June 2025
The Ontario Court of Appeal’s recent decision in Yui v. Yan, 2025 ONCA 410, provides important guidance for transactional real estate lawyers on the proper exercise of lawyer approval conditions in assignment agreements. This unanimous decision reinforces the protection of solicitor-client privilege while clarifying the requirements for valid termination under these conditions.
Case Background
The dispute arose from an assignment agreement dated August 29, 2023, where sisters Christine and Michelle Yui agreed to take over the purchase of a property from the assignor Sa Yan. The agreement required a $60,000 deposit and included a lawyer approval condition that permitted the assignees to terminate if the terms were “not acceptable to the [Yuis’] lawyer based on the lawyer’s own and absolute opinion.”
The condition required written notice of termination within 17 banking days of accepting the offer. The Yuis’ real estate agent provided timely notice of termination to the assignor’s agent, Picard, but the assignor refused to return the deposit, arguing the termination was invalid.
The Superior Court Decision
The application judge ordered the return of the $60,000 deposit, finding that the Yuis had properly exercised their termination rights. The application judge accepted the Yuis’ evidence that a lawyer was consulted before terminating and held that the assignees were not required to disclose their rationale since that information was protected by solicitor-client privilege.
The Appeal and Key Arguments
The assignor appealed on three main grounds:
- Insufficient Evidence: The only evidence relied on was an affidavit from one of the assignees.
- Implied Waiver: Solicitor-client privilege was impliedly waived when exercising a condition dependent on lawyer approval.
- Lack of details: The termination email merely stated they were “backing out” without referencing lawyer disapproval.
The Court of Appeal’s Analysis
Solicitor-Client Privilege Remains Intact The Court of Appeal unanimously dismissed the appeal, providing crucial guidance on solicitor-client privilege in the context of lawyer approval conditions. The court held that including such a condition does not create an implied waiver of privilege. The specific wording referring to the “Assignee’s Solicitor’s own and absolute opinion” makes clear that termination is within the lawyer’s sole discretion without requiring disclosure of the underlying reasoning.
No Requirement for Detailed Explanation Significantly, the court found nothing in the termination condition requiring the assignees to specifically disclose that their lawyer disapproved the agreement or provide reasons for the disapproval. Nor did the condition’s language mandate that the lawyer personally communicate the decision. It was sufficient that the assignees acted on their lawyer’s advice.
Agent’s Speculation Irrelevant The court also addressed the assignor’s argument that the evidence offered by Picard suggested the termination was based on the Yuis’ living arrangements rather than legal advice. The Court of Appeal found this evidence, at best, reflected Picard’s understanding based on discussions with the assignees’ agent, and held that the application judge’s failure to specifically reference this evidence was neither surprising nor consequential.
Practical Implications for Transactional Lawyers
Drafting Considerations This decision reinforces the importance of precise language in lawyer approval conditions. The language used in the condition was the key to the court’s interpretation that no disclosure was required. When drafting such conditions, consider:
- Whether you want to require specific disclosure of the lawyer’s reasoning
- The time limits for exercise
- Whether the lawyer must personally communicate the decision
- The manner in which the disclosure should be made
Risk Management For lawyers representing purchasers in assignments, this case provides comfort that lawyer approval conditions can be exercised without detailed disclosure. However, it also emphasizes the need for actual legal consultation as the protection depends on genuine lawyer involvement, not merely invoking the condition as a convenient exit strategy.
Conclusion
Yui v. Yan clarifies that lawyer approval conditions in real estate assignments can be exercised without compromising solicitor-client privilege or requiring detailed explanations of the legal advice received. The decision provides valuable guidance for transactional lawyers drafting such conditions and reinforces the importance of precise contractual language.
For practitioners, this case serves as a reminder that while lawyer approval conditions offer flexibility for purchasers, they must be exercised in good faith with actual legal consultation. The Court of Appeal’s decision strikes an appropriate balance between protecting solicitor-client privilege and ensuring contractual terms are properly interpreted and enforced.
The decision also underscores a procedural point often overlooked: the respondents’ attempt to vary the order regarding pre- and post-judgment interest failed because they did not file a cross-appeal as required under the Rules of Civil Procedure.
This article is for informational purposes only and does not constitute legal advice. Practitioners should review the full decision and consider specific factual circumstances when advising clients.
