Court File and Parties
Court File No.: CV-14-00512903-0000 Date: 2018-09-05 Ontario Superior Court of Justice
Between: HURST REAL ESTATE SERVICE INC. and DTZ CANADA INC., A UGL COMPANY, Plaintiffs – and – GREAT LANDS CORPORATION, GREAT LANDS (HALTON HILLS) INDUSTRIAL PARK CORP. and SAM SADR, Defendants
Counsel: Peter Manderville and Lindsay Moffatt, for the Plaintiffs David A. Weisman, for the Defendants
Heard: March 19, 20, 21 and 22, 2018
Reasons for Judgment
DIETRICH J.
Overview
1This case involves a determination of whether the plaintiff, Hurst Real Estate Service Inc. (“Hurst Real Estate”), through its principal, David Hurst, earned, and is therefore entitled to, a real estate commission of five percent (5%) on the sale of a commercial property.
2The subject commercial property was a 48-acre parcel of industrial land in the Township of Halton Hills, in the Province of Ontario.
3An agreement of purchase and sale was concluded on November 14, 2013 providing for a sale price of $10.8 million and the transaction closed in January 2014.
4The evidence at trial confirmed that Mr. Hurst was the sole real estate agent involved in the sale throughout. He represented the plaintiff Hurst Real Estate and, also, for a time, the plaintiff DTZ Canada Inc., a UGL company (“DTZ”). Mr. Hurst testified that he provided comprehensive real estate agent services for the defendants, whether as a representative of Hurst Real Estate or DTZ, and was the prime conduit and catalyst in bringing the purchaser and vendor together upon the very terms demanded by the vendor Sam Sadr.
5The defendant corporations and Mr. Sadr personally have pleaded certain technical defences to Mr. Hurst’s entitlement to a commission and, in particular, allege that no commission is payable because there was no signed commission agreement in place at the closing of the transaction.
Issues
6The issues in this matter are as follows:
- Was a binding contract formed by Mr. Sadr’s promise to pay a commission not to exceed 5% if Mr. Hurst introduced a purchaser who would pay a price exceeding $10.3 million for the commercial property?
- Are the plaintiffs barred from bringing their action by the Real Estate and Business Brokers Act, 2002?
- If a commission is payable to the plaintiffs/Mr. Hurst on the sale of the commercial property, who is liable for the payment?
Factual Background
7Mr. Sadr is a real estate developer. At all relevant times, Mr. Sadr was the sole shareholder, director and officer of Great Lands (Halton Hills) Industrial Park Corp. (“Great Lands HH”), the registered owner of the commercial property. He was also the sole shareholder, director and officer of Great Lands Corporation and approximately 20 other corporations, including a real estate brokerage. Great Lands HH was not a subsidiary of Great Lands Corporation.
8Mr. Hurst introduced a number of prospective purchasers to the commercial property and to Ron Stein, the Manager of Land Development for Great Lands Corporation. Included in these prospective purchasers was Triovest Realty Advisors Inc. (“Triovest”). Ultimately, Triovest made an offer that resulted in a sale of the property for $10.8 million.
9The relationship between Mr. Hurst, as real estate broker/agent, and Mr. Sadr and the Great Lands corporations, as vendors, developed over many months. The relevant time periods can be described as: the initial contact period; the listing agreement period; the holdover period; the post holdover period; and the new agreement/Triovest period.
10In March 2012, Mr. Hurst, on behalf of a potential purchaser from the U.S., approached Great Lands Corporation to make inquiries about the commercial property. Mr. Stein advised that the property was not listed for sale, but that if the right offer were made, Mr. Sadr would be prepared to sell it.
11On March 14, 2012, Mr. Stein provided Mr. Hurst with an information package printed on Great Lands Corporation letterhead. The information package disclosed that the property was owned by Great Lands HH. In the covering email Mr. Stein advised Mr. Hurst that: “Sam is looking for $15 million which includes a 3% commission for your company.” There was no mention of a listing agreement or a commission agreement. Mr. Hurst testified that more than 70% of the commercial real estate transactions with which he was involved did not require a commission or listing agreement prior to the closing of the transaction and as a prerequisite to receiving a commission.
12Between March and October 2012, Mr. Hurst introduced prospective purchasers to the property, including the U.S. based Trammell Crow Properties. Mr. Hurst testified that he encouraged his contact at Trammell Crow Properties, Mitch Fasken, to deal directly with Mr. Stein to discuss the property, though the two never met. Mr. Hurst also testified that such direct contact between a potential purchaser and the vendor was not uncommon in the trade. He explained that it is an efficient means for the purchaser to get information and direct answers to questions about the property for sale.
13On November 2, 2012, Mr. Sadr, on behalf of Great Lands HH, and Mr. Hurst, on behalf of Hurst Real Estate, entered into a listing agreement with an expiry date of February 28, 2013 and a 180-day holdover period (expiring August 27, 2013). It provided for a commission of 3% of the sale price to the listing broker, or a commission of 4% if there was a co-operative broker. Mr. Sadr was then looking for $15 million for the property.
14Mr. Hurst proceeded to actively market the commercial property through advertising, an information brochure and signage. He testified that, by March 2013, he had introduced approximately 42 prospective purchasers to the property. Among these prospective purchasers were First Gulf and Verus, each of which entered into agreements of purchase and sale to purchase the property during the holdover period.
