The Setup: A Private Deal Gone Wrong
In Afshari v. Privitera, 2025 ONSC 5758, Justice MacNeil tackled a question that should interest every real estate lawyer: can a brokerage be held liable for a realtor’s conduct after the listing agreement has been cancelled?
The facts present a cautionary tale. Panthea Afshari, herself a licensed real estate broker associated with Royal LePage, listed her residential property on Lloyminn Avenue for sale and lease on February 2, 2024. Less than two weeks later, on February 13, 2024, she cancelled both listings at 11:40 a.m., with her broker of record signing off at 12:13 p.m. The stated reason? “Seller has decided to take off market.”
But Afshari hadn’t decided to take the property off market at all. By 4:43 p.m. that same day, she had signed both an Agreement of Purchase and Sale and an Agreement to Lease with Maurizio Privitera, thereby cutting Royal LePage entirely out of the transaction.
The Smoking Gun: Text Messages
The evidence revealed telling text exchanges. On February 12, 2024, Privitera texted that he wanted to do a “private” sale without paying the 2% realtor fees, offering to purchase for $1,465,000 if they could “go private.” Afshari responded: “But I need to cancel both listings and tell everyone I decided not to sell.” Privitera agreed.
Both final agreements showed “N/A” for listing and buyer brokerages. Schedule A to the Purchase Agreement stated: “The Buyer acknowledges that The Seller is a licenced real estate broker in the province of Ontario and that there are no brokerages or realty fees involved in this agreement.” Similar language appeared in the Lease Agreement.
The deposit was paid to Afshari’s real estate lawyer, not Royal LePage. The brokerage only learned of these transactions months later when it received Privitera’s statement of defence and counterclaim.
The Counterclaim: Casting a Wide Net
When the transaction soured, Afshari sued Privitera for breach of contract and damages. Privitera raised a counterclaim against both Afshari and Royal LePage, alleging fraud, misrepresentation, negligence, defamation, breach of the Residential Tenancies Act, and failure to meet fiduciary duties. He sought over $400,000 in damages and an order that both defendants fulfill the purchase agreement at $1,465,000.
Critically, Privitera’s counterclaim contained only one paragraph making a specific vicarious liability claim against Royal LePage (paragraph 41), simply asserting that Royal LePage should “be held liable for the conduct for the actions of Panthea Afshari,” while failing to assert any actual acts or conduct on the part of Royal LePage.
The Legal Framework: Vicarious Liability Requires Connection
Justice MacNeil conducted a thorough analysis of vicarious liability principles, citing the Supreme Court of Canada’s decision in Bazley v. Curry. The fundamental question is whether the wrongful act is sufficiently related to conduct authorized by the employer to justify imposing vicarious liability.
The court emphasized that vicarious liability is appropriate only where there is a “significant connection” between the creation or enhancement of a risk and the wrong that flows from it. The enterprise and employment must have “materially” enhanced the risk by significantly contributing to it.
Importantly, where a plaintiff in a personal capacity has dealt with an employee in a personal capacity, the employer will not be vicariously liable.
The Court’s Analysis: No Genuine Issue for Trial
Justice MacNeil found no evidence of a “significant connection” between Afshari’s alleged wrongdoing and any creation or enhancement of risk by Royal LePage. The timing was critical: after Afshari cancelled the listings and her broker signed off, she proceeded to enter into both agreements without Royal LePage’s involvement or knowledge.
The court found that Afshari was dealing with Privitera in her personal capacity, not as Royal LePage’s employee or agent. Crucially, Privitera himself knew Royal LePage was being excluded. His own pleadings admitted as much when he quoted Afshari’s text about cutting out “the ‘Levie Team’ at Royal LePage, and her Brokerage.”
Royal LePage had no knowledge of Afshari’s continued negotiations after cancellation, received no commission or fees, and had no opportunity to supervise or control Afshari’s conduct once the listings were cancelled.
Striking the Pleadings: Multiple Grounds
The court dismissed the counterclaim against Royal LePage on three independent bases:
- Summary judgment (Rule 20): No genuine issue requiring a trial existed regarding Royal LePage’s liability.
- Failure to disclose a reasonable cause of action (Rule 21.01(1)(b)): The pleadings failed to set out material facts supporting any direct or indirect relationship between Privitera and Royal LePage, or how Royal LePage’s conduct caused the alleged damages. It was “plain and obvious” that no tenable cause of action was possible.
- Frivolous and vexatious (Rules 21.01(3)(d) and 25.11): The counterclaim contained only bald allegations against Royal LePage without sufficient facts or particulars to enable it to know the case it had to meet.
Significantly, the court struck the pleadings without leave to amend, finding this was an exceptional case where no amendment could cure the deficiencies.
Practical Implications for Real Estate Lawyers
This decision offers several lessons for transactional lawyers:
For vendor’s counsel: When your client is a licensed realtor selling their own property, ensure they understand their obligations to their brokerage. Document the cancellation of any listing agreement before proceeding with a private transaction.
For purchaser’s counsel: If the vendor is a realtor and there’s no brokerage listed on the agreement, inquire about any prior listings. Text messages or emails discussing “going private” to avoid commissions could become problematic evidence if disputes arise.
For everyone: Don’t assume that just because someone is associated with a brokerage, that brokerage bears liability for their personal transactions. The temporal sequence matters. Once a listing is properly cancelled and the brokerage signs off, its involvement and potential liability typically ends.
The court’s decision also serves as a reminder about pleading requirements. Bare allegations of vicarious liability, without material facts showing how the employer created or enhanced the risk of wrongdoing, will not survive a motion to strike.
Conclusion
Afshari v. Privitera clarifies that brokerages can successfully extricate themselves from disputes over transactions completed after listing cancellations, provided the evidence shows they had no involvement and no knowledge of the agent’s subsequent conduct. For transactional lawyers, the case underscores the importance of understanding the distinction between an agent acting within their agency relationship versus acting in a purely personal capacity.
