Avoiding Conflict (and Litigation) when Juggling Multiple Parties

One real estate agent.  A buyer.  Two purchasers with the appearance of competing offers.  The allegation and appearance through some of the documents that the agent is acting for all parties.  When the deal goes south, the parties are at odds with one another and an action is commenced. The key factual issue is that the original purchaser claims they removed the financing condition on the property, and the agent and the vendor deny that they did.  This resulted in the vendor not closing the transaction.

The court in a recent Queen’s Bench decision (Shermet v Miller, 2015 SKQB 34 (CanLII), <http://canlii.ca/t/ggbsr>) considered a summary judgment application for a claim that one purchaser brought against a number of defendants.  A summary judgment application is when the parties ask the court to deal with the issues on the basis of affidavit evidence and law in order to avoid a trial of the issue.  This application was successful for two of the defendants, including the agent.

It was determined that based on the affidavit evidence presented to the court that the agent caused no damages to the plaintiff, and the claim was dismissed.  However, there are some lessons to be learned in the subtext of the decision.  The court does identify or infer some methods in which the individual might have been responsible if the facts were different.  The court also seems to be inferring that there were significant gaps in evidence with some aspects of its fact finding (see paras. 8, 11, 12, 14, 27-30, 45, 46.)  How that additional evidence would impact the decision is unknown. 

Some excerpts from the decision:

 – “It is curious that the plaintiff’s financing issues appear to be common knowledge amongst at least the real estate agent, the Millers and Mr. Lomenda and Ms. Melnychnko. It is also curious that the ultimate mortgage provider gave an affidavit disclosing the plaintiff’s personal financial information.”

Lesson – Treat your client’s personal financial information with the privacy it requires.  Professionals involved in these deals may hurt their clients by providing personal and confidential information.  It is also a significant breach of privacy.   Consent may have been provided by the Plaintiffs to release that information, or they may have released it themselves.  However, as a professional, you should be clear about that consent if you are the one releasing it, or the obligation at law that you have to disclose it.   

 – “Mr. Miller “believed” that the Lomenda/Melnychenko offer would be effective if the plaintiff failed to obtain mortgage financing. I do not see a specific condition to this effect in the contract of purchase and sale. Unless I have missed that condition, it appears the Millers had in place two offers for the same parcel of land which were both potentially effective if both of the individual parties received mortgage approval.”

Lesson – Paper your deal completely – Ensure that your contract includes the whole of the contract.  The language in these contracts expressly state that to be the case, and to avoid future claims, make sure it is all in writing.  If the fact scenario is unusual, get some assistance with the drafting.

– At paragraph 18 of the transaction, the court identifies a key factual dispute.  The plaintiffs indicate that they removed the financing condition, and the vendors and the agent dispute that.

Lesson – Have a good evidence trail for major decisions on a transaction – the court did not describe the evidence in detail in the application.  However the strength of the agent’s evidence would be stronger in a situation where there was a clear email recounting instructions versus a telephone call that one party is recalling through memory. 

– The court allows the application for summary judgment against the agent because nothing was alleged in the evidence or pleadings that would suggest that the agent caused any damage against the plaintiff.  While there was an allegation that the agent owed a duty to the purchaser, it was not resolved by the evidence.  In any event, the court indicated that it was the vendor defendant’s insistence that they not close the deal that caused any potential damage, even if a duty was owed.

Lesson – Be clear on who your clients are, and to whom you owe duties.  With all the parties involved in this deal, and deals like it, you need to be clear on ‘which hat you are wearing’ and what obligations it imposes on you.  There are a number of different scenarios that could play out in the facts of this decision, and whether they were appropriate or not would depend on what role the agent was playing relative to the purchasers.