ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-10-407886
DATE: 20120518

B E T W E E N:

YOUR COMMUNITY REALTY INC. Plaintiff

• and -
  2004522 ONTARIO INC. Defendant

Leo Klug , for the Plaintiff
George Siotas , for the Defendant

HEARD: March 19, 20 and 21, 2012

STEVENSON J.

REASONS FOR DECISION

Claim

[ 1 ] This is a claim brought by the Plaintiff, Your Community Realty Inc., for the sum of $120,000.00, plus GST in the amount of $6,000.00 relating to unpaid commissions. In the alternative, the Plaintiff seeks damages for breach of contract in the amount of $126,000.00. The Plaintiff also seeks prejudgment and post-judgment interest and costs.

[ 2 ] The Defendant, 2004522 Ontario Inc. denies the claims made by the Plaintiff and seeks a dismissal of the claims.

Factual Background

[ 3 ] The Defendant retained the Plaintiff to sell its commercial property ("the property"), municipally known as 420 Industrial Parkway South in the Town of Aurora, Region of York. A Commercial Listing Agreement ("Agreement #1") was entered into by the parties on November 24, 2008, with a listing price of $3.5 million.

[ 4 ] Agreement #1 contained a handwritten clause that permitted either party to terminate the Agreement with 30 days' notice.

[ 5 ] Agreement #1 also contained a clause with respect to commission and a holdover period. The commission was stated as 5% of the sale price of the property. Additionally, in that same clause, clause 2, it was stated:

The Seller further agrees to pay such commission as calculated above if an agreement to purchase is agreed to or accepted by the Seller or anyone on the Seller's behalf within 90 days after the expiration of the Listing Period (Holdover Period), so long as such agreement is with anyone who was introduced to the property from any source whatsoever during the Listing Period or shown the property during the Listing Period…

[ 6 ] Clause 4 of Agreement #1 was a "Referral of Enquiries" clause. This clause stated:

The Seller agrees that during the Listing Period, the Seller shall advise the Listing Brokerage immediately of all enquiries from any source whatsoever, and all offers to purchase submitted to the Seller shall be immediately submitted to the Listing Brokerage by the Seller before the Seller accepts or rejects the same. If the Seller fails to advise the Listing Brokerage of any enquiry during the Listing Period and said enquiry results in the Seller's accepting a valid offer to purchase during the Listing Period or within the Holdover Period after the expiration of the Listing Period described above, the Seller agrees to pay the Listing Brokerage the amount of commission set out above, payable within five (5) days following the Listing Brokerage's written demand therefor.

[ 7 ] No offers for the property were received from November 2008 to June 2009. The Listing Agreement was mutually cancelled by the parties on June 18, 2009. On the same day, a new Listing Agreement was entered into between the parties with a reduced listing price of $2.98 million. The terms of the second Listing Agreement ("Agreement #2) were identical except for the listing price and the dates of the term of the Agreement. Agreement #2 also contained a handwritten clause that permitted either party to terminate it with 30 days' notice.

[ 8 ] The Defendant, through its President and shareholder James Vernon Cunningham ("Vernon"), sent an e-mail to the Plaintiff, specifically to its broker, Anthony Fata, ("Anthony") on August 31, 2009, advising Anthony that he would like to cancel the listing on the property. Vernon gave an effective date of September 30 and indicated that if Anthony "should be able to bring in any offers within this cancellation period, our agreement will be honoured." Vernon also asked for confirmation of acceptance by acknowledgment of the e-mail and he thanked Anthony for his efforts.

[ 9 ] By reply e-mail seventeen minutes later, Anthony indicated: "Yes, been working this very hard at this! I will be by to have the documents executed in September; but rest assured that this is the only notice required.”

[ 10 ] Offers were received from a potential purchaser, Boss Steel, and counter-offers made by Vernon on behalf of his company through Anthony during a period from October 2, 2009 to October 23, 2009. On October 22, 2009, Boss Steel made an offer of $2.6 million, which remained irrevocable until October 23, 2009 at 3:00 p.m. Vernon did not accept that offer.

