Fiduciary Relationship Responsibilities Between the Licensee and Client #29

By Gerry Neely
B.A. LL.B.

Legally Speaking Column No. 1 discussed the fiduciary relationship between the licencee and the person who has retained the licencee to sell his property. Those principles were examined in a recent case where the licencee exchanged his property for that of the principal's property. The principal had listed a 2 1/2-acre semi-rural parcel of land upon which was situate a well-aged two bedroom bungalow. A licencee in the office which had the listing offered in July to purchase the property for completion in October. The offer by the licencee to purchase the 2 1/2-acre property was subject to several conditions, including tentative approval from all appropriate authorities for the subdivision of the property, to be obtained by September 15th, 1980. Another condition was approval of financing. The principal's offer to purchase the licencee's three bedroom home was also subject to several conditions, one of which was approval of financing by August 4th.

These negotiations took place in 1980 when residential real estate values in the Victoria area were increasing substantially. During September the licencee asked the principal for an extension of the date for completion until December 15th, and on October 7th, new interim agreements were signed containing the same prices as the July agreements, and containing similar condition precedents except that the subject clauses relating to financing had been dropped. The licencee had written assurance of financing while the principal had only oral assurances which subsequently were not honoured. During the discussions leading up to the October 7th agreements, the principal had asked the licencee whether property values for the two properties had changed in the two months since the July agreements were signed. The licencee said that while they had, that would have made no difference because both of the properties would have risen equally in value. In the licencee's opinion, the difference of $15,100.00 between the prices for the two properties which had been settled in July, still represented the difference in value between them in October. The licencee had until December 1st to remove the condition relating to approval for subdivision, which he did.

Ultimately, the principal declined to complete and the licencee sued for specific performance. The critical question at trial was the accuracy of the advice given by the licencee in October that there had been no change in the spread in price of the two properties. The principal had no other professional guidance apart from the licencee and the suggestion by one of the licencee's colleagues to the owner that she obtain independent legal advice did not assist the licencee, because he was aware that she had not done so. Appraisal evidence given on behalf of the principal indicated that her property had increased in value somewhat under 20%, or an increase of $21,400.00. The evidence also suggested that the increase in value would be attributable principally to land rather than to improvements. Since the value of the principal's property was greater than that of the licencee's, it meant that the licencee's property would have had to increase by 35% to maintain the same spread in price. The evidence on behalf of the licencee as to the increase in value of his property was based upon the weekly statistical summaries of the Victoria Real Estate Board which appeared to prove that the average price paid for a three bedroom home increased by 38.7 per cent from the third week of July to the first week of October. The same weekly summaries showed that the average price of houses with one or two bedrooms increased by only 4% and that houses with four bedrooms decreased by 5%. The Court found it difficult to accept these one week summaries as being representative of the changes which had taken place, because to do so would have meant accepting the lower percentage changes up and down as being representative of the change in values of the other categories of homes. The Court held that the sampling represented by one week's sale was too small to determine the average price and instead accepted the appraisal evidence of value offered on behalf of the principal.

In considering the respective positions of the licencee and the principal, the Court also decided that the licencee had given himself somewhat in excess of four months to decide whether to take up or abandon the sale as might prove to be in the licencee's interests. The Court looked upon this as an option for which the licencee paid nothing.

The Court held that the licencee had not discharged the onus of proving that he had complied with his obligation to the owner and held against his action for specific performance.

The principles applied by the Court are summarized in the following statement: ". . . an agent purchasing from his client who enjoys an advantage - such as the present plaintiff (licencee) enjoyed - by virtue of greater knowledge and acumen, must show that, innocently or otherwise, he did not take advantage of this disparity."'

1.

Roga Holdings Ltd. v. Hystad,S.C.B.C. 1982 B.C.D. Civil 3795-01.

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