H.W. Liebig Co. v. Leading Investments Ltd., [1986] 1 S.C.R. 70
H.W. Liebig & Company Limited Appellant;
and
Leading Investments Limited Respondent.
1985: February 14, 15; 1986: February 28.
Present: Dickson C.J. and Estey, McIntyre, Chouinard, Lamer, Le Dain and La Forest JJ.
on appeal from the court of appeal for ontario
Contracts ‑‑ Real estate ‑‑ Listing agreement and agreement for purchase and sale ‑‑ Buyer unwilling to close ‑‑ Deposit held by broker ‑‑ Vendor’s action against buyer settled ‑‑ Relationship between two documents ‑‑ Interpretation of documents ‑‑ Whether deposit to be returned to vendor or commission to be paid to broker ‑‑ Judicature Act, R.S.O. 1980, c. 223, s. 36.
Respondent vendor listed property with appellant real estate broker. A buyer completed an agreement of purchase and sale and paid over a deposit to the broker. When the buyer refused to close the deal respondent brought an action against it for specific performance and in the alternative, for damages for breach of contract, and against the broker for the deposit. Appellant counterclaimed for its commission. The action between vendor and broker continued, but the action between the vendor and buyer was discontinued. The trial judge found that the agreement of purchase and sale governed and awarded appellant its commission but without interest or costs. The Court of Appeal reversed that decision and, given appellant's failure to find a buyer ready, willing and able to close, awarded respondent its deposit with interest and costs. The major issues here related to (1) the interpretation of the listing agreement regarding compensation to the broker and (2) the interpretation of the agreement of purchase and sale regarding such compensation and the relationship of the two documents.
Held (Estey, McIntyre and Chouinard JJ. dissenting): The appeal should be dismissed.
Per Dickson C.J. and Lamer and La Forest JJ.: The listing agreement governed. The bargain between vendor and broker was struck when the listing agreement was signed and its meaning was not altered by reading it with the agreement of purchase and sale. Indeed, the agreement of purchase and sale, read by itself, would not give the broker the right to claim its commission for there was neither privity of contract nor consideration between broker and vendor. The vendor, by signing the agreement of purchase and sale, intended to accept the buyer's offer; the clause in that agreement concerning the broker's commission merely confirmed the bargain struck in the listing agreement.
The operative word in the listing agreement was "sale" in the ordinary sense of transfer of property to another for a price. In the absence of evidence to the contrary, this ordinary meaning should not be displaced by a technical legal meaning used to reflect the rule that a court in the exercise of its equitable jurisdiction may order specific performance of an agreement of purchase and sale. The vendor is seeking a sale, not a lawsuit. This is supported by the general understanding of the nature of contracts of this kind.
Where the vendor has reneged, it is sufficient for the broker to establish the intended buyer ready, willing and able to buy. The vendor not having reneged, however, the broker was not entitled to his commission unless he could show the intended buyer was ready, willing and able to close on closing day. The listing contract between broker and vendor was not changed by the vendor's bringing an action against the intended buyer even though such action could affect the broker's rights by entitling him to a portion of the proceeds of investment either by virtue of quantum meruit or contract.
Per Le Dain J.: The event upon which the commission was payable was a completed sale. That event did not occur, not through any fault of the vendor, but because the purchaser was unwilling to complete the sale. The agent was, therefore, not entitled to the commission.
This conclusion is reached not by any presumed intention based on the "common understanding of men", as applied in Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277, which was properly repudiated in Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781, as being contrary to Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108, but on a consideration of the terms of the listing agreement and the agreement of purchase of sale, both of which are valid and binding in so far as the obligation to pay the commission is concerned, and must be considered together.
What the agent was required to do to earn his commission was to procure a valid offer to purchase. That was the consideration for the vendor's obligation to pay the commission but it was not the event upon which the commission was payable. That event was "any sale or exchange". It is clear from the terms of the listing agreement and the agreement of purchase and sale that what was contemplated was a completed sale out of the proceeds of which the commission would be payable. This results from the following provisions in the two agreements: the stipulations in the listing agreement that "the said commission is to be paid on the date set for completion of the sale" and that "for the purpose of this agreement a sale shall be deemed to include the entering into of an agreement to exchange this property or the granting of an Option to Purchase this property during the currency of this listing, if said exchange or option is subsequently completed"; and the provision in the agreement of purchase and sale that the commission is to be deducted from the deposit on the date set for completion of the sale and the vendor's solicitor is to pay the agent any unpaid balance of commission from the proceeds of the sale.
Where the event upon the occurrence of which the commission is payable is a completed sale, and the sale is not completed, the agent must show, in order to be entitled to the commission, that the purchaser was willing, ready and able to complete the sale. In other words, he must be able to show that it was not through his fault or that of the purchaser that the sale was not completed. This the agent could not show in the present case. There is an obvious difference between the case where the sale is not completed through the fault of the vendor and the case where it is not completed through the fault of the purchaser. It would not be reasonable to imply a term in the vendor's obligation to pay the commission, that in the case where the purchaser refused without justification to complete the sale, the vendor must go to the hazard and expense of a lawsuit to enforce its completion. Where the vendor successfully sues for specific performance or damages in such a case the agent should have a right to recover for his services, but it is not a claim, as in the present case, to enforce the vendor's obligation to pay a commission in accordance with the terms of the listing agreement or the agreement of purchase and sale.
Per Estey, McIntyre and Chouinard JJ., dissenting: The agent was entitled to its commission, whether or not the transaction closed. The terms of the listing agreement and the agreement of purchase and sale, when construed together, were consistent, compatible, complementary and provided for payment of commission upon the happening of the same event‑‑the agent's procuring a "valid offer" on the terms recited in the listing agreement or other terms accepted by the vendor.
The word "sale", in this case, was better interpreted as "binding agreement for sale" than as "completed sale". The commission was expressed to be payable upon the agent's having procured a valid offer. The commission, too, was stated in both the listing agreement and the commission slip appended to the agreement for sale to be payable on "the date set for the completion" of the sale. These words would have no purpose unless the parties intended the obligation to arise irrespective of whether completion actually occurred. Indeed, the parties expressly prescribed the condition of performance before the liability for commission arose in the case of an agreement for exchange or option but did not prescribe such a condition in the case of contract for sale. The obligation to pay a commission under the listing agreement, therefore, arose "on the date set for completion" once a valid offer had been procured and not "on the date of completion". The agent did everything required of him by the listing agreement and was entitled to his commission. It was not necessary to base the agent's entitlement to commission on the commission clause in the agreement of purchase and sale given its compatibility with the clause in the listing agreement.
