CITATION: Fraser Beach v. Toronto Real Estate Board, 2010 ONCA 883

DATE: 20101221

DOCKET: C51533

COURT OF APPEAL FOR ONTARIO

Goudge, Gillese and Lang JJ.A.

BETWEEN

Fraser Beach

Applicant (Appellant)

and

The Toronto Real Estate Board

Respondent (Respondent)

Counsel:

Thomas G. Heintzman, Q.C., Randy A. Pepper and Lawrence M. Dale, for the appellant

William V. Sasso, Jeffrey B. Rosekat and Jacqueline A. Horvat, for the respondent

Heard: November 29, 2010

On appeal from the judgment of Justice David M. Brown of the Superior Court of Justice, dated December 7, 2009.

Lang J.A.:

[1] This appeal challenges the trial judge’s interpretation of the 2007 documents that delineated the parameters of the relationship between the trade association, the Toronto Real Estate Board (TREB) and the appellant, Fraser Beach, one of TREB’s approximately 25,600 member brokers. After a seven-day trial of the issues, the trial judge dismissed the appellant’s claims. For the reasons that follow, I would dismiss the appeal.

BACKGROUND

[2] The appellant was the broker of record for BNV Real Estate Inc. (BNV). He had a password provided by TREB to access its database. Using the appellant’s password, BNV uploaded and made available to the public the contents of TREB’s Multiple Listing Service residential resale database (MLS Database or Database) of its listings in Toronto’s centre core.

[3] TREB responded to BNV’s action by cutting off its access to TREB’s MLS Database on the basis that BNV and the appellant breached the terms of their contractual agreements with TREB. Without access, the appellant was no longer able to continue the website in its intended format and was not able to carry on business as a real estate broker. BNV eventually relinquished its brokerage and is not a party to this proceeding.

[4] The trial judge reviewed the documentary parameters of the relationship between the appellant and TREB. He concluded that the appellant had breached the Authorized User Agreement (AUA) that he had signed with TREB. He also concluded that, in the circumstances, TREB was entitled to suspend the appellant’s access to its MLS Database without giving prior notice. The appellant appeals seeking declaratory relief, including a declaration reinstating his TREB membership and data access.

THE TRIAL JUDGE’S REASONS

[5] In detailed and comprehensive reasons, the trial judge explained that TREB collected, formatted and electronically stored the listing information provided by its members in its MLS Database. The purpose of the Database was to pool all information and to allow all members access to each other’s listings. Members obtained access by using TREB-supplied passwords and TREB-designed software. TREB also supplied a feature so that members could download information from the Database to their own computers and use their own software to refine their search in a particular manner. A member could also use a feature called Property Match, which permitted a member to initiate a specific inquiry and to request that an e-mail be sent to the prospective client with the search results, as well as any updated results.

[6] The Toronto Real Estate Board permitted limited public access to its information in one way. Under an agreement it had as a member of the Canadian Real Estate Association (CREA), TREB uploaded and updated certain listings, which CREA made available to the public through its website. TREB controlled the data it provided to CREA and that data did not contain all the information available to TREB’s member brokers on its website.

[7] As the trial judge explained, BNV was conceived by Bell New Ventures to use its “expertise in technology to provide residential real estate brokerage services to buyers and sellers of homes at rates substantially lower than those charged by other agents.” BNV and the appellant predicted that their website would be extremely popular and could be expanded across Canada to “generate a cumulative net cash flow of $331 million over the first five years of its business plan and, once operational, would create a business with a net present value of $1.4 billion.” BNV intended to develop a business as a discount brokerage based on access to the content of TREB’s database through the application of BNV’s software.

[8] In the view of BNV and the appellant, the proposed venture did not conflict with the appellant’s agreement with TREB. The trial judge did not accept that view. Instead, based on factual findings and his interpretation of the documents, the trial judge concluded that “the way in which BNV operated its website … breached sections 2, 7(a), (c)(ii) and (d) of the AUA.” Central to his conclusion, the trial judge observed that, while members of the public could receive listing information, they could only do so “through the intermediary of a TREB member real estate agent.”

[9] The trial judge rejected TREB’s argument that the appellant also breached TREB’s Acceptable Use Policy on the basis that TREB had failed to prove that the Policy was in force at the relevant time. The trial judge also declined to make a finding that the appellant breached TREB’s Rules or its Code of Ethics. However, he found that BNV further contravened s. 7(c) of the AUA because its website was a “derivative work.” Finally, the trial judge concluded that TREB was justified in the circumstances, and on the basis of Policy 508, in suspending and continuing the suspension of the appellant’s access to the Database. In his opinion, TREB’s delay/refusal to reinstate the membership of the appellant’s former brokerage could be properly resolved if the appellant invoked the hearing provisions set out in TREB’s By-law.

