Lawyer Not Vicariously Liable To Opposite Party In Failed Real Estate Transaction

• Published date: 24 June 2022
• Subject Matter: Real Estate and Construction, Real Estate
• Law Firm: Gardiner Roberts LLP
• Author: Mr Stephen Thiele, James R.G. Cook and Daria Risteska

There appears to be a growing propensity on the part of litigants to sue the opposite party's lawyer when a transaction fails or something else goes wrong that results in alleged damages. Although it might be natural for an aggrieved party to name as many defendants as possible as defendants to an action, it is extremely rare for the lawyer of an opposite party to be responsible in any way whatsoever for the alleged damages of the aggrieved party. In circumstances where the lawyer of the opposite party is named as a defendant to an action, the action against the lawyer can be dismissed on a pre-trial motion because such an lawsuit discloses no reasonable cause of action.

The action against the lawyer

In Braysan Properties Inc. "In Trust" v. Muchos, 2022 ONSC 3703 (not currently available on CanLII), the plaintiff commenced an action against multiple defendants, including a lawyer who represented some of the defendants in a real estate transaction.

The plaintiff had entered into an agreement of purchase and sale (the "APS") to buy a property in Mactier, Ontario. The closing date was affixed as September 30, 2021. Certain conditions applied to the transaction.

Before closing, the plaintiff and the owners agreed to amend the APS. Addendum #3 to the APS moved the closing date to August 31, 2021. The plaintiff also agreed to waive financing and inspection conditions and the new closing date was to be conditional on the plaintiff being able to obtain building permits for proposed new construction on the property.

In anticipation of the sale, one of the owners, G.M., entered into an agreement to buy a property in Point-au-Baril, Ontario.

On July 13, 2021, the plaintiffs and the owners entered into Addendum #7-V3. This addendum moved the closing date to August 24, 2021 and gave the plaintiff 30 days to arrange first mortgage financing of $900,000, with the owners agreeing to provide a vendor-take-back mortgage for the balance of the purchase price. If the plaintiff was unable to arrange financing, the plaintiff and owners agreed that Addendum #7-V3 would become null and void. In that case, the previously accepted APS would govern the contractual relationship.

The plaintiff was unable to arrange financing. Accordingly, the closing date for the transaction reverted to August 31, 2021 and the previous APS with its prior addendums applied.

The transaction did not close and the plaintiff sued. The plaintiff alleged that the defendants engaged in a fraudulent scheme to...