COURT FILE NO.: CV-12-447348 DATE: 20190522 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
James Ngai and Meir Sharvit Plaintiffs – and – Fufa Limited and Hollyburn Properties Limited Defendants
Counsel: Brian Illion and Jonathan Marchand, for the Plaintiffs John Contini and Nicholas Contini, for the Defendant, Fufa Limited
HEARD: November 20-23, 2018 NISHIKAWA J.
Overview
1The Plaintiffs, James Ngai and Meir Sharvit, commenced this proceeding for payment of commissions on the sale of a multi-residential property (the “Property”) owned by the Defendant, Fufa Limited (“Fufa”). Mr. Ngai and Mr. Sharvit claim that each of them had an agreement with Fufa that they would be compensated if their efforts resulted in the sale of the Property. Alternatively, they claim commissions on the basis of the doctrines of unjust enrichment and quantum meruit.
2The sale of the Property to the Defendant, Hollyburn Properties Limited (“Hollyburn”), closed on May 19, 2011, for a purchase price of $15,700,000. Mr. Sharvit claims a commission of 1.5% of the sale price of the Property, or $235,000. Mr. Ngai claims 1.25% of the sale price, or $196,250. In addition, they each claim $25,000 in punitive damages.
3The Plaintiffs originally named Hollyburn as a Defendant and alleged a conspiracy between Fufa and Hollyburn to avoid paying commissions. Hollyburn cross-claimed against Fufa for contribution and indemnity. The Plaintiffs subsequently dismissed the claims against Hollyburn, on Hollyburn’s consent. The conspiracy claim and cross-claim are thus no longer at issue.
Issues
4The Plaintiffs’ claims raise the following issues:
(i) Did Fufa agree to pay Mr. Ngai a commission on the sale of the Property? (ii) Did Fufa agree to pay Mr. Sharvit a commission on the sale of the Property? (iii) If there was no agreement to pay a commission, is Mr. Ngai entitled to compensation on the basis of quantum meruit? (iv) If there was no agreement to pay a commission, is Mr. Sharvit entitled compensation on the basis of quantum meruit?
Facts
5The following facts were largely undisputed. Where the facts are in dispute, they are dealt with at greater length in the Analysis section.
The Parties
6The Plaintiff, James Ngai, was a licensed real estate agent with ReMax Hallmark Property Realty Ltd. (“ReMax”). Mr. Ngai left ReMax and gave up his licence in 2012.
7The Plaintiff, Meir Sharvit, also known as Martin Sharvit, is a licensed real estate broker. At the relevant time, Mr. Sharvit was associated with Great Spaces Realty Corporation (“Great Spaces”). Great Spaces was subsequently purchased by Forest Hill Real Estate Inc. (“FHRE”). Mr. Sharvit is a sales representative with FHRE pursuant to an independent contractor agreement dated July 10, 2013. The agreement is for a term of one year and automatically renews each year.
8The Defendant, Fufa, is a corporation incorporated under the Ontario Business Corporations Act, R.S.O. 1990 c. B.16. Fufa was the owner of the Property, an 88-unit multi-residential building at 780 Eglinton Avenue West, in Toronto. The sole officer and director of Fufa was Tak Kai Lee. Mr. Lee passed away on January 1, 2010.
9After Mr. Lee’s death, his widow, Li Ying Duan, also known as Lisa Lee (“Ms. Lee”), became Fufa’s president and sole director. Mr. and Ms. Lee had four children, who were living in Hong Kong with Ms. Lee. Ms. Lee and the children generally came to Toronto during the summer. Before their marriage, Ms. Lee was a notary public in China, but ceased working after getting married. After Mr. Lee’s death, Ms. Lee relocated to Toronto with the children and took over managing Fufa’s affairs.
10The Defendant, Hollyburn, is an extra-provincial corporation with a head office in Vancouver, British Columbia. Hollyburn is in the business of owning and managing multi-unit residential apartment buildings. The principals of Hollyburn are Stephen Sander and his sons, Mark Sander, Dan Sander, and Paul Sander. As noted above, the claim against Hollyburn was dismissed.
11At trial, the Plaintiffs brought a motion for leave to amend the Statement of Claim to add Great Spaces, with its consent, as a Plaintiff. The Defendant did not consent, but did not oppose. Leave to add Great Spaces to the Statement of Claim was granted.
Fufa’s Attempts to Sell the Property
12In the years preceding Mr. Lee’s death, Fufa had been trying to sell the Property. Mr. Lee received expressions of interest and offers from various brokers who contacted him. None of the offers resulted in a sale.
13On May 17, 2008, Fufa entered into a listing agreement with ReMax for the Property, with Mr. Ngai as the listing agent. The Property was listed at a sale price of $19,500,000. No sale resulted and the listing agreement terminated on August 15, 2008.
14One of the agents who brought offers to Mr. Lee during his lifetime was Mr. Sharvit. Mr. Sharvit introduced several potential purchasers to the Property and transmitted a number of offers, but none resulted in a sale.
15When Ms. Lee took over the management of Fufa, she set about learning how to maintain and manage the Property. Numerous agents began to contact her about selling the Property and some brought offers.
The Introduction to Hollyburn
16In March 2010, Mr. Sharvit contacted Fufa about the Property. Ms. Lee answered the phone call and told Mr. Sharvit that Mr. Lee had passed away. Mr. Sharvit asked her whether Fufa was still interested in selling the Property. Ms. Lee’s testimony is that she said she would think about it. Mr. Sharvit testified that Ms. Lee responded that she was interested in selling the Property at the right price. Mr. Sharvit also visited Ms. Lee at the Property. The parties do not dispute that Mr. Sharvit recommended that Ms. Lee not list the Property but instead retain him to solicit offers from potential purchasers. It is also undisputed that at the time, Mr. Sharvit and Ms. Lee did not discuss specific terms, including whether he would be paid a commission and how much it would be. Mr. Sharvit testified that he did not raise the issue of a commission because it was “too early.”
