CITATION: S.G. Investments Group Ltd. v. Avison Young Commercial Real Estate (Ontario) Inc., 2016 ONSC 2272
COURT FILE NO.: CV-13-468993
DATE: 20160404
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
S.G. INVESTMENTS GROUP LTD.
Plaintiff
– and –
AVISON YOUNG COMMERCIAL REAL ESTATE (ONTARIO) INC. and MARK SEVENPIFER
Defendants
Yadvinder S. Toor for the Plaintiff
Maureen M. Quinlan for the Defendants
HEARD: March 9, 2016
PERELL, J.
REASONS FOR DECISION
A. INTRODUCTION AND OVERVIEW
[1] Because the remuneration of real estate brokers is built upon a commission model in which the agent only gets paid if he or she finds a purchaser for the property, it is inevitable that from time to time, a real estate agent will have a conflict of interest with his or her client. It is also inevitable that from time to time and depending on market conditions, a savvy vendor will turn the tables on his or her real estate agent and leverage the agent’s fear of making no commission to pressure the agent into reducing his or her commission. Thus, a vendor will say to his or her agent that if the agents involved would just reduce their commission, then the vendor would accept the purchaser’s offer. Agents plural, because both a listing broker and a co-operating broker, who acts for the purchaser, may be involved. With the vendor hesitating to sign, the agents may offer to reduce their commission. Their reduced commission is not as much as they would be entitled to under the listing agreement, but in a competitive eat-what-you-kill business, some commission is better than no commission at all.
[2] Thus, it sometimes happens that there are re-negotiations about the agents’ commission during the course of a transaction. That is what happened in the case at bar – several times. In the immediate case, S.G. Investments Group Ltd. (“S.G. Investments”), whose principals are Mr. Kulbushan (Kapil) Narang, and his wife Rani Pardal, retained Mark Sevenpifer, a principal and a sales representative of Avison Young Commercial Real Estate (Ontario) Inc. (“Avison Young”), to act as its real estate agent on the sale of a commercial property. The property was sold - twice - and S.G. Investments completed the sale to the second purchaser. In this action, S.G. Investments sues Mr. Sevenpifer and Avison Young for $77,970, which is the amount S.G. Investments claims it overpaid for real estate commission on the second transaction. S.G. Investments submits that the Defendants agreed - twice - to a renegotiated commission but that they reneged on the deal. An enforceable agreement to reduce commission for the second transaction is denied by the Defendants. The Defendants rely on the terms of their original listing agreement for the transaction that closed, and they submit, therefore, that there is nothing to refund.
[3] Indeed, Mr. Sevenpifer and Avison Young now bring a motion for a summary judgment to dismiss S.G. Investments’ action. I acknowledge at the outset that, because this fact-driven case is on the borderline of a case suitable for summary judgment, I seriously considered just sending it on for trial, but ultimately after an extensive review of all of the evidence, I decided that I did understand what occurred and that a summary judgment should go against the Defendants. Piecing together the history from the documents and from the portions of the testimony that are believable and consistent with the documents, the surrounding circumstances, and human nature, I conclude that the Defendants’ summary judgment motion should be dismissed and a summary judgment should be granted to S.G. Investments for $77,970 plus pre-judgment interest.
B. PROCEDURAL AND EVIDENTIARY BACKGROUND
[4] On September 18, 2013, S.G. Investments issued its Statement of Claim.
[5] On October 30, 2013, the Defendants served a Demand for Particulars.
[6] On November 19, 2013, S.G. Investments served a Response to Demand for Particulars.
[7] On December 16, 2013, the Defendants delivered their Statement of Defence.
[8] On September 24, 2014, Mr. Narang and Mr. Sevenpifer were examined for discovery.
[9] On December 10, 2015, the Defendants brought a summary judgment motion.
[10] In support of the motion for a summary judgment, the Defendants relied on the following evidence:
• The affidavits of Mr. Sevenpifer dated January 5, 2016 and January 25, 2016. He was cross-examined on February 2, 2016.
