Payment of Commission #48

By Gerry Neely
B.A. LL.B.

A recent judgement is of the good news/bad news type of bad joke - the good news, Mr. Agent, is that you have earned a commission, the bad news is that you can't enforce payment of it. These circumstances arose in a case in which a vendor agreed to sell the business, fixtures, goods and chattels of a hotel. In addition, the purchaser was given an option to purchase the real property within a period of five years following the sale of the business. The vendor paid to the agent a commission of $16,250.00 upon the sale of the business, and agreed to pay a commission of $31,000.00 if the option were exercised.

The option was exercised just prior to its expiration, but the vendor refused to pay the $31,000.00 commission. The vendor's refusal was based upon the fact that by the time the option was exercised, the agent had ceased to be licensed. The underlined words of section 37(1) of the Real Estate Act, which are repeated below, provided the answer as to whether or not the vendor's defence would be successful.

"37(1) No person shall maintain an action in any Court for the recovery of compensation for any act done or expenditure incurred by him as an agent or salesman without proving that he was duly licensed under this Act as an agent or salesman, as the case may be, at the time the alleged cause of action arose."

By this Section, the licensee's claim for compensation arises as a result of "any act done by him." The act done by the agent was the procurement of the option which was contained in an Interim Agreement dated December 2nd, 1976. Unfortunately, the underlined portion of the section states that the agent must be licensed at the time the alleged cause of action arose. That cause of action arose in 1981, when the option was exercised and at that time the licensee had ceased to be licensed.

The Judge reluctantly agreed with the argument of the defendant that the plaintiff could not enforce his claim for commission.

The judgment raises the question as to what the agent could have done to protect himself. Could the licensee have assigned the commission claim to another agent likely to continue in business over the five year period? The assignment would be absolute and payment to the first agent would be made upon the basis of a percentage of the commission to be collected by the second agent. Payment to the formerly licensed agent would not appear to be a breach of Section 30 of the Real Estate Act. That Section only prohibits payment of compensation to any person who was unlicensed at the time that person acted as an agent or salesman. In 1976 when the first agent acted to obtain the option, he held a license.

Although these circumstances are unusual, perhaps they merit consideration of an amendment to Section 37 which would allow the agent to enforce payment of a commission if the agent were licensed either at the time the act was done or at the time the cause of action arose.

1.

Morton Ho Associates Realty Ltd. v. Wong Brothers Construction Company Ltd., S.C.B.C. 49 B.C.L.R. 68.

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