The offer was valid so as to trigger the obligation to pay the commission as defined by the listing agreement. Firstly, the vendor accepted the offer. Secondly, the vendor did not plead the invalidity of the agreement either in law generally or by reason of non‑compliance with the licensing agreement. Thirdly, and most significantly, the vendor instituted an action pursuant to the agreement procured for it by the appellant agent in the Ontario courts to enforce that contract against the purchaser and the agent. The vendor was not in a position to say that the agreement of purchase and sale was anything less than a binding contract made pursuant to a valid offer procured by the agent. The right to seek recovery for any losses that occurred through the purchaser's failure to complete this valid and binding contract was simply voluntarily given up. This Court accordingly was left without any information as to what the vendor may have recovered by way of settlement. No amendments were made to the pleadings as against the agent. The vendor, after asserting its rights by an action and then settling, sought to secure the fruits of the action from the agent. Ordinary equitable principles, however, would not allow it to take this benefit at the expense of the unpaid agent who made its recovery possible and who had no part in reaching that settlement.
The English case Dennis Reed, Ld. v. Goody is no support for an expansive interpretation of a contract such as the listing agreement here, given the fact that this approach was already set aside by the Court of Appeal in Christie Owen & Davies Ltd. v. Rapacioli.
Cases Cited
By La Forest J.
Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108; Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277, considered; Gladstone v. Catena, 1948 CanLII 92 (ON CA), [1948] 2 D.L.R. 483, [1948] O.R. 182; Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781, distinguished; Loveridge v. Cooper, 1959 CanLII 399 (ON CA), [1959] O.W.N. 81, 18 D.L.R. (2d) 337; Alex Duff Realty Ltd. v. Eaglecrest Holdings Ltd. (1983), 1983 ABCA 119, 146 D.L.R. (3d) 731; Tilden Rent‑A‑Car Co. v. Clendenning (1978), 1978 CanLII 1446 (ON CA), 83 D.L.R. (3d) 400; Inchbald v. Western Neilgherry Coffee, Tea and Cinchona Plantation Co. (1864), 17 C.B. (N.S.) 733, 144 E.R. 293; Jaques v. Lloyd D. George & Partners Ltd., [1968] 1 W.L.R. 625; C and S Realties of Ottawa Ltd. v. McCutcheon (1978), 1978 CanLII 1386 (ON SC), 84 D.L.R. (3d) 584, 19 O.R. (2d) 247; Nigro v. Wilson, [1924] N.Z.L.R. 834; Prickett v. Badger (1856), 1 C.B. (N.S.) 296, 140 E.R. 123; Carsted v. Gass (1980), 1980 CanLII 2480 (MB CA), 116 D.L.R. (3d) 550; James v. Smith, [1931] 2 K.B. 317n; Martin v. Perry and Daw, [1931] 2 K.B. 310; Copeland v. Wedlock (1905), 6 O.W.R. 539; Ramm v. Cooper, [1955] O.W.N. 525; Re Brethour and Morris Ltd. v. Shields Construction Co., [1958] O.W.N. 128, referred to.
By Le Dain J.
McCallum v. Hicks, [1950] 2 K.B. 271; Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277; Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781; Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108; Ramm v. Cooper, [1955] O.W.N. 525; C and S Realties of Ottawa Ltd. v. McCutcheon (1978), 1978 CanLII 1386 (ON SC), 19 O.R. (2d) 247; Loveridge v. Cooper (1959), 1959 CanLII 399 (ON CA), 18 D.L.R. (2d) 337.
By Estey J. (dissenting)
Loveridge v. Cooper, 1959 CanLII 399 (ON CA), [1959] O.W.N. 81, 18 D.L.R. (2d) 337; Gladstone v. Catena, 1948 CanLII 92 (ON CA), [1948] 2 D.L.R. 483, [1948] O.R. 182; Township of Nelson v. Stoneham, 1957 CanLII 353 (ON CA), [1957] O.W.N. 109; Howell and Howell v. Kenton Agencies Ltd., 1953 CanLII 840 (ON SC), [1953] O.W.N. 248; Re Brethour and Morris Ltd. v. Shields Construction Co., [1958] O.W.N. 128; Royal Trust Co. v. Toronto Transportation Commission, 1935 CanLII 11 (SCC), [1935] S.C.R. 671; Murray v. Saskatoon (No. 2) (1951), 1951 CanLII 202 (SK CA), 4 W.W.R. (N.S.) 234; Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277; Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108; Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781.
Statutes and Regulations Cited
Judicature Act, R.S.O. 1980, c. 223, s. 36.
Authors Cited
Oxford English Dictionary, vol. 9, Oxford, Clarendon Press, 1933, reprinted 1961, "Sale".
APPEAL from a judgment of the Ontario Court of Appeal (1981), 1981 CanLII 1700 (ON CA), 34 O.R. (2d) 175, allowing an appeal from a judgment of Eberle J. Appeal dismissed, Estey, McIntyre and Chouinard JJ. dissenting.
P. B. C. Pepper, Q.C., for the appellant.
A. Sternberg, for the respondent.
The judgment of Dickson C.J. and Lamer and La Forest JJ. was delivered by
- La Forest J.‑‑The question in this case is whether a real estate broker may recover his commission from a vendor despite the fact that an intended purchaser found by the broker refuses to complete the transaction after entering into an agreement of sale.
Facts
- The facts for the purposes of this appeal may be briefly stated. By a listing agreement dated February 5, 1974 the respondent vendor, Leading Investments Limited, gave the appellant real estate broker, H.W. Liebig & Company Limited, exclusive authority to sell certain vacant lands in the County of Halton, Ontario, for $521,000 or such lesser amount as might be acceptable to the vendor, such authority to expire on April 30, 1974. The agreement had been drafted by the broker, Liebig. Two paragraphs of the agreement deal with the commission to be paid the broker for its efforts. They read as follows:
I agree to pay a commission of 5% of the sale price on any sale or exchange howsoever effected during the currency of this authority. It is understood and agreed that the said commission is to be paid on the date set for completion of the sale, if the said listing Broker or his sub‑agents procure a valid offer on the terms and conditions set out in this listing agreement or on such other terms or conditions as I may accept or, if the property is sold by me or anyone on my behalf within 90 days after the expiration of this authority to anyone who has been made aware of the property, through the marketing activities of you or your sub‑agents during the term of this authority.
For the purpose of this agreement a sale shall be deemed to include the entering into of an agreement to exchange this property or the granting of an Option to Purchase this property during the currency of this listing, if said exchange or option is subsequently completed.
- A month after the listing agreement was made the broker was successful in obtaining an offer from New Forest Investments Limited. By the agreement of purchase and sale, the latter unconditionally agreed to purchase the lands from Leading for a total consideration of $453,000, the transaction to close on May 31, 1974. Pursuant to this agreement New Forest paid the broker the sum of $15,000 as a deposit to be put in trust. The vendor, Leading, accepted the offer by signing a clause at the foot of the agreement in the following terms:
I hereby accept the above Offer and agree to and with the Purchaser to carry out the same on the terms and conditions above mentioned.
