 Ch. L-5.1,

ABOUT TITLE NUMBER 128591332lN THE NAME OF TRENT DOERKSENCOVERING LOT 12, BLOCK 201, PLAN G779 EXTENSION 0

ANDABOUT MORTGAGE #109531773 REGISTERED IN FAVOUR OF crnc

MORTGAGES INC.

BETWEEN:

JACK DAVID NEUMANN and SEYMOUR LEOPOLD NEUMANN

APPLICANTSAND:

TRENT DOERKSEN, erne MORTGAGES INC., andTHE REGISTRAR OF TITLES APPOlNTED PURSUANT TO THE LAND

TITLES ACT, 2000

BEFORE THE HONOURABLEMR. JUSTICE R.D. LAINGIN CHAMBERS

)))

ORDER

RESPONDENTS

TUESDAY THE 26TH DAYOF APRIL, 2005

)

UPON THE APPLICATION ofEmanuel Sonnenschein, Q. C., Solicitor for the

Applicants, Jack David Neumann and Seymour Leopold Neumann, and upon hearing

read Affidavit of Jack David Neumann, Affidavit of Seymour Leopold Neumann,

.Affidavit of Brent D. Barilla, two Affidavits ofBrad Jamieson, Affidavit of Trent

Doerksen, Affidavit ofTrent Lipka, Memorandum of Law, and Draft Order herein,

and upon hearing Dale K. Beck, counsel for the Registrar ofTitles, Carson Demmans,

counsel for CffiC Mortgages Inc., and Trent Doerksen, appearing in person:

2

IT IS HEREBY ORDERED:

1. That the style of cause be amended as shown on this order;

2. That pursuant to section 109 of The Land Titles Act, 2000:

a. Title # 128591332 for surface parcel #120266456 with the Reference

Land Description ofLot 12, Block 201, Plan No. 0779 Extension 0 as

described on Certificate ofTitle 69824292 be'vested in the names of

Jack David Neumann and Seymour Leopold Neumann,

b. The mortgage in favour ofcrnc Mortgages Inc. registered as

Interest Register #109531773, Interest #127294094 be discharged;

c. The Registrar ofTitles accept this Court Order as authorization for an

application to discharge mortgage Interest Register #109531773,

Interest #127294094 and for an application to transfer Title

#128591332 from the name ofTrent Doerksen to Jack David

Neumann and Seymour Leopold Neumann, free and clear of all

interests; and

d. All rights and interest shall be preserved as if the mortgage registered

as Interest Register #109531773, Interest #127294094 remained on

Title #128591332.

3. Upon the request of the Registrar ofTitles pursuant to section 108 of The

Land Titles Act, 2000, the following question respecting the operation of the

land titles registry and The Land Titles Act, 2000, in relation to the

transactions that give rise to this application shall be deemed to have been

referred by the Registrar to the court for decision:

a. Is crnc Mortgages Inc. entitled to be compensated by

Information Services Corporation of Saskatchewan pursuant to

part XII of The Land Titles Act, 2000, in relation to the mortgage

registered as Interest Register #109531773, Interest #127294094

)

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against Title #128591332 whether as a result of the discharge of

the mortgage pursuant to this order or otherwise?

4. For the purpose of answering the question posed by the Registrar pursuant to

section 108 of The Land Titles Act, 2000, it is further ordered that:

a. The parties to these .questions shall be erne Mortgages Inc. as

applicant and the Registrar ofTitles as respondent.

b. Mr. Justice Laing is seized with jurisdiction over this file for the

purpose of answering the questions.

c. It shall be taken as a fact that fraud occurred when the title was

transferred from the.names·of Jack David Neumann and Seymour

Leopold Neumann into the name ofTrent Doerksen as described on

Certificate ofTitle 69S24292, and when the mortgage as described on

Interest Register #109531773, Interest #127294094 was granted in

favour of effiC Mortgages Inc. by a person purporting to be Trent

Doerksen.

d. The parties have leave to rely on all affidavit material filed in support

of the application by Jack David Neumann and Seymour Leopold

Neumann as the factual circumstances relevant to determination of the

issue directed by this order, and may, with leave of this court, file

additional relevant affidavit evidence.

e. The parties will provide any additional affidavit evidence to the other

party not later than May 20, 2005 and exchange and file briefs oflaw

on or before May 27,2005.

f. The Local Registrar shall set a date and time for argument of the

questions under section 108 of The Land Titles Act, 2000, to take place

in June of2005.

-; .....

ISSUED at Sas~atoon, Saskatchewan, this ,2 ~ day of April, 2005.

ClBC Mortgages Inc. consents to this orcdcr this.

. '., MfolF .~Q ~\JVJ .~ .~;J

day ofApril. 200S.

,-.t.J.,J

Per:,-:-~_:-:- _

Cowiste1 for erne Mortgzlp Inc.

I.ok David NC\JmIUlI1 and S~OUl:LeoIPo1d NCUIJW1Il COTISeu.t to tbi;.a 9Nc:r this 22114

day ofApril, 2005.

Som1mscbcin UW O~ce. / -C:::./' ..':)' ."~'II,.:..- --.......Per. !,..... ~Counaad for J;&'DlLvid NflUI1IAtll\ andSeyuJtllUC'Leopold Neummn

The RegiBtnr ofTitles con,entll to~ OItder this~h--aa~ofApril, 2005.

Sl8ka~~C:. .

Per:Dl1c~halfofThe

. ReglBthrofTltles

This docmallll:lt has bem prqlartdby.

Sonn=schein Law OfficeLinc.oln's Iun313 • 20111 Street EastSa.s1cJtoon, SaskatchewanS7KOA9

Whose address for service is the same lI!l above.

Solicitor in charge offile: E. SonnemscheiD, Q.c.

Telephone NlI1tlbCl'l (:306) 652-4730Fax Number: (306) 653-5760

(

Fax:306653S760

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flpr 26 2005 9:37 P. 05

...

) .ClBC Mortgages Inc. consents to tbiB mrder this a: ~ day ofApril. 2005.

DuchilD. Bayda & KroczyDsld

1cr:_~ V~!JlCouue. tbrCIBC Mortgapa Ino.

lack D-vidNew:naon and Seymour leojpoldNwawm consent to~ order this~day ofAprll, 2005. . . .

~cheinLaw0.,~~/., ~;.;"'"

fer: (::." t1'!'FCcnmseHorI~David Neumann andSeymour leopoldNemnann

The RegistrarofTitlea~s to this Cltder thia day ofA:pri!. 2005.

SonnenllCbetn Law OffiIXlLiD.oobrs Iun313 ·20* StreetEastSukatoont SukatchcwanS7KOM

Whose add.reu tor semele is the sameas above.

Solicitor in cha:se of:B1e: B.SQm1~ Q.C.

TelephoneNumber. (306) 6524730Pax. N\IQlbet: (306) 653·5760

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Q.B. No. 0426 of2005

IN THE COURT OF QUEEN'S BENCH FOR SASKATCHEWANJUDICIAL CENTRE OF SASKATOON

IN TIffi MATTER OF THE LAND TITLES ACT 2001Ch. L-5.1, FORMERLY R.S.S. Ch. L-5, SECTIONS 86 AND 87. AND ALL OTHER RELEVANT

SECTIONS AND THE LAND TITLES AMENDMENT ACT, 2004, BEING AN ACT TO AMENDCHAPTER 59, LAND TITLES 2000 AND BEING SECTION 15 BEING AN AMENDMENT TO

SECTION 109 ABOUT TITLE IN THE NAME OF TRENT DOERKSEN COVERING LOT 12, BLOCK201, PLAN G779 EXTENSION 0 AS DESCRIBED ON CERTIFICATE OF TITLE 69S24292 AND

MORTGAGE REGISTERED IN FAVOUR OF CffiC MORTGAGES INC.

BETWEEN:

JACK DAVID NEUMANN and SEYMOUR LEOPOLD NEUMANN

APPLICANTS

AND:

TRENT DOERKSEN, crnc MORTGAGES INC., andCATHERINE BENNING AS REGISTRAR OF TITLES FOR THEPROVINCE OF SASKATCHEWAN

RESPONDENTS

MEMORANDUM OF SUBMISSIONS ON BEHALF OF JACKDAVIDNEUMANN AND SEYMOUR LEOPOLD NEUMANN,

APPLICANTS HEREIN

SONNENSCHEIN LAW OFFICEBarristers and Solicitors

313 - 20th Street EastSaskatoon, Saskatchewan

S7K0A9

LAWYER IN CHARGE OF FILE: EMANUEL SONNENSCHEIN, Q.C.

TELEPHONE NUMBER: (306) 652-4730

FAX NUMBER: (306) 653-5760

CONIENTSBACKGROUND AND FACTS

ISSUES TO BE DETERMINED

PORTIONS OF THE LAW TO BE REFERRED TO

SUBMISSIONS

DISCUSSION OF THE LAW

SUMMARY OF LAW AND ARGUMENT .

RELIEF

INDEX OF CASE LAW

Hermanson v. Martin (1987) 1 WWR 439- referred to in (a)

Watson v. Ogilvie et al (1924) 1DLR 815 - referred to in (b) and (f)

DeLichtbuerv. Dupmeier (1941) 3 WWR 64 -referred to in (c)

Assetsco v. Mere Roihi (1904) 74 IJPC 49 -referred to in (d)

Gibbs v. Messer (1891) LJC 20 - referred to in (e)

Adams and McFarland (1914) 20 DLR293 -referred to in (g)

PikHar Kwan v. Kinsey etal (1979) 10 RPR 44 - referred to in (h)

Brown v. Broughton (1915) 24 DLR244 -referred to in (i)

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Q.B.No. of200S

)

IN THE COURT OF QUEEN'S BENCH FOR SASKATCHEWANJUDICIAL CENTRE OF SASKATOON

IN TIIE MATIER OF TIffi LAND TITLES ACT 2001Ch. L-S.1, FORMERLY R.S.S. Ch. L-S, SECTIONS 86 AND 87 AND ALL OTHER RELEVANT

I SECTIONS AND THE LAND TITLES AMENDMENTACT, 2004, BEING AN ACT TO ANfEND.t: CHAPTER 59, LAND TITLES 2000 AND BEING SECTION 15 BEING AN AJ.\1ENDMENT TO'SECTION 109 ABOUT TITLE IN THE NAME OF TRENT DOERKSEN COVERING LOT 12, BLOCK

201, PLAN G779 EXTENSION 0 AS DESCRIBED ON CERTIFICATE OF mLE 69S24292 ANDMORTGAGE REGISTERED IN FAVOUR OF crnc MORTGAGES INC.