• The affidavit of Karina Sondek, who is the National Controller of Avison Young. She was cross-examined on February 2, 2016.
[11] In resistance to the motion for summary judgment, S.G. Investments relied on the following evidence:
• The affidavits of Mr. Narang dated January 18, 2016 and January 26, 2016.
• The affidavit of Ms. Pardal dated January 18, 2016.
C. FACTUAL BACKGROUND
[12] Mr. Narang and Ms. Pardal are the principals of S.G. Investments, which owned a commercial property municipally known as 370 New Huntington Rd. in Woodbridge, Ontario. They leased the property to a furniture company that they operated. Around 2010, they put the property up for the sale and a series of real estate brokers were unsuccessful in finding a purchaser for the property.
[13] After the Huntington Rd. property had been on the market for several years, in the fall of 2012, S.G. Investments retained Mr. Sevenpifer of Avison Young to list the property for sale, and on October 30, 2012, S.G. Investments signed a MLS (Multiple Listing Service) Agreement.
[14] Before the MLS Agreement was signed, Mr. Narang had unsuccessfully attempted to negotiate a reduced real estate commission, but his corporation, S.G. Investments, ultimately signed the standard form listing agreement with the standard commission rates.
[15] The listing price for the property was $9.9 million. Under the MLS Agreement, S.G. Investments agreed to pay a commission of 5% of the sale price to the listing broker to be divided equally with any co-operating broker. The MLS Agreement stated:
(2) COMMISSION: in consideration of the Listing Brokerage listing, the Property for sale, the Seller agrees to pay the Listing Brokerage a commission of 5% of the sale price of the property or ... 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.
The Seller further agrees 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.
ln the event the buyer fails to complete the purchase and the deposit forfeited, awarded, directed or released to the Seller, the Seller then authorizes the Listing Brokerage to retain as agreed compensation for services rendered, fifty (50%) per cent of the said deposit (but not to exceed the commission payable had a sale been consummated) and to pay the balance of the deposit to the Seller.
All amounts set out as commission are to be paid plus applicable federal Goods and Services Tax (GST) on such commission.
(3) REPRESENTATION: The Seller acknowledges that the Listing Brokerage has provided the Seller with written information explaining agency relationships, including information on Seller Representation, Sub-agency, Buyer Representation, Multiple Representation and Customer Service.
The seller authorizes the Listing Brokerage to co-operate with any other registered real estate brokerage (Cooperating Brokerage and to offer to pay the Cooperating Brokerage a commission of 2.5% of the sale price of the Property or ... out of the commission the Seller pays the Listing Brokerage. The Seller understands that unless the Seller is otherwise informed, the Cooperating Brokerage is representing the interests of the buyer in the transaction. …. Any commission payable to any other brokerage shall be paid out of the commission the Seller pays the Listing Brokerage.
The Seller hereby appoints the Listing Brokerage as the Seller's agent for the purpose of giving and receiving notices pursuant to any offer of agreement to purchase the Property ….
[16] In a side letter dated October 24, 2012, Avison Young agreed that if there was no cooperating broker, then the commission payable to it would be 3%.
[17] On January 25, 2013, 2113470 Ontario Inc., which Mr. Sevenpifer sometimes referred to as “the Russians,” because its principals were of Russian origin, made an offer to purchase the Huntington Rd. property.
[18] Under the offer, the purchase price was $9.2 million with a closing scheduled for June 27, 2013. There was a $100,000 deposit. It is worth noting that the deposit, which would be held by the real estate agents, would not cover the real estate agents’ commissions.
[19] Accompanying the offer was a Confirmation of Co-operation and Representation, in which the cooperating broker, Right at Home Realty Inc., agreed to being paid a reduced commission totaling $78,770, including HST, which I calculate to be a commission of 0.75% instead of the 2.5% share it would have been entitled to receive under the MLS Agreement.
[20] Although the offer is dated January 25, 2013, it was accepted and became a binding agreement of purchase and sale on February 7, 2013.