I agree to pay the Agent a commission of 5% of the sale price for having procured this Offer, said commission to be deducted from the deposit on the date set for completion of sale and I irrevocably instruct my Solicitor to pay direct to the said Agent, any unpaid balance of commission from the proceeds of the sale and further instruct the agents to remit any balance of monies to my Solicitor herein.
The transaction did not go through; this, it was conceded by the present parties, was owing to the default of the purchaser, New Forest, which subsequently released any claim it might have to the deposit.
Counsel engaged in some discussion regarding the intention of the parties as revealed by oral and documentary evidence of what transpired between them. In particular reference was made to three other transactions between the parties at about the same time, in two of which wording was added in the commission clause expressly stating that the commission was payable only if the transaction was completed. But counsel for the appellant, Liebig, rightly conceded that this was only of marginal relevance. He presented these facts largely as showing that the vendor was experienced in the area. In the absence of other evidence, no other weight can properly be attached to them in view of the fact that the other transactions were completed later than that with which we are concerned. In any event, the case was not argued on that basis. As counsel for Liebig himself put it, "this case falls to be decided not on the credibility of witnesses but rather on the interpretation of two documents". That, he added, was the "narrow point of the law" it sought to have determined.
I agree that there are no special considerations militating in favour of Leading. Though Mr. Miller, who controls it, does not appear to have had the benefit of counsel in dealing with this transaction, it is clear that he is an experienced business man. But while there is thus nothing in the particular context requiring consideration, it must be remembered that the words used in a document are not to be interpreted in a vacuum. One must at least advert to the kind of document that is in question and the common understanding of people about such documents.
On July 10, 1975, Leading brought action against the defaulting purchaser, New Forest, for specific performance of the agreement and against Liebig for the deposit. Liebig counterclaimed for $22,650 as commission for having procured a binding agreement of sale, together with interest and costs. The action between the vendor and the intended purchaser was settled, but the only real information we have about the terms of the settlement is that the purchaser released the deposit.
The action between the present parties went to trial on the question whether Leading was entitled to the $15,000 deposit or whether Liebig was entitled to its commission of $22,650 plus interest and costs. The trial judge, Eberle J., held in favour of Liebig. In his view the agreement of purchase and sale was the controlling document and he construed the clause therein signed by Leading as entitling Liebig to its commission on the completion of that agreement. He, however, awarded no interest or costs.
This judgment was reversed by the Ontario Court of Appeal (Brooke, Wilson (now of this Court) and Morden JJ.A.) In its view the governing document was the listing agreement the words of which, having regard to the expectations of the parties in entering into such an agreement, meant that to succeed the broker had to procure a purchaser who at the date fixed for closing was ready, able and willing to complete the transaction. This the broker failed to do. Leading was, therefore, awarded $15,000 with interest and costs.
Liebig sought and was granted leave to appeal to this Court.
The Issues
Liebig not only raises the correctness of the substantive decision of the Court of Appeal but also its award of interest. However, the major issues relate to:
the interpretation of the provisions of the listing agreement regarding compensation to the broker; and
the interpretation of the provisions of the agreement of purchase and sale regarding such compensation and the relationship of this document with the listing agreement.
General Considerations
Before entering into a discussion of the precise terms of the documents in question, it is useful to make some general observations about contracts between vendors of land and real estate brokers. There can, as Viscount Simon pointed out in Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108, at p. 119, be considerable difficulty in formulating general principles on the subject because there is no single pattern followed and the precise terms of the relevant contract must be examined. That consideration, however, should not be overstated, particularly having regard to the organization of the real estate sales business in Canada. The bulk of agreements are in standard form. In the present case, counsel for Liebig informed us that the wording in both the listing agreement and in the agreement of purchase and sale was that used in the standard forms of these agreements prepared by the Ontario Association of Real Estate Boards.
In addition, Viscount Simon's statement must not be viewed as an invitation to ignore the general nature of vendors' contracts with real estate brokers or the practice regarding them. Viscount Simon and, for that matter, the other judges in the Luxor case, do not do so. Lord Wright, for example, expressly stated at p. 139 that in construing the contract before him he took account of "the more general aspects of the course of business in these matters".
Now generally when a vendor seeks the service of a real estate broker, what he wants to do is to dispose of his property. He is not attempting to get an offer that will not go through, or to obtain a right of action against a purchaser. I am not the first to give expression to this obvious fact; see, inter alia, Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277, at p. 284, per Denning L.J. (C.A.); folld. Loveridge v. Cooper (1959), 1959 CanLII 399 (ON CA), 18 D.L.R. (2d) 337, at p. 345 (Ont. C.A.)
The real estate broker knows this too. His whole business revolves on contingencies. He (or as often she) ordinarily operates on the basis that his remuneration is contingent on finding a purchaser for a property; the arrangement is not a contract of employment. "The contracts", as Lord Russell of Killowen put it in Luxor (Eastbourne), Ld. v. Cooper, supra, at p. 124, "are merely promises binding on the principal to pay a sum of money upon the happening of a specified event...." Counsel for Liebig put it that a listing agreement is rather like a hunting licence. I agree. But as in hunting, the broker may spend much time and effort but fail to achieve his goal in a particular case. Still, the venture is well worth it. There is other game and the prize is enticing. Real estate commissions are substantial. For a similar view, see Lord Russell of Killowen in the Luxor case, supra, at p. 124.
The real estate broker may seek to change the rules of the game by altering the words of the contractual documents which ordinarily emanate from him and often have been drafted at the behest of real estate associations. More often than not they are signed by the vendor without the benefit of legal counsel and often without even reading them. This has led some courts to interpret these documents contra proferentem (see Alex Duff Realty Ltd. v. Eaglecrest Holdings Ltd. (1983), 1983 ABCA 119, 146 D.L.R. (3d) 731 (Alta. C.A.)), and others to hold that the signature of a party in such circumstances can only be relied on as manifesting assent to a document when it is reasonable for the party relying on the signed document to believe that the signer really did assent to its contents (see Tilden Rent‑A‑Car Co. v. Clendenning (1978), 1978 CanLII 1446 (ON CA), 83 D.L.R. (3d) 400 (Ont. C.A.))
I need not enter into a consideration of these cases. I simply mention them as illustrating the reliance of courts on the general background in assessing the intention of contractual parties. In this as in other situations the courts, in interpreting the contract, read its words in the context in which they are found. Many courts have echoed the sentiment of Lord Wright in the Luxor case, supra, at p. 137, that "language is imperfect"; words must necessarily take meaning from the context in which they are expressed.