17On or about March 25, 2010, Mr. Sharvit contacted Mark Sander of Hollyburn, a company with which he had previous dealings, to tell him about the Property. Mr. Sharvit sent an email to Mr. Sander with information regarding the Property, including its size, vacancies, rental income and expenses.
18On April 28, 2010, Mr. Sharvit arranged an appointment to show the Property to Hollyburn on May 6, 2010. This was confirmed in an email sent by Mr. Sharvit to Mark Sander, on which Ms. Lee was copied. Ms. Lee responded by email to Mr. Sharvit on the same day, stating, “I told you I would have a broker tomorrow. I would like [to] talk to him before I promise you. Thanks.” Mr. Sharvit claims that he did not receive this email. By that point, Ms. Lee had been discussing entering into a listing agreement with Mr. Ngai. Ms. Lee forwarded the email to Mr. Ngai the following day.
The Listing Agreement Between Fufa and ReMax
19In January or February 2010, Mr. Ngai also found out about Mr. Lee’s death from Ms. Lee when he tried to call Mr. Lee. Mr. Ngai told Ms. Lee that he was Mr. Lee’s friend, and that he had helped him with the Property, providing advice about renovations and other matters. Ms. Lee had not met Mr. Ngai previously.
20Mr. Ngai came to the Property a few times in the spring of 2010. Ms. Lee discussed the possibility of selling the Property with Mr. Ngai. In March or April 2010, Ms. Lee contacted Mr. Ngai about entering into a listing agreement. On April 28 or 29, 2010, Ms. Lee advised Mr. Ngai that she wanted to hire him as her agent. While various brokers and agents had been contacting Ms. Lee about the Property, she chose to hire Mr. Ngai because he knew her late husband and because he spoke Chinese. Ms. Lee mentioned to Mr. Ngai that she had also been contacted by Mr. Sharvit.
21On April 30, 2010, Mr. Ngai attended at the Property with the “Listing Agreement – Commercial”, the Ontario Real Estate Association Standard Form 520 (the “Listing Agreement”). The parties to the Listing Agreement were Fufa as seller and ReMax as the listing brokerage. Ms. Lee signed the agreement for Fufa and Mr. Ngai signed on behalf of ReMax. The Listing Agreement states that the Seller “hereby gives the Listing Brokerage the exclusive and irrevocable right to act as the Seller’s agent…” (emphasis in original). It further states that “[t]he Seller hereby represents and warrants that the Seller is not a party to any other listing agreement for the Property or agreement to pay commission to any other real estate brokerage for the sale of the property.”
22The Property was to be listed at a sale price of $17,700,000. The Listing Agreement provided for a commission of 2.75%, unless the property was both sold and listed by Mr. Ngai, in which case the commission would be 2%. The Listing Agreement authorizes the Listing Brokerage to cooperate with any other registered real estate brokerage and to offer to pay the cooperating brokerage a commission of 1.5% of the sale price of the Property.
23The Listing Agreement contains an entire agreement clause, which states: “This Agreement, including any Schedule attached hereto, shall constitute the entire Authority from the Seller to the Brokerage. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein.” The Listing Agreement expired on July 29, 2010, but included a holdover period of 60 days to September 27, 2010. Both Mr. Ngai and Ms. Lee agree that it was Ms. Lee who requested a shorter holdover period than the 2008 listing agreement. Ms. Lee explained, and Mr. Ngai acknowledged, that this was because she did not know Mr. Ngai.
The Hollyburn Offer
24On May 6, 2010, as had been arranged by Mr. Sharvit, Dan Sander and Mike Capone, a property manager with Hollyburn, attended to view the Property. Mr. Sharvit and Ms. Lee were present and showed the building to them. Mr. Ngai did not attend.
25On May 10, 2010, Mr. Sharvit sent an email to Mark Sander forwarding further information about the Property. This included a rent roll and a “Geowarehouse Report” from Teranet, which included sales of other properties in the area and information about the demographics of the area. Mr. Sharvit also sent Hollyburn a draft agreement of purchase and sale. The name of the seller, Fufa Limited, was completed, but the remaining terms were not filled in. On the morning of May 11, 2010, Mr. Sharvit sent a further email attaching projected rent rolls.
26Sometime after the showing, Mr. Sharvit and Mr. Ngai met at a donut shop. Neither has a clear recollection of the date or details of their first meeting. Mr. Sharvit wanted to satisfy himself about the terms of the Listing Agreement, and in particular, what his share of the commission would be. Mr. Ngai showed him the signed agreement.
27On May 11, 2010, Hollyburn made an offer in writing to purchase the Property for $14,250,000. The draft agreement of purchase and sale provided by Mr. Sharvit served as the offer. Mr. Sharvit met with Mr. Ngai and presented Hollyburn’s offer to him. Since Mr. Ngai and Mr. Sharvit do not recall a separate meeting, this was likely to have been the same meeting when Mr. Ngai showed Mr. Sharvit the Listing Agreement. What is clear from both Mr. Ngai’s and Mr. Sharvit’s testimony is that Mr. Sharvit wanted to see the Listing Agreement before presenting Hollyburn’s offer.
28On May 18, 2010, Fufa signed the offer back for a purchase price of $16,950,000. Fufa also made amendments to the draft agreement of purchase and sale, including adding a provision that the agreement was conditional upon approval of its lawyer within five business days, failing which the agreement would be null and void (the “Vendor Subject Clause”). Mr. Ngai assisted Ms. Lee with the sign back and sent it to Mr. Sharvit, who then sent it to Hollyburn.