BETWEEN:

JACK DAYID NEUMANN and SEYMOURLEOPOLD NEUMANN

APPLICANTS

AND:

TRENT DOERKSEN, ernc MORTGAGES INC., andCATHERINE BENNING AS REGISTRAR OF TITLES FOR THEPROVINCE OF SASKATCHEWAN

RESPONDENTS

MEMORANDUM AND SUBMISSIONS ON BEHALFOF JACK DAVID NEUTV1A.L"'ffl AND SEYMOUR LEOPOLD

NEUMANN, APPLICANTS HEREIN

(1) BACKGROUND AND FACTS

Herman Neumann and Rachel Neumann had resided on premises known as 611 Leslie Avenue, Saskatoon,

Saskatchewan, and whose legal description is Lot 12, Block 201, Plan G779 Extension 0 as described on

Certificate ofTitle 69S24292, hereinafter referred to as "the said land" since approximately 1959.

Herman Neumann died on or about November 27, 2003. Rachel Neumann died on or about July 17, 2004.

Prior to the death ofRachel Neumann, she did transfer the said land into the names ofher two sons, Jack

David Neumann and Seymour Leopold Neumann, the Applicants herein. (See Affidavits of Applicants,

Jack David Neuma.nn, and Seymour Leopold Neumann, paragraph (3), Exhibit "A")

That the said land was listed with Trent Lipka ofRelMax Saskatoon for sale since on or about August 23,

2004 and the listing was renewed on or about December 17, 2004.

That some time apparently in December of2004, the addresses of the Applicants were changed by an

unknown party on the face of the title of the said land (See Affidavit of Applicants, Jack David Neumann

and Seymour Leopold Neumann, paragraph (4), Exhibit liB").

2

That around December 13, 2004, a document was filed with the LandRegistry System in Saskatchewan

causing title to be transferred (See Affidavit ofBrent D. Barilla indicating that he did not sign same and see

Affidavit ofApplicants, Jack David Neumann and Seymour Leopold Neumann, paragraph (5), Exlubit

"C").

That on or about February 1, 2005, a mortgage was registered in favour ofcrnc MORTGAGES INC. (See

Affidavit ofBradley Jamieson, Exhibit and Exhibit ofAffidavits of Jack David Neumann and Seymour

Leopold Neumann.

That from the information above, it is clear that neither ofthe Applicants signed a transfer in favour of

Trent Doerksen and that someone purporting to be Trent Doerksen had caused a transfer to be registered in

favour ofthe said name and caused a mortgage to be registered accordingly, all of which could readily be

found to be fraudulent in its nature.

That the Applicants have a sale ofthe property and require clear title in order to transfer same.

(2) ISSUES TO BE DETERMINED

The issues to be determined are as follows:

(a) Are the Applicants the rightful owners ofthe property and should title be registered in

their names?

(b) Should the property justifiably retain the mortgage in favour ofcrnc Mortgages Inc. or

should it be removed?

(3) PORTIONS OF "THE LAW TO BE REFERRED TO

1. We note that the Land Titles Act being Chapter L-5.l of the Statutes of Saskatchewan 2000 as

amended by the Statutes of Saskatchewan, 2001 C20 and 33; 2002, cC-l!.l and C-5l and 2004, c59 as

several sections which relate to the current situation.

2. Section 15 deals with exclusion to exclusive title. Section 15(1) indicates: "In the following

cases, title is not conclusive proof that the registered owner is entitled to the ownership share ofthe surface

parcel, mineral commodity, or condominium unit for which the title has been issued:

(a) Where the registered owner has acquired the title by participating or colluding in fraud;

(2) Every title is subject to alteration or revocation or removal from the registered owner by:

(a) A correction made in accordance with Section 97;

)

)(b)

(c)

(d)

3

A Regis1:rats Order made pursuant to Section 101;

A Court Order; or

Any procedure authorized by this Act or any other Act;

(3) An action ofejectment from land or other action to obtain·or recover land may only be instituted against

the registered owner:

(a) In the case of Subsection (1);

(b) In the case ofa person enforcing any interest or right mentioned in Section 14; or

(c) Where there is authority for the action pursuant to this Act or any other Act;1I

It might be noted that Section 14 relates to the fact that every title is subject to:

(a) Any interest that is registered against the title pursuant to this Act or any other Act or

law; and

(b) The exceptions, reservations, and interests that are implied pursuant to Sections 18 to 20

whether or not those exceptions, reservations, and interests are registered against the title

or mentioned on any title;

Section 16 deals with completing titles and states:

"(16)(1) In this Section "A person whose title was registered first" means:

(a) The person who is the registered owner of the title that was registered first; or

(b) Any person whose claim is derived directly or indirectly from the person mentioned in

Clause (a);

(2) Where competing titles exist at any time .with respect to all or a portion of the same surface parcel,

mineral commodity, or condominium unit, the person who is entitled to be the registered owner ofthe land·

is a person whose title was registered first.

Section l07 deals with the powers of the Court and notes: "107: Any person may apply to the Court for an

Order with respect to:

)

(a)

(b)

(c)

The operation of:

(i) The Land Titles Registry; or

(li) This Act or the Regulations;

Any decision ofthe Registrar with respect to any action that the Registrar is required or

authorized to take pursuant to this Act;

Any Order, decision, or correction of the Registrar pursuant to Section 101, 169, or 202;

4

(d) Any application respecting land or an interest in land; or

(e) Any application respecting a transaction or contract relating to land or to an interest in

land;

Section 109 states as follows: 11109(1) In any proceeding pursuant to this part, the Court may make any

Order the Court considers appropriate and in so doing may direct the Registrar to or authorize any person to

apply to the Registrar to:

(a) Register, discharge, amend, postpone, or assign an interest; or

(b) Transfer title or make changes to a title;

(2) The Court may seek assistance from the Registrar in any proceeding pursuant to this part.

(3) On an application to the Court pursuant to this part, if the Judge hearing the application considers

it appropriate to do so, the Judge may make an Order: (a) Directing that a title be vested in any person;

and (b) Either; (c) Direct the Registrar to transfer title or to make changes to a title; or (d) authorizing any

person to apply to the Registrar to transfer title or have changes made to a title.

(4) An application for an Order pursuant to Subsection (3) may be' made:

(a) On any notice that the Court considers appropriate; or

(b) Without notice, if in the Court's opinion the circumstances warrant it

Section 113 indicates 11113(1) Any document to be served pursuant to this Act or the regulations or in any

proceeding or matter under the jurisdiction of the Registrar may be served:

(a) By personal service made;

(i) In the case of an individual on that individual;

(li) In the case of a partnership, on any partner; or

(iii) In the case of a body corporate, on any officer or director of the body corporate;

or

(b) By any other prescribed means;

(2) A document required to be served on the Registrar may be served in the prescribed manner:

/(3)(a) By leaving the document at the Office of the Registrar; or

(b) By any other prescribed means;

Service of a document by any prescribed means is to be proved in the prescribed manner.

)

)

5

(4) Any person entitled to be served with a document may at anytime waive, in writing service ofthe

document.

It is also noted under Section 116 dealing with delivery ofdocuments "116 In the case of any document

that is to be delivered, but that is not required to be formally served pursuant to the Act or the regulations,

the document is deemed to be sufficiently delivered to a person, if sent to that person's last address: as

recorded in the Land Titles Registry; or (b) in the case ofcondominium corporation as recorded in the

Registry established pursuant to the Condominium Property Act, 1993.

(4) SUBMISSIONS

It is suggested that there is an identity theft using the name and creditrating of"Trent Doerksen" to obtain a

false and fraudulent title and thereafter to place a mortgage and receive monies thereon. This was done

without the concurrence or co-operation in any way, shape, or form ofthe Applicants.

We suggest that someone, in effect, using the name "Trent Doerksen" falsely got a fraudulent transfer to 'the

name of"Trent Doerksen" and obtaining money from CIBC Mortgages Inc. using that document.

Someone, obviously, observed that the Neumann house was for sale and had been for sale for some time

and. thereafter committed the fraud. Someone also represented themselves falsely to be "Trent Doerksen"

and signed the said mortgage.

The Applicants had held the title free and clear of any encumbrances and are entitled to receiving same.

It is clear that the Applicants are entitled to own the land free and clear of the mortgage ~s they did not

place it on and it was placed on by fraud.

This Honourable Court has the authority under the Land Titles Act Sections noted above and the powers

therein to vest the title once it is satisfied that the title has been transferred in a false or fraudulent manner

and is not supposed to have been titled done and that the documents which were registered'were also

registered improperly. We suggest that is clear and unambiguous that this could and should be done.

Besides the Statutes noted above, there is ample case law authorizing the Court to make a vesting Order in

the appropriate instances.

We suggest the Hermanson case noted below discusses indefeasibility of title and would seem to authorize

the Court to make the Vesting Order requested herein. Also the Saskatchewan case ofWatson v. Ogilvie

seems to prove the Old English case of Gibbs v. Messer case. That case would seem to indicate that a non-

/existent person could not give a valid mortgage to a bona fide mortgagee. This is referred to in paragraph.# (e) on Page 8 below, copies of such cases are annexed hereto.

~ .

L0717 /1

6

(5) DISCUSSION OF THE LAW

(a) In the classic case ofHermanson v. Martin (1987) 1 WWR 439, Chief Justice Bayda

discuSses the indefeasibilitY of title. In that case one ofthe owners had someone pose as his wife and had

the home property transferred to ~other who had nothing whatsoever to do with the fraud. The purchaser

was a bona fide purchaser for value without notice.