I have already related the general context and the common understanding of people about contracts for the sale of land by real estate brokers. Of course, as earlier stated, parties need not conform with the common understanding. So, in the Luxor case, supra, at p. 120, Viscount Simon mentions the case where an agent is employed in the strict sense of the word to sell a property, citing Inchbald v. Western Neilgherry Coffee, Tea and Cinchona Plantation Co. (1864), 17 C.B. (N.S.) 733, 144 E.R. 293, as an example; see also Lord Russell of Killowen and Lord Wright in Luxor, at pp. 128, and 147‑48, respectively. That relatively unusual arrangement bears no resemblance to the present case, but Viscount Simon (p. 120) also mentions the situation, more germane here, where the parties agree that the agent is to get his commission on procuring an adequate offer. But in considering whether such an agreement has been made, it is important to note that this will not be assumed in the absence of clear terms. The words of Lord Russell of Killowen, at p. 129 of the same case, underline this. He says:
It is possible that an owner may be willing to bind himself to pay a commission for the mere introduction of one who offers to purchase at the specified or minimum price; but such a construction of the contract would in my opinion require clear and unequivocal language.
- Other judges, notably Lord Denning, have used similar language. In Dennis Reed, Ld. v. Goody, supra, real estate brokers sought, on the basis of the words in the contract, to recover their commission despite the fact that the proposed purchaser had withdrawn his offer. They strongly relied on the words of the contract that simply required that the agent "find a person ready, able and willing to purchase the...property". In rejecting this argument, Lord Denning said in part at p. 288:
So far, I have considered this particular clause only. But I would like to add that the various new clauses that have appeared seem to be capable of a similar interpretation. I can see no sensible distinction between instructions to "find a purchaser," "find a party prepared to purchase," "find a purchaser able and willing to complete the transaction," and "find a person ready, willing and able to purchase." The rights and liabilities of house owners in these cases should not depend on fine verbal differences. If estate agents desire to get full commission not only on sales, but also on offers, they must use "clear and unequivocal language": see Luxor (Eastbourne) Ld. v. Cooper, per Lord Russell. Such a claim is, indeed, so contrary to the ordinary understanding on these matters that I think that the estate agent who desires it should bring it specifically to the notice of the house owner and get his specific agreement to it.
- In Jaques v. Lloyd D. George & Partners Ltd., [1968] 1 W.L.R. 625 (C.A.), he reiterated his views in the following passage at p. 630:
The principles which in my opinion are applicable are these: When an estate agent is employed to find a purchaser for a business or a house, the ordinary understanding of mankind is that the commission is payable out of the purchase price when the matter is concluded. If the agent seeks to depart from that ordinary and well‑understood term, then he must make it perfectly plain to his client. He must bring it home to him such as to make sure he agrees to it.
These and other cases underline that, in construing listing agreements, the words used must be read in the light of the general context and the common understanding of these agreements.
I am aware that there are statements in Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781 (C.A.), that express the view that Lord Denning went too far in his statement of the law. I do not myself accept this view, but at all events, the contract there used more precise language than is ordinarily found in such transactions. It provided that the commission was payable on the agents' "effecting an introduction ... of a person ... ready able and willing to purchase". There is no comparable language here, and I would again draw attention to Lord Russell's statement, cited above, that "such a construction of the contract would ... require clear and unequivocal language". What is more it was the vendor, and not the purchaser, who reneged in that case.
With this background I turn now to the specific words used in the listing agreement and in the agreement of purchase and sale.
The Listing Agreement
- The first part of the provision in the listing agreement, which is cited earlier, seems clear enough on its face. The vendor (Leading) agrees to pay the broker (Liebig) a commission of 5 per cent of the sale price on any sale or exchange howsoever effected during the continuance of the listing agreement. The operative word in the present case is sale but the implication of transfer in the word exchange should not be ignored. Indeed, I would have thought the primary meaning of sale was the transfer of property to another for a price. That is substantially what the Oxford English Dictionary tells us. It defines sale as:
The action or an act of selling or making over to another for a price; the exchange of a commodity for money or other valuable consideration.
This interpretation is reinforced, if reinforcement is needed, by the common understanding of the import of this type of contract to which I have already referred. Some support for this view may also be deduced from the second paragraph of the commission clause which provides that a sale shall include an exchange or option if these are subsequently completed: see C and S Realties of Ottawa Ltd. v. McCutcheon (1978), 1978 CanLII 1386 (ON SC), 84 D.L.R. (3d) 584 (Ont. H.C.), per Henry J.
I am aware, of course, that lawyers frequently speak of an agreement of sale as being a sale. That approach flows from the fact that courts, under their equitable jurisdiction, have power to order specific performance of such agreements. The trial judge refers to this in his oral reasons for judgment relying on certain remarks in the judgment of Laidlaw J.A. in Gladstone v. Catena, 1948 CanLII 92 (ON CA), [1948] 2 D.L.R. 483 (Ont. C.A.), at p. 487. The latter had in turn cited a statement from the New Zealand case Nigro v. Wilson, [1924] N.Z.L.R. 834, at p. 839, that "A sale is `effected' when made, a title in equity being created."
While the remarks of Laidlaw J.A. were later relied on in a number of decisions at first instance, the issue in Gladstone v. Catena, supra, as the Court of Appeal in the present case noted, was really whether a contract had been entered into at all. The question of the rights and obligations of the parties when a broker procures an intended purchaser who later reneges did not arise. Laidlaw J.A. was certainly not giving the opinion of the Court of Appeal on the issue with which we are concerned. Hogg J.A., who also sat, thought the words there used in the listing agreement meant the same as "completion of the sale". Henderson J.A. agreed with both.
To approach the issue in the way Laidlaw J.A. appears to have done involves transposing a doctrine intended to do equity so as to create an inequitable situation not contemplated by the parties. I do not think the technical meaning that lawyers may attach to a word for certain purposes should be substituted for the ordinary meaning of that word in everyday speech unless there is evidence that the parties intended to use it in that special or technical sense. I have not found the word defined in that sense in the Oxford Dictionary, and it flies against the ordinary understanding of people as to the meaning of the word, particularly, as has been judicially recognized, in the context of this kind of agreement. I realize, of course, that people will sometimes say they have sold a property when they have accepted an offer for it. But that is wishful thinking based on the normal sequence of events. If there is a chance that a proposed purchaser will renege, the vendor will wistfully inform you that he thought it was sold.
This is perhaps another way of saying that what the vendor seeks to obtain is a sale, not a lawsuit. All a lawyer means when he speaks of an agreement of sale as being a sale is that it ordinarily carries a right to specific performance. But that is obviously not what the parties have in mind in entering into the contract; they are thinking of a completed sale. The fact that a lawyer, if consulted by the vendor, would seek to make this understanding clear is merely a credit to his caution, a natural bent of lawyers supported in this instance, as we have seen, by some authority. This, however, does not alter the plain meaning of the words as used by ordinary people in an ordinary business setting.