29On May 22, 2010, Mr. Sharvit sent an email to Hollyburn attaching the 2010 tax bill for the Property.
30On May 24, 2010, at Mr. Ngai’s suggestion, Mr. Sharvit and Hollyburn prepared a short form purchase and sale agreement, which again stated a price of $14,250,000. It is not clear from the evidence whether this version was presented to Fufa.
31On June 9, 2010, Fufa signed back the offer at $16,550,000. The offer was open until June 13, 2010. Mr. Sharvit sent this to Hollyburn stating that “I did call her agent and did [suggest] to him that I will try to get the best sign back from my client at the same time we should go to the seller together to recommend her to have the property appraised that way hopefully she will feel better to what will be the reasonable price that she should expect[.] The end of the day I have achieved that she should not sign any other offers but to continue with you and that was not easy to achieve.”
32On June 10, 2010, Hollyburn sent an email to Mr. Sharvit instructing him to make a counter-offer at $14,550,000. Hollyburn also asked Mr. Sharvit to eliminate the “unreasonable terms” such as the Vendor Subject Clause and requested updated expense information. Mr. Sharvit forwarded this information to Mr. Ngai, and Mr. Ngai forwarded the email to Ms. Lee. Other than forwarding the email message, it does not appear that a formal counter-offer at $14,550,000 was made. Mr. Sharvit and Mr. Ngai discussed the offer over the phone, and Mr. Ngai advised him that the amount was not acceptable to Fufa.
33On July 1, 2010, Mr. Sharvit contacted Ms. Lee about setting up a face-to-face meeting with Hollyburn. On that date, Mr. Sharvit sent an email to Hollyburn stating: “I spoke to Mrs. Lee and have informed her of the visit, Mrs. Lee does welcome the visit and willing to make herself available.”
34On July 5, 2010, Ms. Lee sent Mr. Sharvit an email asking for further information about Hollyburn, including the properties they owned.
35On July 6, 2010, Mr. Sharvit emailed Dan Sander to try to make arrangements for Hollyburn to meet with Ms. Lee. Mark Sander of Hollyburn responded, stating that there was not much point to meeting if the parties were “nowhere near a deal.” Mr. Sharvit explained in a further email that it would help make the seller more comfortable with the purchaser. On July 7, 2011, Mark Sander sent an email to Paul Sander asking him to go meet with Ms. Lee. However, the meeting did not take place.
36On August 5, 2010, Mr. Sharvit emailed Mark Sander again to ask if Hollyburn was still interested in the Property. There was no evidence of a response.
The Failed Sale to O’Shanter
37Around the same time period, on May 17, 2010, Fufa received an offer, through Mr. Ngai, from an entity known as O’Shanter Development Company Ltd. (“O’Shanter”). O’Shanter offered a price of $15,250,000. O’Shanter was being represented by a ReMax agent, Peter Howarth.
38On May 31, 2010, Fufa signed the offer back at $16,950,000. Fufa and O’Shanter went back and forth from June to August, with Fufa making further offers at $16,000,000 and $15,500,000. O’Shanter increased its offer by $20,000 to $15,270,000.
39Mr. Ngai recommended that Fufa attempt to come to an agreement with O’Shanter, since he was familiar with the company and it owned other properties in the area. Mr. Ngai did not have information about Hollyburn.
40On August 8, 2010, Mr. Ngai executed a handwritten note indicating that his commission would be reduced to 2% on the sale to O’Shanter. This was formalized by a written agreement between Fufa and ReMax, signed on August 20, 2010 (the “Amendment”).
41On or about August 16, 2010, Fufa entered into a conditional agreement for the sale of the Property with O’Shanter for a purchase price of $15,270,000 (the “O’Shanter Transaction”). O’Shanter paid a deposit of $250,000. On August 20, 2010, Fufa waived the Vendor Subject Clause that it had added to the offer.
42In the end, the sale did not close because O’Shanter was not satisfied with its due diligence. Fufa and O’Shanter terminated their agreement on October 23, 2010. O’Shanter, Fufa and ReMax executed a standard form mutual release and Fufa returned O’Shanter’s deposit. The Mutual Release states: “the Brokerage hereby releases both parties from any claims that the Brokerage may have had for commission or other remuneration in the above transaction, except as may be hereinbefore specifically provided.” Brokerage includes the listing brokerage and the registrants and employees of the brokerage. By this time, the holdover period under the Listing Agreement, which was until September 27, 2010, had come to an end.
43Neither Ms. Lee nor Mr. Ngai told Mr. Sharvit about Fufa’s discussions with O’Shanter. Mr. Sharvit was thus in the dark about the lack of progress in Fufa’s negotiations with Hollyburn, which were happening during the same time period. Mr. Ngai explained that he did not tell Mr. Sharvit because he was acting in Fufa’s best interests.
44After the O’Shanter Transaction failed, Mr. Ngai asked Ms. Lee if he could continue to seek prospective purchasers. Mr. Ngai and Mr. Sharvit both testified that after the Property failed to sell, Ms. Lee led them to believe that she was no longer interested in selling the Property. Ms. Lee testified that she decided to run the business for a while, because the Property required a lot of maintenance and she wanted to focus on that rather than trying to sell.
45In November 2010, Ms. Lee retained a broker in Hong Kong to market the Property to potential purchasers in Asia. She did not receive any offers.
The Hollyburn Sale
46Around December 24, 2010, Paul Sander of Hollyburn contacted Ms. Lee to see whether the Property was still available. He asked Ms. Lee how much she would sell the Property for, and she responded $17,000,000. He also asked if Ms. Lee had an agent and she responded that she did not.