15After the listing agreement expired, Mr. Hurst attempted on a number of occasions to have the listing agreement renewed, but Mr. Sadr declined. By then Mr. Hurst knew the commercial property well and continued to make efforts to sell it without a listing agreement.
16On April 10, 2013, Mr. Hurst introduced Triovest Realty Advisors to the commercial property by sending an email to Jamie Kitchen of that company. He followed up with Mr. Kitchen by telephone and gave him more details about the property. Mr. Kitchen told Mr. Hurst that he would apprise Triovest’s downtown Toronto office about the property.
17On April 30, 2013, Mr. Hurst had a meeting with Mr. Sadr and Mr. Stein. At that meeting Mr. Sadr personally made an offer to Mr. Hurst that if Mr. Hurst brought a purchaser for the commercial property who offered a price greater than $10.3 million, which was accepted by Mr. Sadr, then Mr. Hurst and Mr. Sadr/Great Lands Corporation would split any amount in excess of $10.3 million on a 50/50 basis. The commission on a sale for $10.3 million or less would be 3%.
18On May 1, 2013, Mr. Stein sent an email to Mr. Hurst confirming but altering the commission calculation. In the email, Mr. Stein clarified that Mr. Hurst’s share of any excess over $10.3 million would be capped at 5% of the sale proceeds. The email included a statement that a “co-op agreement” would need to be signed. Mr. Hurst, Mr. Stein and Mr. Sadr all testified that in this context a “co-op agreement” refers to a commission agreement.
19On May 17, 2013, First Gulf made an offer, through Mr. Hurst, to purchase the commercial property for $10.7 million. The offer included a vendor take back mortgage and a 90-day due diligence period. Mr. Sadr agreed to a sale price of $10.8 million, a vendor take back mortgage and a 75-day due diligence period. The agreement of purchase and sale provided that the vendor would be responsible for paying its agent a commission on closing. That deal collapsed when First Gulf requested an extension of the due diligence period, which angered Mr. Sadr, and he declined the extension.
20On September 4, 2013, Mr. Stein advised Mr. Hurst by email that the commercial property was being taken off the market and that Mr. Hurst should remove his signs from the property. Mr. Hurst agreed to remove his signs but none the less persisted in his efforts to sell the property. He kept Mr. Stein apprised. In his email reply to Mr. Stein on September 4, 2013, Mr. Hurst assured Mr. Stein that he would not even consider bringing another offer (from First Gulf) unless it was firm.
21Mr. Hurst wrote to Mr. Stein again on September 6, 2013 to let him know that he was continuing to consider development strategies for the commercial property. He offered one such strategy to Mr. Stein that he believed could result in a ‘fresh’, UNCONDITIONAL offer over the next few weeks.” Mr. Stein agreed to forward the strategy on to Mr. Sadr. Mr. Stein reverted to Mr. Hurst on September 12, 2013 reminding him that the commercial property was “off the market” and that the only chance of making a deal (with First Gulf) would be if “[Mr. Hurst] came in with a signed unconditional cash offer.” He told Mr. Hurst that a vendor take back mortgage was no longer an option.
22Mr. Hurst continued to work with his contact at First Gulf to obtain the only offer that Mr. Sadr would accept: an unconditional cash offer at $10.7 million.
23On September 30, 2013, Mr. Hurst advised Mr. Stein, by email, that he was continuing to work on the deal and knew that a pension fund advisor, Triovest (which had contemplated a joint venture with First Gulf), was still very interested in the commercial property. Mr. Hurst confirmed to Mr. Stein that he had let Triovest know that Mr. Sadr would not consider anything other than an all cash deal with a 30-day closing and a price of $10.8 million. Mr. Hurst let Mr. Stein know via email that Triovest might contact Mr. Stein directly and that Mr. Hurst would appreciate if Mr. Stein would remind Triovest that it must deal through Mr. Hurst. In the same email Mr. Hurst apprised Mr. Stein of two other purchasers who may be interested, namely, Forgestone Capital and Menkes Developments. Mr. Hurst told Mr. Stein that he had let the broker for Menkes Developments know that only a “no conditional offer” (all-cash, 30-day closing, with a price of $10.8 million) would be considered.
24Later that same day, after Mr. Hurst discussed the property with Richard Mulvale of Triovest, Mr. Hurst wrote to Mr. Stein again to advise that Triovest wanted to submit an offer at $10.8 million, all cash. However, because Triovest was an advisor to a pension fund, which would be the ultimate purchaser, the offer could not be made without a due diligence period. Concerned about this request for a due diligence period, Mr. Hurst specifically asked Mr. Stein if Mr. Sadr would consider a very short due diligence period; otherwise, he said, he would discourage Triovest from making the offer.
25Still later that day, Mr. Hurst forwarded to Mr. Stein an offer made by Mr. Mulvale on behalf of Triovest. Triovest was offering to purchase the property for $10.8 million, all cash, but it wanted a 45-day due diligence period. In forwarding the offer to Mr. Stein, Mr. Hurst reassured Mr. Stein that he would “push [Triovest] down to 10 days” for due diligence. In the email from Triovest, Mr. Mulvale promoted Triovest’s track record (100%) for closing on land acquisitions and included a list of closed transactions. These details were included, on the advice of Mr. Hurst, specifically, to persuade Mr. Sadr that Triovest was a serious purchaser notwithstanding its request for a due diligence period.
