In Ker v. Deol, a motion judge of the Ontario Superior Court of Justice considered whether the buyer’s real estate agent could be added as a defendant in a lawsuit brought by the seller arising from an aborted transaction.
The transaction and the lawsuit
In March 2021, the buyer agreed to buy the seller’s property in Orangeville, Ont. for $1.1 million pursuant to an Agreement of Purchase and Sale (APS).
In June 2021, the seller was advised that the buyer would not be completing the transaction. The seller subsequently commenced an action against the buyer for damages due to his failure to close.
In his defence, the buyer claimed that he was approached by an individual (Cheema) with respect to purchasing a home on his behalf. Cheema then made an offer to purchase using the buyer’s name as the purchaser and paid the deposit through the buyer’s real estate agent.
The buyer further claimed that his real estate agent and Cheema were long-time friends who had orchestrated the transaction for Cheema’s benefit. The buyer alleged that his agent agreed to arrange the mortgage for the property. He said that he was unsure whether he even signed the APS.
The seller’s motion to amend
This was all new information to the seller. When the statement of claim was prepared, the seller had no idea that Cheema even existed and did not know about the alleged scheme or the agent’s involvement in it.
As the statement of claim originally pleaded only breach of contract, the seller brought a motion to amend the pleading to add Cheema and the buyer’s real estate agent as defendants, along with a claim of damages for negligent misrepresentation.
The real estate agent opposed the seller’s motion to add him as a defendant.
Under Rule 26.01 of the Ontario Rules of Civil Procedure, a court has broad power to permit leave to amend pleadings at any stage of a proceeding.
The rule requires the court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of the court’s process; or the pleading discloses no reasonable cause of action.
The agent’s opposition
The real estate agent’s lawyer argued that there would be irreparable prejudice to the agent’s reputation if the amendment was allowed.
However, reputational harm is not the type of non-compensable prejudice that can defeat a motion to amend a claim.
The agent’s second argument was that he, as the real estate agent for the buyer, did not owe a duty of care to the seller, and therefore no reasonable cause of action could lay against him. In that regard, the seller’s agent argued that he made no explicit representations himself to the buyer or her broker.
An amendment to add a defendant can be defeated on the basis that the proposed amendments do not disclose a tenable cause of action.
The seller’s claim against the agent
The seller’s claim against the agent alleged negligent misrepresentation, which requires a plaintiff to prove (amongst other things) that there was a duty of care between the representor and the representee based on a “special relationship.”
In this case, the crucial vantage point is that of the “representor” or the seller. A duty of care and special relationship may exist if it is reasonable to foresee from the representor’s perspective that there will be reliance on the representation made.
The thrust of the seller’s claim was that Cheema and the agent had agreed to misrepresent who the purchaser of the property was.
According to the buyer himself, the agent orchestrated this scheme and assisted and encouraged Cheema and the buyer to pull the wool over the seller’s eyes.
The seller argued that had she known who the real buyer was, there is, at the very least, a reasonable prospect that she would not have entered into the APS.
“A seller’s agent can be liable to a buyer for certain misrepresentations”
In the motion judge’s view, the fact that the seller’s agent was listed on the APS as the broker acting for the buyer was sufficient to ground a cause of action against him.
Prior cases have determined that a seller’s agent can be liable to a buyer for certain misrepresentations: Mohn v. Dreiser, 2002 CanLII 42547 (ON SC), Hauck v. Dixon (1975), 1975 CanLII 754 (ON SC).
Further, in the motion judge’s view, “(A) real estate agent representing a purchaser has a duty of care to the vendor that he is representing who he says he is representing.”
Lastly, the motion judge was concerned that if the agent was not added as a defendant and the buyer was found to be an innocent dupe, the seller could be left without a remedy.
The addition of the agent was, therefore, necessary to enable the court to adjudicate effectively and completely on the issues in the proceeding.
The judge’s decision
The court, therefore, allowed the amendments to the claim, adding the claim for negligent misrepresentation and the agent as a defendant along with the agent’s brokerage and Cheema.
Whether the agent will be found liable to the seller for misrepresenting the identity of the buyer has yet to be determined.
It seems clear from the decision that the court was concerned about the allegation that the agent had actively misrepresented the true buyer of the property.
One might draw a distinction between this type of factual misrepresentation and a situation where the identity of a buyer was specifically left undisclosed. Offers to purchase are sometimes made on behalf of a party “in trust” or a corporation whose principals are unknown to the other party.