Counsel for Liebig argued that it was sufficient for the broker to establish that he had procured a person who was ready, able and willing to purchase. That is certainly true where it is the vendor who reneges. In that case, the broker could recover either on a quantum meruit (see Prickett v. Badger (1856), 1 C.B. (N.S.) 296, 140 E.R. 123; Carsted v. Gass (1980), 1980 CanLII 2480 (MB CA), 116 D.L.R. (3d) 550 (Man. C.A.), or in contract: see, inter alia, the Luxor case, supra, at pp. 120, 126, 142. The action in contract may be justified, on several bases, including the fact that it is the vendor's own fault that the contract is not completed; see Dennis Reed, Ld. v. Goody, supra, at p. 285. In cases where the vendor has not reneged, however, the courts have not allowed the broker to obtain his commission unless he was able to show that the proposed purchaser was ready, able and willing to purchase at the time set for the completion of the sale: see James v. Smith, [1931] 2 K.B. 317n (C.A.); Martin v. Perry and Daw, [1931] 2 K.B. 310; Loveridge v. Cooper, supra; see also Christie Owen & Davies Ltd. v. Rapacioli, supra.
The fact that the vendor brought action against the person who agreed to purchase in no way changes the situation. The contract between the vendor and the real estate broker cannot be changed by the subsequent dealings between the vendor and his intended purchaser. This does not mean, however, that such actions may not affect the broker's rights. If, for example, the vendor sued and recovered a substantial amount from the intended purchaser, either by judgment or settlement, the broker could recover for his services to the vendor on a quantum meruit, or as we would now say, in restitution. Otherwise the vendor would be unjustly enriched from the efforts of the broker at the vendor's request.
In a case where the purchaser is ready, able and willing to comply with the offer, the compensation to which a broker is entitled is the amount of the agreed fee, whether the action is grounded in contract or on a quantum meruit. It is different in a case where the broker brings an action on a quantum meruit to recover his appropriate share of a judgment or settlement obtained by the vendor against the purchaser. In such a case I would have thought a fair amount of compensation would be the agreed percentage of the amount received on the judgment or settlement, less the vendor's costs and probably a reasonable allowance for his efforts in proceeding with the claim. For a judgment is a very different thing from a sale; it involves many other risks and pitfalls. Consistant with these last remarks, I do not think the broker can force the vendor to institute a lawsuit: see, inter alia, Dennis Reed, Ld. v. Goody, supra; Carsted v. Gass, supra,
I need not enter further into this matter. In the present case a claim in quantum meruit or restitution was not pressed. We have no information about the settlement except that the proposed purchaser released his claim to the deposit. And that deposit in ordinary circumstances belongs to the vendor. It is recompense to him for the fact that his property was taken off the market for a time as well as for his loss of bargaining power resulting from the revelation of an amount that he would be prepared to accept.
The foregoing disposes of the arguments relating to the meaning of sale in the listing agreement. However, the listing agreement goes on to say:
It is understood and agreed that the ... commission is to be paid on the date set for completion of the sale, if the said listing Broker or his sub‑agents procure a valid offer on the terms and conditions set out in this listing agreement or on such other terms or conditions as I may accept....
These words, counsel for Liebig argues, indicate that payment of the commission is due when an offer is procured, though payable on completion. As I read this sentence, however, it is simply a direction regarding the manner in which the commission is to be paid when there is a sale or exchange as provided for in the first sentence of the clause. It is to be paid at the time of the completion of sale, on the basis of a valid offer on the terms and conditions set out in the listing agreement or on such other terms as the vendor may have accepted.
The argument that the words "procure a valid offer" were added to standard listing agreements by real estate boards in view of the use of similar words by Meredith C.J. in Copeland v. Wedlock (1905), 6 O.W.R. 539 (Div. Ct.), at p. 540, does not impress me. The agreement in that case was entirely different from that in the present case. What is more, whatever may have been the intention of the real estate boards in adding those words (about which we have no evidence except counsel's ipse dixit) is really not relevant. It is not what these boards may have intended a court might read into the clause that is determinative. It is what a court, from an objective standpoint, thinks both parties in the circumstances would have agreed to by the words used. And when one looks at these words in the light of the common understanding of people about this kind of contract, it becomes evident that this is not the meaning to be attached to them. Certainly they are far indeed from bringing home that meaning to the vendor.
I would, therefore, conclude that the listing agreement does not entitle the broker to his commission.
The Purchase and Sale Agreement
I shall at the outset baldly state that I agree with the Court of Appeal that the vendor and broker struck their bargain when they signed the listing agreement. What the vendor had in mind in signing the agreement of purchase and sale was to accept the intended purchaser's offer. There was, to be sure, a clause in the latter agreement stating that he would pay the broker the commission but he had already agreed to this. This was the reality of the situation traditionally dealt with under the rubric that there was no privity of contract between the vendor and the broker under that agreement. That the broker was not considered a party to the transaction is evident from the fact that Mr. Liebig, who (since he controlled Liebig) would ordinarily have signed for the broker, witnessed the vendor's signature. As well, as the Court of Appeal notes, there was no consideration flowing from the broker to the vendor.
As the Court of Appeal also notes, there is no evidence that the parties intended to amend the listing agreement and there is nothing in the agreement of purchase and sale to warrant that conclusion. It would have to be clearly established that the purchase and sale agreement had altered the bargain struck under the listing agreement: see Ramm v. Cooper, [1955] O.W.N. 525 (Ont. C.A.) Reading the two documents in harmony as counsel for Liebig asks us to do, the agreement of purchase and sale merely confirms the bargain struck in the listing agreement.
Even standing alone, the words of the agreement of purchase and sale contemplate payment on the completion of sale, words that must be read in accordance with the common understanding of contracts of this kind. As already explained in dealing with the listing agreement, the broker would also be able to effect recovery if the purchaser was ready, able and willing to complete the sale at the time contemplated for closing; see Re Brethour and Morris Ltd. v. Shields Construction Co., [1958] O.W.N. 128 (Ont. H.C.)
Counsel for Liebig placed some reliance on the case just cited but I would observe that the agreement of purchase and sale there (the only document) was, as Spence J. observed, "not in the usual form when commission is to be payable only in the event of a sale being completed" but was "drafted carefully to avoid implication" (see p. 131). No reference to the completion of sale was there made (p. 129).
In my view, then, the governing agreement is the listing agreement and I do not think its meaning is in any way altered by reading it with the agreement of purchase and sale. Indeed, I do not think the latter agreement, read by itself, would give the broker the right to claim his commission.
Interest and Costs
Counsel for Liebig, we saw, also questioned the Court of Appeal's award of interest and argued that it did not comply with s. 36 of the Judicature Act, now R.S.O. 1980, c. 223. However, leave to appeal to this Court was not made on this point, but solely on the ground that the Court of Appeal erred in holding that Liebig was not entitled to a commission. Under these circumstances it would appear inappropriate to deal with this matter.
Counsel also argued that the trial judge should have awarded Liebig costs, but in view of the conclusion I have arrived at, that issue has become irrelevant.