26Mr. Hurst then let Mr. Mulvale know that he had forwarded Mr. Mulvale’s offer to Mr. Stein and expected a reply in the next couple of days. In the same email, he suggested that Mr. Mulvale consider a much shorter due diligence period.
27Mr. Stein replied to Mr. Hurst the same day, September 30, 2013, to say that he would show Mr. Mulvale’s email to Mr. Sadr the next day. He also commented that he was doubtful that any due diligence period would be acceptable and that he would get back to Mr. Hurst.
28On October 1, 2013, Mr. Stein wrote to Mr. Hurst to apprise Mr. Hurst of his discussion with Mr. Sadr following Mr. Sadr’s review of the offer from Mr. Mulvale. In Mr. Stein’s email to Mr. Hurst he stated that Mr. Sadr “is very unhappy” about being contacted by Mr. Hurst with time wasting emails with conditional offers and wants “the discussion to end now”, and that “Sam is a principled business man … who said that he will not entertain any conditional offers, even 5 days, and meant it.” Mr. Stein’s email goes on to say that Mr. Hurst is free to deal with potential buyers through an unofficial due diligence period and he comments: “Obviously it is worth the investment and risk to you, if there’s a 3% commission involved, but [Mr. Sadr] doesn’t want to hear about it. He feels that Trivest [sic] is just playing a game. … The only contact he expects is the forwarding of an unconditional clean offer for $10.8 million and closing in 45 days.” Mr. Stein concluded the email by stating: “contact us only if there is an offer in hand as per the price and closing period noted above, and it is being delivered.” There is no mention of any commission or co-op agreement in Mr. Stein’s note.
29The evidence shows that later that same day, on October 1, 2013, Mr. Stein received a message from Mr. Mulvale directly and a call was arranged between the two of them. Mr. Hurst followed up with Mr. Mulvale by email on October 3, 2013 to ask whether Triovest was able to proceed without a due diligence period and whether he had had a conversation with Mr. Stein. Mr. Hurst got no reply.
30On the morning of October 7, 2013 Mr. Mulvale sent a letter of intent addressed to Great Lands (HH) to Mr. Stein directly. The letter of intent contained all the same terms as Mr. Mulvale’s email offer of September 30, 2013 sent to Mr. Hurst who forwarded it on to Mr. Stein the same day: all cash, $10.8 million, and 45-day due diligence period. The letter of intent also included a statement on brokerage commission that reads as follows:
The Purchaser warrants that it has not engaged any real estate brokerage firm in respect of this transaction. The Vendor shall be solely responsible for the payment of any brokerage commissions associated with the sale of the Property.
31On October 16, 2013, Mr. Stein sent an email to Mr. Mulvale attaching the letter of intent signed back by Mr. Sadr. On the same day, Mr. Stein sent an email to Mr. Hurst to let him know that Mr. Sadr signed back “a letter of interest.” He also stated that he had had a number of discussions with Mr. Mulvale in the past few weeks and that he would keep Mr. Hurst posted.
32On October 18, 2013, Mr. Hurst replied to Mr. Stein’s email and specifically reminded Mr. Stein that Mr. Hurst had recommended that Mr. Mulvale contact Mr. Stein directly, and that he had provided Mr. Mulvale with Mr. Stein’s contact details, so that the two of them could discuss Triovest’s offer in greater detail. In the same email, Mr. Hurst inquired about the purchase price and offered to negotiate with Triovest if its offer was less than $10.8 million “in order to cover our commission.” Mr. Hurst noted that he and the Senior Vice President at DTZ, where Mr. Hurst was then working as a real estate agent, had had numerous discussions with Triovest and would continue to work with them to “firm up” and “close.”
33Mr. Stein responded the same day to let Mr. Hurst know that there was no need to follow up and confirmed that the purchase price was $10.8 million, all cash. Again, he offered to keep Mr. Hurst posted.
34Mr. Hurst wrote to Mr. Stein again on October 30, 2013 to let him know that he would be taking some vacation in Florida. He mentioned that the deal seemed to be going fine and that Mr. Mulvale was in Montreal and would not likely need to be involved again until the agreement of purchase and sale was to be signed. Mr. Hurst also reminded Mr. Stein that it was agreed that a separate commission agreement would be executed since Mr. Hurst did not get the renewal of the listing agreement he was seeking. Mr. Hurst confirmed that he would deal with the matter of the commission agreement when back from vacation around November 15, 2013. Again, he committed to make the deal “go firm” and “close.”
35The agreement of purchase and sale was signed by the purchaser (a numbered company on behalf of pension funds) on October 30, 2013 and by Sam Sadr on November 4, 2013. The purchase price was $10.8 million, all cash, and there was a 45-day due diligence period. Paragraph 12.2 of the agreement of purchase and sale provides as follows regarding commission:
Commission: Each of the Vendor and Purchaser represents and warrants to the other that it has not engaged or retained the services of any real estate broker or agent in connection with this Agreement or the transactions contemplated by this Agreement. The Vendor agrees that it is responsible to pay any fees or commissions payable to any real estate broker or agent engaged by [sic] on behalf of the Vendor in respect of the purchase and sale of the Property. The Vendor shall indemnify the Purchaser from any and all claims, demands, actions or liability with respect to any such fees or commissions. The Purchaser shall be responsible to pay any fees or commissions payable to any real estate broker or agent engaged by or on behalf of the Purchaser in respect of the purchase and sale of the Property. The Purchaser shall indemnify the Vendor from any and all claims, demands, actions or liability with respect to any such fees or commissions. This provision shall not merge upon but shall survive Closing. [Emphasis added.]
