Trust is necessary for real estate transactions to function: Superior Court
In a case arising from a real estate transaction, the Ontario Superior Court awarded $25,000 in punitive damages against a disbarred lawyer who appeared to engage in a pattern of defrauding clients, falsifying documents, and misappropriating funds.
In Stewart Title v. Hutchinson et. al., 2026 ONSC 4190, the defendants were a disbarred lawyer and the Ottawa law firm that he used to operate. In the real estate transaction, he acted for the vendors and received the purchase funds.
In October 2023, the parties closed the transaction, with title transferred to the purchasers. However, the defendants failed to pay the municipal taxes or the first and second mortgages that the sellers owed.
The first mortgagee commenced sale proceedings against the purchasers. The purchasers’ title insurer – the plaintiff in this case – paid the taxes, retired the outstanding mortgage debts, and obtained a clear title for the purchasers.
On Mar. 5, 2025, in a disciplinary proceeding unrelated to the real estate transaction, a Hearing Division panel of the Law Society Tribunal revoked the individual defendant’s law licence.
Through a statement of claim served on Apr. 11, 2025, the plaintiff insurer sought to recover $101,484.38 as the total amount paid, as well as $100,000 in punitive damages. The insurer moved for summary judgment.
The defendants did not defend against the insurers’ action or attend the disciplinary proceeding.
A regional senior judge of the Ontario Superior Court of Justice signed a default judgment against the defendants. The award to the plaintiff insurer included:
The Superior Court acknowledged that one might argue that punitive damages were inappropriate because the disciplinary action against the individual defendant and the loss of his licence sufficiently condemned his conduct.
However, the court considered punitive damages appropriate based on the facts. The court held that the defendant owed the purchasers and the insurer a fiduciary duty of good faith, even though they were not his clients.
The court emphasized that the misappropriation of trust funds or purchase monies allocated to specific purposes went to the heart of the trust central to the duty of solicitors as court officers, as well as the trust necessary for real estate and other transactions to function.
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