Limited Dual agency--Defining "Personal Information" and Limitations on Dual Agency Relationships #366
By Gerry Neely
A recent BC Supreme Court decision raises the question: are there circumstances when a licensee should avoid entering into a dual agency relationship? I also believe this case is the first to examine the meaning of "personal information" in the Limited Dual Agency Agreement.
A licensee undertook the sale of a commercial business with an advertisement that drew the attention of a buyer interested in looking at it and other businesses. The buyer signed an Exclusive Buyer's Agent Contract, which contained the licensee's acknowledgement that only the seller would pay commission, and the buyer's agreement to sign a Limited Dual Agency Agreement if he made an offer to purchase the property.
While the seller's licensee was actively giving the buyer information about the commercial business, the buyer retained another licensee to represent and advise him. The seller's licensee was to submit the buyer's offer and the expected counter-offer, and both licensees agreed upon a division of the commission. Thereafter, they thought the seller's licensee acted only for the seller, and the other for the buyer. Despite this, the seller's licensee had the buyer sign a Limited Dual Agency Agreement in accordance with their original agreement, and the buyer bought the commercial business for $12,600,000.
A few years later, having decided he had paid too much, the buyer sued both licensees for $2,468,473. He argued the licensees had breached s.36 of the Real Estate Act, the Exclusive Buyer's Agent Contract and the Limited Dual Agency Agreement.
The judge rejected the buyer's evidence of the breach of s.36 disclosure requirements, and ruled the Exclusive Buyer's Agent Contract was repudiated when the buyer decided to seek another advisor--the seller's licensee accepted this when he agreed to share commission with the other licensee.
The buyer argued the licensee had breached the Limited Dual Agency Agreement by revealing to the seller that he was able to complete a business transaction for $10-15 million without the buyer's consent. He claimed this encouraged the seller to set a higher price than originally intended.
The judge agreed it was the licensee's obligation to "keep the confidence of the buyer with respect to information not in the public domain, of commercial or industrial value, given on a business-like basis, and with some avowed common object in mind." However, he also held that, while this information was personal, the buyer consented to its release because he had provided it for use in a resume, which would be given to the seller. The buyer's action was dismissed.1
The seller's licensee was not trying to double-end the commission. In hindsight, there was no need for the Limited Dual Agency Agreement, which exposed him to the duties and limitations of a dual agent.
The limitations mean there are circumstances when dual agents cannot give the advice for which they were retained. Complex commercial transactions are one instance. Multiple offers in a hot market may be another. One cannot avoid the circumstance where licensees representing a seller and buyer, respectively, work in the same office or for a company with multiple offices.
An agent hoping to double-end should first assess the risks and rewards of being a dual agent.
The October 2003 Report from Council, published by the Real Estate Council of British Columbia, contains an excellent article detailing an Alaska Supreme Court decision. The case deals with the conduct of a listing agent who did not discuss agency relationships with a prospective buyer until after the buyer had viewed the property and made an offer to purchase it. Her actions resulted in an undisclosed dual agency relationship and led to an award, which included punitive damages of $200,000. As the article points out, the decision could be followed in this province because the Alaska agency disclosure appears to be similar to that in s.36 of the Real Estate Act.
|1.||Lee v. Royal Pacific Realty Corp. and Chan, SCBC, Vancouver Registry, Reasons for Judgment, June 12, 2003.|
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