(b) In an earlier decision ofWatson v. Ogilvie et al (1924) 1DLR 815, ChiefJustice Brown

ofthe Court ofKing's Bench for the Province of Saskatchewan where a transfer was signed and there was

fraud present In that case, the Plaip.tiffhad signed a transfer being led to believe that it was an application

for a loan and other details were filled in later. There was a false Affidavit ofExecution. In the third

paragraph ofpage 816, the LeamedJudge relied on the well-known case of Gibbs et al v. Messer (1891)

. AC 248. On page 817 referring to that case in the third paragraph, fourth line, notes as follows: "... the ­

. registered owner was boundto see to it that the transfer was a valid one. As a matter of act, the

circumstances surrounding the execution, completion, and use of the transfer are reeking with fraud,

deception, and forgery, and the Certificate ofTitle, which is issued in the Defendant's name by virtue of

such transfer, therefore not indefeasible.

The Plaintiffis, therefore, entitled: to have the Certificate ofTitle cancelled and a new one issued in his own

name, and the Registrar is directed to act accordingly ...n

(c) In the case ofde Lichtbuer v. Dupmeier et al (1941) 3 WWR 64, Mr. Justice MacLean of

the Saskatchewan Court onUng's' Bench dealt with evidence and fraudulent registration and a mortgage

registered against the same land. It related to a situation wherein Bernard and Joseph Dupmeier forged a

transfer in their favour (see p. 65 - 2nd par). This transfer was set aside. In the next p~agraph, the issue

was how the mortgage would pe disposedDf. In the paragraph following it was noted that the Dupmeier's

had for many years dealt with the bank and its predecessor. Also, they had farmed the land in question for

many years.

At page 68 in the second and third paragraphs dealing with the outstanding authority of Gibbs v. Messer

(1891) 60 LJPC 20, indicated at the last sentence of the second paragraph on page 68 that the II ••• Privy

Council held that as the name ofthe supposed person Hugh Cameron did not represent any existing person,

the transfer and the mortgage following it were null and void, but in the course of their judgment, their

Lordships say:

"In the present case, ifHugh Cameron had been a real person whose name was fraudulently

registered by Cresswell, his Certificates ofTitle, so long as he remained undivested by the issue of

new Certificates to bona fide transferee, would have been liable to cancellation at the instance of

Mrs. Messer, but a mortgage executed by Cameron himself, in the knowledge of Cresswell's fraud,

would have constituted a valid encumbrance in favour of a bona fide mortgagee."

)

)

7

The next paragraph on page 68, bad Mr. Justice MacLean noting that "... Such a mortgage constitutes a

valid charge in favour. of the mortgagee."

The Learned Judge goes on to indicate that the bank in that instance was acting in good faith and knew that

the Dupmeiers were farming the land joining other land·they were farming and had indication that it was

their land and never had any knowledge or suspicion of fraudulent dealing.

It might be noted that one of the distinctions between that case and the case in hand is that an existing

person whom the bank knew had dealt with title. The case at hand appears to be one of fraud and identity

theft, which did not exist in the cases mentioned.

(d) In the said case, there was.reference to Assetsco v. Mere Row (1904) 74 LJPC 49. It is a

New Zealand case, which seems to indicate a registered title of land in the absence of fraud is conclusive;

and defects in procedure cannot affect such title. The fraud must be proven in order to invalidate the title of

a registered purchaser for value and that a title certified under the Lands Act must be brought home to the

person whose registered title is impeached or his agents. Fraud by persons from whom he claims does not

.. affect him unless knowledge of it is brought home to him or his agents. Lord Lindley delivered the

judgment for the Privy Council and notes at page 49 that the title was impeached by the Plaintiffs on

grounds of fraud and inappropriate registration. At page 60 in the second last paragraph, His Lordship

noted: "Tne mere fact that he might have found out fraud ifhe had been more vigilant and had made

further inquiries which he omitted to make does not of itself prove fraud on his part, but ifit be shewn that

his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the

case is very different and fraud may be properly ascribed to him."

'It

We note at the bottom ofpage 57, it notes: "It is said that Gibbs v. Messer [1891 shews that registered

titles may not be conclusive even in favour ofa bonafide registered purchaser from a registered owner.

The case no doubt does shew that such a case may occur. The case was one of fraud and forgery. A

transfer from a registered owner to a non-existent person had been fraudulently procured aJ;l.d registered,

and a fictitious transfer from that fictitious transferee to a bondfide mortgagee was afterwards registered.

In a suit by the first registered owner against the Registrar, the registered mortgagee, and the perpetrator of

the fraud, the name of the first registered owner was ordered to be restored to the register by this Board.

The Supreme Court ofVictoria had held that the true owner had lost her property, but was entitled to

damages out of the compensation fund. The appeal was by the Registrar from this decision. This Board

held that as there was, in fact, neither any transferee from the first registered owner, nor any transferor to

the registered mortgagee, there was nothing to deprive the first registered owner ofher property - nothing

in fact, on which the subsequent registrations could operate; and those registrations were accordingly

ordered to be cancelled. Lord Watson, in his observations on the protection given to bonafide purchasers,

points out that a bona fide purchaser from a registered owner is in a better position than a first registered.,I" owner whose title may be impeached for' .<Uld. But there is nothing inbi' judgment in favour of the view

8

that an original registered owner claiming.through a real person does not get a good title against every one

except in the case specially mentioned in the Act, fraud being one ofthem."

. This could seem to indicate that the mortgage holders in this case might have a valid mortgage. It may well

be that they have a claim against the Land Registration Assurance Fund or some other fund such as

Mortgage Insurance.

(e) In Gibbs v. Messer, (1891) UC 20, this is a case before the Privy Council relating to a

forged transfer ofland to a fictitious purchaser and who in~mortgaged the property. In the head note, it

was noted that there was the duty of ascertaining the identity qf the principal for the whom the agent acted

rested on the mortgagees and the damages were not recoverable from the Registrar under Section 144 of the

Act; that the Certificate ofTitle and memorial ofmortgage must be cancelled and the Certificates ofTitle

be substituted by the Registrar in the name of the true owner." This is noted in the last few paragraphs of

the judgment on.page 25.

(f) We next 'refer to the case ofWatson v. Ogilvie (1924) 1 DIR 815 atwhich time Chief

Justice Brown ofthe Saskatchewan Court ofKing's Benchref~ed to the Gibbs v. Messer case. It is noted

that this also referred to a fraudulent transfer. Atpage 816, the third paragraph states: "In Gibbs et al v.

Messer (1891) AC 248, Lord Watson says at page 255: - "The protection which the statute gives to persons

transacting on the faith of the register is, by its terms limited to those who actually deal with and derive

right from a proprietor whose name is upon the register. Tho~e who deal, not with the registered proprietor,

but with a forger who uses his name, do not transact on the faith of the register; and they cannot by

registration of a forged deed acquire a valid title in their own'person, although the fact of their being

registered will enable them to pass a valid right to third parties who purchase them in good faith and for

onerous consideration" .

And, again, at pp. 257-8: - "Although a forged transfer or mortgage, which is void at common law, will,

when duly entered on the register, become the root ofa valid title, in a bonajidepurchaser by force ofthe

statute, there is no enac~ent which makes indefeasible the registered right ofthe transferee or mortgagee

under a null deed. II

(g) In Adams and McFarland (1914) 20 DLR293, Mr. Justice Walsh of the Alberta

Supreme Court referred to the Gibbs v. Messer case and notes at the second paragraph ofpage 295: "Gibbs

v. Messer ... is decisive of this case, unless there is some difference between the statute there in question

and our Land Titles Act It is a judgment of the Privy Council on appeal from the Supreme Court of

Victoria. The Plaintift's signature to a transfer was forged and the forged transfer recorded, the transferee

named in it being a fictitious person. A mortgage of the land purporting to be executed by this non-existent

transferee was afterwards recorded against the land, the mortgagee, in perfect good faith, advancing on this

security the amount named in it The action was brought by the former registered owner against the

mortgagee and the registrar for an order for the calling in and cancellation ofthe certificate issued upon this

# ..'l

/

)

9

forged transfer and for the issue to her of a new certificate free from the mortgage and for payment out of .

the assurance,fimd ofany sum required to accomplish this. Lord Watson, in delivering the judgment ofthe

Board, says atpp. 254 and 255: ..."

(h) In PikHar Kwan v. Kinsey et al (1979) 10 RPR 44, Mr. Justice Munroe ofthe British

Columbia Supreme Court dealt with the issue of a mortgage, which was forged. This was a case ofs'ome

forgery. It dealt with the factors ofa forged mortgage being invalid. However, a third mortgage which was

registered and accepted for value in good faith without notice of any forged instrument The situation in

that case dealt with good and bad mortgages. It is noted that the third paragraph-states as follows: "JIS and

CI Ltd. and FD Co. having dealt with a forg~ rather than the registered owner on the land, obtained.no title .,

against K the true registered owner ofthe property. However, M, a good faith mortgagee without notice of

any forged instrument or of the interest ofK in the properly and whose mortgage had been executed and

delivered by the then registered owner had a char~e that was valid against K's interest The assurance fuii.d "

should provide sufficient money to enable K to discharge M's interest in the land. M had not contributed to

his own loss, but had relied on the information gleaned from the land registry office records."

Accordingly, we have a case where there is an interesting distinction. In the case at hand, the transfer was

obviously a forged document The mortgage also was :forged in that it was not executed by the real "Trent

Doerksen", but somebody who assumed his name. It i~ also noted that the mortgage company and their

solicitor appear to have taken some opportunity to try to make sure they were dealing with the proper

registered owner.