While an agent should not lie about who they are acting for, it is not clear whether a representation about the identity of a party entering into an APS will always give rise to a duty of care based upon reliance by the other party as to the person signing the APS.
In many cases, a seller may not care (or rely upon) whose name appears in the APS. In any event, these are issues to be addressed on another day.
James Cook is a partner at Gardiner Roberts in Toronto and has been with the firm since he articled there in 2002. As a litigator in the firm’s Dispute Resolution Group, he has experience in a broad range of commercial, real estate and professional liability litigation. Phone 416-865-6628; email email@example.com. This article is provided for educational purposes only and does not necessarily reflect the views of Gardiner Roberts LLP.
I read this 3 times and I’m still not sure what actually happened.
I think at this point it was just the amendment to the claim – adding the Buyers agent to the lawsuit. I don’t think the suit has received a judgment yet.
I think it was to add the sellers agent….
I think the agent was representing the seller, as well as acting for the buyer. “In the motion judge’s view, the fact that the seller’s agent was listed on the APS as the broker acting for the buyer was sufficient to ground a cause of action against him.”
He was going double end the deal. Not now I guess.
The best advice that my lawyer mentioned to me, decades ago, was BRING ALL DOCUMENTS TO ME FIRST & DON’T SIGN ANY PAPERS. I was under alot of stress and failed to resist signing. The real estate agent was rotten to the core and definitely had no conscience. To this day I’ve encountered bad attitude agents, that don’t care.
I feel you. I read it three times as well and I THINK I got it. Basically the agent is the problem here, on SOOO many levels. He was acting for the seller and went into a multiple rep instead of customer service, but really should he have been a third party to the whole fiasco in the first place? Isn’t that the real problem?
I agree. This article is unclear/poorly written.
Same here. Very difficult to understand!
Oh hood, I’m not the only one! Not very well written
I totally agree with the honorable judge. A buyers realtor directly protect the interest of buyer and indirectly protect the interest of seller and same applies to sellers realtor. Sellers realtor trust buyers realtor in qualifying the buyer , that is why we have FINTRAC forms a buyers realtor need to prepare.
Why do you make the effort to capitalize the word FINTRAC but you do not use the term or word REALTOR® properly. Is it because the author of the article did not use the term REALTOR® in the title of the article. Sorry pet peeve of mine seeing other REALTORS® using the term incorrectly as it is required to by the Code of Ethics. Looks like I will just unsubscribe from this
How many Realtors involved?
If a lawyer can’t clearly describe who is who, in the essence, can’t imagine the judge can be better – which world we are living!
I don’t see how the buyer’s agent could have been excluded, that would mean the system is open to legitimately falsifying parties to a contract. It’s also not the same as buying in trust for some unnamed person as that places the onus of further inquiry onto the seller. Here a straw buyer was named and represented as the real buyer.
I see further legal activity such as mortgage fraud against the real buyer and agent.
The elephant in this particular room is why the Buyer’s Agent was deliberately trying to conceal the identity of the true Buyer. I’m guessing almost certainly to avoid tax and conceal the number of properties owned as principal residences.
Sellers are sometimes Irate when their sale falls apart – was upset with the original buyer and would not take a chance on him a 2nd time – therefore the agent used another name as purchaser. (that’s my take )
or possible a non Canadian buyer
Agent was pulling some sort of scam or worse. This is why the public thinks we are all liars, because of BS like this. They were also arranging a mortgage for a property for someone who on paper wasn’t the buyer. So add some mortgage fraud in there too. Agent should lose their license.
Time to forget the legal mumbo jumbo. It is just plain unethical and immoral. There was collusion here for whatever reason between all three involved in the purchase for whatever reason to purchase this property on Cheemas behalf. Was the buyer getting a “fee” for his part in the bargain. Whatever the reasons, this type of behaviour needs a hard stop, and penalizing all three by paying major damages is the first step.
Hopefully the fine is hefty, very hefty, if the law is to have any teeth.
This is exactly why ALL Realtors integrity is questioned by consumers. Maybe the scam involves the fake buyer signing the agreement to purchase for $1.1 million then backing out at the last minute. Then the agent presents the “real buyer” as a client who may be interested, last minute, but at a lower price. The seller being in a pickle then feels pressure to just get it sold to minimize damages, maybe it being suggested to sue the original buyer for the difference, which doesn’t always happen.