[21] On February 7, 2013, before the agreement was accepted by S.G. Investments, Mr. Sevenpifer had a meeting with Mr. Narang and Ms. Pardal. With the knowledge that the cooperating broker had already agreed to reduce its share of the commission, at the meeting, Mr. Narang asked Mr. Sevenpifer whether Avison Young would also agree to reduce its share of the commission on the transaction. Indeed, Mr. Narang made it clear that he would not accept the offer unless Avison Young agreed to cut its commission. Mr. Sevenpifer agreed, and later that day, he sent the following letter to S.G. Investments to the attention of Mr. Narang.
This letter will serve to confirm that, subsequent to the terms and conditions of the MLS Agreement ('MLS") entered into by SG lnvestments Group Ltd. and Avison Young Commercial Real Estate (Ontario) Inc. (Avison Young), both parties have mutually agreed that the commission paid to the Listing Broker (Avison Young) will be 1.75 % of the sale price of the property, based on the Agreement of Purchase and Sale, dated January 25th 2013 between 2113470 Ontario Inc. (Buyer) and SG lnvestments Group Limited (Seller), agreed purchase price of $9,200,000 (Cdn).
It is also understood and agreed that the commission owed to the Listing and Selling Broker will be deducted from the deposit being held in trust by Avison Young and any amount outstanding not covered by money being held as a deposit in trust will be paid to Avison Young by Seller’s lawyer upon closing.
[22] It shall be important to keep in mind that under this arrangement to reduce the commission, the combined commissions for the February 7, 2013 agreement of purchase and sale with the Russians totaled 2.5%, and thus the total amount of commission expense was $230,000 plus HST. After deducting the real estate commission, the net purchase price totaled $8,970,000.
[23] It is also important to note that the agreement to reduce the commission set out in the letter of February 7, 2013 was specific to the agreement with 2113470 Ontario Inc., which is a circumstance that the Defendants’ rely on in denying that they ever reduced their commission for the purposes of the transaction with the second purchaser, which is the transaction that eventually closed.
[24] I foreshadow to say while it is true and to be expected that the letter of February 7, 2013 would only address the then current transaction with 2113470 Ontario Inc., it is at least understandable that Mr. Narang might later think that the February 7, 2013 letter had a more pervasive operation. I also foreshadow to say that I find as a fact that Mr. Sevenpifer did later orally agree to reduce the commission for the second transaction in accordance with the February 7, 2013 letter. The only difference was that Avison Young agreed to its commission of 1.75% based on $9.3 million and not $9.2 million.
[25] Returning to the narrative, in the February 7, 2013 agreement with 2113470 Ontario Inc., there were five conditions. One of the conditions was that the transaction was conditional on the purchaser arranging, at its own expense, a satisfactory new first mortgage. The condition clause provided a right to terminate within 30 days – that is, by March 9, 2013 - if the conditions were not satisfied. The agreement of purchase and sale provided:
The Buyer shall have the right to terminate this Agreement in writing delivered to the Seller not later than 6:00 PM, within THIRTY [30] days following date of acceptance of this Agreement. Upon receipt of the above notice, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. These conditions are included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period stated herein.
[26] I pause here to point out in advance that Mr. Sevenpifer did not understand and still does not understand how this conditional clause operated. He was and is mistakenly of the view that if the Russians did not waive the conditions within thirty days, then their agreement would lapse; i.e., the agreement would automatically become null and void with a return of the deposit. While it is true that under the February 7, 2013 agreement, the purchaser had thirty days to waive the conditions, in order for the purchaser to terminate the agreement, it had to deliver a notice of termination in writing by March 9, 2013.
[27] In the period between February 7, 2013 and July 31, 2013, Mr. Sevenpifer’s actions and communications with Mr. Narang and Ms. Pardal need to be viewed in the light of his misapprehension of how the February 7, 2013 agreement actually operated.