Conclusion
- I would dismiss the appeal with costs.
The reasons of Estey, McIntyre and Chouinard JJ. were delivered by
Estey J. (dissenting)‑‑The issue on this appeal is whether a vendor of real estate (here the respondent‑plaintiff) is liable to pay commission to a real estate agent (the appellant‑defendant) who succeeded in procuring an agreement for sale which was never performed due to the default of the purchaser. The purchaser is not a party to this appeal, but was a defendant in the action brought by the vendor. The claims against the purchaser were discontinued prior to trial.
The essential facts are not in dispute, the issue turning on the interpretation of a real estate listing agreement and a commission agreement appended to the aforementioned agreement of purchase and sale. The listing agreement complied with the provincial statute. The relevant part of the contract states:
I agree to pay a commission of 5% of the sale price on any sale or exchange howsoever effected....[T]he said commission is to be paid on the date set for completion of the sale, if the said listing Broker ... procure[s] a valid offer on the terms and conditions set out in this listing agreement or on such other terms or conditions as I may accept....
There is no issue raised as to the validity of the offer procured by the agent, or as to its conformity with the terms of the listing agreement. The vendor accepted the offer, and an agreement of purchase and sale was entered into. The commission clause in this agreement reads as follows:
I agree to pay the Agent a commission of 5% of the sale price for having procured this Offer, said commission to be deducted from the deposit on the date set for completion of sale....
- The learned trial judge made several findings and interpretations en route to concluding that the agent had established its entitlement to commission. Initially, he found that Miller, the principal of the vendor company,
... had, at that time, no understanding of, or any belief in, any arrangement with the agent whereby he would not have to pay any commission unless this transaction closed.
The trial judge then proceeded to an analysis of the listing agreement and the commission slip appended to and forming part of the agreement for purchase and sale, and stated:
In my view, the governing terms [in this case] are those in the agreement of purchase and sale, [which terms entitle] the agent to commission, whether or not the transaction closes.
With respect, I am in agreement with that conclusion although I find that the same result is more easily reached by construing the listing agreement and the agreement of purchase and sale together. When this is done, it is readily apparent that their terms are consistent, compatible, complementary, and provide for payment of commission upon the happening of the same event, namely, the agent's procuring of a "valid offer" on the terms recited in the listing agreement or on other terms the vendor accepts.
The Court of Appeal concluded otherwise. In interpreting the commission clause in the listing agreement, Brooke J.A. came to rest for support in law upon the judgment of Roach J.A. in Loveridge v. Cooper, 1959 CanLII 399 (ON CA), [1959] O.W.N. 81, 18 D.L.R. (2d) 337. The learned justice in appeal stated in his reasons (18 D.L.R. (2d) 337 at 343):
To succeed the plaintiff had to prove as part of his case, that the purchasers at the relevant time were willing, ready and able to complete the deal or, to put it otherwise, that the non‑completion was not due to any default by them. The relevant time was the date fixed for closing the deal....The plaintiff was not entitled to succeed by merely proving that he had obtained a binding offer to purchase on terms agreed upon by the defendant.
There may be in today's law room for disagreement with the comments of Roach J. It does not seem to be a practical distinction to require the vendor to pay a commission when the purchaser is of a mind to close the contract and the vendor is not, but not when it is the purchaser who decides that he is not ready, willing and able to complete the purchase. We do not need, however, to decide the validity or otherwise of the above‑quoted comment, because one need only turn to the contract before the court in the Loveridge case, supra, to see that that case concerned contractual provisions very different from those which are presented in this appeal. The listing agreement in the Loveridge case provided:
If said property is sold by you or your agents before the expiration of this agreement,...I agree to pay you ... Commission of Five per cent.
The Court of Appeal in that case was, therefore, concerned with the meaning of the word "sold" used by itself to describe the contingency upon which commission would be payable. The words of the Loveridge contract stand in sharp contrast to the terminology employed by the parties in the listing agreement here. In the instant case, the contract provides that commission will be payable if a sale is effected, but this is qualified by the words, "if the ... listing Broker ... procure[s] a valid offer...." No such terminology appeared in Loveridge.
- The case of Gladstone v. Catena, 1948 CanLII 92 (ON CA), [1948] O.R. 182 (C.A.), also concerned a contract in which commission was expressed to be payable only upon the "sale" of the property. Because the contract in the present appeal differs materially from the contracts in both Loveridge, supra, and Gladstone, supra, I do not find it necessary to determine, as between the judgments of the Court of Appeal in the two earlier cases, which of the interpretations given was correct on the facts common to both. In the latter case, Hogg and Laidlaw JJ.A. reached different results. Hogg J.A. decided that a "sale effected" is indistinguishable from a completed sale. Laidlaw J.A., on the other hand, reached the contrary conclusion that a sale is "effected" once an agreement for purchase and sale is entered into by a vendor and purchaser, whether or not that contract is actually performed as prescribed in the contract or otherwise. His Lordship stated at p. 187:
The grammatical meaning of the words "on any sale effected" is perfectly plain to me....A "sale effected" is a sale made by a vendor to a purchaser. I do not say that the purchase price has to be paid, the transfer of title must be completed, or that all obligations under such a contract have to be fulfilled, to bring a transaction within the meaning of the words "sale effected". There must, however, be a valid contract between the vendor and the purchaser. It was so decided in Nigro v. Wilson et al., [1924] N.Z.L.R. 834, where Stout C.J. at p. 839, says: "A sale is `effected' when made, a title in equity being created." See also Bellingham et al. v. Bly (1915), 34 N.Z.L.R. 538.
Standing alone, the word "sale" may be interpreted to mean either a binding agreement for sale or a completed sale. In the circumstances of the present appeal, the former interpretation is to be preferred, for the simple reason that here, commission is expressed to be payable upon the agent's having procured a valid offer.
Further, in both the listing agreement and the commission slip appended to the agreement for sale in this case, it is stated that commission will be payable "on the date set for completion" of the sale. This wording too is critically absent from the contracts before the court in Gladstone, supra, and Loveridge, supra. The use of these words is for no purpose unless the parties intended that the obligation would arise irrespective of whether or not completion actually occurred. The words are "on the date set for completion", not "on the date of completion". It would have been a simple matter of draftsmanship to accommodate the requirement that money actually change hands between vendor and purchaser before liability to pay commission to the agent arises in the vendor. The adoption by the parties of the words "to be paid on the date set for completion of the sale" supports clearly the subsequent wording in the commission clause in the listing agreement that the agent's entitlement to commission shall arise should he "procure a valid offer".
A further term of the listing agreement here in issue provides:
... a sale shall be deemed to include the entering into of an agreement to exchange this property or the granting of an Option to Purchase this property during the currency of this listing, if said exchange or option is subsequently completed.
