Jun 01, 2004

Commission Claims - Agent and Not Licensee Must Sue Under s.43 of the Real Estate Act; Importance of a Written Record #372


By Gerry Neely
B.A. LL.B.

A false start raised several expensive obstacles for a licensee who sued for payment of a commission. The commission agreement was made by letter from the licensee's client, a limited company, addressed to the licensee and his agent. It agreed to pay a commission to the licensee personally, if a binding lease was signed between the company and a named prospective tenant.

When that occurred the company acknowledged the commission had been earned but, upon a change in share ownership, it refused to pay. An action was commenced in the name of the licensee.

The company's first defence was that the licensee had no status to bring the action because of s.43(2) of the Real Estate Act. It does not allow a salesperson to accept remuneration with respect to a real estate transaction, other than through the agent employer. Therefore, the licensee's agent should have started the action.

This forced the licensee to apply to the BC Supreme Court to have the agent added as a party. A judge has the discretion to do this to ensure that all issues in a proceeding can be effectively decided. Since the agent was named in the commission letter, the judge included the agent.

The second defence was that the licensee was not an employee of the agent, because the licensee was named as an independent contractor in their written contract. This is significant because s.43 of the Act only allows a salesperson to enter into a contract of commission if the salesperson is doing so as an employee of the agent.

The judge examined the terms of the contract containing the licensee's obligations and duties. These exceeded the obligations and duties the licensee would have had as a self-employed person. This, and a termination clause for breach of contract, led the judge to decide that the licensee was an employee of the agent, despite the classification of independent contractor for income tax or other purposes.

The final defence claimed the contract was void for uncertainty because, while it was made with both the licensee and the agent, the commission was payable only to the licensee. The judge rejected this argument, saying the commission could be accepted by the licensee for delivery to the agent to be distributed according to their contract.

The licensee's success would normally have entitled him to an order for costs against the company. However, since he commenced the action instead of the agent, he had to pay his own costs.1

* * *

A Victoria salesman wrote to describe his success in suing for commission without a lawyer in small claims court, as the representative of the agency.

His client accepted a conditional offer after he and the buyer's agent reduced their commission slightly. The client was grateful for this concession and appeared to be pleased when the conditions were removed; however, she repudiated the sale a few days later. The deposit was returned to the buyer. Through her lawyer, she claimed she had been reluctant to sell and was rushed into a decision in the dead of night.

The salesperson prepared an inch-thick volume of all documents from the listing contract to the amendment removing conditions, all signed by his client. It included the date, time and name of each REALTOR for 14 showings over the 56 days of the listing. The judge concluded the licensee's evidence was entirely credible, while the defendant's was not.

His suggestion to REALTORS: "From the very first contact with a potential client . . . document, document, document."

 1. Cameron v. Salmon Arm Business Park Ltd.,, SCBC, Salmon Arm, Reasons for Judgment, April 27, 2004.

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