Legal Blog

Quick Closing Re-Visited

In our December 1997 newsletter, we commented on the Ontario Court (General Division) case of Sheardown v. Slater. The trial judge’s decision was appealed and, in 1999, the Ontario Court of Appeal rendered its decision.

Recap

Purchasers retained a solicitor on December 19 to act on their behalf in a transaction scheduled to close December 20. The solicitor did not even receive the agreement of purchase and sale until the original date of closing. The purchasers were financing part of the purchase by way of a second mortgage on their existing condominium unit. The vendor was taking back the second mortgage.

The condominium had recently been re-financed and three encumbrances that had been discharged as part of the re-financing were still registered on title. The vendor’s lawyer requisitioned the registration of the discharges of those encumbrances.

The solicitor did not write a letter to the vendor’s lawyer informing him of the prior refinancing. The solicitor did not obtain the reporting letter of the refinancing, a letter that also set out details of the repayment of the encumbrances. Even worse, the vendor’s lawyer had faxed a letter at 2:00 p.m. on December 31, the postponed date of closing, alleging that the transaction was not closing because the purchasers had insufficient funds. The solicitor never replied to rebut this misunderstanding.

The solicitor did not register the discharge of the encumbrances; the transaction was not completed; and the purchasers, who otherwise were in funds, forfeited their $30,000 deposit to the vendor. The purchasers then sued the solicitor.

The solicitor did not call the vendor’s lawyer to testify. The trial judge simply did not believe the solicitor’s assertion that the vendor’s lawyer refused to accept anything less than discharges of the encumbrances or that the solicitor even “made reasonable alternative proposals … that were rejected”. The trial judge held the solicitor liable for the purchasers’ damages of $30,000.

Court of Appeal

The solicitor submitted, in his main ground of appeal, that there was no evidence that the vendor’s lawyer would have accepted anything other than the registration of the discharges of the three encumbrances.

The court pointed out that this ground misconstrued the essential basis for liability. The finding of liability rested, not so much on assumptions made with respect to the actions of the vendor’s lawyer, but on the solicitor’s inaction. The court noted that the trial judge found the solicitor liable because he “failed to take adequate steps to provide evidence to the builder’s solicitor that the condominium had been refinanced, existing encumbrances had been paid out and that the actual discharges of liens and mortgages would be forthcoming. He held that, in essence, the appellant abandoned the respondents”.

Finally, and most importantly, the court noted that the trial judge expressly stated that he was not impressed with the solicitor’s testimony and that he was not prepared to make any findings based on his evidence alone. In other words, the trial judge did not believe one word the solicitor said. The court agreed that the evidence supported this finding of credibility.

Not surprisingly, given these findings, the court dismissed the solicitor’s appeal.

$600 Deal

Lest you forget, the solicitor had quoted $600 to act for the purchasers on this transaction and had not even rendered his account.