Vicarious Liability: A Broker’s Personal Promise Does Not Bind the Brokerage

In Ceballos v. Pearl Hospitality Inc., 2020 ONSC 769, FCL LLP Associate, Sienna Molu obtained a favourable decision for the defendant brokerage after persuading the Ontario Superior Court that there was no genuine issues requiring trial. The court agreed that, contrary to the plaintiffs’ claim, the broker could not bind the defendant brokerage for a personal promise he made to the plaintiffs, without the express authority or knowledge of the brokerage.

In this case, the plaintiffs alleged that when securing their second mortgage, their mortgage broker, Mr. Lewis promised them a reimbursement of $5,000.00. This amount was never paid. The plaintiffs asserted that the brokerage, Mortgage Centre Canada (“MCC”), should be held vicariously liable for Mr. Lewis’s breach of agreement. Ms. Molu brought a motion for summary judgment to dismiss the claim against MCC. The court granted the motion.

In deciding this case, the court deliberated on two issues: whether there was an agreement between Mr. Lewis and the plaintiffs and beyond that, whether if there was an agreement, Mr. Lewis had the authority to bind MCC. The court declared that even if there was an agreement, this did not automatically establish the liability of MCC. Mr. Lewis’s intention was to do a personal favour for the plaintiffs and he did so without seeking the approval of MCC.

Vicarious liability of a company for the wrongful acts of its agents can only be established if the agent has the ostensible or apparent authority to bind the company. In addition, the agent or employee must commit the act in the course of their employment. An employer however, is not generally liable for wrongful acts committed by an independent contractor. In this case, Mr. Lewis was an independent contractor, and he acted beyond the scope of his employment. The plaintiffs failed to show that MCC authorized the agreement or that it was closely connected to any authorized acts. As such, the plaintiffs failed to establish a cause of action against MCC.

Arguably, this case stands for two important points: first, that to hold the brokerage vicariously liable for the negligence of the broker, the brokerage must have provided actual or ostensible authority to broker to bind the brokerage; and second, that a brokerage will not be held vicariously liable for unauthorized acts committed by an employee, unless said acts are closely connected to authorized acts.