[28] Returning to the narrative, on or about March 3, 2013, Mr. Sevenpifer advised Mr. Narang that there was another potential purchaser who was contemplating making an offer for the property but who had not yet done so. At this point in time, 2113470 Ontario Inc. had just six more days to waive the conditions or terminate its agreement. It appears that at this time, Mr. Sevenpifer was correctly of the view that S.G. Investments could not accept any offer from the potential purchaser.
[29] Meanwhile, on or about March 4, 2013, Mr. Sevenpifer received a request from 2113470 Ontario Inc. to amend the agreement of February 7, 2013. Mr. Sevenpifer understood that 2113470 Ontario Inc.’s ability to obtain financing would be enhanced if the amount of the financing was reduced by the vendor taking a vendor take back mortgage, and the Russians were requesting that S.G. Investments take back a $1.0 million mortgage. The request to amend was open for acceptance to March 5, 2013. At this point in time, 2113470 Ontario Inc. had just five more days to waive the conditions or to terminate its agreement.
[30] On March 6, 2013, S.G. Investments signed the amending agreement agreeing to take back a mortgage from 2113470 Ontario Inc. And on the same day, the rival purchaser made its move and delivered its offer to Mr. Sevenpifer for presentation to S.G. Investments.
[31] Thus, on March 6, 2013, while 2113470 Ontario Inc. had just four more days to waive the conditions or to terminate its agreement, Belarmino Moniz, in trust, made an offer dated March 4, 2013, irrevocable to March 14, 2013, to purchase the Huntington Rd. property. This time the purchase price was $9.3 million with a scheduled closing date of July 31, 2013. Mr. Moniz offered a $500,000 deposit.
[32] There was a new cooperating broker, Homelife Royalcorp Real Estate Inc. In the Confirmation of Co-operation that accompanied the original offer, it stated that the listing agent would pay the cooperating broker the commission as indicated in the MLS information for the property; i.e., the original offer from Mr. Moniz envisioned that the real estate agents would be paid a 5% commission.
[33] On March 7, 2013, with just two more days to the condition deadline of the February 7, 2013 agreement, as an alternative to terminating, 2113470 Ontario Inc. requested another amendment to the agreement; this time, they requested an extension of the conditional period until April 3, 2013 without any change in the date of closing for the end of June, 2013.
[34] In presenting this extension request, Mr. Sevenpifer advised Mr. Narang that the purchaser’s investment committee was not likely going to get financing approval until the end of March because its banker was going away for March Break and its investment committee only met twice a month. It was for these reasons that the Russians were seeking an extension of the conditional period until April 3, 2013.
[35] Mr. Narang asked Mr. Sevenpifer for his advice about what to do about the Moniz offer and about the Russians’ request to amend the February 7, 2013 agreement to extend the conditional period. At this juncture, Mr. Sevenpifer knew that the Russians had not been able to obtain financing and he believed that they would not waive the conditions in their agreement.
[36] As already noted, in responding to Mr. Narang’s request for advice, Mr. Sevenpifer was operating under a mistaken understanding of the legal status of 2113470 Ontario Inc.’s agreement. Mr. Sevenpifer mistakenly believed that if the Russians did not waive the conditions in its agreement by March 9, 2013, then the agreement would automatically come to an end. That was not the case. The legal situation was that if 2113470 Ontario Inc. did not waive the conditions by March 9, 2013, then it had to deliver a notice of termination by that date in order to terminate the agreement. Thus, with his mistaken understanding of the surrounding circumstances, on Friday, March 8, 2013, Mr. Sevenpifer recommended that S.G. Investments should not grant an extension and rather should negotiate with Mr. Moniz - after the agreement with the Russians lapsed. He sent Mr. Narang the following email message:
I understand where you are coming from, but we are now dealing with the lesser of two evils. My confidence in the Russians is less than it was. You have missed the theatrics that occurred this week but I have serious concerns that if we grant them an extension for financing they could easily ask for another and never waive. As it stands, they are not in a position to waive any conditions. A month has passed and nothing has been accomplished. If they don’t get financing from this bank and they try from another source and require another 30 days and fail – then we have wasted 3 months in total on them. If I can get an improved offer with a more-credible buy, I would rather put you in that situation. What you are suggesting is to push back so abruptly, the new buyer will be gone and the offer may never be recoverable. I have met these people and heard their story. Let’s not be foolish and push them beyond the brink of doing a better deal than what you have from the Russians.
