COURT FILE AND PARTIES
COURT FILE NO.: CV-11-103104-00
DATE: 20120926
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Re/Max Omega Realty (1988) Ltd., Plaintiff
AND:
Ross Draper, Defendant
AND BETWEEN
Ross Draper, Plaintiff by Counterclaim
AND:
Re/Max Omega Realty (1988) Ltd., Lu Dobson and Jean Albert, Defendants by Counterclaim
BEFORE: Justice M. McKelvey
COUNSEL:
Charles Baker, Solicitor for the Plaintiff, Defendants by Counterclaim
Morris Manning and Theresa R. Simone, Solicitor for the Defendant, Plaintiff by Counterclaim
Iain Donnell, Solicitor for Re/Max Landmark Realty
HEARD: July 21, 2012
ENDORSEMENT
[ 1 ] This litigation involves a claim by the plaintiff Re/Max Omega Realty (1988) Ltd. (“Omega Realty”) for a real estate commission it alleges is owed by the defendant Ross Draper (“Mr. Draper”). Mr. Draper is the owner of a five acre property in Keswick, Ontario. In April, 2008 Mr. Draper entered into a purchase and sale agreement. Ultimately the sale failed to close. Omega Realty claims that it is still entitled to the commission on the sale in the amount of $132,500.00 plus HST of $17,225.00.
[ 2 ] Pleadings have been exchanged in the action. This includes a counterclaim brought by the defendant Mr. Draper against the plaintiff as well as two other individuals including Jean Albert (“Ms. Albert”) who was the sales representative for Omega Realty at the time the purchase and sale agreement was entered into. In the counterclaim the defendant Mr. Draper alleges that the defendants by counterclaim made a number of negligent misrepresentations and were in breach of a fiduciary duty to him.
[ 3 ] Pleadings in the action were completed by May, 2011. However, the action has not proceeded to examinations for discovery. Instead two motions have been brought. The first is a motion brought by the defendant Mr. Draper under Rule 21 to dismiss the plaintiff’s action. The second motion is a motion by the plaintiff to amend its statement of claim. The amendments sought to the statement of claim include adding both an additional plaintiff and defendant to the action. These amendments are opposed by the existing defendant and the proposed defendant. Counsel for both the plaintiff and the defendant have filed responding material and factums on the motions. Counsel for the proposed new defendant Re/Max Landmark Realty Inc. (“Landmark Realty”) has not filed any responding material or a factum on the motion. However, Landmark Realty was represented by counsel on the hearing of the motions.
Background and Pleadings
[ 4 ] In the original statement of claim the plaintiff alleges that Ms. Albert met with Mr. Draper at his farm office to discuss the potential sale of his property. At the meeting Ms. Albert advised Mr. Draper that his property was then currently zoned as rural but that if it were rezoned as commercial it would be worth substantially more. On April 7, 2008 Mr. Draper signed a listing agreement (the “listing agreement”) which provided for a commission of five percent, “for any valid offer to purchase the property from any source whatsoever obtained during the listing period and on the terms and conditions set out in this agreement or such other terms and conditions as the seller may accept”.
[ 5 ] The agreement further provided that the seller agreed, “to pay such commission as calculated above even if the transaction contemplated by an agreement to purchase agreed to or accepted by the seller or anyone on the seller’s behalf is not completed, if such non completion is owing or attributable to the seller’s default or neglect, said commission to be payable on the date set for completion of the purchase of the property”.
[ 6 ] A purchase and sale agreement was entered into between Mr. Draper and a numbered company (the “purchaser”) on May 5, 2008 (the “purchase and sale agreement”). In the statement of claim it is asserted that one of the conditions to the sale of the property was that it had to be rezoned from its current rural to commercial zoning. The agreement contained provisions providing for extension of time for satisfying this condition and other conditions to be fulfilled.