(i) In the case ofBrown v. Broughton (1915) 24 DLR 244, Mr. Justice Curran of the

Manitoba Court of Qu~en'sBench found a case where there was a forgery ofa transfer and a consequent

mortgage. On page 250, the Gibbs v. Messer case was referred to. At page 251, the Learned Judge noted:

"1 quote from the judgment at p. 254: -

"The main object ofthe Act, and the legislativ~ scheme for the attainment ofthat object appear to

them to be equally plain. The object is to save persons dealing with registered proprietors from

the trouble and expense of going behind the-register, in order to investigate the history oftheir

author's title and to satisfy themselves of its'validity. That end is accomplished by providing that

every one who purchases, in bonafide and for value, from a register proprietor, and enters his

deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right,

notwithstanding the infirmity ofhis author's title. In the present case, ifHugh Cameron (the

fictitious transferee) had been a real person whose name was fraudulently registered by Cresswell,

his certificate of title, so long as he remained undivested by the issue ofnew certificate to a bona

fide transferee, would have 'been liable to cancellation at the instance ofMrs. Messer; but a

mortgage executed by Cameron himself, in the knowledge of Cresswell's fraud would have

constituted a valid incumbrance in favour ofa bonafide mortgagee."

10

At the bottom ofpage 251, it is noted: "InAssets Companyv. Mere Roihi [1905] A.C. 176, Lord Lindley

at 204, commenting on the decision in Gibbs v. Messer, supra, says: -

Lord Watson in his observations on the protection given to bonafide purchasers points out that a

bonafide purchaser from a registered owner is in a better position than a first registered owner

whose title may be impeached for fraud, but there is nothing in his judgment in favour of the view

that an original registered owner claiming through a real person does not get a good title against

everyone except in those cases specially mentioned in the Act, fraud being one ofthem."

At page 253, against quoting on the Gibbs. V. Messer case, the Learned Judge notes: "The Judgment in

Gibbs v. Messer, supra, at p. 255, seems to make the reason for this distinction clear. It says:" -

The protection, which the statute gives to persons transacting on the faith ofthe register, is by its

terms limited to those who actually deal with and derive rights "from a proprietor whose name.is

upon the register. Those who deal not with the" registered proprietor, but with a forger, and who

use his name, do not transact on the faith ofthe register; and they cannot by registration of a

forged deed acquire a valid title in their own person, although the fact oftheir being registered will

enable them to pass a valid right to third parties who purchase from them in good faith and for

onerous consideration.

I think, therefore, that the plaintiffis entitled to have the existing certificate oftitle standing "in the name of" "

the defendant Broughton set aside and cancelled, and to have anew certificate oftitle issued to him

revesting the land in him as ofhis former estate, but subject, however, to the mortgage ofthe defendant

company, which I hold to be a good and valid encumbrance upon the land therein mentioned.

The Plaintiff will be entitled to costs as against the defendant Broughton. Had he asked for damages I

would have awarded them to him, but he has not asked for any." ...

On Page 254, in the final paragraph, Curran J. notes: "It is to be hoped that the District Registrar will, on

the strength ofmy findings of fact, be able to recommend to the proper authorities prompt payment to the

plaintiff out ofthe assurance fund not only of a sum sufficient to" discharge the defendant companys

mortgage, but also all costs and disbursements to which the plaintiffhas been put ... "

This case seems to indicate that title can be returned to the name of the rightful owners, damages were

given, and the mortgage remained with the ~egistar being asked to make a payment from the Assurance

Fund.

(6) SUMMARY OF LAW AND ARGUMENT

The various case law seems to indicate there is an indefeasibility of title and there does not seem to be any

question that title should be returned to the names of the Neumanns where there has been fraud. This is

being established by the various Affidavits of the Neumanns who state that they had not executed Transfer

)

11

or signed other documents. This is bolstered by the Affidavit ofMr. Barilla whose niune was used as a

witness transferring to Trent Doerksen. Trent Doerksen from Prince Albert, Saskatchewan, indicates he did

not submit a transfer and no transfer was sought or issued to him.

We next must come to the position ofthe mortgage in favour ofCJBC Mortgages Inc.. Mr. Brad Jainieson

placed a mortgage and paid out the money on behalfofCJBC Mortgages Inc. On the surface it would

seem that they were a bona fide mortgage holder for value. They saw what was believed to be an

indefeasible title and money was paid out to an individual who purported to be "Trent Doerksen" .

We submit that both.the transfer and the mortgage were fraudulent. It is not suggested in any way, shape,

or form that there is no evidence that the Neumanns were a party to the fraud. In fact,.there is evidence that

they were not. The real "Trent Doerksen" who notes that he is the only Trent Doerksen and his identity

seems to have been stolen, was not involved in the fraud and did not seek the title nor did the person whose'

name was alleged on the transfer as a witness, Mr. B. D. (Brent) Barilla become involved in the transfer.

The mortgage was obviously signed by someone. Bradley Jamieson says he took some cautions and got

two pieces of identification, i:J.amely, a health card and a birth certificate. Mr. Jamieson.also asked a

question. Accordingly, he had some suspicions. The Respondents, crnc Mortgages Inc., paid out money,

taking information and obvibusly felt they were lending the money in good faith and received what

appeared to be on the surface a valid mortgage.

The case law seems to be somewhat mixed and depends on the facts as to whether as in the (b) Watson v.

Ogilvie case "The circumstances surrounding the execution, completion, and the use ofthe transfer are

reeking with fraud, deception, and forgery, and the Certificate ofTitle, which is issued in the Defendant's

name by virtue of such transfer, therefore, not indefeasible." On the other hand, (c) de Lichtbuer v.

Duumeier et al, the notation indicates that the lender had a relationship with the mortgagor and had reason

to believe that it was a valid title and suggested that although there was a forgery and title should be

returned "the mortgage constituted a valid charge in favour of the mortgagee". This may well create an

injustice or confusion. The writer would suspect that should the mortgage company in that instance attempt

to collect from the valid owner, it would have some grave difficulties. Yet, on the other hand, this is by

legislation an exception due to the indefeasibility of title to the rule "Nemo dat quad non habet" (No one

can give what they do not own.)

The rest of the case law seems to be discussing these aspects. Accordingly, that is why the writer has gone

into these matters at length as this may be one of the first cases under the new Land Holding System which

the Court is obliged to deal with. However, the principles appear to be set out in detail.

There should be costs against the Assurance Fund as in accordance with the Provisions of the legislation

and perhaps a claim against the Assurance Fund for the Mortgage Company as well as costs.

12

(7) RELIEF

We suggest the' following Relief:

(a) An Order. directing a transfer ofthe title back to the Applicants, Jack David Neumann of

1339 University Drive NW, Calgary, Alberta T2N 3Y8, and Seymour Leopold Neumann

of29 :"10301-104th Street, Edmonton, Alberta T7J 1B9, respectively.

(b) An Order directing the removal ofCffiC Mortgages Inc. mortgage registered on

February 1, 2005 as Instrument Register No. 109531773;

(c) Alternative, if the mortgage is not removed, the Registrar ofTitles for the Province of

Saskatchewan should be directed to remove mortgage after paying out CffiC Mortgages

Inc.

(d) Costs ought to be ordered on a solicitor and clientbasis to the Applicants' solicitor.

(e) Such further and other costs as the Applicants have beenput to be ordered.

(t) Such further and other relief as the Court may deem fair, just, and reasonable considering

all the circumstances.

All ofwhich is respectfully submitted this 16th day ofMarch, 2005.

Emanuel Sonnenschein, Q.C.,Solicitor for the Applicants,Jack David Neumann and Seymour Leopold Neumann

This document was delivered by:

Sonnenschein Law OfficeBarristers and SUlicitors313 - 20th StreetEastSaskatoon, SaskatchewanS7K0A9

Whose address for service is: same as above

Lawyer in charge offile: EMANUEL SONNENSCHEIN, Q.c.

Telephone Number: (306) 652-4730

Fax Number: (306) 653-5760

)

) -.

Q.B. No. 0426 of2005

li'i THE CO\.JRT OF Qt;EEN'S BE~CH FOR SASKATCHEWAJ.'\jJUDICIAL C:ENTRe O.F SASKATOON

IN THE MArTER Or THE LAND .TITLES ACT, 2000 Cll. L-S.l,

A.BOliT TITLE #1285913'32 N THE NAME OF TRENT DOERKSENCOVERING LOT 12.. BLOCK 201, PLAJ.~ C779 EXTENSION 0

ANDr\BO'L'T MORTGAGE #109531773 REGISTERED IN FAVOUR OF

crnc MORTGAGES INC.

BETWEEN:

.JACK DAVm NEUMANN and SEYMOUR LEOPOLD NEUMJ.~~N

APPI.TC.I\N'i'SAND:

TRJ!',NT DOERKSF,N, CU~C MORTGAGE,S INC., andnm REGISTRAR OF 1'1TLES

APPOINTED F'~jRSUANT TO THE LAND l1TLES ,ler. 200:)

RF.:.SPONUENTS

1\RlE10FLAW

(on ~ehalf 0 f TIle Rc,;ima71J fTities)

._-_._--------------

Deput)' Minis~cr of ju~dce andDeputy Att.!ll11ey G~;1f:·rai.

51thflClc<, 1374 Scar&, SlreetResina Sask. S4P 3V7

TABLE OF CONTENTS

T. INTRODUCTION I

n. FACTS 3

m. ISSUE 5

IV. LAW

A. Indefeasibility ofTitle under .The Land Titles Act, 2000 " 5

B. Interests under The Land Titles Act. 2000 , ..•.............. 7

C. Statutory Basis for Claims and CQmpcnsation 8

V. ANALYSIS

A. A forged mortgage creates no rights ," 10

B. Adoption in all other Canadian Tonens jurisdictions 12

C. Hermanson v. Marlin " " 14

D. Is a n.ull mortgage compensable under Part xn of The Land Titles Act, 200tJ16

VI CONCLUSlON ; " 19

VII RELIEF REQUESTED 19

vn AUTHORITIES 21

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)

I. INTRODUCTION

1. AJ:t. imposter can not create a legal interest.

)

2. To "rely o.n the registry" a person has to deal with the person named on the registCt'.

3. The Lan.d ritles Act, 20001 allows claims for errors on tbe part of the r.egistry and for

fraud in relation to title, but not for fraud in relation to interests.

4. These are well-established lcgal-pri.nciples and statutory provisions adverse to a claim by

erne Mortgages Tne. (herein "CIBC").

5. This matter arises from a question asked by the Registrar pursuant to section I08 of The

Land Titles Act, 2000 and stated in a consent order of this court dated April 26, 2005.