[37] Thus, as of Friday, March 8, 2013, Mr. Sevenpifer recommended that S.G. Investments submit a counteroffer on the following Monday, March 11, 2013. I believe that Mr. Sevenpifer expected that the Russians would not deliver a waiver by March 9, 2013 and then on March 11, 2013, S.G. Investments would be free to sell the property to Mr. Moniz.
[38] Thus, around this time, Mr. Sevenpifer was offering advice to Mr. Narang as if S.G. Investments had no obligation or would have no obligation to complete a transaction with 2113470 Ontario Inc. as of March 11, 2013, and it is in this context that Mr. Narang asked Mr. Sevenpifer to compare the two agreements. What Mr. Narang should have been told is that he could not accept any offer until it was determined whether 2113470 Ontario Inc. had delivered a notice of termination.
[39] What Mr. Sevenpifer did tell Mr. Narang was that Mr. Moniz’s offer was more advantageous than the agreement from 2113470 Ontario Inc. because of the higher purchase price of $9.3 million, a $100,000 increase in the price, and the greater deposit of $750,000. Unless Mr. Sevenpifer was implicitly agreeing to keep in place a reduction in the Defendants’ commission, this advice was disingenuous. The higher purchase price of the Muniz offer meant little unless an arrangement was made to reduce the agents’ commissions because the higher purchase price would be devoured by the return to the commission rates of the MLS Agreement.
[40] Thus, in a point that I will return to below, from a financial perspective, extending the Russians’ agreement was more favourable for S.G. Investments than accepting the Moniz offer, but from Avison Young’s perspective, the Moniz offer was preferable because if the Defendants no longer agreed to reduce their commission below 2.5%, then their commission would improve by $71,500 plus HST under the Moniz offer; visualize $232,500 plus HST for the Muniz offer as compared to $161,000 plus HST for the transaction with the Russians.
[41] Further, although the higher deposit from Mr. Moniz was a better indication of his earnestness in completing the transaction, the deposit was also a very good thing for the agents, because the deposit now covered their commissions.
[42] I will return to the advice that Mr. Sevenpifer was providing to Mr. Narang, but S.G. Investments did make a counteroffer on March 11, 2013. However, on March 11, 2013, Mr. Moniz did not accept the counteroffer, and instead, he made a counter-counteroffer, which was delivered to Mr. Sevenpifer who, in turn, presented it to Mr. Narang with the information that Mr. Moniz was holding firm on the original price but that Mr. Sevenpifer had got him to increase the deposit to $750,000 (from $500,000) and that he had persuaded the other agent (Homelife Royalcorp) to reduce its commission to 1.5 %. Thus, on March 11, 2013, Mr. Sevenpifer sent the following email message to Mr. Narang:
I got the buyer to agree to increase the deposit to $750,000. The other agent will reduce fees to 1.5 percent. Let me know if this is acceptable and we will get them a signback in the a.m. and get this done.
[43] As it happened, on March 11, 2013, 2113470 Ontario Inc. signed a release, and thus S.G. Investments dodged the legal problem of having two binding agreements of sale for one property. I do not know how this came about. In an email message to Mr. Narang on March 14, 2013, mentioned below, Mr. Sevenpifer indicates that he was having conversations with the Russians and had sent a letter to their lawyer. The letter, however, was not produced as a part of the record for this motion.
[44] Thus, on March 11, 2013, if S.G. Investments signed the counter-counteroffer (which it would do), then it would have a binding agreement with Mr. Moniz or it would have no agreement at all. Pausing here, from a legal perspective, S.G. Investments had dodged a serious problem - but it did not know it. Although 2113470 Ontario Inc. had not waived the conditions in its agreement by the deadline, it also had not delivered a notice of termination and it was too late to do so. It did not have to deliver a release and could have insisted on performance of the agreement. Thus, the Russians’ agreement with S.G. Investments could have been still operative, and if S.G. Investments accepted the counter-counteroffer from Mr. Moniz without a release from the Russians, then it would have sold the same property to two rival purchasers. Oblivious to having had the problem, S.G. Investments accepted the counter-counteroffer to constitute a binding agreement of purchase and sale with Mr. Moniz.