[ 7 ] The statement of claim alleges that there were a number of extensions granted to the purchaser to satisfy the conditions in the purchase and sale agreement. The final extension was granted on September 23, 2010 and extended the conditional period to December 27, 2010.
[ 8 ] On August 29, 2008 Ms. Albert transferred her real estate licence from Omega Realty to Landmark Realty. The statement of claim notes that on that same day Ms. Albert arranged for the defendant Mr. Draper to sign an amendment to the agreement of purchase and sale agreement to transfer the purchaser’s deposit from Omega Realty to Landmark Realty as well as for the defendant Mr. Draper to sign an assignment of the listing agreement to Landmark Realty.
[ 9 ] The statement of claim also asserts that on June 9, 2010 David Metherall, another agent with Landmark Realty, contacted Ms. Albert and advised her that Mr. Draper now wished to be represented by him on the sale of the property. In that letter he went on to state that Ms. Albert was to “cease and desist” from contacting the purchaser and Mr. Draper. Nevertheless the statement of claim asserts that Ms. Albert continued to participate in the zoning of the property to commercial use and continued to be involved in the contemplated sale.
[ 10 ] The plaintiff alleges that Mr. Draper refused to extend the period for satisfying the conditions of the purchase and sale agreement beyond December 27, 2010 and the agreement of purchase and sale therefore expired. It is further alleged that the non-completion of the purchase and sale agreement was caused by the default or neglect of the defendant Mr. Draper who subsequently relisted the property for sale at a higher price then had previously been agreed to with the purchaser.
[ 11 ] A number of defences are raised in Mr. Draper’s statement of defence. However, considerable emphasis is placed on the assignment of the listing agreement dated August 29, 2008 (the “assignment agreement”). Its terms are specifically referenced in the statement of defence. This agreement provides that the plaintiff assigns, transfer and sets over to Landmark Realty, “any and all interest in the listing agreement, including all rights, duties and obligations pursuant to the agreement. The listing brokerage releases the seller from any claims of remuneration or compensation with respect to this listing agreement”. The defendant Mr. Draper argues that by virtue of the assignment agreement the plaintiff was no right to claim commission in this matter. The defendant Mr. Draper maintains that only Landmark Realty has the right to claim a commission.
[ 12 ] The defendant brought a motion pursuant to Rule 21 to dismiss the plaintiff’s claim. In a brief factum filed in support of that motion it is asserted that the plaintiff has no capacity in law to sue for commissions or remuneration given the terms of the assignment agreement. The plaintiff has brought a motion to amend its statement of claim which appears to be a response to the issue as to whether the assignment agreement precludes its entitlement to successfully assert a claim for commission.
The Position of the Parties
[ 13 ] The plaintiff’s position is that as of right it is entitled to amend its pleading so long as there is a prima facie case raised against the defendants and there is no prejudice which cannot be compensated for by way of costs or an adjournment. The plaintiff’s counsel further asserts that in considering the amendments I must assume the facts as pleaded in the amendments are capable of proof.
[ 14 ] The defendant Mr. Draper objects to the proposed amendments on the following basis:
(a) the plaintiff has no cause of action as its purported claim relates to a claim arising out of the purchase and sale agreement which does not contain any commission agreement;
(b) the plaintiff made no claims in the original statement of claim for rectification, rescission or a declaration that the assignment of the listing agreement is null and void;
(c) the plaintiff made no pleas of non est factum, estoppel and waiver ;
(d) the proposed amendments are untenable in law; barred by the passage of the limitation period; an abuse of the process of the court and prejudicial to the defendant;
(e) the proposed amendments are “scandalous, frivolous or vexatious and/or an abuse of process”;
(f) the proposed amended statement of claim does not identify a cause of action in contract against the defendant Mr. Draper or the proposed defendant Re/Max Landmark Realty Inc.;
(g) the plaintiff and the proposed plaintiff have no capacity in law to sue the defendant Mr. Draper;
(h) the plaintiff is seeking to order Landmark Realty to assign a cause of action for damages where Landmark Realty has no cause of action because it has executed a mutual release.
