Commission #24

By Gerry Neely
B.A. LL.B.

"A 1980 decision in which licensees who did not have a listing were successful in obtaining payment for services rendered by them,". . . illustrates that even in a slumping market for real estate, there are opportunities for a licensee to be of service and to be paid for doing so. An owner gave a first mortgage to a company and then granted six mortgages to another company. Default having occurred in payment of the amount owed under the first mortgage, the first mortgagee commenced a foreclosure action. The second mortgagee was in financial trouble as well, and, as a result, a Receiver-Manager of the second mortgagee was appointed. The Receiver-Manager applied in February, 1980 in the foreclosure action for exclusive conduct of sale and for the right to list the property for sale with a real estate firm at a commission of not more than seven per cent (7% ) to be paid from the gross selling price. This application was approved.

In August, 1980, a real estate firm brought to the Receiver-Manager an offer of $900,000.00, and the Receiver-Manager instructed his solicitors to apply to the Court for an Order that the offer be accepted, and that real estate commission be paid in respect of that offer. However, during the period between February and August, two other licensees had been dealing with the registered owner, who had encouraged them to try and find a purchaser. Just prior to the date when the application to approve the $900,000.00 offer was to be heard, the two licensees brought the registered owner an offer at $1,100,000.00 which was accepted by the registered owner, subject to Court approval.

At the hearing, the Court rejected the offer brought by the Receiver-Manager and approved the sale of the property at $1,100,000.00 but because of objections raised by counsel acting for the Receiver-Manager, declined to deal with the question of payment of the real estate commission. Counsel argued that even though the Receiver-Manager had benefitted by the actions of the two licensees in that the second mortgagee received an additional $200,000.00, no commission was payable as the property had not been listed with the two licensees, nor had there been any discussions between them and the Receiver-Manager or with any officer or servant of the second mortgagee. The argument of the two other licensees was that through their efforts and services, a substantial benefit was obtained by the Receiver-Manager of the second mortgagee and it would be inequitable and against conscience to allow the second mortgagee to benefit as a result of services performed by others, without payment for those services. The concept to which the Court then referred was that of unjust enrichment, which arises when:

1. A defendant has been enriched by receipt of a benefit,
2. He has been enriched at the plaintiff's expense, and
3. It would be unjust to allow the defendant to retain the benefit.

The Court went on to discuss the circumstances under which an individual is liable for payment for services rendered. Liability would occur normally where the individual requested the services. Liability may also occur, however, where, although no request was made, the individual had an opportunity to reject the services, but, instead, accepted them, "with actual or presumed knowledge that they would be paid for". The evidence before the Court made it clear that at the hearing to approve the ultimate sale, the Receiver-Manager was aware of the part played by the two licensees and was made aware, further, that they were looking for payment of a commission from the sale proceeds. The Court held that since the second mortgagee received a benefit and since the Receiver-Manager had not objected to the sale, the second mortgagee was unjustly enriched at the expense of the two licensees.

Using the rate of commission that would have been paid to the agent who brought in the offer at $900,000.00, $30,000.00 was fixed as fair and reasonable compensation for the services performed by the licensees in arranging the sale for $1,100,000.00.

An important ingredient in the success of the licensees was that their intention to claim a commission was made known to the Receiver-Manager in the Court hearing. It is important, therefore, that a licensee makes certain that this fact is brought before the Court, even if the licensee is separately represented by counsel at the Court proceedings.

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