Executive Summary: Key Legal and Evidentiary Issues

• Appellants claimed the seller's lawyer breached a trust obligation by releasing $600,000 in deposit funds from his trust account to pay previous option holders before the real estate transaction completed.

• No trust was found to exist over the deposits because the contracts, when read as a whole, contemplated the seller having use of the funds before closing and returning them if the transaction did not complete.

• Merely designating funds as payable "in trust" to a lawyer's trust account does not automatically create a trust or fiduciary obligation in favour of the depositor, as discussed in Green Light Solutions Corp. v. Baker, 2021 BCCA 287.

• The seller's lawyer owed no duty of care to the buyers (non-clients) because no relationship of proximity was established and the appellants had their own representation throughout the transaction.

• Appellants' attempt to raise new allegations of fraud and professional misconduct on appeal was rejected for not having been raised at trial and lacking evidentiary support in the record.

• The contra proferentem principle did not apply because the trial judge found no ambiguity in the contracts, interpreting them as clearly contemplating the deposit funds being paid out of trust.

The failed real estate transaction

In 2019, the appellants—Manveer Mattu, Jagroop Mattu, Parminder Dhaliwal, and Avtar Uppal—agreed to jointly purchase three building lots in a new subdivision in British Columbia. The lots had been previously listed in 2018, with those sales falling through, and were listed again on September 23, 2019, by realtor Jason Sandhu for $549,900 each. The seller was Legendary Developments (Fraser Heights) Ltd., and its principal Gurdeep Dhaliwal negotiated with the appellants. Sukhwinder Mattu, the father of Manveer and Jagroop and an experienced residential builder, became interested in buying the lots. The plan was for Manveer and Jagroop to buy the lots on Sukhwinder's behalf because he was not able to obtain any additional mortgages in his own name. Sukhwinder and the other appellants, Parminder Dhaliwal and Avtar Uppal, agreed they would jointly purchase the lots with Manveer and Jagroop. Through their realtor, Harjot Dhatt, the appellants made offers on October 2, 2019, to purchase each lot for $520,000 with a deposit of $200,000 per lot. Notably, the standard language indicating the deposit would be held in trust by a real estate brokerage or a lawyer was crossed out and initialled by the appellants in their initial offers, and the deposits were to be paid directly to the seller within 24 hours of acceptance.

The counteroffers and the deposit structure

On October 4, 2019, the seller made counteroffers that maintained the $520,000 purchase price and $200,000 deposit per lot but introduced significant changes. Most significantly, the term requiring the deposits to be paid directly to the seller was crossed out and replaced with "Direct to sellers lawyer PLG LLP In Trust within 24 hours of subject removal." The trial judge accepted the reasons for this change: Mr. Dhaliwal needed the deposit funds to pay the previous buyers who held options to purchase on the lots ("Option Holders"); the Option Holders agreed to release their Options to Purchase from title prior to being paid but would not release their contractual claims to the lots until they were paid; and the deposit funds were to flow through Mr. Aggarwal's trust account rather than directly to Mr. Dhaliwal to provide security and ensure the Option Holders were paid. The counteroffers also replaced the clean title warranty with subject clauses requiring both buyer and seller to receive and approve legal advice regarding the deposit structure and the title. It was a "fundamental term" that the seller would deliver a copy of the title clear and free of any previous or further obligations. If the sale did not complete on the completion date of October 18, 2019, the seller was to return the deposit back to their lawyer. Additionally, the seller personally guaranteed the "deposit return," and both buyer and seller relinquished any claim of liability on the part of their real estate agents.

The deposit payment and discrepant contracts

On October 5, 2019, the deadline for acceptance, the appellants signed the counteroffers and initialled the changes, forming the binding contracts (the "Contracts"). On October 9, 2019, the appellants removed the subject terms and provided Mr. Dhatt with bank drafts for the three deposits, totalling $600,000. The next day, October 10, 2019, a series of events unfolded. Mr. Dhatt gave the bank drafts to Mr. Sandhu as required by the Contracts, and Mr. Sandhu gave them to Mr. Dhaliwal. Mr. Dhaliwal then brought the bank drafts and contracts to Mr. Aggarwal for the purpose of paying the Option Holders. However, the contracts Mr. Dhaliwal presented were different from the Contracts. These "October 10 contracts" showed a purchase price of $580,000 plus GST per lot instead of $520,000, the deposits were to be paid directly to the seller within 24 hours of subject removal, and certain clauses were missing the appellants' initials, including the purchase price clause. Mr. Aggarwal reviewed the October 10 contracts rather than the Contracts before paying the Option Holders. He questioned Mr. Dhaliwal about why the October 10 contracts stipulated payment to the seller when the bank drafts were made out to his law firm in trust. Mr. Dhaliwal told him the payment into trust was to facilitate payment to the Option Holders. On Mr. Dhaliwal's instructions, Mr. Aggarwal deposited the bank drafts into the trust account and paid the Option Holders, who went to his office, signed releases, and were provided with cheques.