THE AUTHORIZED USER AGREEMENT

[10] There is no dispute about the relevant provisions of the AUA. The trial judge reviewed them in the following terms, parts of which I have italicized for emphasis:

E.1 Definitions

[69] For the purposes of this proceeding the key definitions in the AUA are those for the terms “Services”, “MLS Database”, and “Content”. The AUA defined “Services” to mean:

TREB’s proprietary Internet-based system and associated technology that provides web-enabled display, search, retrieval, and uploading capabilities through the TREB website to its MLS Database and BRS Database and other related capabilities, including, without limitation, customer information services.

The term “MLS Database” meant:

the aggregation of all Content as well as its or their selection, assembly, and arrangement, that from time to time, comprises the Internet-based service currently known as the multiple listing service (MLS), and any successor or replacement service thereto owned and operated by or on behalf of TREB.

“Content” was defined to mean “all information, comments, opinions, statements, advice, descriptions, services, offers, data, files, links, ideas, software, images, graphics, audio clips, video clips, icons, or any other form of content or information.”

E.2 The general structure of the AUA

[70] … Section 2 of the AUA [entitled LICENSE GRANT] then described the licence TREB granted an Authorized User in respect of the MLS Database and Services:

Subject to the terms of this Agreement, TREB grants authorized user a non-exclusive, non-transferable license, without right to sublicense, to access and use the Services, MLS Database and BRS Database in accordance with this Agreement and in compliance with all applicable TREB requirements (“License”) solely for the purpose of and directly related to the Authorized User’s ordinary carrying on of its business.

The AUA defined TREB Requirements to mean TREB’s MLS Policies, MLS Rules, By-Laws, and Standards relating to the technology needed to access the MLS Database.

[71] TREB’s grant of license was followed immediately by this acknowledgment in Section 2 by the authorized user:

Authorized User unconditionally agrees to access and use the Services, MLS Database and BRS Database only in the manner and for the purposes expressly specified in this Agreement and for the exclusive and internal use by Authorized User and by other Authorized Users that have a valid Authorized User Agreement in effect with TREB which has not been terminated or suspended. (additional emphasis contained in the original)

[72] Section 3(b) of the AUA stated that under the licence an authorized user could “make Copies solely for the purpose of Business”, with “Copies” defined as “hard copy print outs and electronic versions of the reports, results, and other information or materials generated from Authorized User’s access and use of the Services and MLS Database.” Business was defined as the business of trading in real estate.

[73] Section 4 of the AUA placed certain restrictions on the use of the MLS Database. The restrictions at issue in this case are the following:

4. RESTRICTIONS ON USE

Authorized User acknowledges that the MLS Database and BRS Database as formatted by TREB have substantial monetary value, has a special value due to access only by TREB members and users authorized by TREB, and is considered the confidential property of TREB and that TREB retains ownership of all rights, title and interest to the Services, the Software, the MLS Database and the BRS Database. Except as expressly authorized in this Agreement, Authorized User shall not: (additional emphasis contained in the original)

(a) use either the MLS Database, the BRS Database or the Services in any manner not directly related to the business of real estate as defined in the Real Estate and Business Brokers Act R.S.O. 1990, as amended ...

(c) circulate or copy either the MLS Database, the BRS Database or the Services in any manner except to authorized users who have a valid Authorized User Agreement which they have signed and delivered to TREB which agreement has not been terminated or is suspended, and except to persons or entities who desire or may desire to acquire or dispose of certain of their rights respecting real estate;

(d) use, copy, reproduce or exploit either the MLS Database, the BRS Database or the Services for creating, maintaining or marketing, or aiding in the creation, maintenance or marketing, of any MLS Database or BRS Database which is competitive with the MLS Database or the BRS Database or which is contrary to the By-Laws, the MLS Rules and MLS Policies, or the Real Estate and Business Brokers Act, R.S.O. 1990, as amended under the Real Estate and Business Brokers Act, 2002 when proclaimed in force, and as may be further amended from time to time.

The provisions of this Section shall not apply to that part of the MLS Database, as formatted by TREB, which is publicly available without breach of any obligation by Authorized User hereunder; or is lawfully obtained by Authorized User from a third party who has a legal right to disclose it.

