Commissions, Garnishees and Interest #97

By Gerry Neely
B.A. LL.B.

Before weave the memory of 1986 too far behind, some questions have been asked concerning several of the 1986 Legally Speaking columns.

Column 90 discussed a case where an agent was unable to collect a commission where a purchaser had defaulted, and the listing contract omitted to state what the vendor's obligation would be if that occurred. A number of Boards have covered this omission by providing that the agent is entitled to receive the commission or the deposit, whichever is the lesser. The recommendation in the column was that this part of the listing contract should be drawn to the attention of the vendor. This recommendation has been questioned on the basis that if the listing contract signed by the owner gives the agent a claim for commission even if the purchaser defaults, what more is necessary?

The recommendation is based upon remarks found in the Supreme Court of Canada decision referred to in Column 90. The first remark was that it is the normal understanding of an owner that he hires an agent to find a purchaser who completes his purchase. Therefore, if the owner is to pay a commission or relinquish the deposit to the agent, the agent's rights must be stated in clear and unequivocal language. Since the agent's right to the commission or deposit, whichever is the lesser, appears to be a clear and unequivocal statement, that would appear to be the end of it.

That brings us, however, to the second remarks found in the decision. The Judges referred to the fact that the listing contracts are usually drafted by real estate associations and therefore originate with the listing agent, rather than with the owner. Even if the wording is clear and unequivocal, as one of the Chief Justices said, "more often than not they are signed by the vendor without the benefit of legal counsel and often without even reading them." The Judge went on to say that the signature of the owner on a document will bind the owner if the party relying upon the document (the agent) can reasonably believe that the owner accepted or assented to the contents of the document.

The best proof of that acceptance is evidence that the contents of the listing contract were drawn to the attention of the owner and the listing agent had every reason to believe that the owner understood what was being discussed. The suggestion to high-light, perhaps by capitalizing that part of the contract dealing with payment of the lesser of the commission or deposit, was to make it more difficult for the owner to deny knowledge of it.

Column numbered 92 referred to the difficulty faced by a creditor in attempting to garnishee any commission salesman's wages. The difficulty arises because the amount to be garnisheed must be a wage payable or due within 7 days after the date of the affidavit sworn in support of the garnishee order. This raised the question as to whether or not the Department of National Revenue was bound by the same laws that apply to other creditors. The fact is that the Department of National Revenue does have an advantage. When it demands payment of an amount due from an employee, the demand remains open until the liability to Revenue Canada is satisfied. In addition, unlike an ordinary creditor, Revenue Canada does not need to obtain a judgment and it is not limited in the amount that it can demand is to be paid to it from a salary cheque.

Column numbered 95 dealt with interest calculations and it resulted in two separate questions. The first was as to the interest calculation by which the first eleven monthly payments were applied entirely to principal. It was suggested that this is either wrong, or at the least, confusing and unnecessary given that the calculations were based upon the 10.48% monthly equivalent of 11% compounded annually. These facts were taken from the reasons for judgment and must have been drawn from the expert evidence given to the Judge. If any other expert wants a forum to challenge the mathematical calculations, I will provide it in a Legally Speaking column.

The second question concerned the correctness of the conclusion that interest was to be compounded once a year, notwithstanding that payments were to be made monthly. Whether the decision is correct in law, this case illustrates the wisdom for anyone charging interest of stating whether the compounding is to be done annually, semi-annually, monthly, weekly, daily or whatever.

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