The collapse of the transaction and the litigation

The completion date of October 18, 2019, was extended six times by agreement up to February 4, 2020. In late October 2019, Mr. Dhatt became aware that the deposit funds were not being held in the trust account, which initiated correspondence about where the funds were and whether certain versions of the agreements had been received. The parties retained litigation counsel. On February 4, 2020, the seller's new lawyer advised Mr. Dhindsa, the appellants' lawyer, that he had been instructed not to proceed any further with the sales. On February 11, 2020, the appellants elected to treat the Contracts as terminated and demanded the return of the deposits. By the time of trial, the seller company was dissolved and Mr. Dhaliwal had declared bankruptcy, leaving the appellants to pursue claims against Mr. Aggarwal and his law firm, Punjab Law Group LLP (also known as PLG LLP), and Aggarwal Law Office Ltd., for breach of trust or fiduciary duty and in negligence.

The trust and fiduciary duty analysis

The central question at both trial and on appeal was whether a trust was created over the deposits when they were paid into Mr. Aggarwal's trust account. The trial judge found that the contracts, read as a whole, showed the parties intended the seller would have use of the deposits before closing and would return them to the appellants if the transaction did not complete. Several contractual provisions supported this interpretation: the express requirement for the seller to return the deposits, which would not be necessary unless they were available for use by the seller; the elimination of standard language requiring the deposits to be held in trust; the reference to legal advice specifically relating to the deposit structure; the granting of options at the seller's expense; and the assumption of personal liability by the seller for the deposits. The Court of Appeal agreed with the trial judge's conclusion that the case was factually distinguishable from Fogler, where the lawyer knew of the trust in favour of the Royal Bank over the funds from his client and, contrary to the trust and his client's written instructions, used the funds to pay the client's fees and released the balance to the client. As discussed in Green Light, the mere holding or administering of trust property is not enough in itself to result in a finding that a lawyer is a trustee for the transferor. The appellants' argument that the contra proferentem principle should have been applied was also rejected; the trial judge found no ambiguity in the Contracts, interpreting them as clearly contemplating the deposit funds being paid out of trust and returned by the seller if the transaction did not complete. Absent ambiguity, the contra proferentem principle—an interpretive rule of last resort—was not engaged.

The duty of care analysis

On the negligence claim, the Court of Appeal upheld the trial judge's finding that Mr. Aggarwal did not owe the appellants a duty of care. Applying the Anns/Cooper framework and more recent guidance from Maple Leaf Foods, the court found no relationship of proximity existed between Mr. Aggarwal and the appellants. Distinguishing Tracy v. Atkins and Dhillon v. Jaffer, where a duty of care was imposed on lawyers to non-clients, the trial judge found Mr. Aggarwal did not undertake tasks that would normally have been performed by the appellants' lawyer, nor was he placed in a situation where he was required to safeguard their interests. Instead, his role was solely to carry out his client's "end of the contracts" by making deposits available, during a process in which the appellants had their own representation. The court further noted that the appellants had the opportunity to negotiate better protection for themselves from the risk of losing the deposits in their contracts with the seller, but chose not to, and that the contractual matrix linking the parties can be an important factor in finding a lack of proximity. The trial judge also expressed the view that even if a duty of care was established, Mr. Aggarwal met the standard of care, and further, if there was a breach of the standard, Mr. Aggarwal's failure to contact the appellants prior to paying out the deposit funds did not cause the loss claimed because the appellants had agreed to the deposits being paid out under the Contracts.

The ruling and outcome

The British Columbia Court of Appeal, in a unanimous decision delivered on March 18, 2026, by Justice Fleming with Justices Fisher and Grauer concurring, dismissed the appeal. The court found no error in the trial judge's conclusions that no trust or fiduciary obligation was established over the deposits, and that Mr. Aggarwal owed no duty of care to the appellants. The appellants' attempts to raise new allegations of fraud and professional misconduct on appeal were also declined, as they had not been raised at trial, the appellants had not sought leave to raise them, and the evidentiary record was insufficient to support them. The respondents—Mr. Aggarwal, Punjab Law Group LLP, and Aggarwal Law Office Ltd.—were the successful parties. No specific monetary award was ordered; the appellants' claim to recover the $600,000 in lost deposits was dismissed, and costs on appeal were not expressly addressed in the reasons.