47On December 24, 2010, Paul Sander sent an email to Ms. Lee attaching an offer to purchase the Property for $15,000,000. Hollyburn used the draft agreement of purchase and sale that Mr. Sharvit had provided, with certain amendments.
48There were further discussions between Fufa and Hollyburn, including a telephone call between Ms. Lee and Stephen Sander on January 11, 2011. On January 13, 2011, Ms. Lee sent an email to Mark Sander stating: “We made a deal on this Tuesday. But I still request that you send me the offer at your earliest convenience.”
49On January 14, 2011, Hollyburn, through its real estate lawyers, sent an offer to purchase the Property for $15,800,000 to Ms. Lee’s lawyer. On January 18, 2011, Paul Sander of Hollyburn sent the offer by email to Ms. Lee directly.
50Fufa accepted Hollyburn’s offer on January 19, 2011, by signing the draft agreement of purchase and sale (the “APS”). Hollyburn paid a deposit of $175,000 to Fufa’s lawyer in trust.
51On April 6, 2011, the parties amended the terms of their agreement. In an email to Dan Sander, Ms. Lee clarified that she was reducing the price by $100,000 to $15,700,000, conditional upon Hollyburn taking the Property “as is,” and on the understanding that all conditions were waived. In addition, Fufa was not required to clean the storage rooms, the buyer was to complete the remaining work to comply with a fire prevention notice, and there would be no interest on the deposit.
52The sale of the Property to Hollyburn closed on May 18, 2011 (the “Hollyburn Sale”). Fufa paid no commission on the sale to Hollyburn.
53In March 2011, while Fufa was in discussions with Hollyburn, Mr. Sharvit contacted Ms. Lee to ask if the Property was still available. He sent an email to Ms. Lee asking for an updated rent roll and expenses summary for “my client in US” on March 1, 2011. Mr. Sharvit testified that Ms. Lee responded that the Property was still available, which she denies.
54At some point, Mr. Sharvit heard from another agent that the Property was sold to Hollyburn. He drove by the Property to confirm and saw that it was under new management. Mr. Sharvit contacted Mr. Ngai because he thought that Mr. Ngai had proceeded with the sale to Hollyburn without him. Mr. Ngai was also surprised to hear that the Property had been sold.
Analysis
The Parties’ Positions
55The Plaintiffs’ claims as originally pleaded in the Statement of Claim were based on the Listing Agreement. At trial, the Plaintiffs departed significantly from this position and instead testified that they each had separate verbal agreements with Fufa, pursuant to which Fufa agreed to pay them commissions on a successful sale of the Property. None of this was specifically pleaded. The Plaintiffs did not seek leave to amend the Statement of Claim to plead the alleged verbal agreements.
56The Court of Appeal has consistently emphasized that “it is central to the litigation process that issues in a civil action be decided within the boundaries of the pleadings. Fundamental fairness and the efficacy of the litigation process demand no less”: Bayens v. Kinross Gold Corp., 2014 ONCA 901, at para. 84. See also: 460635 Ontario Limited v. 1002953 Ontario Inc., [1999] O.J. No. 4071 (C.A.), at para. 9. In Sankreacha v. Cameron J. and Beach Sales Ltd., 2018 ONSC 7216, at para. 143, Charney J. held that it would be unfair to make a finding of liability against a defendant on a basis that was not pleaded in the statement of claim. While this should preclude the Plaintiffs from succeeding on their claim, for the reasons given below, I need not address the issue any further.
Mr. Ngai
57Mr. Ngai’s position is that his entitlement to a commission is not governed by the Listing Agreement, but by a new agreement that resulted when he agreed to reduce his commission on the O’Shanter Transaction. This new agreement “merged” with the Listing Agreement. Mr. Ngai submits that, as a result, the holdover period in the Listing Agreement does not apply.
58At trial, Mr. Ngai argued that he was misled by Ms. Lee into believing that she was no longer interested in selling the Property, and that but for the misrepresentation, he would have contacted Mr. Sharvit and completed a sale to Hollyburn. No cause of action for negligent or fraudulent misrepresentation was alleged, and this argument was raised for the first time at trial. Mr. Ngai also makes a claim for quantum meruit for his services, which included assisting Fufa with the O’Shanter Transaction and attending the Landlord Tenant Board with Ms. Lee on September 20, 2010.
Mr. Sharvit
59Mr. Sharvit’s position is that while Mr. Lee was alive, Fufa entered into a verbal agreement with him to “entertain” offers from potential purchasers introduced by Mr. Sharvit, and to pay a commission in the event that one of those offers resulted in a sale. Alternatively, Fufa entered into an agreement with him on the same terms after Ms. Lee took over. Mr. Sharvit maintains that the Listing Agreement does not apply to him because he had performed his obligations under the verbal agreement by the time Fufa and ReMax entered into the Listing Agreement. His entitlement to a commission thus predated the Listing Agreement. Mr. Sharvit further argues that he is entitled to a commission because he was the “effective cause” of the sale to Hollyburn.
60Alternatively, Mr. Sharvit argues that Fufa was unjustly enriched by his work toward the Hollyburn Sale and that the amount of the enrichment is the commission that Fufa did not pay, but should have, on that transaction.
Fufa
61Fufa argues that the only agreement that it entered into pertaining to a commission on the sale of the Property was the Listing Agreement with ReMax. The Listing Agreement expired on July 29, 2010, and the holdover period ended on September 27, 2010. The Listing Agreement did not apply to the sale to Hollyburn, since the holdover period had expired by the time Fufa and Hollyburn entered into the APS. Fufa further submits that neither Mr. Sharvit nor Mr. Ngai were the effective cause of the Hollyburn Sale.