This clause has no direct application in the present case, because the agreement of purchase and sale procured by the agent and accepted by the vendor did not provide for any "exchange [of] this property" or for "an Option to Purchase". Its relevance here is confined to the fact that its presence in the listing agreement reinforces the significance and emphasizes the absence of the requirement that unlike an exchange or option, a straightforward agreement for sale need not be performed before commission becomes payable to the agent. The parties expressly prescribed the condition of performance before liability for commission arises in the vendor in the case of an agreement for exchange or option of the listed property. No such condition was prescribed in the case of a contract for the sale of the listed property. The term "sale" is not restrictively defined by this agreement but rather is expansively defined to include an exchange or option to sell. The obligation to pay commission as defined by the opening clause of the listing agreement is unaffected by the later definitive provision.
It is, moreover, not without significance that, as the learned trial judge has found, these parties in three contemporaneous transactions took pains to include in the listing agreement a precise provision making commission payable only upon the closing of the sale established by any valid offer procured by the agent and accepted by the vendor. The absence of such a clause in the contract here in issue takes on, in these circumstances, added significance. While this is a relevant consideration, it by itself is far from controlling and goes mainly to the sincerity of the respondent's testimony on the interpretation of the two contracts.
It follows that the condition of "completion" is inapplicable on the facts of this appeal. In my view, the obligation to pay a commission under the opening clause of the listing agreement as set out above, arises on "the date set for completion" once a "valid offer" has been procured. The agent, having done everything required of him by the listing agreement, is entitled to his commission.
This conclusion is in harmony with the plain terms of the commission slip appended to the agreement of purchase and sale, which clearly states that commission is to be paid to the agent "for having procured this Offer". Even if there were a conflict between the two contracts, however, I would be inclined to accept the view of the trial judge that the later in time and the more precise in purpose (the agreement of purchase and sale) would be dominant. At one time, the argument might have been made that under the law of the Province of Ontario, the vendor incurs no liability to the agent under such a clause in the agreement for sale, because the latter did not execute the agreement for sale. Here, however, the agent is listed in the body of the agreement as the vendor's agent in the transaction, and did in fact execute the agreement as witness to the signature of the purchaser. There are numerous cases in which in like circumstances, the agent has been held entitled to claim commission based on a clause appended to an agreement of purchase and sale: see, for example, Township of Nelson v. Stoneham, 1957 CanLII 353 (ON CA), [1957] O.W.N. 109 (C.A.), Howell and Howell v. Kenton Agencies Ltd., 1953 CanLII 840 (ON SC), [1953] O.W.N. 248 (H.C.), Re Brethour and Morris Ltd. v. Shields Construction Co., [1958] O.W.N. 128 (H.C.) In my view, however, it is not necessary in this appeal to base the agent's entitlement to commission on the commission clause in the agreement of purchase and sale, because there is no conflict between this clause and the commission clause in the listing agreement. The opportunity granted to the agent by the listing agreement (sometimes referred to in the cases as a licence to hunt) is in the nature of a unilateral contract. Further formality is not required to confirm the agent's entitlement to commission where, as here, his performance conforms to the terms of the listing agreement.
There remains only the issue as to whether the offer was "valid" so as to trigger the obligation to pay commission defined by the listing agreement. There are three relevant considerations, all leading to the same result. Firstly, the vendor accepted the offer. The evidence is that he was an experienced businessman who had had other dealings in the buying and selling of real estate with the agent involved in this appeal. Secondly, the vendor did not plead the invalidity of the agreement either in law generally or by reason of non‑compliance with the licensing agreement. Thirdly, and most significantly, the vendor instituted an action in the Ontario courts to enforce the agreement against the purchaser and the agent, claiming (a) a declaration that the agreement was a binding contract, (b) specific performance, (c) in the alternative, damages for breach of contract and (d) an order directing the agent to pay over to the vendor the $15,000 deposit held by the agent on account of commission entitlement. The agent counterclaimed for its commission, and defended the main claim on the same basis as that on which the counterclaim was advanced. The vendor pleaded in defence to the counterclaim that as the purchaser had not completed the sale, no liability to pay commission arose in the vendor. The record is, however, strangely devoid of precise details of the action against the purchaser, and its eventual disposition. The purchaser's statement of defence is not included. For reasons wholly unexplained, the action by the vendor against the purchaser was discontinued. There was apparently no trial of the issue against the purchaser. No judgment was entered pronouncing the agreement for sale invalid. The record includes only a notice of discontinuance by the vendor against the purchaser entered into prior to the trial as between the vendor and the agent. The trial judgment recites that the action between vendor and purchaser was “apparently” settled, but the terms of any settlement are not known. The vendor apparently recovered no costs against the purchaser.
It would therefore appear that the vendor has simply voluntarily ceased to pursue his rights to seek recovery of any losses incurred through the purchaser's failure to complete a valid and binding contract. The vendor has chosen not to acquaint the trial court, and successive courts, with the terms on which he discontinued his action against the purchaser. Thus, this Court is left without any information as to what, if anything, the vendor as plaintiff may have recovered by way of settlement, damages or other relief or concession from the purchaser. What the Court is left with is the fact that the vendor elected to seek recovery for whatever losses he suffered on the failure of the purchaser to close the transaction from the agent alone, in the form of a suit for recovery of the deposit received by the agent under the agreement of purchase and sale from the purchaser as agent for the vendor. All of this is drawn from a record which includes the following passage from the reasons for judgment of the learned trial judge:
There were issues in this action between the plaintiff vendor and the defendant New Forest, as purchaser, but those issues were settled; and the parties now in issue (namely, the vendor Leading and the agent Liebig) have agreed, through their counsel, that the transaction between the vendor and purchaser failed to close, due to default by the purchaser.
Having discontinued the action against the purchaser and failed to amend its pleadings as against the agent, the vendor is not in a position to say that the agreement of purchase and sale was anything less than a binding contract made pursuant to a valid offer procured by the agent.
Even assuming therefore, that the contract did not entitle the agent to payment once he had procured a valid and enforceable agreement of purchase and sale, the vendor could not resist the agent's claim to commission on the facts of this case. It has been said that a vendor not otherwise required to pay commission may have an obligation to do so where he is able to enforce the contract, either specifically or through an award of damages, against his defaulting purchaser.