Amendment Sought by the Plaintiff to its Statement of Claim
[ 15 ] The plaintiff seeks to add Ms. Albert as a plaintiff in the action and also seeks to add Landmark Realty as a defendant. With respect to the prayer for relief the amendments include an additional claim against the defendant Mr. Draper. In this regard, the plaintiff now claims, “An Order rescinding or declaring null and void the assignment of listing agreement dated August 29, 2008”. In the alternative the statement of claim now asserts that Ms. Albert is entitled to payment of the commission from the defendant Landmark Realty.
[ 16 ] With respect to the assignment agreement the plaintiff seeks to add the following allegations to the statement of claim,
When she transferred her licence from the Plaintiff Re/Max Omega to the Defendant Re/Max Landmark all of the parties agreed and intended that all rights to the commission described in the Listing Agreement would remain with the Plaintiff Re/Max Omega. It is for this reason that the parties agreed that the Agreement of Purchase and Sale would remain with the Plaintiff Re/Max Omega and would not be transferred to the Defendant Re/Max Landmark.
None of the parties believed or had a reasonable expectation that the Plaintiff Re/Max Omega intended to assign its rights to the commission, as described in the Listing Agreement.
The sole reason for assigning the Listing Agreement to the Defendant Re/Max Landmark was to permit Ms. Albert to continue to service it while she was at the defendant Re/Max Landmark. It is for the same reason that on June 7, 2010, she again requested the Defendant Mr. Draper to sign a new listing agreement with Royal LePage Your Community Realty, because she had just transferred her real estate license to that brokerage, as referred to at paragraph 35 of the amended Statement of Claim.
The Assignment of Listing Agreement dated August 29, 2008, was made on standard Ontario Real Estate Association form. There was no other form of available, to the best of the Plaintiffs’ knowledge, to effect its assignment. At no time did the parties intend that the signing of this document would mean that the Plaintiff Re/Max Omega was releasing the Defendant Mr. Draper from any and all claims for remuneration or compensation with respect to the Listing Agreement.
The Plaintiffs state that the parties made a mistake when they entered into the Assignment of Listing Agreement. They only intended that it would permit Ms. Albert to service the listing, not release the Plaintiff Re/Max Omega for any claims for remuneration or compensation.
The Plaintiff Re/Max Omega seeks rectification of the Assignment of the Listing Agreement to accord with the understanding, common intention, reasonable expectations and agreement of the parties.
In the alternative, the Plaintiff Re/Max Omega requests an Order rescinding or declaring null and void the Assignment of the Listing Agreement.
In the further alternative, the Plaintiffs state that the parties had a “collateral contract” whereby both the Defendants advised the Plaintiffs that if they signed the Assignment of the Listing Agreement that all rights to the commission described in the Listing Agreement would remain with the Plaintiff Re/Max Omega. The Plaintiffs relied on this assurance. The Plaintiffs state that this assurance creates a precondition to the enforcement of the Assignment of the Listing Agreement.
In the further alternative, where there is an inconsistency between the understanding, common intention, reasonable expectations and agreement of the parties, the inconsistency in the Assignment of Listing Agreement should be treated as a misrepresentation and it should be rescinded, declared null and void and not be enforced.
In the further alternative, there was no consideration for the Assignment of the Listing Agreement. Absent consideration the Assignment cannot be used or interpreted as conveying or relinquishing rights to payment for the previous efforts and entitlements of the Plaintiffs. It would be commercially absurd to give the Assignment that interpretation or effect. The Assignment must be considered in the commercial context it was made.
[ 17 ] It is apparent that these proposed amendments reflect the position of the plaintiff Omega Realty that the assignment agreement should not deprive it of its right to claim a commission.
