Commission, Claim by Former Employee for Listing Portion of The #86

Jun 01, 1986

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By Gerry Neely
B.A. LL.B.

As every licensee knows, the listing obtained by that licensee is the property of the agent for whom the licensee is employed at the time the listing is taken. The licensee may lose his right to a commission if he moves his licence to another agency and the listed property is sold after the change of employment has occurred.

Those agencies which have policy manuals or contracts of employment, however, may provide that, depending on the circumstances, the departed listing licensee shares in the distribution of the commission.

The Ontario Court of Appeal heard a case involving a claim by a salesman for the listing portion of the commission of property listed by the salesman that was sold after he had moved to another agency. His contract of employment stated that the listing was the property of the company and the salesman was entitled only to commission if he were an employee of the company on the date the property "is sold or listed." It further provided that if a listing were sold after his employment ended, then any commission he received would be at the sole discretion of the company.

The salesman obtained a listing for the sale of a very large residential complex in Ottawa, inspected the property, photographed it, assembled the necessary financial data and other relevant information, and prepared a brochure for presentation to prospective purchasers. Together with another salesman in the same office who had found a purchaser who was interested in purchasing the property, they worked over a number of months and finally an agreement was reached for the sale of the property at a price of $9,100,000.00.

However, before this contract came into being, the salesman had moved to another office and, concerned about his commission, kept in touch with both the other salesman working on the transaction and the office manager. He was reassured by their statements that he would be taken care of. He took this to mean that he would receive a share of the commission.

Instead, the company, through the office manager, exercised its sole discretion in favour of the other salesman, who received both the listing and selling portions of the commission. The evidence at the trial disclosed that the office manager received more than half of the listing salesman's portion of the commission. Since the office manager held a salaried position and was not entitled to any commission, his only explanation at the trial for the receipt of this money was the repayment of a small loan and a consulting fee paid to him by the other salesman for advice given by the office manager with respect to transactions unrelated to the property in question.

Having decided that he had really been taken care of, the departed listing salesman sued for the listing portion of the commission and was met by the argument that his entitlement was at the sole discretion of the company. It had exercised its discretion against him and that was the end of it.

The trial judge decided that the payment to the office manager was a bribe to him to exercise his discretion in favour of the selling salesman. The trial judge, however, felt that he couldn't interfere with the company's exercise of its discretion.

The Court of Appeal decided otherwise; it held that in exercising its sole discretion, the company could not deprive a former salesman of commission earned through services performed during his employment, without reasonable grounds for so doing. If the clause were to have any meaning at all, it could not be interpreted as if it were to say no more than "we will pay you your commission only if we feel like it." Instead, the sole discretion of the company had to be exercised reasonably, honestly and in good faith.

The Court held that the company had to show that in the circumstances, its decision was not unreasonable. The evidence of the collusive agreement between the selling salesman and the office manager made it impossible for the company to show that it had acted reasonably in exercising its discretion. In the result, the former salesman was successful in his claim for payment of the sum of $57,625.00.

  1. Greenburg v. Meffert, 37 R.P.R., pg. 74.

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