In this case, the only right or entitlement on the part of the vendor to claim anything against the defaulting purchaser arose from the agreement for sale of land. This right was procured for the vendor by the appellant in accordance with the instructions of the vendor and with his approval. Having asserted his rights under the agreement by an action‑‑which was, apparently, settled upon terms acceptable to the vendor‑‑the vendor now seeks to secure the fruits of the action at the expense of the agent. It may well be that the vendor worked out an accommodation with the purchaser which amounted to performance of the contract, and a court may assume in these circumstances that the accommodation, acceptable to the vendor, is in law completion of the contract in issue. The court does not know because the vendor chose not to lead such evidence. The courts have long protected themselves from having to do an injustice when a litigant chooses to leave an important element unexplained. This Court is free, therefore, to interpret a record such as we have here by an assumption which favours the opposite party's position: see Royal Trust Co. v. Toronto Transportation Commission, 1935 CanLII 11 (SCC), [1935] S.C.R. 671, per Davis J., at p. 675; Murray v. Saskatoon (No. 2) (1951), 1951 CanLII 202 (SK CA), 4 W.W.R. (N.S.) 234 (Sask. C.A.) Here the vendor may be taken to have accepted something of value in lieu of performance by the purchaser, and now seeks to leave the appellant‑agent without commission and without direct recourse to his commission, and in addition, to claim the benefit of $15,000 in an action it commenced based on the allegation that the agreement was valid and enforceable. Ordinary equitable principles would not allow it to take this benefit at the expense of the unpaid agent who made possible its recovery and who, as far as the evidence goes, had no part in reaching the settlement that led to the action's being discontinued. The $15,000 is, of course, not full recovery but it arises from the agreement procured by the agent's efforts. By its election to discontinue its claim to specific performance or damages in lieu, and its acceptance of some acceptable alternative, the vendor may not now require repayment of this sum by the agent, nor may it resist payment of the remainder of the commission after relying on and taking benefit under the agreement for sale.
It may be thought that the English case Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277, is support for a loose, or at least expansive, interpretation of a contract such as the listing agreement in issue here where one of the parties might have expectations which would be disappointed by a stricter reading of the contract governing the transaction. This approach has, however, clearly been set aside by a later decision in the Court of Appeal, in which all three members of the court found it to be contrary to the law as set out by the House of Lords in Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108; Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781.
In the result, the agent succeeded in procuring a valid and enforceable contract. On the terms of the listing agreement and the agreement of purchase and sale, construed reasonably and in conformity with the surrounding circumstances disclosed in the evidence and with the findings of fact made by the trial judge, the agent is entitled to commission. For these reasons, I would allow the appeal and restore the judgment at trial, with costs to the appellant here and below.
The following are the reasons delivered by
Le Dain J.‑‑I would dismiss the appeal. In my opinion the event upon which the commission was payable in this case was a completed sale. That event did not occur, not through any fault of the vendor, but because the purchaser was unwilling to complete the sale. The agent was, therefore, not entitled to the commission.
I do not reach this conclusion by the aid of any presumption of intention arising from the notion of the "common understanding of men" as applied by Denning L.J. in McCallum v. Hicks, [1950] 2 K.B. 271, and Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277. That approach, in my respectful opinion, goes too far as a matter of contract, and was properly repudiated by the Court of Appeal in Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781, as being in conflict with what was said by the House of Lords in Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108, concerning the proper approach to the construction of contracts of this kind, as reflected in the following statement of Lord Russell of Killowen, at p. 124:
(I.) Commission contracts are subject to no peculiar rules or principles of their own; the law which governs them is the law which governs all contracts and all questions of agency. (2.) No general rule can be laid down by which the rights of the agent or the liability of the principal under commission contracts are to be determined. In each case these must depend upon the exact terms of the contract in question, and upon the true construction of those terms.
I reach my conclusion on the issue in this appeal by consideration of the terms respecting the obligation to pay the commission in the listing agreement and the agreement of purchase and sale, both of which in my opinion are valid and binding agreements in so far as that obligation is concerned and must be considered together, as was held by the Ontario Court of Appeal in Ramm v. Cooper, [1955] O.W.N. 525. Since in my opinion the two provisions respecting the payment of commission are complementary and reinforce one another in respect of the issue in the appeal, I do not find it necessary to consider which provision should prevail if their terms appeared to lead to different results, and I express no opinion on that point.
It is clear from the two commission provisions that what the agent was required to do to earn his commission was to procure a valid offer to purchase. That was the consideration for the vendor's obligation to pay the commission, but it was not, with respect, the event upon the occurrence of which the commission was payable. That event was "any sale or exchange", as indicated by the following words in the listing agreement: "I agree to pay a commission of 5% of the sale price on any sale or exchange howsoever effected during the currency of this authority". It is clear in my opinion from other words in the two commission provisions that what was contemplated was a completed sale out of the proceeds of which the commission would be payable. I think this is indicated by the stipulation in the listing agreement that "the said commission is to be paid on the date set for completion of the sale" and by the following sentence in that agreement, the significant words of which I have underlined: "For the purpose of this agreement a sale shall be deemed to include the entering into of an agreement to exchange this property or the granting of an Option to Purchase this property during the currency of this listing, if said exchange or option is subsequently completed." It will be seen that I agree with the significance attached to these words by Henry J. in C and S Realties of Ottawa Ltd. v. McCutcheon (1978), 1978 CanLII 1386 (ON SC), 19 O.R. (2d) 247, and adopted by the Court of Appeal in the case at bar. That what was contemplated as the event upon the occurrence of which the commission would be payable was a completed sale is further indicated in my opinion by the provision for payment of the commission in the agreement of purchase and sale, the whole of which I quote with the words to which I attach particular importance underlined: "I agree to pay the Agent a commission of 5% of the sale price for having procured this Offer, said commission to be deducted from the deposit on the date set for completion of sale and I irrevocably instruct my Solicitor to pay direct to the said Agent, any unpaid balance of commission from the proceeds of the sale and further instruct the agents to remit any balance of monies to my Solicitor herein." This provision indicates clearly, I think, that what was contemplated was a completed sale out of the proceeds of which the commission would be payable.
Where the event upon the occurrence of which the commission is payable is a completed sale, and the sale is not completed, the agent must show, in order to be entitled to his commission, that the purchaser was willing, ready and able to complete the sale: Loveridge v. Cooper (1959), 1959 CanLII 399 (ON CA), 18 D.L.R. (2d) 337 (Ont. C.A.) In other words, he must be able to show that it was not through his fault or that of the purchaser that the sale was not completed. This the agent could not show in the present case. There is in my opinion an obvious difference, in respect of the equities and allocation of risk, between the case where the sale is not completed through the fault of the vendor and the case where it is not completed through the fault of the purchaser. It would not be reasonable to imply a term in the vendor's obligation to pay the commission that in the case where the purchaser refuses without justification to complete the sale the vendor must go to the hazard and expense of a lawsuit to enforce its completion. Where the vendor successfully sues for specific performance or damages in such a case the agent should have a right to recover for his services, but it is not a claim, as in the present case, to enforce the vendor's obligation to pay a commission in accordance with the terms of the listing agreement or the agreement of purchase and sale.
For the foregoing reasons I would dispose of the appeal as proposed by La Forest J.
Appeal dismissed with costs, Estey, McIntyre and Chouinard JJ. dissenting.
Solicitor for the appellant: P. B. C. Pepper, Toronto.
Solicitors for the respondent: Goodman and Carr, Toronto.