[ 18 ] The other set of amendments proposed by the plaintiff to the statement of claim deals with the claim of Ms. Albert against the proposed defendant Landmark Realty. Those proposed amendments are as follows:
The Defendant Mr. Draper alleges that the Plaintiff Re/Max Omega does not have the capacity to sue the Defendant Mr. Draper. In the event that this Honourable Court accepts that argument, the Plaintiffs state that the Defendant Re/Max Landmark must assist them to collect the claimed commission, but it is clear to them by its words and deeds that it will not.
The Plaintiffs’ state that the Defendant Re/Max Landmark has an obligation to act reasonably and fairly in light of all the facts and circumstances of this commission dispute to and address their pecuniary interests. It cannot unreasonably deprive them of the claimed commission. Its actions are unreasonable because they do not involve any attempt by it to either (a) persuade the Defendant Mr. Draper to pay all or even part of the commission, (b) to assign to them its cause of action against him; (c) to commence its own action against him to collect the commission or (d) to have attempted to save the transaction. Instead, it has made a decision to appropriate the listing for itself, at their expense.
The Plaintiffs’ plead and rely upon the doctrines of estoppel and waiver.
The Plaintiffs plead and rely upon the doctrine of non est factum.
[ 19 ] There are also some additional amendments sought which are consistent with and generally flow from the proposed amendments set out above.
The Applicable Law Relating to the Amendment Sought by the Plaintiff
[ 20 ] Rule 26.01 provides as follows:
“[o]n motion at any stage of an action the court shall grant leave to amend the pleading on such terms as are just, unless prejudice would result that could not be compensated for costs or an adjournment.”
[ 21 ] With respect to the addition of parties to an action Rule 5.04(2) provides as follows:
At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[ 22 ] There is a considerable body of caselaw which has developed on the issue of a plaintiff’s entitlement to amend a pleading or to add parties to an action. It is apparent that a party is entitled to amend its pleading as of right unless there is evidence of prejudice as outlined in the rule. The burden of showing prejudice lies with the party opposing the amendment. In addition, the caselaw has established that where it is plain and obvious that the amendments disclose no reasonable cause of action or lack a legal foundation the amendment should be refused.
[ 23 ] In Marks v. Ottawa (City) , 2011 ONCA 248 the Court of Appeal dealt with an appeal where the plaintiffs were seeking leave to amend their original statement of claim. The court noted that although the general rule is that amendments are presumptively approved, there is no absolute right to amend pleadings. The court has a residual right to deny amendments where appropriate. In their decision the court noted that the “proposed amendment must be shown to be an issue worthy of trial and prima facie meritorious”.
[ 24 ] In its factum the defendant Mr. Draper acknowledges that a court will not conduct a detailed examination of the evidentiary merits of a proposed amendment. The court is only required to ensure it is meritorious in the sense of raising a tenable plea. It is suggested in Mr. Draper’s factum, that the pleading amendment analysis incorporates the test in Rules 25.11 and 21.01(1)(b) because those are the rules available before a defendant pleads. Those rules do not contemplate the review of evidence but rather proceed on assumption that the allegations can be proved. This would appear to be an accurate statement of the applicable law. In the case of Plante v. Industrial Alliance Life Insurance Co . (2003), 2003 64295 (ON SC) , 66 OR (3 rd ) 74 Master McLeod reviews the applicable test which must be satisfied. He notes that the amended pleading must be legally tenable but states:
It is not necessary to tender evidence to support the claims nor is it necessary for the court to consider whether the amending party is able to prove its amended claim. The court must assume that the facts pleaded in the proposed amendment (unless patently ridiculous or incapable of proof) are true, and the only question is whether they disclose the cause of action. Amendments are to be granted unless the claim is clearly impossible of success. For this purpose amendments are to be read generously with allowance for deficiencies in drafting.
