What if my deposit was released before the deal fell apart?

A deposit that has already left the account where it was held is a different problem from one still sitting in trust. What you can do turns on three facts: who held the money, who authorized the release, and what your purchase agreement said the deposit was for. Gather the agreement, any deposit receipt and every release instruction before you contact anyone, so you can ask precise questions.

If a lawyer held it in trust

Ask which province’s law society rules govern the trust account that held the deposit. In British Columbia, Law Society Rule 3-64 says a lawyer must not withdraw or authorize the withdrawal of any trust funds unless the funds fall within the listed categories, one of which is funds properly required for payment to or on behalf of a client or to satisfy a court order. Ask the lawyer in writing what instruction authorized the release and who gave it. A release you did not instruct or agree to is worth raising with the lawyer and, if needed, with the law society.

If it went straight to the seller

If the money was paid to the seller or someone else before the deal collapsed, the question is about the agreement rather than a trust rule. Look for wording on when the deposit is released, whether it is credited against the price, and whether it must come back if a condition fails. If the release matched the agreement, your claim may be for a refund under its terms. If it did not, the claim may be that the agreement was breached. The page on how a deposit is handled in a business sale covers deposit clauses.

Watch the clock

A claim to recover money is subject to a limitation period. Ontario’s Limitations Act, 2002 says that, unless the Act provides otherwise, a proceeding must not start after the second anniversary of the day the claim was discovered. British Columbia’s Limitation Act says that, subject to the Act, a court proceeding must not be commenced more than 2 years after the day the claim is discovered. Alberta’s Limitations Act gives a defendant who pleads it immunity if the claimant does not seek a remedial order within 2 years after the date the claimant first knew, or in the circumstances ought to have known, of the injury, that it was attributable to the defendant’s conduct, and that it warrants a proceeding, or within 10 years after the claim arose, whichever period expires first. Each statute has its own rules on discovery and its own exceptions, and other provinces differ. Write down the day you first learned the deposit had been released.

First steps

• Ask the holder in writing who authorized the release, when, and on what document.
• Compare that answer with the deposit clause and any written release instruction.
• Take legal advice on the limitation period before you negotiate further.