By Ty Schmidt – Supervised by Professor Maharaj
The recent decision of the Master in the summary judgment application in Chow v Sidhu Alexander LLP, 2022 ABQB 178 serves as a reminder of how important it is for business people engaged in ad hoc projects (or anyone else, for that matter) to be aware of exactly who represents them with respect to the various legal matters that are necessary for engaging in business with other parties.
The plaintiffs, Ms. Chau and Ms. Chow, entered a joint venture agreement (JVA) with Cruz Custom Homes Ltd. (a homebuilder) to construct a house with the intention of selling it and making a profit. This venture turned out to be unsuccessful as they had to sell the house at a substantial loss. Partly because Cruz avoided any part of the loss and was able to recoup its costs, the plaintiffs alleged there was professional negligence by the lawyer, Mr. Alexander, who the plaintiffs alleged had acted for both Cruz (and its principal Mr. Astete) and the plaintiffs in drafting the JVA.
Ms. Chow discontinued her claim while Ms. Chau continued hers, so a critical issue was whether the lawyer owed any duty of care to Ms. Chau with respect to drafting the JVA, when almost all of his dealings were in fact with Ms. Chow, whom the lawyer had advised to seek independent advice. In the circumstances, the Master found there was no solicitor-client relationship between Ms. Chau and Mr. Alexander. Furthermore, there was not sufficient proximity between these two that would give rise to a duty of care in negligence because Ms. Chau had allowed Ms. Chow (who indicated to Mr. Alexander that she, Ms. Chow, had her own lawyer) to communicate with Mr. Alexander on behalf of them both. In essence, Mr. Alexander’s advice to Ms. Chow to obtain advice from independent counsel effectively coupled with Ms. Chau’s decision to delegate responsibility for communicating with Mr. Alexander to Ms. Chow precluded the possibility of finding the relationship necessary to ground either a claim of a solicitor-client relationship or one of proximity in negligence. Ms. Chau may have honestly thought that Mr. Alexander was supposed to protect her interests as well, regardless of these circumstances, but the fact remains that our uncommunicated beliefs about others do not typically lead to an assumption of risk or responsibility on their part.