Fraudsters nearly sold a B.C. resort condo they didn’t own for $580K, court hears

Big White Ski Resort near Kelowna, B.C., is pictured in this handout photo. (Big White Ski Resort)

The situation that befell two couples who owned property in a B.C. resort community was “the stuff of nightmares,” but it was not the result of a Realtor’s negligence, according to B.C. Supreme Court Justice Elin Sigurdson.

The judge was tasked with weighing the couples’ civil claim against Gary Turner and RLK Realty Inc., which alleged that the Realtor and his brokerage were liable for the fraudulent contract of purchase and sale that purported to transfer a condo at Big White Ski Resort from one couple to the other.

Luke and Kim McNally were the owners of the condo in question, and they had been in contact with Turner about the possibility of listing it for sale. While Sigurdson’s March 25 decision indicates that Turner and the McNallys agreed to enter a contractual relationship, it was at this point that an unknown fraudster or fraudsters impersonating the couple took over.

Turner told the court he believed he was still communicating with the real McNallys as he began attempting to market and sell the property, eventually finding buyers in the form of Russell and Anne Marie Kirby, who offered $580,000 for the three-bedroom unit.

After the fraudsters accepted their offer, the Kirbys sold their own Big White condo. They were preparing to take possession of the McNallys’ property when the conveyancing lawyer the fraudsters had engaged to complete the transaction recused herself, saying she could not adequately verify the fraudsters’ purported identities.

At that point, the transaction fell apart, leaving the Kirbys without any property at Big White and the McNallys reeling from the knowledge that their identities had been stolen.

The fraudsters were never identified.

The couples sued Turner and his employer, arguing that they had failed to take adequate steps to confirm the McNallys’ identities—steps that would have exposed the fraud sooner.

While she expressed sympathy for the couples’ plight, Sigurdson was unable to agree with their legal arguments. The judge ruled that Turner and RLK had met the standard of care that was required of them under the law at the time of the transaction and had not been negligent. She dismissed the claim and awarded costs to the defendants.

ID verification rules

“The plaintiffs’ case merits considerable sympathy,” Sigurdson writes early in her decision.

“The events before me are the stuff of nightmares. The intrusion and trickery committed by the fraudsters was an invasion of privacy, an attempt at a significant theft, and their actions resulted in harms ranging in seriousness from inconvenience to lost time and expenses, to lost opportunity cost in the value of property, to psychological disruption. These events and their effects have been understandably extremely distressing for everyone involved.”

The question, however, was not whether the couples suffered harm—the decision describes them as “utterly innocent bystanders” whose plight was “absolutely no fault of their own”—but whether the defendants were responsible for that harm.

The McNallys and the Kirbys advanced two arguments for how Turner and RLK could be held responsible for the fraud. The first of those was that they had committed negligence in their business relationship with the plaintiffs, and the second was that they had made negligent misrepresentations—a form of fraud.

Sigurdson tackled the negligence claim first, noting that to prove such a claim, a plaintiff must show that the defendant owed them a duty of care, failed to meet the expected standard of care and caused the plaintiff’s loss through this failure.

Turner owed a duty of care to the McNallys because he had agreed to serve as their Realtor, but Sigurdson ruled that the Kirbys did not have enough proximity to Turner for him to owe them a duty of care.

Even if he owed a duty of care to both couples, the question would be whether Turner met the standard of care expected of a Realtor in the circumstances, which Sigurdson ruled that he had.

The key consideration, according to the decision, was at what point in the process Turner was legally required to confirm the identities of his clients.

The decision notes that the Canadian Real Estate Association’s “Individual Identification Information Record” form, as it existed at the time of the transaction in late 2020 and early 2021, allowed for three methods of confirming a client’s identity.

The Realtor could compare the individual to a government-issued photo ID in person, compare the individual’s name, birthdate and address to a Canadian credit file or review two independent sources of ID without the client being physically present.

“The form expresses that the IIIR should be completed: i) for a buyer when the offer is submitted and/or a deposit made; and ii) for a seller when the seller accepts the offer,” Sigurdson’s decision reads.

Turner requested identification documents from the fraudsters at the start of his correspondence with them, according to the decision, but he did not receive them right away. The fraudsters eventually provided copies of documents they claimed were the McNallys’ passports the day after they accepted the Kirbys’ offer.

While this timing was not ideal, it complied with the rules for client identification that existed at the time, according to Sigurdson’s decision.

“I conclude based on the evidence before me that the standard practice at the time permitted a seller’s agent to verify a seller’s identity anytime before the completion of the sale,” the decision reads.

Negligent misrepresentation

The negligent misrepresentation claim also ended up being decided based on the ID verification process Turner followed.

To prove a negligent misrepresentation claim, the plaintiff must show that the defendant made a false or misleading representation on which the plaintiff relied, and the plaintiff must have suffered a loss as a result of their reliance. The defendant must also have breached the standard of care it owed to the plaintiff when making the representation.

The Kirbys argued that the contract of purchase and sale they signed constituted such a representation, but Sigurdson disagreed.

“Despite the fact that the alleged representations were made based on false information, the defendants did not breach the required standard of care in making them,” the judge’s decision reads.

“I have found that, at the relevant time period, the ID verification practices and timing were such that when Mr. Turner relied on the information in his possession in communicating the listing and accepting the offer he did not do so negligently.”

In a similar vein, the McNallys argued that Turner had made negligent representations about his compliance with standards for verifying identification, and Sigurdson disagreed.

“Given my conclusion that the verification undertaken could have satisfied the Dual ID process, and that the identification was not required to be completed until the sale completion, his representation of the process is fair,” the decision reads.

“I understand that the McNallys feel that, in hindsight, there were signs that things were not as they seemed. This retrospective assessment of the need for greater suspicion does not give rise to a claim in negligent misrepresentation.”

For these reasons, the judge dismissed the couples’ claims and awarded costs to Turner and RLK.

“I must assess the facts of this case on the basis of the standards in place at the time, and not on what I wish or believe should have taken place,” the decision concludes.

“I would not find, given what was known at the time, and given the evidence of the requirements and practices followed at the time, that Mr. Turner or RLK Realty acted negligently in the circumstances or caused the plaintiffs’ damages.”