36The agreement of purchase and sale reflected a change in the commission provision from the one included in the letter of intent. The letter of intent had provided that the Purchaser alone had not engaged an agent and that the Vendor would be responsible for the payment of brokerage commissions.
37On November 15, 2013, Mr. Stein wrote to Mr. Mulvale to let him know that an issue may arise with respect to Mr. Hurst and the payment of a commission. He wrote: “Sam just wanted to let you know, that in the event there is some sort of a claim by David or his company, that is not resolved by closing, and he tries to block the closing by filing a lawsuit, … We would deal with David legally. Hopefully, it doesn’t come to that, but we just wanted to provide you with some comfort we will take full responsibility, so you don’t have to worry about that aspect.” This email was sent following a conversation that Mr. Stein had had with Mr. Mulvale earlier that day.
38On November 18, 2013, upon his return from Florida, Mr. Hurst contacted Mr. Stein and asked him to forward the “Letter of Interest and Agreement of Purchase and Sale” so that he could prepare the commission agreement for Mr. Sadr’s signature. Mr. Stein did not respond.
39Mr. Sadr responded to Mr. Hurst on November 19, 2013 by email “without prejudice”. His email message reads as follows:
Further to your email to Ron Stein of this office, we confirm Great Land (Halton Hills) Industrial Park Corp. entered into an Agreement of Purchase and Sale with a numbered company, and one of the conditions of the Agreement of Purchase and Sale is that all terms and conditions of the Agreement are to remain strictly confidential between the Purchaser and Vendor. Therefore, notwithstanding that we have no reason to do so anyway, we are unable to provide this information to you, or your company.
As was advised previously, both verbally and by email, the property was taken off the market for sale in early September, immediately after the First Gulf Agreement of Purchase and Sale was terminated by them. You recall that you were asked to remove your signs at that time, which were installed as per the expired Listing Agreement signed November 2, 2012, with your previous company.
The sale with the numbered company was negotiated through direct contact between our lawyers and the Purchasers lawyer, with no real estate [sic] involvement. The fact that you do not have a copy of the Letter of Intent or the Agreement of Purchase and Sale confirms the fact that your firm did not represent the Purchaser or Vendor, in this Agreement.
We trust this clarifies our position, and ask that if you have an issue with this position, you contact the TREB Legal Department to discuss it. We also wish to note that we have advised the Purchaser, that should this matter be referred by you to the courts, Great Land (Halton Hills) Industrial Park Corp. will take full responsibility for the process.
Please do not personally contact us any more regarding this matter, or for any other reasons, or enter our offices as your involvement in any Great Land properties is no longer required. This is the last response you will receive directly from Great Lands staff or myself.
Analysis
Issue 1: Was a binding contract formed by Mr. Sadr’s promise to pay a commission not to exceed 5% if Mr. Hurst introduced a purchaser who would pay a price exceeding $10.3 million for the commercial property?
40For the reasons that follow, I find that Mr. Hurst satisfied Mr. Sadr’s requirement in every respect. Mr. Hurst acted as both a catalyst and conduit to fully comply with Mr. Sadr’s terms and earned the commission promised to him. A binding contract was formed between Mr. Sadr and Mr. Hurst.
41By the end of April 2013, Mr. Hurst’s listing agreement with the defendants had expired and despite Mr. Hurst’s repeated requests for a new listing agreement, Mr. Sadr did not oblige. On April 29, 2013 Mr. Stein wrote to Mr. Hurst to advise him that Mr. Sadr was cool to relisting the property. Mr. Sadr was waiting to see whether a pending offer from Verus would lead to a sale and also looking for the offer from First Gulf that Mr. Hurst had said he may be bringing in. Mr. Stein reminded Mr. Hurst that Mr. Sadr could simply list the property on MLS through his own real estate brokerage. At this point, Mr. Sadr had a price of $10.3 million in mind but there was no list price per se.
42The next day, on April 30, 2013, at the meeting among Messrs. Hurst, Sadr and Stein, Mr. Sadr made the offer to Mr. Hurst whereby if Mr. Hurst brought in a purchaser who purchased the property for a price greater than $10.3 million, then Mr. Hurst and Mr. Sadr/Great Lands Corporation would split any amount above $10.3 million on a 50/50 basis. Following the meeting, and on the same day, Mr. Hurst sent an email to Mr. Stein in which he expressed appreciation for Mr. Sadr’s offer: “I really appreciated Sam’s “risk/reward” offer on the end sale pricing in excess of $10,300,000 – it does provide great incentive.” On the morning of May 1, 2018, Mr. Hurst sent another email to Mr. Stein in which he states: “I am grateful to you Ron for reestablishing the listing as I believe you were instrumental in telling Sam how hard I have worked on your property … with an anticipated sale in the range of $10.0M to $11.0M, there’s lots in this deal for everyone – especially if I get a deal over $10.3M!!!!!”
