Sep 01, 2000

Commission, Receiver/Manager Can’t Be Sued Personally for Sale of Unionized Business, Seller Discharged Employees, Not Liable for Payment Made by Buyer to Settle Grievance #327

Sep 01, 2000

Commission, Receiver/Manager Can’t Be Sued Personally for Sale of Unionized Business, Seller Discharged Employees, Not Liable for Payment Made by Buyer to Settle Grievance #327

By Gerry Neely
B.A. LL.B.

An agent who is given a listing of real property by a receiver/manager licensed under the Bankruptcy and Insolvency Act can confidently expect to be paid if a buyer contracts during the term of the listing to purchase the property in question and completes the purchase. Unfortunately, the agent with a listing from the owner of the property can rarely expect to be paid from the proceeds of sale, which usually are insufficient to pay both the secured creditors and the commission.

An owner's agent with a listing of development property, who was in this position, sued the receiver/manager personally for refusing to pay the commission. The agent obtained a conditional offer from two companies which had been involved with the development of adjoining property, also owned by the agent's principal. Although the offer was accepted, the sale did not complete because of the intervening action of a receiver/manager appointed to manage the affairs of the principal.

The facts are complex but include the granting by the receiver/manager of a listing to an agent who was entitled to a commission if a binding contract was entered into during the term of the listing and the sale completed. Payment was not dependent upon the agent introducing a buyer to the property.

Eventually a settlement was made with the two companies and court ordered approval was given to their purchase of the property and to the payment of commission to the agent appointed by the receiver/manager. The owner's agent's claim for commission was lost because of a section of the Bankruptcy and Insolvency Act that bared a claim against a receiver/manager personally under a contract made between the debtor and a creditor prior to the date of the appointment of a receiver/manager.

The result might have been different if the receiver/manager had agreed in the beginning to be bound by the owner's agent's listing contract. A licensee in the same position as the owner's agent, who wants to have the receiver/manager accept the agent's listing, will have to first determine whether the licensee's principal will consent to what may be a conflict of interest between the principal and the receiver/manager.1

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It is common in a commercial contract for the sale of a business as a going concern, to find a clause requiring a seller to terminate the employment of all employees, and to indemnify against claims for employees for "wages, salaries, bonuses, pensions or other benefits, severance pay, notice or pay in lieu of notice and holiday pay, for any period prior to closing."

The words in quotations are taken from an asset purchase agreement of a unionized business. The buyer rehired all but five employees, who grieved and received a settlement of their claims from the buyer who sued the seller for the amount paid. The buyer lost upon a finding by the judge that it was a successor employer; the amounts paid were not severance payments but, instead, were settlements of the employees' claims to be reinstated. In addition, the payments were not made for periods prior to closing.2

  1. Howlett et al. v. 512046 B.C. Ltd., BCSC, Vancouver, Reasons for Judgment, June 2, 2000.
  2. Woodgrove Manor Ltd. v. Kem Enterprise Inc. et al., BCSC, Victoria, Reasons for Judgment, May 2, 2000.

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