Can I guess in what city that happen
It says Irangeville, Ontario at the beginning of the article
Where is Reco??
Over 65 thousand licence in Onrario. Moro to come.
Take his License away permanently and a few years in jail, that would teach him and others that follow.
Appears to be the “straw buyer” routine. Be interesting to see how this turns out.
If the case presented is factual, then who “Cheema” is should be fully disclosed for the benefit the readers as a caution for future dealings with that individual.
On a seperate note, fully agree with other commenters, author should take a class in “Coprehensive writng” skills.
Realtors are required to state if they have an interest in any property through a disclosure. It is part of the Board of Ethics we subscribe to as part of our profession.
If Cheema asked someone to put the offer in for him and provided the deposit, he had an “undisclosed interest” under the Ethics of practice, whether or not he was listed as a buyer. It should have been disclosed. It will be interesting to see the outcome.
Same here. Very difficult to understand!
This was confusingly written and had to stop and think it through each step but what happened was, if I am correct, not multiple representation….
-the first buyer could not close due to financing – seller started litigation.
-The Buyer agent & Cheema (2nd buyer) tried to save deal by doing another offer using 1st buyer’s name but Cheema signed and was going to finance… (scam) the seller.
-According to 1st buyer QUOTE ‘In his defence, the buyer claimed that he was approached by an individual (Cheema) with respect to purchasing a home on his behalf. Cheema then made an offer to purchase using the buyer’s name as the purchaser and paid the deposit through the buyer’s real estate agent.”
-if true….How can Buyer agent not understand that was wrong??
A version (different paragraphing and with the word ARTICLE included and half of this para missing “Further, in the motion judge’s view, “[a] real estate agent representing a purchaser has a duty of care to the vendor that he is representing who he says he is representing.”) appeared in another Legal News aggregator — Mondaq.
I read it again to see if it was clearer?
I noted 4 times in the margins “How many Brokerage’s were involved?”
We should insist that “legal” articles concerning Registrants be written in the correct CURRENT RECO & REBBA/TRESA terminology.
Broker of Record,
“Real Estate Agent” was commonplace, albeit incorrect non-gender usage 30 years ago – surely any lawyer who frequently submits articles about cases concerning real estate has received the memo by now.
As a retired R.E.Broker with over 25 yrs. in the biz, the actions or inactions of any licensed agent falls under the authority of the governing body known as RECO ( Real Estate Council of Ontario). No mention of any pending investigation by RECO regarding the ethical or unethical practices by bith brokerage firms involved in this transaction. The Broker of Record is responsible for any and all actions of all agents under his/her brokerage roof.
Any buyer who walks away from a mutually agreed upon Agreement of Purchase and Sale is liable for ” breach of contract”and forfeits their ” good will” deposit. Should this owner be forced to resell the property a 2nd time and take a loss from the originally sold price the original buyer is on the hook for the $ amount difference.
I find this article severely lacking alot of pertinent details in order to determine exactly what transpired from day one.
The breach of contract is a legal issue. The actions of the agents is an issue that has to be thoroughly investigated by the real estate industries governing body; RECO.
Unfortunately there are ALOT of people out there with a piece of paper that states they are a licensed sales representative but that doesn’t mean they are “experts” or ” ethical” either. Just like a drivers license; just because you have one; doesn’t mean you know how to drive.
Yes, there are ALOT of licensed agents out there…too many in fact…that shouldn’t be in the industry.
There is a very valid reason why 5% of all the agents do 95% of the business; they are professionals; have the knowledge and experience; take the business seriously; are FULL TIME agents; are ethical; follow the rules and laws and value their license!! The other 95% are well dressed order takers who should get a 9-5 job.
What I just noticed is the court documents are in the link at the top KER V. DEOL it all explains it more there. Also Listing Brokerage was a Sutton Brokerage so was not same salesperson representing the buyers. From court documents it looks like there was the one offer – Deol (buyer) and he could not close due to financing. After seller starts litigation he claims that he never saw the property never signed the APS and that Cheema said he would buy in his name and put the deposit through his agent friend who will help get him financing but use Deol’s name? Is the Buyer (Deol) trying to find a way to not get sued? If this is true Soooooo many wrongs here
Oh no don’t take away his license. He took all of two weeks to pass that rigorous test.