43Mr. Stein sent Mr. Hurst the May 1, 2013 email later that day to confirm but alter the commission sharing arrangement and to memorialize the offer Mr. Sadr made to Mr. Hurst. The email relating to the commission offer reads as follows:
As well, I spoke to Sam before he left about the listing, and we did not understand correctly yesterday. He agreed specifically with you, that if you sold that if you sell [sic] the property for a sale price greater than $10,300,000, and the commission payable is 3% due to you personally selling the property, the difference in the sale price minus the $10,300,000, will be split 50%/50% between you, as a bonus commission, and Great Lands. The total commission paid is not to exceed 5% of the sale price. In other words the commission to you is capped at 5%. He does not want to list the property with any companies at this time, and keep his options open until he decides what to do with it. Sorry for the confusion. You should hold off putting any new signs on the property. If you receive an offer, Sam will have to sign a co-op agreement for that specific deal.
44In cross-examination, Mr. Stein agreed that this email message constituted a new agreement between the defendants and Mr. Hurst. He also agreed that the email was sent bearing the Great Lands Corporation logo, that the offer of an enhanced commission was made by Mr. Sadr to Mr. Hurst, and that the apportioning of the enhanced commission would be between Mr. Hurst and Great Lands Corporation (and not Great Land Halton Hills).
45Mr. Hurst acknowledged the agreement by reply email on May 2, 2013 and specifically notes that “Sam’s generosity is greatly appreciated (on any transaction in excess of $10.3 million). In making the various acknowledgements of Mr. Sadr’s offer, I find that Mr. Hurst unequivocally accepted the terms of Mr. Sadr’s offer of April 30, 2013 as clarified by the May 1, 2013 email and confirmed his acceptance in writing on May 2, 2013.
46Mr. Stein admitted in cross-examination that this new agreement was not dependent on the terms of the expired listing agreement or holdover period and that the offer was never revoked by the defendants. He also admitted that if the First Gulf transaction had closed, Mr. Hurst (then acting for DTZ) would have been entitled to a 5% commission on the sale. Mr. Sadr agreed with these admissions in his cross-examination. Mr. Stein and Mr. Sadr agreed that Mr. Hurst would have been entitled to the commission on that deal because he introduced First Gulf to the defendants when he had the listing agreement and an offer was made during the holdover period.
47At the trial, both Mr. Stein and Mr. Sadr testified that the 5% commission was not payable on the sale to Triovest because it was not Mr. Hurst, but the purchaser Triovest, who provided the letter of intent and the agreement of purchase and sale and because Mr. Sadr did not sign a co-op/commission agreement in advance of the offer being presented. The May 1, 2013 agreement does not provide for any of these pre-conditions. There is no evidence that these pre-conditions were included in any of the email or other correspondence between the parties or discussed by the parties prior to or around the time of the Triovest offer. The first suggestion by the defendants that Mr. Hurst was not involved in bringing the purchaser to the defendants was contained in Mr. Sadr’s November 19, 2013 email. The only listing agreement entered into between the parties makes no mention of the real estate agent’s commission being dependent on the defendants’ willingness to sign a commission agreement.
48I find that the defendants were consistent in their advice regarding Mr. Hurst’s entitlement to a commission from March 2012 to October 1, 2013 when Mr. Hurst attached the Triovest offer to an email to Mr. Stein and advised Mr. Stein that Mr. Mulvale may contact Mr. Stein directly to further discuss the offer. I find that Mr. Hurst relied on that advice. He understood that if he brought the defendants an offer to purchase the commercial property on terms and conditions acceptable to the defendants, he would be paid a commission on the successful closing of the transaction.
49The evidence before the court supports the finding that there was a binding agreement between Mr. Hurst and Mr. Sadr/Great Lands Corporation on the commission payable to Mr. Hurst on the sale of the property. The May 1, 2013 agreement is simple, but clear and binding: the commission will be paid if Mr. Hurst brings in a purchaser who buys the property for more than $10.3 million. The mention of a “co-op agreement” is not a condition of the simple contract. There is no disagreement among the parties that the “co-op agreement” referred to in the May 1, 2013 agreement is a commission agreement. There is no onus on either party to prepare such a document, only a statement that Mr. Sadr will have to sign such a document. I find that this inclusion in the agreement is a reference to further papering of the already defined promise by Mr. Sadr to pay the commission if Mr. Hurst introduces a satisfactory purchaser. The agreement was made in writing. The only variable was whether Mr. Hurst would be entitled to an enhanced commission if the property sold for more than $10.3 million to a purchaser introduced to the defendants by Mr. Hurst. In that scenario, Mr. Hurst would receive up to 5% of the purchase price on closing.
50The evidence also supports a finding that Mr. Hurst satisfied all of the conditions of the May 1, 2013 agreement. Mr. Hurst introduced Triovest to the defendants on September 30, 2013. Mr. Sadr and Mr. Stein testified that they had never heard of Triovest or Mr. Mulvale prior to Mr. Hurst’s efforts to sell the commercial property. The sale occurred as a consequence of Mr. Hurst’s efforts and his introduction of this purchaser to them. Mr. Sadr and Great Lands Corporation accepted all of Triovest’s terms and conditions and signed back their offer with no amendments to the proposed price and terms. The transaction closed on the very terms and at the very price that had been proposed by Mr. Mulvale in his offer to purchase sent to Mr. Hurst and forwarded by Mr. Hurst to Mr. Stein on September 30, 2103. Accordingly, all of the terms of Mr. Hurst’s agreement with Mr. Sadr were fulfilled by Mr. Hurst.