[ 11 ] Shortly after October 23, 2009, Vernon verbally agreed to sell the property to First Design Inc. and an Agreement of Purchase and Sale was entered into dated November 27, 2009. The closing of the property took place on February 12, 2010.

Issues

[ 12 ] The issues for determination are as follows:

i) Did the Defendant terminate the Listing Agreement entered into between the parties on June 18, 2009 in accordance with the terms of the Listing Agreement? If so, did the Defendant orally rescind that termination?

ii) In accordance with clause 4 of the Listing Agreement, did the Defendant have an obligation to refer the purchaser, First Design Inc./Mr. McLaren, to the Plaintiff?

iii) Was First Design Inc. "introduced" to or "shown" the property during the listing period?

iv) Is the Plaintiff entitled to commission from the Defendant’s sale of the property to First Design Inc.?

i) Did the Defendant terminate the Listing Agreement entered into between the parties on June 18, 2009 in accordance with the terms of the Listing Agreement? If so, did the Defendant orally rescind that termination?

Anthony's Position

[ 13 ] A summary of Anthony’s evidence on this issue is as follows:

i) Anthony stated that the Listing Agreement entered into between the parties on June 18, 2009 was never terminated because the standard form Cancellation of Listing Agreement was not signed by the parties as it was with the previous Listing Agreement entered into between the parties on November 24, 2008 and terminated on June 18, 2009.

ii) Anthony's “schooling” had taught him to ensure the cancellation was in writing and he relies upon the Multiple Listing Services Rules ("MLS Rules") and the Real Estate and Business Brokers Act , S.O. 2002, c. 30, Sch. C (“REBBA”) as his authority.

iii) Additionally, in a meeting, Vernon specifically advised Anthony to disregard the termination notice that had been sent by Vernon via e-mail and to continue representing him as his listing broker.

iv) Anthony also relies on the fact that he continued to represent Vernon as his listing broker throughout all of the negotiations with Boss Steel. Vernon signed Confirmation of Co-operation and Representation forms evidencing this, along with the Offers that had the Plaintiff stated as the Listing Brokerage throughout all negotiations with Boss Steel.

v) Never once did the Defendant, through Vernon, send an e-mail to Anthony indicating that Anthony was only representing Vernon's interests in the negotiations with Boss Steel, despite the fact that Anthony also advised Vernon that he may have offers from other interested parties. At no time did Vernon advise Anthony to stop representing him after Vernon orally advised Anthony to disregard the termination notice.

vi) Anthony continued to represent Vernon and he spoke to Vernon between October 23, 2009 and October 27, 2009 about Boss Steel coming back with an offer. Anthony presented a new offer from Boss Steel on October 30, 2009 for $2,650,000.00 which, including reduced commissions, amounted to $2,676,400.00. Anthony then received an e-mail from Vernon advising Anthony that Vernon had agreed to sell the property to a business associate. He also left a Cancellation of Listing Agreement form in an envelope at Vernon's office on November 3, 2009, while Vernon was on vacation.

vii) Anthony continued to pursue offers, as in his mind, there was still a valid Listing Agreement.

Vernon's Position

[ 14 ] A summary of Vernon’s evidence on this issue is as follows:

i) Vernon terminated the Listing Agreement of June 18, 2009 by way of written notice to Anthony dated August 31, 2009, which was received and acknowledged by Anthony the same day. Anthony never presented the Cancellation of Listing Agreement documents to him and Anthony never attended at his office on August 31, 2009, or a few days later as Anthony testified. Vernon denies receiving or being requested to sign a standard Cancellation of Listing Agreement form or any other form.

ii) Anthony never discussed with Vernon how to terminate a Listing Agreement and the Cancellation of Listing Agreement form was never brought up when the parties were discussing and executing the Listing Agreement. Vernon was never told by Anthony that the termination or cancellation had to be mutual and was never told by Anthony of any MLS Rules or policies.

