Sale of 100% the Shares of a Company Owning Real Estate Within the Definition of Real Estate "Employee" #241
By Gerry Neely
A 1981 decision of a judge of the Supreme Court of British Columbia goes some distance towards answering the question of whether licensees can sell the shares of a company which own real estate, and collect a commission for doing so. In addition, it may provide some support, little and perhaps too late, for those persons claiming the status of independent contractors, in insolvency proceedings involving their agent.
The facts were that shareholders of a company owning land adjacent to a golf course, which was to be developed for residential use, offered an individual a commission of $20,000, if he found a purchaser of their shares. The individual was not licensed under the Real Estate Act, and at his request, his status was stated to be that of a consultant or independent contractor, rather than an employee.
Eventually a sale was made, but payment of his commission was refused because it was argued that his actions brought him within the definition of an agent, and Section 37 of the Real Estate Act prevented him, as an unlicensed person, from enforcing payment.
Section I of the Act defines real estate to include a business, or a share in a business. That definition is not broad enough to cover the shares of the company that carries on the business of developing the real estate owned by it. The salesperson's argument was then, that the sale of shares was not a disposition of real estate, which required him to be licensed in B.C.
The judge referred to a 1951 Supreme Court of Canada decision concerning the interpretation of a similar section in the Ontario Real Estate Act. That case involved a commission payable when an option for the purchase of a majority of the shares of a company operating a business was signed by a prospective purchaser.
The question was whether the transaction fell within the definition of real estate. The S.C.C.'s decision was that the purchase of the shares of a company is not the same as the purchase of a property owned by the company. Therefore, the option contract did not fall within the definition of real estate, and the unlicensed salesperson could sue for commission.
The Ontario case dealt with a majority of shares, while the British Columbia decision involved 100% of the shares. The B.C. judge was prepared to use this distinction to say that, where all of the shares of a company owning real estate are purchased, then the transaction falls within the Section 1 definition.
His reasoning was that the purchase of 100% of the shares gave the individual purchasing them the power to deal with the assets of the company as if they were held in the purchaser/shareholder's name. If the B.C. case went no further than this, the salesperson was acting as an agent within the definition of that term in Section 1 and his claim for commission was barred because he was unlicensed.
The salesperson's response was that Section 2.1(1) exempted him because he was a "full-time salaried employee of a principal to a real estate transaction". The judge agreed that at least in the context of this subsection, "employee" included an independent contractor.
This liberal interpretation of the definition of "employee", contrasts with the restrictive interpretation contained in the HomeLife/Victoria case referred to in Column #227, that independent contractor status under the Real Estate Act is ulawful.1
|1.||Higginson v. Kelowna Pines Golf Course Ltd et al., 26 B.C.L.R., p. 89.|
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