The question asked is this:

Is CIBC Mortgages Inc. entitled to be compensated by InformationServices Corporation of Saskatchewan pursuant to Part XII of TheLand Titles Act, 2000, S.S. 2000, c.L~5_t, in relation to the mortgageregistered as Interest Register #109531773, Interest #127294094against Title #128591332, Whether as a result orthe discharge 01 themortgage pursu.ant to this order or otherwise? .

6. This places the quest.ion of liability before the court. The question docs not call for

quantification ofdamages. The calculation ofdamages is a straightforward mathemati.cal

calculation, but is subject to an obligation to mitigate on the part oferne through recovery

ofmortgage proceeds, where possible. Therc should be no difficulty in settling the quantum

of damages, ifthere is liabiljty to .pay. The Registrar accepts as correct the mortgage

balance and per di.em rate in paragraph 6 of the Affidavit of Linda Woollard dated May 13,

2005.

7. The key principles ofthe Torrens system are:2

a) the mirror principle, which suggests t.hat the title accuiately retlects t.~e state of

the property and the interests registered against it;

'R.S.S. c.L-5.1.

2 See for example, John Sterk, Alberta Conveyancing Law and Practtce; (Toronto:Burrougbs,1981) at 3 [tab I) aod T.homas W. Mapp, Torrens' Elusive Title, {Edmo.nton: Faculty ofLaw, University ofAlberta, 1978), at 66 [tab 2].

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SK JUSTICE CIVIL LAW PAGE as

b) the curtain principle, which limits thc necessity to examine the history of the title

prior to any transaction;

c) subject to certain ex.ceptions, guarantee or warranty of title througb assurancc

coverage; and

d) compulsory registration.

8. The role oflhe Register ofTitles is to defe.nd the Torrens principles, to ensure the intcgrityofthe land titlt:s system and to pay compensation as provided by the Act. This claim teststhe limits of the Registrar's obligation to pay compeusation. The Regi.strar is concerned thatextending compensation to eIBe in the facts of this case atlows compensation for claims

arising from matters beyond the control of the registry and matters for which neither theTorrens principles nor the legislation intended compensation.

9. This case has broader implications for the land registry than this single claim. MortgageFraud is a significant issue in Ontario and has the potential to be a significant issue inSaskatchewan. In March, the convocation of the Law Society orUpper Canada3 receiveda report which made the following points:

The estimates oflosses to lenders and i.nsurers from mortgage fraud is in themillions. ifnot biUions of dollars;'

There have been recent dramatic increases in the rate ofclaims;'

There are current investigations of allegations of.mortgage fraud made against 72

lawyers in Ontario.6

J Mortgage Fraud, a report to convocation, Law Society ofUpper Canada, March 24, 2005[tab 3]. .

, At paragraph I

S At paragraph 14

6 At paragraph 60

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II. FACTS

) .10. In early 2004, Rachel Neumann held clear title to 611 Leslie Avenue in Saskatoon (Lot 12,

Block 201, Plan 0779 Extension 0 as described on Certificate ofTitle 69S24292, Parcel

#120266456, herein the "Lands"). (Affidavit of Jack Neumann, para 2 and Exhibit B to

Affidavit)

11. Rachel Neumann transferred 11er entire interest in the Lands to her two sons, Jack and

Seymour Neumann, on May 12, 2004. Rachel Neuman\) died shortl.y thereafter, 0.0. July

17. (Affidavit ofJack Newnann at para 2)

12. Seymour Leopold Neumann and Jack David Neumann (herein tbe "Neumanos''), listed

the property for sale with Trent Lipka on August 23, 2004. (Affidavit ofJack David

Neumann at para 5)

13. On November 22, 2004, an unknown person or per.sons submitted Change of Address

applications to the Land Titles Registry, to change the address o.n title and used for the

delivery ofcorrespondence from the Land Titles Registry to the Neumanns, to an address

.in Prince Albert. The unknown person or persons had no authority to act on behalfofthe

Neumanns. The Neumanns were not awarc that applications to change their addresses had

been submitted and did not want their correspondence sent to Prince Albert.

14. On the face ora Transfer Authorization dated November 12, 2004, Jack Neumann

authorizes the transfer of his interest in the Lands to a Trent Doerksen. The transfer

registered on December 13, 2004. (Exhibit C to the Affidavit of Jack Neumann)

IS. In his affidavit dated March 5, 200S, Jack Neumann states he did not si.gn a transfer of his

interest to Trent Doerkse.n and he did not authooze anyone else to sign on his behalf.(Affidavit ofJack Neumann, para 7)

16. On the face ofa Transfer Authorization dated November 12,2004, Se-ymour Leopold

Neumann authorizes the transfer ofhis interest in the Lands to Trent Doerksen. The

transfer registered on December 13, 2004. (Exhibit C to the Affidavit of SeymourNeumann)

17. In the Affidavit ofSeymour Neumann dated Macch 8, 2005, the affiant states he did .not

sign that document or authorize anyone to sign on his behalf. (at para 5)

18. The transfers and the Affidavit of Value bear the name and putative signature of BrentBariJla., a lawyer in Saskatchewan, as witness to the signatures ofTrent Doerksen. Brent

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Barilla has stated in an affidavit that the signatures ate not, in fact, his signatures, and that he

never met anyone named Trent Doerksetl and did not act on Trent Doerksen's behalf.

(Affidavit ofBrel1t Barilla at para 4(b»

19. On February 1, 2005, eIBe registered a mortgage against the Lands (tbe Mortgage is

Exhibit A to the Affidavit of Bradley Jamieson dated Marc.b. 16,2005; updated title

showing.mortgage is Exhibit e to the same Affidavit ofBradley Jamieson).

20. It appears that on or about March I, 2005, Seymour Neumann became aware tbat

something was wrong when he received a letter from Saskatchewan Government Insurance

containing an insurance policy and naming Trent Doer.ksen as the registered owner ofthe

Lands, and indicating elBC held a mortgage against the Lands. (Affidavit of Seymour

Neumann, para 9)

21. On March 16, 2005, counsel.for the Ncumanns applied to the Court of Queen's Bench for

an order:

a. restoring title to the Lands to the Neumanns;

b. removing the mortgage in favour of effiC Mortgages Inc. from title;

c. containing other just and reasonable teons; and

d. o.rdering the respondents to pay solicitor client costs in the matter.

22. By cousent, an Order issued on April 26, 2005 to restore title to the Neumannsfree and

clear of any and all encumbrances. Specifically, the mortgage ofeffie was discharged.

Since then, the Neumanns transferred the property to bona fide purchasers for value.

23. The Registrar acknowledges tbat, notwithstanding that the registration ofthe mortgage was

discharged from the title by virtue ofparagraph 2(c) of the Consent Order of April 26, the

intent of that order as expressed in paragraph 2(d) is to preser.re any rights a,'1d entitlement

that effie may have pursuant to the mortgage as if the mortgage remained registered

against the title, so that this court may determine those rights.

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lll. ISSUE

), 24. Tbe sole question for detenninatioll. pursuant to section 108 of The Land Titles Act, 2000

is stated in the Order ofApril 26:

Is CIBe Mortgages Inc. entitled to be compet!$ated by Information

Services Corporation of Saskatchewan pursuant to Part XII of The

Land Title~ Act, 2000, 8.S. 1000, c.L-5.1, in relation to the mortgage

registered as Interest Register #109531173, Interest #U7294094

against Title #118591332 whether as II result oftbe discharge of the

mortgage pursuant to this o.rder or otberwise?

)

IV. .LAW

A. Jmmediate Indefeasibility of Title under The Land Titles Act, 2000

25. The Land Titles Act, 2000 gives titles and interests different legal attributes. With

exceptions, titles are immediately indefeasible upon registration..The conoept.Q[

_de.feasiJillili:..9"rjDdefeasi»iliD' is applicable to tit,Jes bijt ngHQ interes~ The Registry confers .

title, but only records notice of interests. The Validity of the interest is a matter outside the

Registry. This distinction is critical to the proper application of The Land TItles A.ct, 2000.

These distinctions are behind the Registrar's position that there are different outcomes for

the Neumanns as title owners and for eIBe as an intaest holder.'

26. Subsection 13(1) codi.fies and places limits on the indefeasibility of title.

13(I) Where the Registrar issues a title pursuant to this Act:

(a) subject to section 14, the rcgilltered owner holds the title freefrom all interests, exceptions and reservations; aud

(b) subject to section 15:

\

(1) the title is conclusive proof that the registered owner isentitled to the ownership share in the surface parcel, mineralcommodity or condominium u.nit for which the title hasissued;

7 The distiuction. between the theories of"immediate indefeasibility" an.d "deferredin.defeasibility·' is explained by ChiefJustice Bayda at pages 442-443 ofHermanson v. Martin [1987]1 W.W.R. 439 [tab 4}.

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\

(ii) the title 'may not be altered or revoked or removed fromthe regis~e:red owner; and

(iii) no action of ejectment from land or other action torecover 01" obtain land lies or shall be instituted against theregistered owner.

This is the mirror prjgciple that title reflects the true state ofown~rsb'p, Under section 13,as long as the current registered owner did not acquire title by participating or colluding in

fraud, the owner's title is sufficient to establish the ownership of the ownership share under

the title, To effect this indefeasibility, the law shields registered owners from actions by all

others who assert a claim to title, as long as those registered owners did not participate or

collude in ftaudulent acquisition of title. This is bow the courts interpreted the provisions of

the prior Act in Hermanson v. MartinS,

27. Section 15. in tum, sets out the terms under which a title may be successfully challenged.

Indefeasibility is not an absolute right. Note that clause 15(1 )(a) uses the words from

sections 68 and 213 of the prior Act. which. sections the Court of Appeal emphasised andrelied upon i.n Hermanson v."Martin9:

15(1) In the following cases, title is not conclusive proofthat the registeredowner is entitled to the owncrshi? share in the stir.t'ace parcel, mineralcommodity or condominium unit for which the titl,e has issued:

<a) wllere tbe registered owner bas acquired the title byparticipating or collUding in fraud; .(b) in the case ofa registered owner who obtains title, di(Cctly OT

indirectly, from a registered owner descnbed in clause (a), where novalue has been given for acquisition of the title since the tegisteredowner described in clause (a) acquired the title;(c) where competing titles, witllin the mea.ning of section 16, ex.istwith respect to all or a portion o£the same surface parcel, minernlcommodity or condominium unit.