[45] I find as a fact that before S.G. Investments signed the counter-counteroffer, there was a conversation between Mr. Narang and Mr. Sevenpifer about Avison Young’s commission for the Moniz agreement. Where the accounts of this conversation differ, I believe Mr. Narang’s version of the conversation.
[46] I find that either expressly, implicitly, or by silence, Mr. Sevenpifer led Mr. Narang to believe that Avison Young would again reduce its commission to 1.75% of the sale price, now $9.3 million, if S.G. Investments signed the counter-counteroffer.
[47] I find further that the profit-seeking Mr. Narang asked for a further reduction of the commission, and it was in this context that Mr. Sevenpifer refused to further reduce Avison Young’s commission. I do not believe Mr. Sevenpifer’s evidence that he told Mr. Narang that by his hard work of negotiating and juggling two rival purchasers and securing a commission reduction from the cooperating broker, he had made it plain that Avison Young expected to be paid a 2.5% commission with the result that the commissions for the Moniz transaction would total 3.25% of $9.3 million. I find instead that Mr. Sevenpifer acknowledged or confirmed that Avison Young would cut its remuneration to 1.75%, but he told Mr. Narang that Avison Young was drawing the line in the sand on any further reduction.
[48] One problem with Mr. Sevenpifer’s version of the discussions about the commission to be paid is that it gets him into the corner of having a conflict of interest with his client. Visualize, from a financial perspective, it would be more advantageous for S.G. Investments to keep its agreement with the Russians viable by extending the time for them to satisfy the conditions in the agreement or by holding them to their bargain because they had not delivered a notice of termination than it would be for S.G. Investments to sign the counter-counteroffer and pay a 4% commission.
[49] In other words, as noted above, for the transaction with the Russians, the net purchase price after deducting 2.5% real estate commission would total $8,970,000 and Avison Young would receive a commission of $161,000 plus HST. In contrast, for the transaction with Mr. Moniz with a commission of 4%, the net purchase price after deducting the real estate commission would total $8,928,000; i.e., $49,000 plus HST less than the transaction with the Russians and Avison Young would earn a commission of $232,500; i.e., $71,500 more than it would earn in commission from the transaction with the Russians.
[50] Colloquially speaking, in asking for a further reduction in Avison Young’s commission, Mr. Narang was asking for the largest piece of the action for his company entering into the second transaction with its higher purchase price as opposed to sticking with the Russians. As Mr. Narang apparently saw it, the Defendants had already agreed to a commission rate of 1.75% on $9.2 million and they should be satisfied with somewhat less than 1.75% on $9.3 million. In any event, for Mr. Narang, S.G. Investments would certainly not sign the second agreement if it meant it recovered less than continuing with the Russians.
[51] Returning to the narrative, around the time that S.G. Investments was entertaining making an agreement with Mr. Moniz, Mr. Sevenpifer learned that 2113470 Ontario Inc. was taking the position that it had a binding agreement of purchase and sale. In these circumstances, Mr. Sevenpifer advised Ms. Pardal to avoid the purchasers. He advised her not to allow them access to the property or an opportunity to tender. In offering this advice, I find that Mr. Sevenpifer was acting under his misapprehension of the status of the February 7, 2013 agreement with the Russians. There was thus the following exchange of emails on March 14, 2013, first from Mr. Narang to Mr. Sevenpifer and then his reply:
Hi Mark
I was talking to Rani and she told me that whatever you told about new and old buyer. As agreed after Saturday March 10, we were not in contact with old buyer, why are they getting upset? Please call them and explain, Rani will try not to open the warehouse doors, but it will be hard on her, until I am back on 21st. Let me know your thoughts and how do you want to proceed.