62Fufa argues that Mr. Ngai has no claim for quantum meruit, since the O’Shanter Transaction failed, and Mr. Ngai had no role in the sale to Hollyburn. Fufa asserts that Mr. Sharvit’s claim for quantum meruit does not entitle him to a commission. Moreover, Mr. Sharvit has not provided any evidence of his work, in terms of time or expenses, on the sale to Hollyburn.
Was Fufa Bound to Pay Commissions to the Plaintiffs?
The Listing Agreement
63The Defendant submits that since the Listing Agreement was entered into between Fufa and ReMax, only ReMax can pursue a claim for breach of the Listing Agreement. Since the Plaintiffs now argue that the Listing Agreement does not apply, and instead rely upon alleged verbal agreements with Fufa, it is not necessary for me to determine whether they would be entitled to a commission under the Listing Agreement.
64In any event, and for the purposes of certainty, the Listing Agreement does not give rise to any entitlement to a commission by the Plaintiffs. It is clear that when Fufa and Hollyburn entered into the APS on January 19, 2011, the Listing Agreement was terminated and the holdover period had expired. Aside from Mr. Ngai’s merger argument, which is addressed below, the Plaintiffs have not argued that the Listing Agreement was amended to extend the holdover period.
Section 23 of the Real Estate Business Brokers Act, O. Reg 567/05
65Section 23 of O. Reg. 567/05 under the Real Estate Business Brokers Act, S.O. 2002, c. 30, Sched. C (REBBA) states:
- (1) Subject to subsection 33 (3) of the Act and subsection (2), a registrant shall not charge or collect a commission or other remuneration in respect of a trade in real estate unless, (a) the entitlement to the commission or other remuneration arises under a written agreement that is signed by or on behalf of the person who is required to pay the commission or other remuneration; or (b) the entitlement to the commission or other remuneration arises under an agreement that is not referred to in clause (a) and, (i) the registrant has conveyed an offer in writing that is accepted, or (ii) the registrant, (A) shows the property to the buyer, or (B) introduces the buyer and the seller to one another for the purpose of discussing the proposed acquisition or disposition of an interest in real estate. (2) Unless agreed to in writing by the buyer, a registrant shall not charge or collect a commission or other remuneration from a buyer in respect of a trade in real estate if the registrant knows that there is an unexpired buyer representation agreement between the buyer and another registrant.
66The Plaintiffs rely upon s. 23(1)(b)(ii), since there is no agreement in writing regarding a commission or other remuneration, and they did not convey the offer that Fufa accepted.
67The case law interpreting s. 23(1), and previous versions of the provision, focus on whether the broker or agent was the “effective cause” of the sale: see Hurst Real Estate Service Inc. v. Great Lands Corp., 2018 ONSC 4824, at para. 57. This means that the agent must demonstrate that they were more than a “mere instrumentality” in the pre-contractual phase of negotiations: William Alan Real Estate Co. v. Robichaud (1993), 11 O.R. (3d) 734 (C.A.) affirming (1990), 72 O.R. (2d) 525 (H.C.J.); First City Realty Ltd. v. Hermans, [2004] O.J. No. 1314 (Sup. Ct.), at paras. 30-31.
68The Defendant notes that caution must be exercised when considering cases decided under the previous version of s. 23(1)(b) because, the current version specifically states: “the entitlement to the commission or other remuneration arises under an agreement…” (emphasis added), where the previous version contained no such language.
Was There An Agreement Between Fufa and Mr. Ngai?
69Mr. Ngai’s position is that when he agreed to reduce his commission to 2% on the O’Shanter Transaction, this constituted a new agreement which “merged” with the Listing Agreement. Mr. Ngai submits that since his claim is based on this alleged new agreement, as opposed to the Listing Agreement, the holdover period does not apply, and he would be entitled to a commission on the Hollyburn Sale.
70This argument has no basis in fact or law. The Plaintiff has cited no authority to support its merger argument. At Ms. Lee’s request, Mr. Ngai agreed to reduce his percentage commission in order to facilitate the O’Shanter Transaction. It was open to Mr. Ngai to refuse to reduce his commission. Because another agent at ReMax was representing O’Shanter, it was in their mutual interest that the transaction close. The Amendment is clear that it applies only to the O’Shanter Transaction, and it contains no other terms. The Amendment does not state that the Listing Agreement no longer applies, or that it affects any other terms in the Listing Agreement.
71The Listing Agreement governed the relationship between Fufa and ReMax, and Mr. Ngai as ReMax’s representative. The Listing Agreement contained an “entire agreement” clause which states that the agreement “shall constitute the entire Authority from the Seller to the Brokerage.” While Mr. Ngai could agree to reduce his commission, this did not render the remainder of the Listing Agreement inapplicable. There is no evidence to suggest that the parties renegotiated any of the other terms, including the holdover period, which ended on September 27, 2010. Moreover, Mr. Ngai admitted that Ms. Lee requested a shorter holdover period than is customary for a commercial listing agreement because she did not know him previously. The holdover period was negotiated between the parties and was important to Fufa. This could not be superseded or waived without specific mention.
72In addition, Mr. Ngai’s agreement to reduce his commission on the O’Shanter Transaction could not have amended the terms between Fufa and ReMax, as they applied to any other sale. There is no conceivable way in which Mr. Ngai’s agreement to reduce his commission on the failed O’Shanter Transaction could alter the terms of the Listing Agreement or create a new agreement that would entitle him to a commission on the Hollyburn Sale. Such an approach would render listing agreements meaningless and lead to an unacceptable lack of certainty in their application. When real estate brokers enter into listing agreements, they take a calculated risk that they will be able to complete a deal during the holdover period. Since no agreement was finalized during the term of the Listing Agreement, Ngai is not entitled to a commission: Your Community Realty Inc. v. 204552 Ontario Inc., 2012 ONSC 2979, at para. 56.