51The facts of this case are similar to those in JJ Barnicke Limited v. 1471422 Ontario Limited, [2007] O.J. No. 3740 (ONSC) in which a real estate agent entered into a listing agreement that provided for a 5% commission. The listing agreement expired and the vendor refused to renew it but agreed to pay the agent a commission on an offer by offer basis. The agent continued to market the property from November 2004 to February 2005. In June 2005 the vendor heard from a prospective purchaser, who had been introduced to the property earlier, inquiring as to whether the property was still for sale. The vendor worked with this purchaser directly and sold the property to a newly incorporated company in August 2005. Throughout the relevant period, the vendor assured the agent that he would be paid a commission on the successful closing, but ultimately refused to do so on the basis that the vendor relied on his own advisors regarding the purchase with no involvement of the agent. The court found in favour of the agent, not on the basis of the expired agreement, but, aside from the agent’s claim in quantum meruit, on the basis that the agent was encouraged to continue to search for a purchaser on behalf of the vendor. Further, the court found that the exchanges of correspondence between the agent and the vendor, and the agent and the ultimate purchaser, constituted an offer in writing. The agent was entitled to the commission despite the fact that changes in the offer were made between the initial offer received by the agent and the offer that was accepted and despite the fact that the ultimate purchaser was a corporation and not the individual introduced to the property by the agent. The court found that the offer executed by the defendant and its purchaser was concluded in a direct sequence of events in which the real estate agent was intimately involved.
52A similar result was achieved by an agent in the case of Century 21 Realty Ltd. v. Trickett, 1986 ABCA 182, [1986] A.J. 808 (Alta. C.A.). In this case a purchaser made an offer that was rejected during the period of the agent’s listing agreement but accepted some months after the listing agreement expired in a private sale between the prospective purchaser and the vendor. In upholding the lower court decision, the Court of Appeal held that the agent was indeed the effective cause of the ultimate sale. There was no break in the continuity: see paras. 6-7.
53In Cash v. George Dundas Realty Ltd., [1973] 40 D.L.R. (3d) 31 (ONCA), the Court of Appeal allowed an agent’s appeal and held that the agent was entitled to a commission of 5%. This was so notwithstanding that once the agent brought the purchaser and vendor together and an agreement of purchase and sale was executed on terms essentially agreed to at a meeting arranged by the agent, the vendor and purchaser dealt directly through their solicitors. The Court of Appeal held that the simple denial of the vendor of any intention to pay any commission to the agent cannot frustrate the agent in asserting his claim when an acceptable offer was produced and executed in a sequence of events in which the agent is directly involved. The Court of Appeal notes, at para. 23, that an agent’s role is frequently supplanted by lawyers. In commercial transactions involving the purchase of real estate, complex tax ramifications frequently require the drafting to be done by a specialist and effectively preclude the participation of the real estate agent. Estey J.A. observes at, para. 24, that the real estate agent can at most be a conduit and a catalyst. In the case at bar, Mr. Hurst demonstrated his value by, in effect, vetting the purchaser to ensure that it could make an offer that would meet the essential conditions laid down by Mr. Sadr.
54As in the Cash case, where the Court of Appeal recognized that an agent may not be required, or even welcome, in negotiating a complex commercial transaction, in the case of William Allen Real Estate Co. v. Robichaud, [1990] O.J. No. 41, the court considered a similar transaction in which the agent had introduced the purchaser to the vendors and brought forward the initial offers to purchase. Subsequently, the parties dealt with one another directly with little involvement of the agent. The terms of the agreements changed as did some of the parties. None the less, the court held that the agent was instrumental in bringing the parties together and had earned his commission: see paras. 39-42. The agent was ready to act as a liaison between the parties and a facilitator in their discussions. This finding was upheld by the Court of Appeal: William Allan Real Estate Company Limited v. Joseph Yvon Robichaud et al., [1993] O.J. No. 75 (C.A.).
55In the case at bar, Mr. Hurst was encouraged to continue to look for a purchaser for the commercial property and was offered an enhanced commission if he found one that was prepared to pay more than $10.3 million. Mr. Hurst worked on the sale of the property continuously from March of 2012 to October of 2013. He did so with the knowledge of Mr. Stein and Mr. Sadr. By offering the enhanced commission, Mr. Sadr encouraged these efforts notwithstanding that he refused to renew Mr. Hurst’s listing agreement and he made statements that the property was “off the market.” The trial record is replete with evidence of Mr. Hurst’s continuity of work and Mr. Stein’s encouragement of Mr. Hurst’s efforts.