[ 25 ] Master McLeod also comments on the test for adding parties to litigation. It is noted that the addition of a party is discretionary and not mandatory. However, Master McLeod notes:
Such discretion of course is not whimsical but based on the principles of fairness and judicial efficiency. It would be appropriate to withhold consent if joinder will unduly complicate or delay the proceeding or if any of the circumstances exist which would justify relief against joinder under Rules 5.03(6) or Rule 5.05. It would also be appropriate to withhold consent if the addition of a party appears to be an abuse of process.
[ 26 ] With respect to prejudice it is apparent that the expiry of a limitation period gives rise to a presumption of prejudice. Normally an amendment to a pleading will not be permitted if it raises a new cause of action which is beyond the applicable limitation period.
[ 27 ] In the Court of Appeal decision in Frohlick v. Pinkerton Canada Ltd. (2008), 2008 ONCA 3 , 88 O.R. (3 rd ) 401 the Court states:
In my view the proper interpretation of Rule 26.01 is that the expiry of a limitation period gives rise to a presumption of prejudice. This presumption of prejudice will be determinative unless the parties seeking the amendment can show the existence of special circumstances that rebut the presumption.
[ 28 ] This view has been generally adopted. For example in 1309489 Ontario Inc. v. BMO Bank of Montreal (2011), 2011 ONSC 5505 , 107 O.R. (3 rd ) 384 Justice Lauwers notes that the court’s usual approach as prescribed by Rule 26.01 is to grant leave to amend a pleading, but not when the new allegation raises a new cause of action outside the limitation period. In that case, however, he found that it was not “plain and obvious” that the limitation period had expired. The plaintiff’s motion to amend the statement of claim was granted without prejudice to the defendant’s right to assert that the limitation period had expired.
Analysis
[ 29 ] The defendant Mr. Draper alleges that the sale of the property in Keswick did not go through without fault on the part of anyone and that as a result there is no commission owing. As a result it is argued that the plaintiff’s entire claim is untenable. At this point I do not believe a firm conclusion can be reached that the plaintiff’s claim is untenable. Under the terms of the purchase and sale agreement there is a provision that may justify payment of a commission if the non completion is attributable to the seller’s default or neglect. In the present case the plaintiff alleges in paragraph 30 of the original statement of claim that the non completion of the agreement of purchase and sale was attributable to the default or neglect of the defendant. The defendant did not challenge the adequacy of this pleading and delivered a defence denying any fault or neglect by the defendant Mr. Draper. On its face the plaintiffs’ pleading would appear to be a tenable one and I therefore conclude that it would not be appropriate for me to strike the plaintiff’s claim on this basis. The plaintiff’s solicitor was able to refer me to at least one case where the court found a commission was payable with a very similar provision. This is the decision in Sutton Group Incentive Realty Inc. Brokerage v. 1246190 Ontario Inc . 2011 ONSC 4786 .
[ 30 ] The defendant Mr. Draper also takes the position that the assignment agreement clearly makes the plaintiff’s claim untenable in law. They argue that the provisions of the assignment agreement leave the plaintiff Omega Realty with no privity of contract between itself and Mr. Draper and remove any right Omega Realty had to sue for its commission. All rights under the agreement were transferred to Landmark Realty. In my view, however, the proposed amendments do raise a tenable issue relating to the enforceability of the assignment agreement. It needs to be recognized that there is no evidence before me to make an assessment on the merits of the proposed pleadings. However, this is not required at the present stage of the action. The court must assume that the facts pleaded in the proposed amendment are capable of being proved.
[ 31 ] The defendant Mr. Draper also makes reference to a mutual release which was signed between the purchaser and the defendant Mr. Draper on March 8, 2011. In that mutual release the purchaser, the defendant Mr. Draper and Landmark Realty released each other from any claims relating to the transaction in consideration of the return of the deposit of $30,000.00 to the purchaser. However, neither the plaintiff, nor Ms. Albert were parties to that agreement and it is therefore not clear to me that this mutual release would act as an absolute bar to the plaintiff’s claim. There would appear to be a triable issue on this point.
