As pointed out in prior cases and articles published in REM, a professional, in order to be liable to a client, must breach a duty of care (skill, diligence, proper advice) and there must be a causal connection between the breach and resulting damages.
As pointed out in prior cases and articles published in REM, a professional, in order to be liable to a client, must breach a duty of care (skill, diligence, proper advice) and there must be a causal connection between the breach and resulting damages. Most importantly, actual loss or damages resulting from the professional’s negligence must occur.
In a case in California, a law firm gave bad advice to a client who owned an infant care and preschool business.
The client had funds that were inadvertently placed in a chequing account rather than in her operating account. Her husband was a signatory on the chequing account, while she was the sole signatory on the operating account.
The client sought legal advice because she wanted the funds moved from the chequing account to the operating account to cover her expenses. She alleged that the lawyers advised her to draw a cheque on the chequing account, sign her partner’s name and deposit that cheque into her operating account.
Unfortunately, she was charged by the District Attorney with forgery.
She was acquitted on the forgery charge because it was her business generating the funds and there was no intent to defraud. However, she did sue the lawyers for the mistake. Certainly she could show breach of duty of care. The lawyer simply could have advised her to call the bank and the bank would have given her advice on how to correct the mistake of the deposit being put into the wrong account.
But the court determined that since she was not found guilty of fraud and allegedly there were no damages sustained, she had no cause of action against the lawyer. In Canada this ruling may have been different. Questions that could have been raised in court would be whether expenses were incurred, if there were interest charges and penalties from the bank, and perhaps if there was loss of reputation and personal anxiety caused by the lawyers.
In any event the lawyers had given bad advice and the Court of Appeal of the American
State of California dismissed the action against the lawyers (no damages proved). (http://law.justia.com/cases/california/court-of-appeal/2015/b253978.html)
Insist that words are inserted into the Agreement of Purchase and Sale
A piece of land owned by B and C was put up for sale. The purchasers met with vendor B and indicated that they wanted the property only if it could be used as a restaurant. B said that would not be a problem and that the city would give approval. However, B did not wish to put a condition to that effect into the agreement as he believed this would cause a problem with C.
The Agreement of Purchase and Sale was drawn up for a $100,000 deposit and a purchase price of $3.5 million with no condition as to use (as a restaurant). Prior to signing, the purchasers went to the city planning department. A staff member told the purchasers that there would be no problem with a restaurant proposal filed with the city. Subsequent to that the parties signed the Agreement of Purchase and Sale (prepared by the purchasers) without any zoning requirement. In fact, the paragraph incorporated was that there was no representation or warranty as to future intended use.
As it turned out, the purchasers could not obtain their desired zoning permit. The transaction did not close. The purchasers sued the vendors B and C for B’s misrepresentation. Surprisingly the action was dismissed, even though B realized that the purchasers would rely initially on his representation of being able to obtain their zoning requirement. However, the court ruled that the purchasers took matters into their own hands and decided to go the city, and after speaking to a staff member were satisfied that they could rely on the city employee’s representation (and not vendor B).
In this trial decision, the judge came to the conclusion that there was no reliance on the vendors and that the purchasers, by making their own inquiries prior to signing the agreement, “relieved the vendors of any such responsibility”. (Meron v 2182804 Ontario Ltd., 2015 ONSC 1966 at canlii.org)
Donald Lapowich, Q.C. is a partner at the law firm of Koskie, Minsky in Toronto, where he practices civil litigation, with a particular emphasis on real estate litigation and mediation, acting for builders, real estate agents and lawyers.
