Finder’s Fee; Unlicensed Person Entitled to Enforce Payment #334

By Gerry Neely
B.A. LL.B.

A Supreme Court of British Columbia judge decided an individual who was not licensed as an agent or salesperson under the Real Estate Act was entitled to payment of $50,000 for introducing a buyer to property sellers. Since Section 47 of the Act bars a claim for commission or other remuneration for an act done as an agent or salesperson by an unlicensed claimant, why did the judge come to this conclusion?

The sellers were the majority shareholders of a limited company that was the registered owner of a commercial/apartment complex. The company was a bare trustee for the shareholders, whose proportionate interests in the complex were represented by shares of the company and a trust agreement of all shareholders.

When the minority shareholder declined to buy their interest, the majority shareholders agreed to pay a finder's fee to an individual, if he brought to them a buyer prepared to pay their price. When the finder did, the minority shareholder exercised a right to purchase by offering the majority an amount that gave them the same net they would have received from the first offer.

However, the minority shareholder refused to pay the finder's fee. An application was made to court and a judge ordered the majority shareholders to decline the first offer and sell to the minority shareholder. He also directed that a further hearing be held to determine whether the finder could enforce payment of the fee.

The finder's argument was that he was not the agent of the sellers and therefore Section 47 did not apply to him. The sellers had not authorized him to act on their behalf to deal with third parties. He merely provided information. He placed himself in the same category as unlicensed fee claimants in other cases against whom the Section 47 defence (or its equivalent in other provinces) had been raised.

In one case, information on homes available for rent had been provided; in another, the fee was to negotiate an extension of a property purchase closing date; and in a third case, the fee was for advice upon how to deal with the prospective buyer. In each case, the court concluded that the claimant was not acting as an agent as defined in the relevant real estate act.

The minority shareholder argued that the finder did more than provide information. His acts in searching out buyers to introduce to the sellers were identical to the principal act of an agent, which is to bring buyers and sellers together, and which very often is the effective cause of sale.

The judge's conclusion was that the "the mere act of introduction" did not fall within the definition of agent found in Section 1 of the Act. Having reached this decision, the judge did not have to address another argument of the finder, namely, that a sale of shares does not fall within the definition of real estate, also in Section 1. No doubt that issue will be debated in the appeal proceedings that have commenced.

1.

Lindholm Land & Investment Corporation v. Danzo,Reasons for Judgment, Victoria Registry, March 7, 2001.

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