(1387881 Ontario Inc. and Ramsay, Ontario Court of Appeal, June 30, 2005)
Annotation for Real Property Reports
As lawyers searching title under the registry system, we look carefully at the instruments registered for the last 40 years. After that, in practice, we’ll almost always know as much as we need to know about the registered title. We wouldn’t find more even if we searched back to the Crown patent. In practice, we rely intuitively on the 40-year rule. If we find no transfer in the last 40 years, we know that someone must own the property, and we naturally look beyond the 40 years for a transfer. Otherwise we rarely encounter a problem, and we don’t need to spend time thinking about the 40-year rule.
In fact, the logic of the 40-year rule is remarkable, and the reasoning of the court of appeal judges who’ve interpreted it is brilliant.
In this case, a person I’ll call “he” (or the claimant) claims that his land is free from “her” (Anita Joyce Ramsay’s) right of way. The right was granted over 40 years ago. Many deeds for both his and her land in the last 40 years refer clearly to it. But a formal notice of claim for it wasn’t registered within 40 years after it was granted.
Most of us would intuitively feel that his claim had no merit whatever. We’d be shocked if the property had lost the benefit of the right of way. We’ve probably acted in many closings without checking whether a notice of claim had been registered. But, because the easement started outside the 40 years, we might wonder if this meant that we could no longer rely on a 40-year search.
Under the basic 40-year rule, a person’s title to an interest in land automatically becomes valid (if it isn’t already valid) when it meets both of two tests. First, no adverse interest has been registered against the interest for 40 years (either by an instrument or a notice of claim). And second, the interest has a good chain of title for a period based on the 40 years. Under these tests, it’s hard to lose a good title, or gain a bad one.
It follows that, if a search over the last 40 years were ever inconclusive, we’d have to search outside the 40 years. We’d be looking for the most recent 40-year period at the end of which the title met both tests. In practice, the rule limits the search to the last 40 years in almost every case, and the exceptions must be rare. Many learned lawyers have searched for a formula in the 40-year rule that’ll solve every problem based on the registrations within the last 40 years. Unfortunately there isn’t such a formula. For example, if the register for the last 40 years were to show conflicting claims to ownership, title couldn’t keep flipping just because the earliest transfer for each claim had slipped below the 40-year horizon.
In Ramsay, for the claimant’s title to be validly free from Anita’s right of way, his title must logically meet both of the two tests. First, her right of way must not have been registered (either by an instrument or a notice of claim) against his land for 40 years. And second, there must be a good chain of title to his land, free from her right of way, for a period based on 40 years. As will be shown, the 40-year rule resolves the issue in Ramsay in a just way, without taking us outside the 40-year period.
The first test is addressed mainly to Anita, because she needs to know when the 40-year period started running against her. It started when the deed transferring her land to her, together with her right of way, was registered against his land. Owners of the fee simple don’t have to register a notice of claim every 40 years after the original Crown grant; a mere transfer re-starts the 40 years. The same applies to a right of way; a transfer of the right re-starts the 40 years. The claimant clearly failed the first test, and Ramsay clearly confirms this. As he must meet both tests, his claim must fail.
Under the second test, the good chain of title test, the claimant’s chain of title starts with the oldest deed for his land within the last 40 years. We assume that, if people had been transferring his land free from her right of way since his chain started, there must have been good title free from the right to begin with. In Ramsay, the owners of his land have within the last 40 years been transferring it subject to her right of way. And the owners of her land have also within the last 40 years been registering against his land transfers of her land, together with her right of way. His chain of title is in both ways subject to her right of way, and he fails the second test. As he must meet both tests, his claim fails on this ground too.
In 1981, the government changed the wording of the law to suggest that a mere reference in his deeds to her right of way shouldn’t be enough to preserve her right. The government probably intended to make this change. In Ramsay, the court of appeal resolved this issue by saying that the 1981 law didn’t reflect this major (and unjust) change clearly enough. We must continue to use good practical judgment in looking at a chain of title. This may seem to open a grey area, but it also leaves room for good sense.
Since there are two basic tests, there are two periods. When the government changed the law in 1981, it might have thought that the period for the chain of title also had to be based on the 40-year period. As a result, the words show that, if there’s a transfer within the last 40 years, the earliest transfer starts the chain of title, and there’s no minimum period for the chain of title. In this way, I think that the original 40-year rule became flawed. We’ve even been troubled about whether a person can register an artificial root of title to acquire title or get rid of a title problem. The government could have chosen a minimum period of, say, 15 years for the chain of title, and still left the 40-year period for registration. In Fire and Longtin, the Supreme Court of Canada confirmed the important result that there’s no minimum period for the chain of title. But, Fire and Longtin doesn’t contain the formula that we’ve been looking for, that’ll solve almost every problem based on the registrations within the last 40 years. Thus, we must search back through the last 40 years for adverse registrations. We can also rely on Fire and Longtin to make our careful search of the chain of title from a root of title that’s less than 40 years old.
The basic rules don’t resolve every possible issue. In Ramsay, the court seemed to base its reasons on the basic rule in my paper published in the 1995 Real Property Reports. There are many issues, and my paper tried to deal with all issues that the court of appeal had addressed in previous cases. Other annotations may deal more with those issues, for example, the effect of actual notice. In Ramsay, I’ve seen things that I’d like to think more about. Other annotations may pick up on those things. The result in Ramsay is obviously right, and the reasons are very good. But, as in all good cases on complex issues, the reasons call for a fair interpretation on each issue, in light of the facts, of the underlying logic of the rules, and of other good cases.
For electronic registration, the Ontario government is now converting most land to the land titles system. But Ramsay shows that our remarkable 40-year rule isn’t dead yet. Our brilliant court of appeal reasons will even be critical in resolving issues on land titles conversions.
The next issue for lawyers searching title, and for learned writers, will be how well the Ontario Land Titles Act, based on an experimental 19th century English statute, meets the needs of 21st century electronic registration. Before our court of appeal tells us whether we need a solution for this, we should look into it.
John R. Wood
Lawyer, Borden Ladner Gervais LLP, Toronto
August 20, 2005