K. Narang
[Mr. Narang]
It’s not as simple as that. There is something called implied contract that the other side is hanging their hat on. I have been on the phone with their lawyer nonstop arguing on this and today sent a letter to them chronicling the events stating that our side [of] the deal was void and they missed opportunity to rely that an implied contract existed. Make no mistake, this situation has all the elements to get real ugly. When dealing with these situations with such tight timeframes, and one side having a sense of loss, there is always one party with their nose out of joint. I will breathe easier once they finally sign the mutual release and the deposit is returned.
I had to inform Rani about possible potholes as I don’t trust the Russians and they may try [to] continue with due diligence and just show up at the bldg., or issue a cheque to her. If that were to happen, they could easily come back at us saying their agreement and the offer is still valid. We can’t let that happen.
MS [Mark]
[52] In any event, after March 14, 2013, everybody’s attention turned to the normal processing of an agreement of purchase and sale with just Mr. Moniz as the purchaser. For present purposes, nothing of significance appears to have happened between March 14, 2013 and July 30, 2013.
[53] The Muniz transaction was scheduled to close on July 31, 2013, and on July 30, 2013, Mr. Narang sent Mr. Sevenpifer an email message asking him to confirm by email that Avison Young had agreed to a commission of $160,000 and that the cooperating broker had agreed to a commission of 1.5%. Mr. Narang deposed that he sent the message because the Defendants had forwarded a commission statement charging a total commission of 4%.
[54] Mr. Sevenpifer testified that he was surprised to receive this email message and he submits and challenges Mr. Narang’s credibility because it could not be the case that he was prompted to make his inquiry because of an Avison Young commission statement. He points out that the statement had not yet been issued when Mr. Narang sent his message. Mr. Sevenpifer submits that Mr. Narang was making a late arriving attempt to reduce the 4% commission that S.G. Investments was obliged to pay.
[55] I agree that Mr. Narang has been caught out in a late arriving attempt to secure a reduction in the commission payable to Avison Young, but my view is that he was again attempting to secure a reduction from the 3.25% commission he understood would be payable (i.e., 1.5 % to the cooperating broker and 1.75% payable to Avison Young).
[56] In any event, on July 30, 2013, Mr. Sevenpifer sent the following email message to Mr. Narang:
... When we started a new deal with Belarmino, for a larger purchase price of $9.3 million, you asked for fees to be reduced. That was achieved by getting the 'Selling Broker' to reduce their side of the deal by 1%. If you recall, the original MLS Agreement signed October 30, 2012, commissions were listed for a total fee of 5% with 2.5 % going to the “Selling Broker.”
In our discussion, we reduced the overall commission of the “Selling Broker” to 1.5% and the “Listing Broker” (Avison) agreed to half of the total fees outlined on the MLS Agreement – 2.5%.
If you recall our conversation during the deal with Belarmino in Trust, we had specific discussions how I had procured a better offer, with a larger deposit, at a higher amount and felt strongly about not discounting my side of the deal.
Review your files and call if you have any questions.
[57] As I have already found above, contrary to what Mr. Sevenpifer says in his email message of July 30, 2013, I conclude that in his March conversations with Mr. Narang and before the Muniz counter-counteroffer was accepted, Avison Young had agreed to a commission of 1.75% but strongly refused a further discount.
[58] After the exchange of emails on July 30, 2013, there was a telephone conversation between Mr. Narang and Mr. Sevenpifer, where they aired their competing versions of what had happened in March 2013.
[59] I do not believe Mr. Narang’s evidence that Mr. Sevenpifer admitted that he was reneging on their deal and taunted Mr. Narang that he would not be able to prove an oral agreement to vary the commission agreement. I believe rather Mr. Sevenpifer simply denied that there ever was such an agreement and persisted in his view that Avison Young was justified in charging a 2.5% commission.
D. DISCUSSION AND ANALYSIS
[60] Having regard to my findings of fact, the discussion and analysis can be brief.
