Law Times

Law Times • October 28, 2013 Page 9 FOCUS Buyer out $100K due to missed fax BY CHARLOTTE SANTRY Law Times W hile people have long since tossed things like cassette tapes onto the 1980s technology scrap heap, lawyers — and not just those nostalgic for the era of the shoulder pad — still widely use fax machines. In a Court of Appeal for Ontario case heard on Sept. 11, 2013, a client lost $100,000 after a real estate lawyer failed to check her fax machine. The client in question in Bronfman-Thomas v. Carreno was Brenda Thomas, a woman who had tried to buy a residential property in Toronto costing $1.5 million. She entered into an agreement of purchase and sale with two vendors in which closing was to take place by 6 p.m. on July 8, 2011. Thomas paid a $100,000 deposit held in trust pending completion or termination of the agreement. Shortly after signing the agreement, Thomas discovered there was an open building permit related to deficiencies in the construction work that had taken place on the property in 2007. Under the permit, the city could have forced her to fix those deficiencies. According to Justice Sidney Lederman's original decision released by the Ontario Court of Justice on March 27, 2013, the permit "related to a fairly substantial renovation and thus, the potential risk and exposure to the applicant was significant. "The city could have imposed extremely onerous work orders which certainly would affect the applicant's use and enjoyment of the property. The applicant would be subject to the possibility of facing significant remedial construction and possible litigation." The discovery sparked a series of correspondence between Thomas' lawyer, Maureen Galea, and the vendors' lawyer, Roman Zarowsky. By closing day, the building permit was still open, which led to Galea and Zarowsky faxing several letters to each other. At 3:55 p.m., Zarowsky faxed a letter stating he had "spoken with Susan Kee at Stewart Title Guaranty Company, who has indicated that her company would be prepared to provide title insurance for the purchaser and title insure over the permit issue." In light of this, Zarowsky took the position that Thomas was "not at liberty unilaterally to terminate the agreement of purchase and sale." Galea, however, didn't see the letter. "She stated that she had not been expecting this letter because Zarowsky had already twice confirmed in writing that same day that the vendors respected the purchaser's right to terminate the agreement," wrote Lederman. "Galea concluded that the deal was dead and turned her attention to other closings taking place that day," he added. She faxed a letter to Zarowsky at 4:01 p.m. confirming that Thomas was unwilling to close the deal while the building permit remained open or to extend the closing date. The agreement would therefore be terminated as of 6 p.m. that evening. About a week later, Zarowsky advised Galea that the building permit had been closed, but she responded within two days saying that Thomas had entered into an agreement for another property and was applying to the court for the return of her deposit. At the Ontario Superior Court of Justice on Feb. 20, 2013, Thomas argued that the vendors had failed to obtain the insurance policy as required under the agreement. However, Lederman found that "the vendors did in fact 'obtain' title insurance." He explained that it was sufficient for Zarowsky to have secured a commitment from Stewart Title to insure over the open building permit and that he didn't have to and wouldn't have been able to actually purchase the policy on his own. "By prematurely ignoring the matter after 4:01 p.m., there was a failure to comply with the duty to continue to carry out the terms of the agreement and to take the necessary steps to act in good faith to close the transaction," wrote Lederman. Galea "had a duty" to monitor the situation until the 6 p.m. deadline, he found. There was "an obligation on both sides to act in good faith and do what was necessary within the time frame set out by the agreement of purchase and sale," he added. Accordingly, Thomas couldn't recover her $100,000 deposit, the judge found. More recently, the appeal court dismissed her appeal. The court's written decision, released on Sept. 16, 2013, said: "The purchaser's failure to respond to Mr. Zarowsky's proposal caused the transaction to fail as the application judge found." Thomas was to pay the vendors $8,500 in costs. Peter Wardle, a partner at Wardle Daley Bernstein Bieber LLP, represented Thomas on the appeal. "Both of the lawyers were busy closing deals. She [Galea] is a sole practitioner and just missed the letter," he says. "There had been a long history of problems [with] the other side not responding to questions and concerns about the building permit issues." The case demonstrates the lack of sympathy the courts have when it comes to terminating an agreement, he suggests. "It sends the message to real estate practitioners that you have to be very careful when you try to terminate an agreement of sale in making sure you document things properly," he notes. Heidi Rubin, a litigation partner at Dewart Gleason LLP, represented the vendors on the appeal. She believes the case has broader implications for contract law. "This decision seems to cement the concept that there's a goodfaith obligation to co-operate on executing the terms of the agreement," she says. "I think it will be used in the future to stand for the principle that both parties have to act in good faith." She agrees with Wardle that it sends a warning to real estate lawyers. "My understanding is that real estate practice is sometimes a last-minute game. The message here is that you have to be present and not go incommunicado if you want to rely on the provision in the agreement that says time is of the essence." LT that the title to the property is good and free case, the discharge cannot be registered w good and free from all registered restrictions letter from the relevant municipality or regul cumbrances except as otherwise specifica adjacent properties, and any easements fo provided in this agreement and save and ex are complied with; you (b) any registered m t run with the land providing that such are c es, telephone lines, cable television lines or ple, where the original mortgagee has assig nts for the supply of domestic utility or telep title of the mortgage and the right to receive h do not materially affect the present use of Keeping you central to the real estate transaction.* ements with publicly regulated utilities provid t titleplus.ca * ® The TitlePLUS® policy is underwritten by Lawyers' Professional Indemnity Company (LAWPRO®). Registered trademark of Lawyers' Professional Indemnity Company. 1-800-410-1013 Untitled-3 1 www.lawtimesnews.com 12-10-22 10:01 AM

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