[74] Section 7 then dealt with issues of Intellectual Property. The provisions at issue in this proceeding were the following:

7. Intellectual Property

(a) The Services, MLS Database, BRS Database, Software and Documentation are proprietary and confidential to TREB, are protected by the Intellectual Property laws of Canada and international treaties and conventions, and shall remain the sole property of TREB. Notwithstanding anything in this agreement to the contrary, TREB shall have sole and exclusive ownership of all right, title and interest in and to the Services and MLS Database, BRS Database, Software and Documentation including all derivative works and all modifications and enhancements thereof and derivative works, regardless of the form or media in or on which the original and other copies may exist. No provision or clause in this Agreement shall be interpreted as an assignment or grant to Authorized User of any right, title, or interest in or to Intellectual Property, all privileges pertaining thereto remaining the exclusive property of TREB (or in some cases, of its subcontractors).

(c) Authorized User shall

(ii) not de-compile, reverse engineer, disassemble, modify, analyze or otherwise examine or otherwise reduce the Software to human readable form or create derivative works of the Software, MLS Database and or the BRS Database;

(d) Authorized User shall not, at any time or times, during or after the term of this Agreement question or dispute any of TREB’s right, title, ownership, license, Intellectual Property, and/or other interests in the Software, the Documentation, the Services, MLS Database or BRS Database nor commit any act or omission which negates, reduces, or impairs any of TREB’s rights or interests in any of same ...

ISSUES

[11] The appellant argues that the trial judge erred in determining that:

1. the appellant breached the relevant agreements with TREB;

2. TREB was not obliged to provide notice of default and later to restore the appellant’s access to the Database; and

3. the BNV website was a “derivative work” in breach of section 7 of the AUA.

ANALYSIS

1. Breach of the AUA

[12] Much of the argument surrounding the breach of the AUA centred on the acknowledged right of TREB members to copy the contents of the MLS Database onto their websites. Appellant’s counsel argued forcefully that, given that right, the appellant’s copying of the Database was contractually permissible and was consistent with similar websites and other activities of other TREB brokers. In particular, the appellant argued that the BNV website provided the public user with the same information that was already available from other TREB brokers, albeit by using different methodologies.

[13] The trial judge considered the appellant’s evidence thoroughly. He made detailed findings of fact. He concluded that there was a fundamentally different feature to the appellant’s website: it provided the public with direct access to TREB’s data “with the ability to search directly listing information that reposed in the MLS Database” without the intervention of a member broker. This direct public access without the intervention of a member was contrary to the practice of a broker or an agent standing “as a buffer between the consumer and the listing information data stored in the MLS Database.”[^1]

[14] The trial judge concluded that by providing the public with direct access to TREB’s Database, among other provisions, BNV and the appellant “breached section 2 of the AUA requiring an authorized user to access and use … the MLS Database for its ‘exclusive and internal use’.”

[15] To the extent that this conclusion represents factual findings, including the scope of activities of member brokers in distributing data, I am not persuaded the trial judge made any reviewable error. The factual findings, and inferences from those findings, were available to him on the evidence. To the extent that the trial judge’s conclusion reflects the pure interpretation of a contract, he applied the correct principles of contract interpretation. He approached the task by reading the plain language of the provisions in the context of the contract as a whole and by placing the contract in its appropriate setting. He made no error of law.

[16] The trial judge recognized that a reading of the AUA as a whole demonstrates that its primary intention was to protect its proprietary interest in the MLS Database for the benefit of its member brokers. This is apparent from its specification that the MLS Database was “owned and operated” and was the “sole property” of and “proprietary and confidential” to TREB. The AUA further describes the Database as having “substantial monetary value” and “special value due to access only by TREB members and users authorized by TREB.”

[17] Section 2, entitled LICENSE GRANT, authorizes access and use of the Database, but solely for the purpose of the broker’s “ordinary carrying on of its business”. The broker unconditionally agrees to use the Database only “for the purposes expressly specified in this Agreement “and” for the exclusive and internal use” by the broker [emphasis added]. In my view, and in light of the agreement’s predominant purpose of protecting TREB’s interest in the Database, the and in section 2 must be read conjunctively so that one specified purpose does not negative the other. In other words, the member is only permitted to use the Database for its business as specified in the agreement and only for the member’s exclusive and internal use.

[18] The trial judge’s conclusion is clear that, in making the Database available to the public for direct search, “BNV breached section 2 of the AUA because it did not confine its access and use of the Services and MLS Database to its exclusive and internal use. It accessed and used the Services and MLS Database for external use by members of the public.” This interpretation, in my view, is unassailable.

[19] The trial judge considered and rejected the appellant’s argument to the contrary based on TREB’s Property Match search feature. That feature, which was totally controlled by TREB, did not permit public access to all the information in TREB’s Database. Further, a Property Match search could only be initiated by a member broker and then was only responsive to a specific inquiry. The customer was not given direct access to the contents of TREB’s Database. As the trial judge concluded, the search feature was no more than a “technological surrogate” for the member.