(2) Every title is subject to alteration or revocation or removal from theregistered owner by:

(a) a correction made in accordance with section 97;(b) a Registrar's order made pursuant to section 101;(c) a court order; or(d) any procedure authorized by this Act or any other Act.

~ supra, at 444-445, concluding with ", ..the'term fraud as used in section 196 must be limited tothe new owner's fraud, that is, to fraud in which he participated or colluded."

9 supra, by Bayda, C.J. at 441-442 and by Brownridge, J. at 449·450.

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) ,

28.

(3) An action of ejectment from land or other action to' 0 btain or recover landmay only be instituted against the registered owner:

(a) in a case mentioned in subsection (1);(b) in the case of a person enforcing any interest or right mentionedin sectic,ln 14; or(c) where there is authority for the action pursuant to this Act Or anyother Act.

Section 22 deserves note because it gives this Honourable Court authority to order that

clear title be restored to the Neumanns, despite the fact ofthe CIBC instrument registered

against Doerksen's title.

;l;l Unless the court orders otberwise or another Act provides otherwise,any new title issued as a result of an aclion brought pursuant to section 15includes and is subject to all interests registered against tbe previous title.

29. Section 23 codifies another pillar of the TO.rrens system, the curtain principle. That is, a

person dealing with title or receiving an interest in land bas no lawful obligation to inquiJe

iuto. the transaction under which the current registered Qwner obtained title. Titles and

interests are equally entitled to this benefit

l3(l) A person taking or proposing to take from a registered owner atransfer or an interest in land or dealing witb a title:

(a) is not bound:(i) to inquire into or ascertain the circumstances in or theconsideration for wbich the registered ow.ner or any previousrc:g.istered owner acquired title; or(ii) to see to the application of the purchase money or anypart of the purc.hase money; and ...

While it is not necessary to look behind the title, it is necessary to deal with the owner ofthe

title.

B. Interests under The Lllnd .Titles Act, 2000

30. Part VIII of the Act deals with itlterests. Subsection 50(1) provides:

SOC) An application for registration of an intC'l'est may be submitted only ifthe interest, at the time of registration, is:

(a) recognized at law as an interest in land;

(b) registrable pursuant to any other Act or any Act of theParliament of Canada; or

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66/21/2665 12:66 366-787-6581 SK JUSI!L~ ~!V!L LAW

(c) designated as a tegistIable in.tetest in the regulations.

31. We submit that section 50 implies that an interest which is not valid is not an interest; this

conclusion is clear from section 54 and in particular from subsection (3) which .provides:

S4(1) A-&1: an interest is registered and until that interest is ex.hausted oruntil the registration ofthat interc~t ex.pires, lapses or is othetWise dischargedfrom the land titles .registIy in accordance witb this Act: .

(a) tIlt: tille on which that interest is based and any title derived fromthat title remains subject to that interest; and(b) any suppottmg interest on which that interest is ba$ed remainssubject to that interest notwithstanding any assignmellt of thesupporting interest.

(3) Any interest registered pursuant to subsection 53(1) is only effectiveacco(ding to the terms of the inS!nlment or la)!l nn whjch the interest is baseda~is not deemed to be valid through .registration.

32. Registration does not confer validity. Pursuant to section 54, registration merely records

the assertio.tl of an interest in land. The fact that an interest is registered does not establish

that the instrument has the legal effect that the party registering it says it has. Specifically,

under subsection 54(3), registration does not perfect deficient instruments. Nor does it

validate instnunents which are nullities. This continues the effect of the prior legislation and

is consistent with the interpretation ofTorrens legislation in Canadian jurisdictions.

33. At common law. under the authority of Gibbs v. MesserlCl, an interest in land which is

acquired tluough fraud is void As discussed later in this brief, this principle is well

established.in Canadian jurisprudence.

C. Statutory Basis for Claims and Compensation

34. A claim for compensation must be brought within The Land Titles Act, 2000, and

specifically, within Part XlI "Claims and Compensation" as is stated in the question

asked by the Registrar. Section 84 provides "Claims for Compensation" and lists in.subsection (2) the circumstances in which claims are pennitted:

10 (1891] A.C. 2481tab 5]

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85/21/2885 12:88 385-787-8581 SK JUSTICE CIVIL LAW PAGE 12

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84(1) In this section, "i:nvalid transfer" means any registration that resultsin the issuance of a new title in the name of a new registered owner wherethe application for registration was based on a transaction not authorized atlaw.

(2) Subject to the exclusions mentioned in sections 85 and 86, any personwho sustains loss, damage or deprivation in any of the followingcircumstances is entitled to make a claim for compensation pursuant to thisPart;

(4) where a J'Cgistration made by the Registrar was not authorizedby this Act;

(b) where the Registrar has omitted to make a registration asrequired by this Act;

(c) where the Registrar has made an error or omission in theperformance of a duty or function pursuant to this Act that is notmentioned in clause (a) or (b);

(d) where a former registered owner has been deprived oftitlethrough the registration of an invalid transfer and that formerregistered owner is prohibited by section 15 from bringing an actionofejectment or other action to obtain or recover land;

(e) where a registered owner haS'been divested of title by theoperation ofclause 15(1)(c) and section 16; ,

(f) where a fonner registered OWner recovers land \n an actionbrought pursuant to subsection 15(3) and the title J'Ccovered includesan interest that was not registered against the prior title ofthatformer registered owner.

35. Section 89 provides that claims must be submitted to the Registrar for consideration.

89(1) Any claim for compensation pursuant to this Part must be submitted totbe Registrar.

(2) On receipt ofa claim for compensation, the Registrar may:

(a) enter into an agreement with the claimant forpaymcJlt ofcompensation where, in the opinion. of the Registrar. the claimant isentitled to compensation; or

(b) deny the claim where, in the opinion of the Registrar,compensation is )'lot payable pursuant to this Part.

36. Only ifthe claim is denied or if the quantum of damages is '(lot settled, maya claimant bring

an action for compensation pursuant to section 91:

91(1) Subject to section 95, any action respecting a claim for compensationmust be brought against the Registrar as defendant

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06/21/2005 12:00 306-787-0581 SK JUSTICE CIVIL LAW

(2) No pexson may bring an action against the Registrar respecting a claimfor compensation ·unless:

(a) the Registrar has denied the claim for compensation pursuant toclause 89(2)(b); or

(b) an offer of compensation from the Registrar has been made andthe person has .refused to enter into an agreement for compensationpursuant to section 90.

37. The position taken by CIBe in this matter effcctively asserts a claim and the response of the

Registrar is effectively a denial of that claim. Nevertheless, the proper course of action

would be an action by crnc against the Registrar with all the protection ofthe rights of the

parties that are provided by the Rules governing civil actio.Os.

V. ANALYSIS

A. A forged mortgage creates DO rights.

38. No forged deed confers in per.~ond.m rights against the perSon impersonated. Subsequent

events like the registration of a mortgage deed or the assignment ora deed to bonafide

purcbasers may complicate the application of the principle that sucb deeds ·are a nullitY. but

the principle still applies.

39. The case of Cooper v. Ve.reyll established a principle whieh is central to fi,e disposition of

this matter. In that case a person - a co-executor ofhis fathe.r's estate - fraudulently sIgned

his father's .name on a mortgage agaiost his father's prol'erty. The co-executors had no

knowledge of the transaction until the son's death. They sued the son's estate.

40. The Court held wbere a forged mortgage is registered against title, putatively granting an

interest to a lender, the mortgage is null. The mortgage is null because the m.o.rtgagor does

not exist. A contract has no legal effect where one of the parties used a name other th.an his1'

or her own: f@(~J"'D..l.; ',3.If A personating B. executes a deed in the name of B. pUqJorting to convey la"B.'s propcrty, no right or interest can possibly pass by such an instrument. Itis not a deed. It makes no difference in law that A. had the same Dilme asB. if the false personation is established; still the in.~ttument is not a deed, andthat plea would bc a complete answer by B., or anyone claiming throughhim.

11(1882),20 Ch.D. 611, aff'd (1882) 20 Ch.D. 625,ltab 6]

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41.

42.

Nme years later, the House of Lords confU"(T1.ed that forged mortgages are null at common

law in Gibbs v. Messer [1891] A.C. 248.

In Gibbs v. Messer a husband al)d wife had title to their home until another person

transferred the property into the \lame of a fictitious person. The person who prepared the

tTansfer signed the transfer on behalf of the transferors and as a witness to the signatures.

After the title was registered in the name of the non-existent person, the fraudster signed a

mortgage on behalf of the supposed owner in favour of innocent mortgagees. 'nlemortgagees had no knoWledge of the fraud behind the transfer or the mortgage, and sought

cOrPpensation from the assuranc~ fund for their losses. There is no material difference

between the facts ofthat case and the facts ofthe current matter.

43. In Canadianjurisdietions operating under the Torrens system afrcal property registration,

Gibbs v. Messer has influenced decisions on two distinct points of law. First, it established

the principle that a mortgage by an imposter is a nullity. The court stated at page 258:

In the opinion of their Lordships, the duty of ascertaining the identity of theprincipal for whom an agent professes to act with th.e person who stands onthe register as proprietor, and of seeing that they get a genuine deedex.ecuted by that principal, rests with the mortgagees themselves; and if theyaccept a forgery they must bear the consequences.

44. Second, in Gibbs Y. Messer the Court held that at common law a registered title is

conclusive proof ofownership unless fraud was .involved in the transaction conferring this

ownersbip. Where fraud occurred, title will onl.y be indefeasible when it is transferred to a

subsequent bonafide purchaser for value. This latter principle has long since been

displaced by decisions of the .Privy Council, begining with Assets Co. v. Mere Roi'hi et

al. \2 and Frazer v. Walker l3 both ofwhich were cited and followed by the Saskatchewan

Court of Appeal in Hermanson 'V. Martin.