73Other than the Listing Agreement, there was no agreement between Fufa and Mr. Ngai that could form the basis for Mr. Ngai’s claim for a commission. The Amendment related solely to the O’Shanter Transaction. Fufa and Mr. Ngai did not enter into a new agreement, written or verbal, after expiry of the Listing Agreement. Mr. Ngai is not entitled to a commission on the Hollyburn Sale.
74As Mr. Ngai has admitted that he had no role in the Hollyburn Sale, it is not necessary to consider whether he was the “effective cause” of that sale.
Was There An Agreement Between Fufa and Mr. Sharvit?
75Mr. Sharvit alleges that he had a verbal agreement with Fufa that it would entertain offers that he procured and pay him a commission or fee if any such offer resulted in a sale. Mr. Sharvit states that the agreement was entered into on Fufa’s behalf by Mr. Lee before his death or by Ms. Lee after she took over. Mr. Sharvit further submits that the Listing Agreement does not affect his entitlement to a commission because he had performed his obligations under the verbal agreement, and therefore earned a commission, before Fufa and ReMax entered into the Listing Agreement.
76A contract exists where there is a “meeting of the minds” between the parties and the essential terms of the agreement are sufficiently clear:
[T]he parties will be found to have reached a meeting of the minds, in other words be ad idem, where it is clear to the objective reasonable bystander, in light of all the material facts, that the parties intended to contract and the essential terms of that contract can be determined with a reasonable degree of certainty.
UBS Securities Canada Inc. v. Sands Brothers Canada Ltd., [2008] O.J. No. 1676 (Sup. Ct.), at paras. 40-42, aff’d 2009 ONCA 328.
77In order to determine whether the parties intended to enter into a contract, a court will consider all of the circumstances between the parties, including their words and conduct: UBS Securities Canada, at para. 41.
78In a similar case, Briardown Estates Inc. v. Peters, 2010 ONSC 1040, Daley J. had to determine whether the parties had an agreement to pay a commission in connection with the sale of land. In that case, there was no listing agreement or written commission agreement. Daley J. stated (at paras. 57-58):
As the percentage or commission amount is an essential element of the alleged oral contract and it had not been agreed to and it was clearly to be the subject of further negotiations…, I find that there was no agreement reached in the telephone discussion between [the parties] that the defendants would pay the plaintiff a commission.
Even where parties have identified the terms upon which a later contract may be based, there is no enforceable agreement where the most essential term, which goes to the heart of the contract, has not been agreed upon: Fridman The Law of Contracts, 5th ed. (Toronto: Carswell, 2006) at p. 62.
79In this case, I find that Fufa did not enter into an agreement with Mr. Sharvit, either before Mr. Lee’s death or after Ms. Lee took over. The evidence does not demonstrate that there was a meeting of the minds or that the essential terms of the alleged agreement were sufficiently clear. It is clear from the evidence that Fufa and Mr. Sharvit did not agree: (i) that he would be paid a commission, and (ii) what the commission would be. Mr. Sharvit admitted on cross-examination that he never discussed his commission with Ms. Lee, including the fact that he expected a commission. Mr. Sharvit testified that it was “too early” to agree to raise the issue of a commission because there was no offer. Mr. Sharvit’s practice was to negotiate a commission once he had a viable offer to present. However, both his entitlement to a commission and the amount were essential terms, without which there could be no agreement. An agreement to “entertain” offers and discuss a commission at a later date is at most an an agreement to agree, and is too vague to be enforceable: Briardown Estates, at para. 56-59.
80Mr. Sharvit’s view is that it is not common practice to enter into listing agreements in commercial real estate dealings, since the amount of the commission would depend upon the terms of the offer and the amount of work an agent had to put into the sale. In his view, the parties agreed that the commission could be determined later, depending on the offer, and their agreement could be interpreted as providing for a reasonable commission. Mr. Sharvit relies upon s. 36 (1.1) of the REBBA, which provides that where the commission is not agreed to, it will be determined the rate generally prevailing in the community where the real estate is located.
81The REBBA and the regulations thereunder, including the Code of Ethics (REBBA, O. Reg 580/05), seek to create certainty and clarity in real estate transactions and to ensure that registrants fulfil their obligations, so that consumers know what they can expect from registrants. Section 11 of the Code of Ethics prescribes the content of written agreements between a brokerage and a buyer or seller, including the method for determining the amount of any commission or other remuneration. If a brokerage enters into a representation agreement with a seller that is not in writing, s. 13 of the Code of Ethics requires that the brokerage reduce the agreement to writing and have it signed “at the earliest practicable opportunity and before any buyer makes an offer[.]” Therefore, s. 36(1.1) should not be interpreted to mean that agreements that do not specify a commission or remuneration are authorized or routine. While Mr. Sharvit may have preferred to operate in circumstances of ambiguity, this is not what is envisaged by the regulatory scheme.
82Moreover, the evidence does not support Mr. Sharvit’s view that Mr. Lee or Ms. Lee agreed to deal with him in this open-ended manner. There was simply no discussion of an entitlement to a commission. The evidence demonstrates that the commission rate was important to Fufa. When Fufa was considering retaining a broker, Fufa opted not to enter into listing agreement with DTZ Barnicke Limited, who proposed a commission of 3.5% and a holdover period of 180 days. Ms. Lee instead chose to retain ReMax, who proposed a commission of 2.75%. Indeed, Mr. Sharvit cannot now claim that the commission was not a material term when he asked to see the Listing Agreement before presenting the first Hollyburn offer in order to satisfy himself as to what his commission would be.