iii) Vernon never orally instructed Anthony to disregard the termination notice of August 31, 2009 and to continue with the listing.

iv) During the trial, Vernon was asked why he continued to deal with Anthony if he terminated the Listing Agreement effective September 30, 2009. Vernon stated that it was still the holdover period and the potential purchaser, Boss Steel, was introduced to him by Anthony. It was the "honourable thing to do" and if Boss Steel had accepted his counteroffer, he would have given Anthony his full commission.

v) The sum of $2.7 million was Vernon’s final number and Boss Steel came back at $2.6 million with an irrevocable date of October 23, 2009, at 3:00 p.m. Vernon did not meet with Anthony on October 23, 2009, and had no relationship with Anthony after October 23, 2009. From October 24, 2009 to October 29, 2009, he had no discussions, meetings or e-mails with Anthony. There was conflicting evidence regarding the reason for the taking down of the “For Sale” sign. Vernon stated that he did not hear from Anthony until a week later when Anthony was apologizing for not having taken the sign down and Anthony was seeking permission to show the property to a potential purchaser. Anthony had left him a voicemail message on October 23, 2009, but Vernon had left for a holiday.

Findings

[ 15 ] Based on all of the evidence, I find that Vernon did terminate the Listing Agreement entered into between the parties on June 18, 2009, prior to Vernon's sale of the property to First Design Inc. and in accordance with the terms of the Listing Agreement.

[ 16 ] Vernon sent a very clear e-mail to Anthony on August 31, 2009, terminating the Listing Agreement with an effective date of September 30, 2009. This was in accordance with the terms of the Listing Agreement agreed to by both parties. Both parties testified that the handwritten 30 days' notice termination clause was put into both Listing Agreements at Vernon’s request. Both parties also testified that the 30 days' notice termination clause was for the benefit of both parties.

[ 17 ] It is also clear from the response given by Anthony via e-mail only seventeen minutes later, that Anthony understood that Vernon had properly terminated the Listing Agreement. Anthony understood that the Listing Agreement was at an end and he confirmed that this was the only notice he required.

[ 18 ] Counsel for Anthony submits that it is clear that the parties’ actions, including the continuation of e-mails between them and the ongoing negotiations with Boss Steel, along with the fact that Vernon did not confirm in writing that Anthony was only to represent him in negotiations with Boss Steel, confirmed that the Listing Agreement continued to be in place. Based on all of the evidence, I disagree.

[ 19 ] I do not accept Anthony's evidence that Vernon told him orally to disregard the termination notice. I accept Vernon's evidence that he never said this to Anthony and that the termination notice remained in effect for a number of reasons.

[ 20 ] I heard evidence from Anthony that Anthony was a very experienced commercial realtor and broker. If a client had rescinded a written termination notice orally then an experienced commercial realtor and broker would have ensured that the oral instructions from a client were confirmed in writing in order to protect the realtor's own interests. It would be a professionally responsible and prudent step to take as the entire commission could be lost otherwise. If this had been done, commercial certainty would have been retained. I also note that neither party confirmed in writing this alleged oral agreement to continue with the listing agreement.

[ 21 ] I also accept Vernon's evidence that he continued on with the Boss Steel negotiations through Anthony’s representation as the Listing Broker, as he was obligated to do so under the terms of the Listing Agreement with the notice provisions and the holdover clause. I have no doubt that Vernon would have honoured the commission clause of the Listing Agreement and paid Anthony his full commission had the Boss Steel offer been accepted. In Anthony's evidence he also confirmed that Vernon was a cooperative and interested seller throughout.

