A recent Ontario case goes to the heart of something dear to real estate agents, commission rights.

The sales rep entered a standard Listing Agreement with the vendor for the sale of the vendor’s property. That agreement provided a commission of 4.5 per cent “for a valid offer” and was “payable should the transaction not be completed due to the vendor’s default.”

The sales rep obtained an offer for the full asking price and presented it to the vendor, who refused to accept it. The sales rep then sued for his commission and obtained it together with costs.

On the appeal that judgment was upheld. The court determined that the vendor acted in bad faith and attempted to frustrate the conduct of the sales rep in presenting a final offer for the full asking price. No evidence was led that the best possible price might have been greater than the asking price. The agreement was binding. The vendor did not have to accept the agreement, which clearly stated payment of commission on presentation of an offer at the full listing price.  (T. L. Willaert Realty Ltd. v. Fody, 2013 ONSC 7533).

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Courts are interested in a party’s motive:  A husband and wife offered to purchase the vendor’s property to be put in the purchasers’ corporation’s name.  The purchasers represented that they were the vendor’s neighbours but in fact their corporation only owned property on the same street.

The vendor learned this fact and refused to complete the transaction.  The court found that the vendor’s consent to the Offer to Purchase was voluntary, not part of any undue influence, there was no domination and that the acceptance of the offer was an exercise of freewill.  The representation was nothing more than an irrelevant misunderstanding by the vendor and she immediately signed the Offer to Purchase. There was no fundamental misleading.

The court found (and no doubt this was essential) that the vendor only raised the alleged “misrepresentation” when she wanted out of the deal so that she could reopen the price. (3434273 Manitoba Ltd. v. Nowak, 2013 MBQB 214)

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Interpretation of ambiguous clauses: In a different case, Howard Sokolowski and Al Libfeld agreed to market and develop a piece of property in three stages. However, they had a dispute partway through Stage 1. They then entered a settlement agreement whereby Libfeld acquired the unsold lots on Stage 1 and all of the Stage 3 lots. Sokolowski acquired all the Stage 2 lots. The settlement agreement indicated that the sales office on Stage 1 was not to be used to sell Stage 3 lots.

Libfeld sold the Stage 1 lots and then moved the sales office (which he remodelled) to the Stage 3 area to sell those lots. Sokolowski then sought relief from the “alleged” breach of covenant under the sales agreement.

The judge held that the existing sales office was not to be used from its position in Stage 1 to sell the Stage 3 lots. However, the settlement did not prevent Libfeld from moving the sales office to Stage 3 and then using it “on Stage 3” to sell the Stage 3 lots. In other words, by moving the sales office and having it remodelled and placed on Stage 3 it could not be said that it had any connection now to the Stage 1 project.

The Court of Appeal in Ontario held that the ambiguous clause could be interpreted by the positions taken by both parties. However, the judge was found to have correctly interpreted that the purpose of the settlement was adhered to when that office was moved to Stage 3 and remodelled. (Sokolowski v. Libfeld, 2013 ONSC 2886)

Donald Lapowich, Q.C. is a partner at the law firm of Koskie, Minsky in Toronto, where he practices civil litigation, with a particular emphasis on real estate litigation and mediation, acting for builders, real estate agents and lawyers. Read full decisions at www.canlii.org.