[61] As I indicated at the outset of these Reasons for Decision, the outcome of this action, be it by summary judgment or be it by trial, depends upon the determination of the facts. Either there was an agreement to reduce the real estate commission for the Muniz sale or there was not.
[62] For the purposes of these Reasons for Decision I need not explicate the law about this court’s jurisdiction on a summary judgment motion, save to say that with the amendments to the summary judgment rule under the Rules of Civil Procedure and with the Supreme Court of Canada’s decisions in Hryniak v. Mauldin, 2014 SCC 7 and Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, the court has enhanced forensic tools to decide actions by summary judgment and it also has the Supreme Court’s encouragement to use those tools if justice can be done.
[63] Further, in exercising its summary judgment powers, the court does not require a cross-motion for summary judgment when it can decide the issue that is the subject matter of the motion for summary judgment: King Lofts Toronto I Ltd. v. Emmons, 2014 ONCA 215, affirming 2013 ONSC 6113.
[64] In the immediate case, there are undoubtedly genuine issues that could be tried at a conventional trial, but after carefully reviewing and considering the material put before the court on this summary judgment motion, I am satisfied that a trial is unnecessary.
[65] The documents and the evidence of Mr. Narang, Ms. Pardal and Mr. Sevenpifer is not going to change at a trial from the evidence they proffered during discovery and under cross-examination, and for the witnesses to repeat with more practice or passion their evidence will not strengthen the evidence, especially for Mr. Sevenpifer, who was not much challenged during his cross-examination for the summary judgment motion about his conflict of interest in promoting the second transaction while disavowing any reduction in the listing broker’s commission.
[66] While the Defendants dodged a legal bullet in potentially letting S.G. Investments be bound to two purchasers, the Defendants cannot get around the circumstance that closing the March 14, 2013 Moniz transaction was $71,500 plus HST better for Avison Young and $49,000 plus HST worse for S.G. Investments than closing the February 7, 2013 agreement with 2113470 Ontario Inc.
[67] Real estate agents have a fiduciary relationship with their principal owing the highest obligation of full disclosure and fair dealing with the vendor who pays the commission: Knoch Estate v. Jon Picken (1991), 1991 CanLII 7320 (ON CA), 4 O.R. (3d) 385 at para. 30 (C.A.); D-Atri v. Chilcott (1975), 1975 CanLII 596 (ON SC), 7 O.R. (2d) 249 at para. 32 (H.C.J.); Raso v. Dionigi (1993), 1993 CanLII 8664 (ON CA), 12 O.R. (3d) 580 (C.A.); 1005139 Ontario Ltd. v. Abraham, 2012 ONSC 3133; Vespra Country Estates Ltd. v. 1522491 Ontario Inc. (c.o.b. Pine Hill Estates), 2015 ONSC 1702.
[68] An agent in breach of his or her fiduciary duty is not permitted to receive his or her commission: 489212 Ontario Ltd. v. Participactive Dynamics Inc., [1994] O.J. No. 780 (Gen. Div.), aff’d [1997] O.J. No. 4251 (C.A.); Vespra Country Estates Ltd. v. 1522491 Ontario Inc. (c.o.b. Pine Hill Estates), supra at para. 112; Ocean Realty Ltd. v. A&M Holdings Ltd., [1987] B.C.J. No. 593 (B.C.C.A.); Raso v. Dionigi, supra; 1005139 Ontario Ltd. v. Abraham, supra.
[69] The evidence establishes that the commission payable for the Moniz transaction should not have been 4% of $9.3 million but should have been 3.25% (listing broker 1.75% and cooperating broker 1.5%) of $9.3 million. The overpayment is $69,750 plus HST for a total overpayment of $78,817.50.
[70] I, therefore, conclude that S.G. Investments is entitled to a judgment for $77,970 (the amount pleaded) plus pre-judgment interest.
E. CONCLUSION
[71] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the Defendants’ submissions within 20 days from the release of these Reasons for Decision followed by S.G. Investments’ submissions within a further 20 days.
Perell, J.
Released: April 4, 2016