Lawyers who relied on false affidavit not liable for negligence
Court rejects claim that lawyers who unknowingly relied on a false affidavit were negligent
In Lograsso v. Kuchar, the Ontario Superior Court of Justice dismissed a negligence claim made against two lawyers.
In April 2006, Reinhard Kliczka entered into an agreement of purchase and sale to sell a residential property in Barrie, Ontario for $1 million. Kliczka subsequently retained a lawyer, Gary Kuchar, to act for him on the transaction. The purchaser of the property retained a lawyer named Paul Daffern. On the eve of closing, Daffern conducted a title search and discovered an outstanding writ of execution obtained by an individual named Joseph Lograsso against Kliczka in the amount of $40,000. Kliczka subsequently swore an “Affidavit as to Writs of Execution” in which he denied being the same “Reinhard Kliczka” named in the writ in favour of Lograsso. Relying on the affidavit, Kuchar and Daffern proceeded to close the transaction.
Unbeknownst to Kuchar and Daffern, the affidavit sworn by Kliczka was false. Lograsso subsequently learned of Kliczka’s sale of the property (free of his writ) and commenced an action in negligence against both lawyers. In his claim, Lograsso alleged that the lawyers owed him a duty of care and ought to have known that the affidavit was false given, among other things, Kliczka’s unusual name. In ignoring this alleged “red flag” and relying on Kliczka’s affidavit to close the transaction, Lograsso argued that the lawyers were willfully blind to the fraud Kliczka was perpetrating and breached the requisite standard of care. Lograsso further alleged that the lawyers ought not to have been allowed to rely on Kliczka’s affidavit given that the total value of the judgment amounted to more than $50,000 given that, with interest having accrued since 1992, it was valued at more than $100,000.
The Court’s decision
The Ontario Superior Court of Justice dismissed Lograsso’s negligence claim against the lawyers. It held that there was no duty of care owed by the lawyers to Lograsso; neither lawyer had been retained by Lograsso and there was no evidence that Lograsso had relied on them for anything (indeed Lograsso was not even aware that the transaction had taken place until some months following the closing).
Moreover, the Court held, neither lawyer had breached the standard of care; they were entitled to rely on Kliczka’s affidavit as the face value of the judgment was less than $50,000. The Court also rejected the Lograsso’s argument that the lawyers ought to have been put on notice of a potential fraud, given that Kliczka’s name was unusual.