Commission Lost by Licensee Who Introduced Purchaser #221

Jul 01, 1994

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By Gerry Neely
B.A., LL.B.

As the real estate industry in British Columbia moves toward the adoption of buyers' agency as an alternative to sub-agency, it is interesting to read decisions in which the licensee's claim for commission would have had a different result if the licensee had been acting for the buyer.

In an Alberta case, a licensee was asked to assemble a parcel of land between 5,000 and 10,000 acres for an undisclosed purchaser, a Hutterite colony. The licensee found an owner with sufficient suitable land and obtained a listing, but negotiations between the owner and the undisclosed purchaser failed because they could not agree upon the price.

The licensee decided to put pressure upon the owner to reduce its price, by assembling a competing, but less suitable block of land near the acreage the colony preferred. This stratagem resulted in the owner selling the acreage to the colony at a reduced price.

The owner refused to pay the agent's claim for commission, arguing that the agent's reasons for assembling the second parcel disentitled it to commission, because those actions were inconsistent with the duty the agent owed to its principal, the owner.

The Alberta Court of Appeal agreed with the trial judge's conclusion that while the agent was the effective cause of sale, its actions were more consistent with it being the agent of the purchaser rather than the seller, disentitling it to commission.

The agent could have employed as tactic safely, if it had been agent for the buyer. To protect itself for commission the agent would have had to either negotiate a commission to be paid by the buyer, or if paid by the seller, under a contract with the seller containing an acknowledgment that the buyer's agent owed no fiduciary duty to the seller.1

***

Deceit - a fraudulent misrepresentation or scheme intended to deceive and trick another, who is ignorant of the facts and who is prejudiced or damaged by the deceit. A finding of deceit allows the court to award damages to compensate people for uncertainty and stress, as well as punitive damages where the conduct of the other party is deserving of punishment.

The court found a purchaser to be deceitful in circumstances where a mother and daughter and their respective spouses owned two adjoining parcels of land which they wanted to sell. For reasons which are too complicated to recite they didn't wish to sell the mother's property, unless the daughter's property was also sold.

A purchaser, "A", viewed the mother's property, but expressed an interest in purchasing the daughter's property. Within a day or so of "A"s visit, an offer by "M" for the mother's property with a closing date of July 15th was accepted, subject to the sale of the daughter's property by a certain date.

Then an offer was received from "A" to purchase the daughter's property, closing date July 30th. Attempts to have the closing date set prior to the closing of the sale of the mother's property failed, because the purchaser said that his money would be invested until July 30th.

The sale of the mother's property completed, but "A" defaulted, forfeiting a $5,000 deposit. The daughter resold her property at a loss, and borrowed money to complete the purchase of other property she had agreed to purchase on the strength of "A"s offer.

The evidence at the trial established that "A" and "M" were working together and that the $5,000 deposit had been drawn on "M"s account. They wanted only the mother's property and had no intention of purchasing the daughter's property.

As a result of "M"s deceit, the daughter received damages of $50,000 for the reduced price on the resale, plus one year's interest on the amount she eventually received; $15,000 for aggravated damages for the uncertainty and stress caused by "MI's action; and $10,000 for conduct described by the judge as "reprehensible, callous and harsh and deserving of punishment."2

  1. Century2lf.E.M.RealtyLtd.v.BeaunaVistaFarmsLtd., 1994,(3W.W.R.685).
  2. Verleg v. Angeloni and McClain, S.C.B.C., #C906159 Vancouver Registry, Reasons for judgement, dated July 5, 1993.

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