[20] The trial judge’s interpretation of the AUA also makes commercial sense. Only TREB and its members had access to the full panoply of the information contained in the Database because it was this very access that provided members with the primary tool to develop relationships with potential buyers.

[21] Since I agree with the trial judge that the appellant was in breach of section 2, it is unnecessary to consider the restrictions placed on that use under section 4. They simply do not apply. However, I also agree with the trial judge that the appellant’s proposed interpretation of s. 4(c) must fail. The appellant argues that the exception to the exception in s. 4(c) should be interpreted as permitting a member the right to provide potential customers with access to the entirety of TREB’s database for search purposes. In my view, this interpretation conflicts with, and would render nugatory, the whole purpose of protecting TREB’s proprietary ownership interest in the “special value” of the Database. As the trial judge observed, the AUA must be read “as a whole, in a commercially reasonable way.” He concluded that “[t]o interpret the language of section 4(c) as permitting a member to copy the MLS Database for the purpose of public search would run completely counter to the main thrust of the AUA.”

[22] Moreover, the appellant’s argument cannot survive scrutiny based on the structure of the AUA. Section 2 limits TREB’s grant of licence to “exclusive and internal use” by the broker. Section 4 places restrictions on the use granted under section 2. Considered in that light, the restrictions in section 4 cannot be interpreted to expand the licence granted under section 2.

[23] The trial judge’s interpretation is further supported by s. 4(d), which provides that the restrictions on use do not apply to that part of the Database that is publicly available. If the restrictions do not apply to the publicly available contents of the Database, they must apply to the Database that is not publicly available. This, in turn means there must be a Database that is not publicly available. No other interpretation makes sense in the context of this agreement.

[24] On appeal, counsel argued that the meaning of the 2007 AUA would be informed by the wording of the 1998 AUA. I do not accept this argument. Given the plain wording of the 2007 AUA, it is unnecessary to consider an earlier version. In any event, the 1998 AUA was structured differently. In 1998, the reference limiting the members’ right to copy “to the extent only that the copy directly relates to such acquisition or disposition” was contained in the licence provision and not in the restrictions on that licence.

[25] Accordingly, I do not accept this ground of appeal.

2. Notice of Default and Reinstatement

[26] The trial judge acknowledged the serious effect of TREB’s denial of access to the appellant to its Database without notice. Such a denial is particularly troublesome where it means the affected person will lose his or her livelihood without notice and without an opportunity to cure its default.

[27] However, the trial judge concluded that TREB was entitled to take this action on the basis of the MLS Policy 508, by which the appellant was bound. Policy 508 provides that “TREB in its sole discretion, may terminate or suspend a Member’s user name and Password code in event of any unauthorized or improper use of the MLS Online system.” As the trial judge concluded, the appellant’s use of the Database was unauthorized. I observe that at the time, the appellant did not choose to pursue any remedy for immediate reinstatement.

[28] In any event, there was little practical point in reinstating access when the entire purpose of BNV’s website and software was to provide public access to the Database; BNV’s position at the time was that its website complied with TREB’s rules; and the appellant acknowledged in cross-examination that “there was no other way that we could have done it”. I am not persuaded that the trial judge made an error, let alone a palpable and overriding one, in arriving at the factual finding that reinstatement served no purpose.

[29] The appellant also seeks declaratory relief requesting reinstatement of his TREB membership, which he since allowed to lapse, as well as his Database access. As the trial judge pointed out, the TREB By-law provides for internal hearing procedures to resolve disputes. The outstanding dispute apparently focuses on TREB’s demand for compensation for costs arising out of the BNV website. In light of the available internal procedure at TREB, the trial judge was entitled to exercise his discretion to decline the appellant’s claim for declaratory relief.

3. “Derivative Work”

[30] In light of my conclusion regarding the plain breach of section 2 of the AUA, it is unnecessary to consider the alternative argument regarding whether the BNV website constituted a “derivative work” under section 7.

RESULT

[31] For the reasons given, I would dismiss the appeal. I would award costs to the respondent fixed in the amount of $23,500, inclusive of disbursements and all applicable taxes.

RELEASED: Dec. 21, 2010 “S.E. Lang J.A.”

“STG” “I agree S.T. Goudge J.A.”

“I agree E.E. Gillese”

[^1]: In his reasons, the trial judge noted that the issue before him was the narrow one of contractual interpretation and he did not consider other potential grounds attacking TREB’s dealings with the Database.