56By taking steps to deliberately exclude Mr. Hurst from the transaction and deny him his commission after he introduced Triovest to the defendants, Mr. Sadr acted in bad faith and contrary to his binding agreement with Mr. Hurst. The Supreme Court of Canada states in Bhasin v. Hrynew, 2014 SCC 71, at para. 93, that “[i]t is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.” Mr. Sadr did not deal honestly with Mr. Hurst when he, through Mr. Stein, advised Mr. Hurst that it was not necessary for him to follow up with Mr. Mulvale of Triovest and then proceeded to follow up with Mr. Mulvale directly. Further, Mr. Sadr signed a letter of intent that specifically included a statement that: “[t]he Vendor shall be solely responsible for the payment of any brokerage commissions associated with the sale of the Property.” However, when the final agreement of purchase and sale was signed by the parties, the paragraph relating to the payment of a commission was altered to state that each of the Vendor and Purchaser represented and warranted that it did not engage or retain the services of any real estate broker or agent in connection with the agreement or the transactions contemplated by the agreement. Mr. Sadr effectively acknowledges his breach of promise when he, through Mr. Stein, alerts Mr. Mulvale to the fact that Mr. Hurst may take steps to enforce his entitlement to a commission and that Mr. Sadr’s corporation will take “full responsibility” for any action Mr. Hurst may instigate in this regard.
57Mr. Mulvale and Triovest were unknown to Mr. Sadr and Great Lands Corporation until Mr. Hurst brought them together. Mr. Hurst’s actions were the effective cause of the ultimate sale. Even though Mr. Hurst did not participate in further discussions or negotiations between Triovest and Mr. Sadr and his Land Manager regarding the closing of the transaction, the Ontario Court of Appeal has held that an agent should not be denied his commission for this reason. Consequently, the defendants are contractually bound to pay the plaintiffs the commission to which they agreed.
Issue 2: Are the plaintiffs barred from bringing their action by the Real Estate and Business Brokers Act, 2002?
58For the reasons that follow, I find that the plaintiffs are not barred by the Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30 Schedule C.
59The defendants rely on sections 9 and 36(3) of the Act, to argue that Mr. Hurst is not entitled to bring this action for a commission. Section 9 provides as follows:
No action shall be brought for commission or other remuneration for services in connection with a trade in real estate unless at the time of rendering the services the person bringing the action was registered or exempt from registration under this Act and the court may stay any such action upon motion.
60The evidence is that Mr. Hurst has been a licensed real estate agent/broker for 45 years, since 1975, and that he was registered under the Act at all relevant times. The evidence is also that while Mr. Hurst was working for Hurst Real Estate, it was registered as a real estate brokerage under the Act. When Mr. Hurst joined DTZ, which was also registered as a real estate brokerage under the Act at all relevant times, he de-registered Hurst Real Estate, as he was legally required to do. When he left DTZ he re-registered Hurst Real Estate as a real estate brokerage and recommenced working for that brokerage. Accordingly, there is no breach of the Act. Mr. Hurst was at all relevant times a licensed real estate agent working at a registered brokerage for the purposes of the Act.
61The plaintiffs in this action are Hurst Real Estate and DTZ. Mr. Hurst represented each of the plaintiffs in his efforts to sell the commercial property. The sale of the property closed in January 2014 while Mr. Hurst was working for DTZ, a registered brokerage. Mr. Hurst testified that DTZ authorized him to bring this action on its behalf. Hurst Real Estate submits that it has a claim in quantum meruit against DTZ for the work done by Hurst Real Estate from March 2012 to March 2013. Any apportionment of Mr. Hurst’s commission as between DTZ and Hurst Real Estate is between them and not for this court to consider.
62The defendants also rely on section 36(3) of the Act in their attempt to deny Mr. Hurst a commission. Section 36(3) provides as follows:
No registrant shall request or enter into an arrangement for the payment of a commission or any other remuneration based on the difference between the price at which the real estate is listed for sale or rental and the actual sale price or rental price, as the case may be, of the real estate, nor is a registrant entitled to retain any commission or other remuneration computed upon any such basis.
63The defendants contend that the May 1, 2013 agreement in which Mr. Sadr offered Mr. Hurst an enhanced commission constitutes a violation of section 36(3). I disagree. The section contemplates an agreement pertaining to real estate that is “listed for sale or rental.” Because the commercial property was not listed on May 1, 2013, or when it was sold, this section does not apply.
64The defendants also submit that s. 23(1) of the Regulations to the Real Estate and Business Brokers Act, 2002 (O. Reg. 567/05) requires that a claim for commission cannot be brought unless the agreement upon which the action is brought is in writing and signed by or on behalf of the person who is required to pay the commission.
65The defendants submit that the May 1, 2013 email was only a proposal as to commission and that Mr. Hurst did not accept the proposal. For the reasons discussed above, I find that the May 1, 2013 email confirming the offer and Mr. Hurst’s response to it on May 2, 2013 constitute a valid and binding agreement. Mr. Hurst accepted Mr. Sadr’s offer when he wrote to Mr. Stein specifically acknowledging that “Sam’s generosity is greatly appreciated (on any transaction in excess of $10.3M).” In Mr. Hurst’s May 2, 2013 email he continues to implore Mr. Stein to persuade Mr. Sadr to give him a listing agreement, but this request does not detract from his unequivocal acceptance of Mr. Sadr’s offer as set out in the May 1, 2013 email from Mr. Stein. Mr. Hurst again confirms his acceptance of Mr. Sadr’s offer of “3% if Hurst [alone as agent] (and bonus above $10.3 M)” in an email dated May 7, 2013 after the Verus deal falls through and Mr. Hurst confirms his commitment to “work on the deal very aggressively.”