[ 32 ] The defendant, Mr. Draper, further takes the position that the amendment sought by the plaintiff raises new causes of action and that the limitation period has expired. Thus, the defendant Mr. Draper and the proposed defendant Landmark Realty both argue that the expiry of the limitation period would be prejudicial to them and the amendments therefore are not to be permitted. The plaintiff maintains that the amendments do not raise a new cause of action. They refer to the fact that the assignment agreement was referred to in both their statement of claim and reply pleadings. In my view there are at least some aspects of the proposed amendments which do raise a new cause of action. For example the addition of Ms. Albert as a plaintiff in the action and her claim based on the allegation that Landmark Realty was obliged to protect her interest would in my view constitute a new cause of action. However, even accepting that to some extent a new cause of action may be raised there is an issue as to whether the applicable limitation period has expired. Thus requires a consideration of when the limitation period would commence and when the cause of action would reasonably be discoverable. The defendant maintains that the limitation period would commence no later than the date of the assignment of listing agreement which was signed on August 29, 2008. On this basis it is argued that the limitation period for any new cause of action has expired.
[ 33 ] The plaintiff argues, however, that the cause of action did not arise until the sale fell through because of the default of the defendant Mr. Draper on December 27, 2010. The defendant argues that it was only at that point that it became clear that the commission which was alleged to be due and payable had been prevented by the conduct of Mr. Draper. It is apparent to me that the commencement date for the limitation period may depend to some extent on a court’s interpretation of the listing agreement including when any commission would have been payable by the defendant. This may well involve a consideration of the evidence about the circumstances relating to the creation of the document. In addition, there may be factual issues which need to be addressed by the court in considering the limitation period issue such as when the plaintiff or Ms. Albert first should have been aware that the defendant was not going to pay a commission to them on the transaction. No definitive authority has been referred to by the defendant that would support its position that the limitation period in a case like this would commence no later than August 29, 2008. For these reasons I have concluded that it is not “plain and obvious” that the limitation period has expired. The issue of the limitation issue should be left for the defendant to advance in its statement of defence.
[ 34 ] One further issue which has been raised by the defence is whether the proposed claim by Ms. Albert against the proposed defendant Landmark Realty is tenable at law. The basis for this claim is an allegation by the plaintiff that Landmark Realty was under a duty to protect the plaintiff’s pecuniary interests. The plaintiff has referred to some case law which would suggest such a duty might arise. There is some support for the plaintiff’s position in this regard in the case of Crompton v. Norman Hill Realty Inc. (1995), 50 R.P.R (2 nd ) 42 . I therefore conclude that the plaintiff has established at least a “tenable” legal argument on the issue.
[ 35 ] One final argument raised by the defendants is that the proposed pleadings do not contain a sufficient factual basis to justify the allegations advanced. In all of the circumstances, however, I believe that the proposed pleading is sufficient and that the defendants have the relevant facts with which to respond in their pleading.
Order
[ 36 ] The plaintiff’s motion to amend and to add Ms. Albert as a plaintiff and Landmark Realty as a defendant is granted. The plaintiffs may issue an amended statement of claim that is consistent with these reasons. Nothing in these reasons prevents the defendants from advancing a limitation period defence. The defendant Mr. Draper’s motion to strike the plaintiff’s action at this stage is dismissed. This is without prejudice to the right of the defendants to bring a motion at a later time with the proper evidentiary foundation provided that this is permitted under the applicable rules relied upon.
[ 37 ] If the parties are unable to agree on costs an appointment may be taken out with the trial coordinator to address the issue of costs. Prior to any hearing on costs the parties shall submit written briefs. The parties have been asked to exchange between counsel estimates relating to costs in advance of receiving my decision. These estimates should be referenced in any submissions with respect to costs. Unless the trial coordinator is advised within 30 days of the release of these reasons of an issue with respect to costs there will be no costs associated with the motions before me.
Justice M. McKelvey
Date: September 26, 2012