45. 1.-1 Saskatchewan, the combined effect of clauses 13(1)(b) and 15(1)(a) of The Land Titles

Act, 2000 incorporates the language ofHermanson v. Martin into .the Act and displaces

the second principle ofGibbs Y. Messer. Tbe combined effect of the two clauses in the

Act provides that title is conclusive proof that the registered owner is entitled to ownership

12 [19051 A.C. 176 [tab 71.

13(1967] 1 A.C. 569, [1967] I All E.R. 649 [tab 81­

.1l~

except whcre the registered owner acquired title by participating or colluding in fraud. 14

while ~nderGibbs II. M~s;erany fraud in atransaction renders the title open to challenge;

now, under The Land Titles Act, 2000, the new registered owner must have colluded or

participated in the fraud in order to render title defeasible.

46. But nothing in The Land Titles Act, 2000 or in any subsequent judicial authority displaces

the nullity 0 f forged mortgages at common law, which was the other co.nclusion of law in

Gibbs v. Messer. Lord Watson explained:

The Mclntyres [mortgagees] cannot bring themselves within theprotection of the statute, because tIte mortgage which they put uponthe register is a nullity. The result is unfortunate. but it is d\\e to theirhaving dealt, not with a registered proprietor, but with an agent and aforger, whose name was not on the register, in reliance upon hishonesty. (at p.257-2S8)

47. Under subsection 54(3) of The Land Titles Act, 2000, the registration of a n.ull interest

does not alter its legal effect. It continues to be null.

B. Adoption in all other Canadian Torrens j ..risdidioDs

48. The common law prinCIple that a forged mortgage conveys no rights has been consistently

applied in all Canadian j urisdictions· operating under the Torrens system. In his article

"Fraud in Real Estate Transactions: The Effects and the Remcdies,,15 Sidney H. Tro.ister

states:

It is a well-accepted principle oflaw that forgeries ate ineffectual. Ingeneral, a document that is found to be forged will be declared a nullity bytbe court.

14Subject also to the qualification that a registered owner who obtained title from a fraudsterwithout an exch.ange for value, .may also have ownership challenged.

15 in Rea! Property Law: Conquering the Complexities, Law Society ofUpper Canada,Special Lectl\res 2002 [tab 9].

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~• 49.

.- 4J:JII!::::.--

50.

~51.

52.

Traister cites Toderan v. Bacchus'6 wherein the Ontario Court of Justice determined the

validity of two .registered mortgages. Sbeehan, tbe fraudster, signed the name ofhis son-in­

law, Toderan, on two mortgages ex.ectlted .at different times. On eacb occasion Sheehan

provided some of Toderan's identifi.cation, to mislead the mortgagees into believing that

Sheehan was Todcran.

Citing Cooper v. Vesey and Gibbs v. Messer, the Court stated:

The law is clear that ifa mo.rtgage is a fo.rgery, it is a nullity and notitle passes to the mortgagee.

In Shorey v. Love & District Registrar ofLand Titles l1 , a solicitor forged a transfer ora

mortgage, which transfer was found to be a null instrument by the Court. Richards J.A.

said of the transferee, "they never really had the mortgage".le The Court also noted the

Registrar had no liability for registering the transfer of the mortgage. Indeed the Registrar

had no means ofknowing or discovering that it was a forgery.

The principle that a mortgage obtained through forgery is null has also been applied in the

following additional cases from Ontario: Shute v. Premier Trust Company,19 Re Comay

Planning Consultants and Starkman et a/.;20 as well as in British Columbia: Credit (@_Foncier Franco-Canadian v. Bennett el we and Allan,21 and Ben1l.cial Realty Ltd. v.

Sun Bae.;22 and in Alberta: Pik Bar Kwan '\I.KjnSe~ .

f\

16 {1979J OJ. No. 1223,13 R-P.R. 122 (Oot. H.C.) {tab 10).

11 [1938] 3 D.L.R. 534 (Man.K.B.) [tab 11].

IR At 536

19 (1993), 50 R.F.L. (3d) 441, 3S RP.R. (2d) 141 (Ont. RC.) [tab 11.).

20 1986 CarswellO:o.t 810; 57 O.R. (2d) 223 (RC.) [tab 13].

2\ (1963) 43 W.W.R. 545 (B.C.C.A.) [tab 14].

12 (1996] AJ. No. 152 [tab 15]. Aft... Q 6.

23 (1979) 10 R."P.R. 44 (B.C.C.A.) (tab 16]. ~.

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53. 1.n the current situation there is no registered owner and no mortgagor named T.rent

Doerkson. The law from Gibbs v. Messer applies directly: a fictitious oWner cannot give a

valid mortgage to another..

54. Thus, the null mortgage, as a registered instrument, c.ould not be enforced against the title it

encumbered. It granted no rights to erne in regard to the title.

C. Hermanson v. Martin

55.

56.

@jjJ

57.

58.

In the several telephone conference calls with the patties and the court leading up to the

COllsent order ofApril 26, the decision of our Court ofAppeal in Hermanson v. Martin·

was discussed and much was thought to tum on this case. We respectfully submit that

decision .is not applicable for the simple reason that the principles enunciated in Hermansondealt with ownership rights and not with inte.(llsts. . . .

In Hermanson, the original registered owners were a couple, who retained title to the ~~,;J;property after their divorce. The husband signed a transfer ofhis interest, and ltilJ girbifie1ll ><fraudulently s.igned his ex-wife's name on the transfer, whereupon the transfer wasregistered, and title issued in the name of the bonafide purchaser for value who had no

knowledge of the fraud. The bonafide purchaser inhabited the hotlse for a number of

years and executed a mortgage in favour ofa mortgagee who was also innocent in relationto the fraud. The plaiJ\tiff- the woman who was originally one of the registered co-owners- brought the suit, seeking clear title, or alternatively, her share of the sale proceeds. Thecentral issue in the appeal was the impact ofthe fraudulent transfer upon the validity of theresulting title.

Justices Brownridge and Bayda delivered eoncumngjudgments, focussing on the

relationship between Gibbs v. Messer and sections 68,196 and 213 of The Land TitlesAct.24

Section 196 prohibited a person deprived of their registered interest in land (rom bringing

an action for ejectment or other recovery of the lands Wlless the curreDt registered owneracquired title through fraud. The Court of Appeal found the word "fraud" in this context is

ambiguous - it could mean "acquired title through fraud whether or not the owner mew or

24 R.S.S. 1978, c.L-5.

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\.59,

participated in the fraud", or it could ,mean "acquired title through fraud where the owner

participated or colluded in the fraud,'"

In Gibbs v. Messer the Court found any fraud was sufficient to defeat the title, regardless

of whether the new registered owner knew, colluded or participated in the fraud. The

Court in Hermanson considered Gibbs v. Messer in light of clause 196(1 )(c) of The Land

Titles Act, and found that clause displaced this principle. The Court of Appeal intctpreted

"fraud" in the statute narrowly, and as a result, found tbat a registered owner must have

colluded or participated in the fTaud in order to render her or his title vulnerable to an action

for ejectment or recovery of land. In all other cases - where the transferor or someone else

committed the .fraud - title is conclusive prooftbat the registered owner is entitled to

ownership, that'is, the title is immediately indefeasible, As such, unless the registered owner

colluded or participated in the fraud, no action for recovery of land or compensation can be

brought.

60. In the facts of HermanSOfl 1/, Martin, the transferor acted fraudulently and without the'

collusion or participation of the transferee, who was a bonafide purchaser for value. On

this basis the Court of Appeal upheld the trial jUdge's finding that the regi:;tercd owner was

entitled to retain ownership oftne lands. This disposed of the issue ofwhether the

register.ed owner was lawfully entitled to retain title.

61. Since the decision ofthe Saskatchewan Court ofAppeal in Hermanson, The Land Titles.Act. 2000 came into force. Sections 13 and 15 continue tbis first principle from

Hermanson, namely that a title is irnmed.iately indefeasible unless the registered owner

participated in or colluded in fraud to obtain the title.

62. The other issue in Hermanson was whether the mortgage given by the registered owner

remai.ned against title, given that fraud preceded issuance of Mr. Martin's title.

63, On this issue, the COlut noted tbe mortgage was not obtained by fraud or forgerj. It bea..--s

the names of the bona fide registered owner as mortgagor and the mortgagee, both of

whom are actual people who signed the document. As well, there was a bona fide

purchase for value between the fraudulent acts and the registration ofthe mortgage. This

transaction shielded the mortgage froro. being tainted by the fraud. For these reasons, the

Court concluded the mortgage was a valid charge and continues to encumber the title.

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64. In the matter currently before this Honourable C9urt, there is no registered owner - theperson named on the title and on the mortgage existed only for the purpose ofpetpetrating

the 6:aud.

65. Further, in Hermanson v. Martin. the registered owner - a borta fide person andpurchaser for value - executed a mortgage in favour ofmortgagees'who were also actual

people and were i.nnocent in the fraud. The mortgage was not obtained through fraud or

forgery and was therefore an enforceable contract. These elements are all absent from the

case of the Neumanns and the fraudster.

