Licensees’ Duty to Disclosure of All Facts to His Principal #1

By Gerry Neely
B.A. LL.B.

The selling agent brought an offer to the listing agent for $85,000.00 on September 26, 1977, which was accepted by the vendors, subject to their obtaining a release of a prior offer by September 29th. The release was obtained, the contract became binding and on September 30, 1977, the selling agent took an exclusive listing from the purchaser for the re sale of the property at $120,000.00. On October 1st, 1977, the property was re-sold for $100,000.00. Both sales were closed concurrently on October 28th, with the pertinent documents in each sale being registered within two minutes of each other at the Registry Office. The only persons unhappy with these results were the vendors, who decided that the additional $15,000.00 over the price they received should have been theirs. They therefore sued the first purchasers, the selling agent and the real estate firm employing the selling agent.

At the trial, these additional facts (as found by the Court) were revealed:

1. The vendors had asked the selling agent if he thought that the purchaser would pay more, and he advised them that their house was only attractive to a certain element of the public and that in addition the offer made to them was unconditional and it should be accepted.
2. The first purchaser had bought and sold a number of properties through the selling agent, and both had been partners in a real estate syndicate.
3. The first purchaser stated that he intended to use the property for a residence and construction office, carry out some improvements and possibly offer it for sale the following spring. This evidence was rejected since his execution of an exclusive listing agreement the day after the conditions were waived seemed somewhat inconsistent with his stated intentions.
4. Between September 27th and September 30th, the selling agent had shown the second purchaser other properties which they found unsatisfactory. The selling agent advised them that he knew of another property that he thought would suit their purposes. He only disclosed its identity to the second purchasers after the exclusive listing agreement was signed (September 30th, 1977), and at noon on the following day, he took them to see the property, which they agreed to purchase.

On these facts, the Court held that the selling agent had allowed and even persuaded his principals, the vendor, to enter into the agreement with the first purchaser with undue haste and without making full and fair disclosure of the prospect of the potential sale to the second purchaser. In doing so, the selling agent violated the principle that he is required to disclose to the vendor all information that the selling agent acquires which would be of advantage to the vendor. Since this was done in the course of his employment, both he and his employer were liable in damages. The damages were fixed at $14,000.00, which was the difference between the two prices, less the commission that would have been paid on that amount. They were also called upon to pay the plaintiffs' costs, both for the action against the selling agent and his employer, but also the costs of the action against the purchaser.

The principles which the Court derived from the facts and the review of other cases are the following:

1. That the relationship between a real estate agent and the person who has retained him to sell his property is a fiduciary and confidential one;
2. That there is a duty upon such an agent to make full disclosures of all facts within the knowledge of the agent which might affect the value of the property;
3. That not only must the price paid be adequate but. . . must be as advantageous to the principal as any other price that the agent could, by the exercise of diligence on his principal's behalf, have obtained from a third person; and
4. That the onus is upon the agent to prove that those duties have been fully complied with.

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