66The defendants also submit that the email exchanges confirming Mr. Sadr’s offer and Mr. Hurst’s acceptance are not valid under the Regulation because they are not signed by either party. The emails do not include an original handwritten signature, which is not possible on email exchanges that are made electronically. However, the respective emails end with a typed version of the sender’s name, his title and the name of the corporation he represents. I am satisfied that in this digital age in which commerce is routinely conducted with the assistance of information technology, this type of electronic signature meets the requirement under the Regulation that the offer be “signed by or on behalf of the person required to pay the commission.”
Issue 3: If a commission is payable to the plaintiffs/Mr. Hurst on the sale of the commercial property, who is liable to pay it?
67The defendants submit that Great Lands (Halton Hills) was the owner of the land and should therefore be liable for any commission owing. Mr. Sadr testified that the proceeds from the sale did not remain in Great Lands (Halton Hills) but immediately following the sale, were reallocated to other Great Lands corporations. The evidence is that Mr. Sadr is the sole shareholder, director and officer of all of the Great Lands corporations.
68At trial Mr. Sadr confirmed that every decision of any consequence concerning any Great Lands corporation is his decision alone. He alone decides on the acceptable sale price for a property and how the sale proceeds will be allocated within the corporate group of companies. Mr. Sadr testified that the proceeds from the sale of the commercial property were extracted from Great Lands (Halton Hills) immediately following the sale and reallocated in his absolute discretion. Given Mr. Sadr’s control and wide discretion with regard to the Great Lands group of companies, it can be said that the companies do not operate at arm’s length. Mr. Sadr is the directing mind of all of them. When Mr. Sadr decided, in his absolute discretion, to deny Mr. Hurst a commission for bringing the purchaser of the commercial property to the defendants, Mr. Sadr breached the May 1, 2013 agreement. He resiled from his own binding offer to pay a 5% commission. He also induced the breach of the agreement by Great Lands Corporation.
69Mr. Sadr testified that some of the sale proceeds were used to pay management fees paid to the nominal owner of the property. Management, in the context of the Great Lands Corporation group of companies, would include the one person responsible for all major decisions within the group, namely, Mr. Sadr. He denied having received any management fees, but his acknowledgement that the nominal owner of the property (Great Lands HH) was responsible for paying management fees leads to the conclusion that he would have received a share of the sale proceeds as management fees.
70In the case of Century 21 Coastal Realty Ltd. v. 0863486 BC Ltd., 2017 BCWLD 5557 (BCSC), dealing with the payment of real estate commissions, the court found a director of the defendant corporation liable for inducing a breach of contract. To establish liability, the court held that there are five constituent elements to the tort of inducing breach of contract and each must be proved to establish liability. The elements are as follows:
- A contract between the plaintiff and a third party and a breach of it by the third party;
- The defendant had knowledge of the existence of the contract;
- The defendant’s conduct was intended to cause the third party to breach the contract;
- The defendant’s conduct caused the third party to breach the contract; and
- The plaintiff suffered damages as a result.
71Applied to the case at bar, the third party is Great Lands Corporation. Mr. Sadr knew of the existence of the contract between Great Lands Corporation and Mr. Hurst/DTZ because he, in fact, was the author of it. It was Mr. Sadr’s decision alone to deny Mr. Hurst on behalf of the plaintiffs, the commission, which was intended to cause Great Lands Corporation to breach its agreement with Mr. Hurst/DTZ. Mr. Sadr’s conduct caused Great Lands Corporation to breach the contract with the result that Mr. Hurst, on behalf of the plaintiffs, was denied the commission earned on the sale of the property.
72Irrespective of Mr. Sadr’s actions as a director in inducing the breach of contract, Mr. Sadr was a party to the contract personally. In Mr. Stein’s discussions with Mr. Hurst, Mr. Stein routinely referred to the fact that it is Mr. Sadr who makes all of the decisions regarding the sale of property owned nominally through the Great Lands group of companies. Consequently, both Great Lands Corporation and Mr. Sadr personally share in the liability to pay Mr. Hurst’s commission.
Disposition
73In summary, the defendant Mr. Sadr resiled from his unequivocal promise to Mr. Hurst of a commission on the sale of the commercial property. I conclude that Mr. Sadr acted in bad faith by cutting Mr. Hurst out of the final stages of the negotiation and sale of the commercial property and by denying payment of the commission earned by Mr. Hurst on behalf of the plaintiffs. The plaintiffs have succeeded in their action and are entitled to judgment in the amount of $540,000, being 5% of the sale proceeds of the commercial property plus HST. The defendants are jointly and severally liable to the plaintiffs for this amount, which shall be paid to the plaintiffs as they shall direct.
Costs
74Having succeeded in their action, the plaintiffs are entitled to their costs of this action. If the parties cannot agree on the matter of costs, the plaintiffs may make written submissions, not exceeding four pages, plus a costs outline, within 21 days of these reasons and the defendants shall have 14 days thereafter to make written submissions, not exceeding four pages, plus a costs outline. The plaintiffs shall have five days to reply with written submissions not exceeding two pages, if so advised.
Dietrich J. Released: September 5, 2018