83This is very different from the case relied upon by the Plaintiffs, Hurst Real Estate v. Great Lands Corp., 2018 ONSC 4824. In that case, Dietrich J. found that the parties’ email correspondence, which included very specific terms regarding a percentage commission if the property sold above a certain price, constituted an agreement to pay the agent a commission. This email exchange took place after the expiry of a listing agreement, and the defendant’s witness admitted that the exchange constituted a new agreement (at paras. 43-45).
84Not only was there no agreement on an essential term, the entitlement to a commission, the evidence negates any mutual intent to be bound. The fact that Fufa entered into Listing Agreements with ReMax in 2008 and again in 2010 is inconsistent with a pre-existing agreement between Mr. Sharvit and Fufa. Mr. Sharvit was one among many real estate agents who expressed an interest in selling the Property. At the latest, on April 28, 2010, Ms. Lee specifically told Mr. Sharvit that she wanted to hire an agent who spoke Chinese. Ms. Lee later advised Mr. Sharvit that she had hired Mr. Ngai as her broker. The Listing Agreement included a term that ReMax had the “exclusive and irrevocable right” to act as Fufa’s agent. It also specifically stated that “the Seller is not a party to any other listing agreement for the Property or agreement to pay commission to any other real estate brokerage for the sale of the property.” As a commercial real estate broker, Mr. Sharvit would be expected to be aware of the terms of the OREA Listing Agreement, which he in any event reviewed with Mr. Ngai. He ought to have understood this to mean that he had no agreement with Fufa.
85Moreover, when Mr. Sharvit heard about the Listing Agreement, he did not tell Ms. Lee or Mr. Ngai that Fufa was already bound to an agreement with him. He did not go back to Ms. Lee and negotiate a commission after Hollyburn made the first offer, as he would be expected to do according to the terms of the alleged verbal agreement. Instead, Mr. Sharvit insisted on reviewing the Listing Agreement so that he could satisfy himself that he would be paid pursuant to its terms. Since Mr. Ngai was Fufa’s agent, Mr. Sharvit was not entitled to the seller’s commission under the Listing Agreement. Rather, Mr. Sharvit could only have been interested in the commission he would be entitled to as a cooperating broker. This is precisely what he pleaded in the Statement of Claim: that he was entitled to a commission as a co-operating broker under the Listing Agreement.
86The evidence supports the conclusion that Mr. Sharvit in fact saw himself as Hollyburn’s agent, as opposed to Fufa’s. In his email of June 9, 2010, Mr. Sharvit stated “I did call her agent and did [suggest] to him that I will try to get the best sign back from my client…” Ms. Lee, Mr. Ngai and Ms. Sharvit all testified that Mr. Sharvit referred to Hollyburn as his client.
87A consideration of all of the circumstances between the parties, including their words and conduct, does not assist Mr. Sharvit in demonstrating the existence of an agreement. Mr. Sharvit provided no detail as to when, where or how the agreement was concluded with Mr. Lee or with Ms. Lee. Mr. Sharvit provided no evidence of any discussion of other terms, such as the duration of any such agreement.
88The cases that the Plaintiffs rely upon do not apply to the facts at hand. All of those cases were decided under the previous version of s. 23, which did not contain express language requiring an agreement. In any event, in all of those cases, the court found a valid and binding agreement between the seller and agent, often after the expiry of a written listing agreement. In J.J. Barnicke Ltd. v. 1471422 Ontario Ltd. (2007), 62 R.P.R. (4th) 124 (Sup. Ct.), Daley J. found that after the expiry of the listing agreement, the seller agreed to pay the agent a commission on an offer by offer basis”: at para. 52. In First City Realty Ltd. v. Hermans, [2004] O.J. No. 1314 (Sup. Ct.) Dawson J. found that commission was owing on an MLS listing agreement on a sale completed within the holdover period.
Was Mr. Sharvit the Effective Cause of the Hollyburn Sale?
89Based on my finding that there was no agreement between Fufa and Mr. Sharvit, Mr. Sharvit has not met the requirements of s. 23(1), and it is unnecessary for me to consider whether Mr. Sharvit was the effective cause of the sale. For the purpose of completeness, and in case I am mistaken, I find that Mr. Sharvit has failed to demonstrate on a balance of probabilities that he was the effective cause of the sale.
90In Cash v. George Dundas Realty Ltd. (1974), 1 O.R. (2d) 241, at page 37, the Court of Appeal stated that a vendor cannot frustrate an agent’s claim to a commission “when an acceptable offer by these processes is thereafter produced and executed in a direct sequence of events in which the real estate agent plaintiff is intimately involved.” In Briardown Estates, Daley J., quoting MacDonald Realty (1974) Ltd. v. Saunders, [1997] B.C.J. No. 1182 (B.C. Sup. Ct.), examined whether there was an “unbroken continuity” between the efforts of the plaintiff and the ultimate sale: at paras. 75, 94-95. Irrespective of the language used, whether an agent is the effective cause turns on the facts of the case. The case law requires an examination of the totality of the circumstances whether the agent was more than a “mere instrumentality” in the pre-contractual phase of negotiations: William Allan Real Estate, at para. 6.
91It is clear that where there are subsequent intervening events, an agent may not be found to be the effective cause of the sale. In this case, many intervening events occurred after Mr. Sharvit introduced Hollyburn and showed the Property to them. First, Fufa entered into a Listing Agreement with ReMax. Second, Fufa entered into the O’Shanter Transaction, which fell through only because O’Shanter was dissatisfied with its due diligence. Had O’Shanter not terminated the agreement of purchase and sale, the sale would have closed and Mr. Sharvit would not have been entitled to a commission. Third, Ms. Lee listed the Property with an agent in Hong Kong in an attempt to procure an overseas purchaser. Months later, Hollyburn re-initiated contact with Ms. Lee directly.
