The Thomas D’Arcy McGee Building in Ottawa is home to Canada’s Federal Court and the Federal Court of Appeal. (Source: SBSA)

QUICK HITS

 

• Canada’s Federal Court of Appeal released a decision on Oct. 13 unanimously dismissing appeals by CREA, TRREB and several brokerages, upholding a 2023 ruling that allowed key claims in a proposed class action over buyer brokerage commission practices to proceed.
• The court found it arguable that the rules could amount to price control under the Competition Act without setting a specific rate and that the associations could be held liable for damages as parties to the alleged offence.
• The proposed class action has not been certified, its allegations remain unproven, and a certification motion is still pending before the Federal Court.

 

A proposed class action challenging how buyer brokerage commissions are negotiated and paid has cleared another hurdle.

The Federal Court of Appeal has rejected attempts by the Canadian Real Estate Association, the Toronto Regional Real Estate Board and several brokerages to have the remaining claims against them thrown out.

The unanimous Oct. 13 decision upholds a 2023 Federal Court ruling allowing plaintiff Mark Sunderland to pursue allegations that brokerages agreed to control buyer brokerage commission prices. Related claims that CREA and TRREB “aided, abetted and counselled the formation and extension of the alleged anti-competitive arrangement” can also proceed.

The lawsuit has not been certified as a class action, and the allegations remain unproven. The ruling does not determine whether any defendant violated the Competition Act.

Sunderland filed the lawsuit in 2021, after paying a 5 per cent commission on the sale of his Toronto home the previous year, with half going to the buyer’s brokerage. He alleges that rules set by CREA and TRREB, and agreed to by brokerages, create a system that limits competition and drives up costs for sellers.

He is seeking damages on behalf of sellers of residential properties listed on TRREB’s MLS since March 11, 2010.

Can rules control the price of a service without setting a specific rate?

 

Sunderland alleges that the challenged rules require listing brokerages to offer buyer brokerages a commission greater than zero, with sellers responsible for the cost even though buyers receive the services. He argues that this limits competition over the fees charged.

The defendants argued that buyers and sellers can still negotiate commissions with their respective brokerages. The appeal court acknowledged that possibility but found that an arrangement controlling who negotiates commissions could potentially amount to price control under the Competition Act.

While the court allowed the price-control claim to proceed, it rejected Sunderland’s attempt to restore allegations of an agreement to fix, maintain or increase buyer brokerage commissions.

 

Allegations against CREA and TRREB survive

 

Sunderland alleges that CREA and TRREB helped brokerages form or join the arrangement by creating the rules and requiring members to follow them. The associations argued that the allegations concerned only how they implemented and enforced the rules. The court found enough detail to let Sunderland pursue his claim that their involvement went further.

The court also rejected an argument that the Competition Act’s damages provision excludes those who aid, abet or counsel an offence. It found it arguable that CREA and TRREB could face damages as parties to the alleged offence, even though they do not compete with brokerages.

Claims against franchisor defendants, including Century 21, Sutton and HomeLife, also remain dismissed. The court upheld the finding that Sunderland had not provided enough detail to support his allegations about their knowledge and intent, although he could seek to amend his claim with further supporting facts. Remax had previously reached a separate settlement with Sunderland.

The court also declined to dismiss claims involving conduct more than two years before the suit was filed on the grounds that they were filed too late. Whether older claims by other proposed class members fall outside the legal time limit remains undetermined. 

 

CREA and TRREB respond

 

In a statement provided to REM on Oct. 14, CREA said: “It is important to emphasize that this ruling simply allows the lawsuit to move forward. It does not represent a judgment on the merits of the claims against CREA, which we continue to believe are without merit.”

CREA added that its policies are designed to promote fairness, consumer choice and collaboration within the real estate marketplace.

TRREB CEO John DiMichele emphasized the allegations that remain dismissed.

“TRREB welcomes the Court’s decision to uphold the dismissal of allegations that the challenged rules constituted an agreement to fix, maintain or increase buyer brokerage commissions,” he said in a statement.

Both organizations said they are reviewing the decision with legal counsel to determine next steps.

Next steps

 

Garth Myers, a partner at Toronto law firm Kalloghlian Myers LLP and counsel for Sunderland, said his side is “pleased that the case can go forward against the brokerages and the associations,” adding that he hopes “it can move toward a speedy determination on the merits.”

The case remains before the Federal Court, where Myers said the motion to certify the lawsuit as a class action is still pending. The parties could also seek leave to appeal the Federal Court of Appeal’s decision to the Supreme Court of Canada.