D. Is a null mortgage compensable under Part XII of The Land Title:; Act, 2000?

66. Subsection 84(2) (quoted at para. 32 above) lists the circumstances j.n which a claim may

be made under Part xn of The Land Titles Act, 2000. CIBe must bring itselfwithinsubsection 84(2) to be entitled to make a claim. The Registrar will not frustrate the intent of

the consent order, which is to seek resolution of the legal issues arising from the

circumstances ofthis case, but does respectfully submit that crnc can not bring the

circumstances ofthe claim arising from its mortgage within subsection 84(2). Clause (a) .

does not apply as the mortgage was prope.t:ly registered. There was no omission on thepart oftne Registrar that would make clause (b) applicable. No other"error or omission in

the perfonnance of a duty or function pursuant to this Act" is alleged on the part of theRegistrar that would make clause (c) applicable. Each ofthe final three clauses specificallyrefers to losses on the part of "a former registered owner". By virtue of the d.efinitions of"registered owner" and "title" in section 2, these clauses are not applicable to the holder ofan interest:

(11) "registered owner" means a registered owner of title;

Cn") "title" means a surface title, a mi[leral title or a condominium title, butdoes not include an uncenified mineral title;

67. The Neumanns would have a right to a claim under Part XII if their title had been restored,

but subject to the eIBC .TOortgage. The claim may have arisen under clause 84(2)(f):

(2) ...any person who sustains loss, damage or deprivation in any ofthc following circumstances is entitled to make a claim forcompensatio.n pUTSuant to this Part:

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06/21/2085 12: 00· 306-787-0581 SK JUSTICE CIVIL LAW PAGE 20

(f) where a former registered owner recovers land in an actionbrought pursuant to subseetio.o 15(3) and the title recovered includesan interest that was not registered against the prior title of thatfonner registered owner.

68. At best, ernc's right to claim compcnsation under: Part XII could only be asserted through

the Neumanns. Regardless, o.n the basis of the principle.in Cooper v. Vesey, followed in

Gihbs and Messer and every Canadian Torrens jurisdiction, the mortgage is a nullity,

crnc is Xl.ot entitled to maintain the registration of the mortgage, nor to enforce the

mortgage against the Neumanns nor to make any claim for compensation pursuant to Part

XU.

69. Two recent claims with similar facts to this matter were dismissed by the Director ofTitles

in Ontario, In the matter o/Lori Rismanzs and In the matter ofYan~6

70. In the Risman matter, a person pretended to be the registered owner ofcertain lands and

grn.nted a mortgage by forging the owner's name on the mortgage. In the Yan case, a

fraudster transfctTed ownership from the registered owner into the name of Chan, who was

a real person. uninvolved in the transaction. Then, still impersonating Chan, tlle fnudster

gave a mortgage to CanadaTrust. As in this case, the central question in fuese two cases

was whetbe.r the mortgagee holding the fraudulently-given mortgage is entitled to

compensation.

71. lu both instances, the Director of Titles denied compensation to the claimants and the

decisions were not appealed. In addressing the claims, the Director found the Assurance

Fund only awards compensation where someone was "wrongfully deprived of all interest in

land". n,e Director applied the common law ofCooper v. Vesey and Gibb,'> v. Messer,

discussed earlier, under which mortgages obtained by fraud are null. They do not confer

any interest in land to the mortgagee. Only a registered owner can confer Or create

interests in land. Any instrument executed by an .imposter who .sigos the registered owner's

name without lawful authority is null.

2SU,e Reasons for Decision in the matter of Lon Risman a;e published as Appendix A to thearticle by Troister, supra, at f.n. IS {tab 17].

26 The Reasons for Decision in the matter afYan are unpublished (tab 18].

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06/21/2005 12:00 306-787-0581

. " ..~. ,.

SK JUSTICE CIVIL LAW PAGE 21

72.

73.

74.

75.

-". -Th:e Dirl:ctor foundJ;t : tutorytttreshold that aclaimant be "deprived of an interest in;~: ~. . . :'7;~/ ·~'·~t .-" .

.land" requires that c . ants first hold an interest, then lose the intacst through erro~ or

.. omission.in the tegister, or through ·fraud. In the claiUls ofboth Risman and Van, the

Director found the null document thal appeared to grant a mortgage, did not confer an

interest in. land on the mo.rtgagee at common law.

T~e n~xt question is whether registration ofthe null i.nstrum~:o.t gave itfulliegaieffect After

reviewing th.e doctrines ofdeferred and immediate indefeasibility of title and interests, the .

Director concluded theOntario Land Titles Act creates a system based on the deferred

indefeasibility of interes~. That is, a registered interest, in itself, is not conclusive evidence

that the interest holdeT actually has an enfotccable inteTcst agai.llst the lands.

Thus, in Ontario, as in Saskatchewan, registratio.n of a null instrument does not alter its legal.effect. On this basis, the Director concluded the mortgages in Risroan and Yan were null atcommon law..Registration did not confer validity.

The decision in Risman closes with the following:

In denying this claim for compensation, it is possible that the Applicant maynever recover the monies that ate due and owing and I find this extremelyregrettable. However, in·my view the Land Titles Assurance Fund is notliable to compensate the Applicant. To paraphrase from Shorey et al. Y.

Love & Di.~trict Registrar a/Land Titles, [1938]3 D.L.R. 534 at 536, theApplicant's difficulty is that she never legally or really'had a charge againstthe property - she wu deprived not ofthe charge but ofher money.Ultimately, the responsibility for ascertaining thc identity of the borrower inorder to obtain a charge against the borrower's property rests with the lenderor the lender's agents.

76. The Registrar submits these facts mirror the facts in Risman and Yan in every respect. An

imposter signed a document purporting to give a mortgagee an interest against certain lau.ds

as security for a loan. The Van matter shares the added dimension ofthe fraudulentlyobtained title preceding the fraudulent mortgage. As in Van and Risman, the lender in this

case never held an interest against the land. At cornmon law the dOcument was null, andthe statutes provide that registration does not alter the legal cffect ofa document.

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CONCLUSION

SK JUSTICE CIVIL LAW PAGE 22

77. The mortgage granted by the imposter was a nullity. No rights arise under the mortgage.

CffiC's sale remedy is to pursue the fraudster.

ORDER SOUGHT

78. The Registrar respecttl.llly requests that the court answer the qucstio.n as follows:

QUESTION: Is CIBC MO.l,"tgages Inc. entitled to be compensatedby Information Services Corporatio~of Saskatchewan pursuant toPart XII of The Land Titles Act, 1000, 5.S. 2000, c.L-5.l, in relationto tbe mortgage registered as Interest Register #109531773, .Interest #127294094 against Title #128591332 whether as a result ofthe discharge of the mortgage pursuant to this order or otherwise?

AN5WER:NO.

ALL OF WHICH IS RESPECTFULLY SUBMITTED.

Dated at Regina, Saskatchewan, this 9th day ofJune, 2005.

Deputy Minister of Justiceand Deputy Attorney-General

per:~~~_Dale K. Beck, counsel for the RegiStrar ofTitles

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06/21/2005 12:00 306-787-0581 SK JUSTICE CIVIL LAW PAGE 23

This document has been prepared by:Deputy Minister ofJusticeand Deputy Attorney-Ge.n.eral9th Floor, 1874 Scarth Street

Regina, Saskatchewan S4P 3V7

Wbose address for service is the same as above.Lawyer in charge offile: Dale K. Beck

Telepho.ne Number: (306) 787-5244

Fax N~ber: (306) 787-0581File Number 8394 UN"

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06/21/2005 12:00 306-787-0581 SK JUSTICE CIVIL LAW

IND.EX OF AUTHORITIES

PAGE 24

Tab1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

ll.

12.

13.

14.

15.

16.

17.

18.

PageJohn Sterk, Alberta Conveyancing Law and Practice, (Toronto: Bun-oughs.,1981) .. 1

Thomas W. Mapp, Torrl1ns' Elusive Title, (Edmonton: Faculty of Law, UniversityofAlberta, 1978) '. 0 • • • • • • • • • • • • • • • • • • • • • • • • • • • 1

t{:~af:,~005d,.~ ~:.o~ ~~ ~~~~~~~t.i~~,. ~~~ ~~~~e.~.~f.~::~ ~.~~~~ 2

Hermanson v. Martin [1987] 1W.W.R. 439 '" 5,6,11,14, 15

Gibbs v. Messer [1891] A.C. 248 0 ~ •••• 8, 11, 12, 13, 14, 15, 17

Cooper v. Vesey (1882), 20 Ch.D. 61.1, affd (1.882) 20 Cll.D. 625 10,13,17

Assets Co. v. Mere Roihi et al. [1905] A.C. 176 11

Fra;;er v. Walker (196711 A.C. 569, (1967] 1 All E.R. 649 0 ••• '" •••••••• 11

"Fraud in Real Estate Transactions: The Effects and the Remedies"by Sidney H. Traister in Real Property Law: Conquering the Complexities,Law Society ofUpper Canada, Special Lectures 2002 12

Toderan v. Bacchus (1979] 0.1. No. 1223.. 13 R.P.R. 122 (Ont. H.C.) 13

Shorey v. Love & District Registrar ofLand Titles (1938] 3 D.LoR. 534 (Man.K.B.) 13

Shute v. Premier Trust Company (1993); 50 R.F.L. (3d) 441,35 R.P.R. (2d)l41 (Ont. RC.) 0" 13

Re Comay Planning Consultants and Starkman et ai. 1986 Carswel10nt 810,57 O.R. (2d) 223 (H.C.) 0 13

Credit Foncter Franco-Canadian v. Bennett et IU and Allan, (1963)43 W.W.R. 545 (B.C.C.A.) 0 13

Beneficial Realty Ltd. v. Sun Bae, [1996] A.I. No. 152 _ 13

Pik Har Kwan v. Kinsey et ai. (1979) 10 R.P.R. 44 (B.C.C.A.) 13

In, the matter of Lori Risman, a decision of the Deputy Registrar ofTitles (Ontario) 17

In the matter arYan, a decision of the Deputy Registrar ofTitles (Ontario) . 0 •••• 17

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DETAILSOF·CASESCITED,ONBEHALF'OFCIBC MORTGAGES INC.

(1) The Land Titles Act 2000 - Sections 84, 85, 86, and 15;

(2) Gibbs v. Messer (1891) A.C. 249 (p.C.) (Distinguished?);

(3) Assets Company Limited v. Roihi (1905), A.C. 176 (P.C.);

(4) Durrani v. Augier (2000) 50 O.R., (3d) 353 (Ont. S.C.J.);

(5) Toronto-Dominion Bank v. Jiang (2003) 63 O.R. (D) 764 (Ont. S.C.J.);

(6) Hermanson v. Schmidt Estate «1986) 164 (C.A.) - Hermanson v. Schmidt Estate (1982) 18Sask.R 430 (Q.B.) - (Hermanson v. Martin (1987) 1 WWR 439)