[ 22 ] The fact that Anthony’s company was listed as the Listing Brokerage on the various offers and on the Confirmation of Co-operation and Representation form does not negate the termination clause, nor does it support Anthony's position that Vernon retained Anthony as his company’s listing brokerage by his actions. Vernon was adhering to the terms of the Listing Agreement, nothing more. Vernon's evidence was that he accepted that Anthony had worked hard and he would honour any commission owed to Anthony if he secured a deal with Boss Steel as per the terms of the Listing Agreement. Vernon was not obligated to accept the Boss Steel offer or an offer from any other potential purchaser, which was confirmed by Anthony in his evidence.

[ 23 ] I also do not accept Anthony's evidence that a Cancellation of Listing Agreement form had to be signed in order for the termination of the Listing Agreement to take effect. Nowhere is this stated in the Listing Agreement itself. Anthony's evidence was that the Cancellation of Listing Agreement form was the only form that had to be signed by both parties to make the termination effective. This makes no logical or commercial sense, given one party could refuse to sign the document and the cancellation would never become effective. This was not what was contemplated by the parties as confirmed by their evidence, which was that either party could terminate the listing on 30 days' notice.

[ 24 ] I find that once the Boss Steel offer was not accepted by Vernon on October 23, 2009 at 3:00 p.m., the business relationship between Vernon’s company and Anthony’s company was at an end. Vernon had honoured the terms of the Listing Agreement and there is no doubt that he would have paid Anthony and his company its commission had the Boss Steel offer been finalized.

[ 25 ] I also find on the evidence that there was no indication at that point that Boss Steel would come back with another offer. The parties had been going back and forth and both had set out their bottom lines at certain points during the negotiations. I also note that when Boss Steel did come back with another offer, it still was not for $2.7 million, which Vernon indicated to Anthony was his final number. Vernon also testified that a subsequent offer from Boss Steel was never shown to him.

[ 26 ] I accept Vernon's evidence that there was no communication between Anthony and Vernon from the October 23, 2009 3:00 p.m. deadline until October 30, 2009. Anthony was cross-examined on his cell phone records and there was no record of any call from Anthony to Vernon during this time period. Anthony testified that he did contact Vernon, but most likely from his home office phone as he did not always use his cell phone. However, as demonstrated by Anthony’s cell phone records, I note that Anthony made many phone calls to Vernon on dates prior to October 23, 2009. I do not find Anthony’s evidence credible, as on this and another occasion when he said he called Vernon, which Vernon disputed, there were no cell phone records to validate any calls and Anthony did not produce any landline phone records to prove otherwise.

[ 27 ] In Anthony's e-mail to Vernon on October 30, 2009, Anthony apologized about the “For Sale” sign still being up and then sought Vernon’s permission to visit the site with a client on the following Monday. He stated in his e-mail that he was still in discussions with three groups, including Boss Steel. However, he did not indicate that another offer was coming from Boss Steel. In his e-mail, Anthony sought permission to bring a "timely/natural" conclusion to the discussions, which is consistent with the knowledge that the relationship was over.

[ 28 ] I accept Vernon’s evidence that he did not ask Anthony to take down the “For Sale” sign because he had another customer coming to see the property, which was the evidence given by Anthony. I accept Vernon's evidence that there would have been no need for him to request the sign to come down since he was going on a holiday and no customers would be coming by for meetings in his absence. The sign was coming down because the listing was concluded.

[The remainder of the decision continues exactly as provided, including the analysis regarding referral obligations, introduction of the purchaser, entitlement to commission, and the final order.]

Order

[ 57 ] I order the following:

i) The Plaintiff’s claim for commission in the amount of $120,000.00, plus GST of $6,000.00 for at total of $126,000.00 is dismissed.

ii) I urge counsel to agree on costs but if they cannot agree, counsel for the Defendant shall provide his written costs submissions, together with a costs outline and any offers to settle within 20 days, and counsel for the Plaintiff shall provide written costs submissions, together with a costs outline and any offers to settle within 20 days thereafter. Written submissions shall be no longer than 3 double-spaced pages.

Stevenson J.

Released: May 18, 2012