92In addition, the plaintiff agent or broker cannot be said to be the effective cause of the sale if the terms of the ultimate sale differ from the offer procured by the agent. While Mr. Sharvit argues that the APS was substantially the same as the offer procured by him, the terms that were ultimately agreed to differed significantly. To begin with, the purchase price was significantly more than Hollyburn’s previous offer. When the discussions with Hollyburn terminated in July 2010, the parties were $2 million apart. A difference in the purchase price is a material difference: Briardown Estates, at para. 66, citing Regional Group of Companies v. Assaly Construction, [2000] O.J. No. 2525 (Sup. Ct.). Unlike J.J. Barnicke, the difference exceeded the amount attributable to the agent’s commission.
93Moreover, the initial offer contained a Vendor Subject Clause that Hollyburn found unreasonable. When the discussions ended in July 2010, Mr. Sharvit had not yet succeeded in getting this clause removed, despite Hollyburn’s request. The final terms of the Hollyburn Sale included Hollyburn accepting the Property “as is”, among other things, in exchange for a price reduction of $100,000. The evidence demonstrates that Hollyburn and Fufa negotiated extensively between January and April 2011. The APS, which was subsequently amended, cannot be said to be substantially the same as the offers exchanged in the spring of 2010.
The Offer From Sidon Investor Services Ltd.
94At trial, Fufa sought to rely upon an offer to purchase dated February 5, 2008, (the “Sidon Offer”) by an entity known Sidon Investor Services Ltd. (“Sidon”) to demonstrate that Hollyburn knew of the property before Mr. Sharvit introduced them to it. Fufa claims that Sidon is related to Hollyburn because they have the same principal, Stephen Sander, and the same corporate address. The offer from Sidon was signed by a Stephen Sander, for a purchase price of $17,600,000.
95Based on my finding that there was no agreement between Fufa and Mr. Sharvit, and that Mr. Sharvit was not the effective cause of the sale, it is unnecessary for me to determine whether Hollyburn knew of the Property before Mr. Sharvit contacted them in March 2010.
96In any event, the relationship between Hollyburn and Sidon remains unclear. While I admitted the Sidon Offer into evidence, I give the document little weight. Ms. Lee could testify only that she found the Sidon Offer in Fufa’s files in preparation for the litigation. Mr. Sanders’ name does not appear on the Corporation Profile Report for Sidon. The Sidon Offer does not prove conclusively that Hollyburn knew of the Property before Mr. Sharvit sent the information to them in March 2010.
97Nevertheless, even though Mr. Sharvit showed the Property to Hollyburn and may have introduced Hollyburn to Fufa, there was no agreement, as required by s. 23(1)(b)(ii) of the REBBA and Mr. Sharvit was not the effective cause of the sale. Therefore, Mr. Sharvit is not entitled to a commission under s. 23(1)(b)(ii).
Is Mr. Ngai Entitled to Compensation for Quantum Meruit
98Alternatively, the Plaintiffs claim that they are entitled to be compensated on the basis of the doctrine of unjust enrichment and quantum meruit.
99In order to establish a claim for unjust enrichment, the Plaintiffs must demonstrate that Fufa was enriched, that they suffered a corresponding deprivation, and the absence of a juristic reason for the enrichment: Garland v. Consumers’ Gas Co., 2004 SCC 25. To establish a claim for unjust enrichment, the plaintiff does not have to establish the existence of a valid contract. It is sufficient that the services were provided at the request, encouragement, or acquiescence of the party that received them in circumstances where it would be “unjust for the opposing party to retain the benefit conferred” by the services: Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2007 ONCA 324, at para. 99.
100The Plaintiffs maintain that Fufa was enriched by not having to pay a commission on the Hollyburn Sale. However, no claim can be advanced by an agent unless it falls within the ambit of s. 23 of the REBBA. The courts have held that in the absence of a contract, the plaintiff is not entitled to be paid the equivalent of a commission on the basis of the doctrine of unjust enrichment: William Allan Real Estate v. Robichaud, at p. 614; Briardown Estates, at para. 106.
101The Plaintiffs’ claim for quantum meruit can only be for services rendered. Mr. Ngai claims compensation for his work on the O’Shanter Transaction and his attendance at the Landlord Tenant Board with Ms. Lee. There is simply no basis for his claim. The terms of Mr. Ngai’s relationship with Fufa were governed by the Listing Agreement. Any entitlement to a commission under the Listing Agreement is premised on a successful sale. The O’Shanter Transaction failed. Mr. Ngai admits that he played no role in the Hollyburn Sale. He further admitted that his attendance at the Landlord Tenant Board, in September 2010, was not in relation to the Hollyburn Sale. There were no ongoing discussions with Hollyburn at that time. In any event, Mr. Ngai has provided no evidence of his time or expenses.
102Moreover, after the O’Shanter Transaction failed, Fufa, O’Shanter and Remax executed a mutual release. The release states that the Brokerage “hereby releases both parties from any claim that the Brokerage may have had for commission or other remuneration in the above transaction, except as may be hereinbefore specifically provided.” Brokerage is defined to include the listing brokerage, cooperating brokerage and the registrants and employees of the brokerage. Any claim that Mr. Ngai could have had in connection with the O’Shanter Transaction is precluded by the mutual release.
Is Mr. Sharvit Entitled to Compensation for Quantum Meruit
103Similarly, Mr. Sharvit’s claim to a commission on the basis of unjust enrichment is dismissed for the reasons given above.
104Mr. Sharvit claims that he was not compensated for his time and work in putting together information, preparing the draft agreement of purchase and sale, participating in negotiations, and showing the Property to Hollyburn. Mr. Sharvit submits that he “pre-qualified” the purchaser and ensured that Hollyburn could make a viable offer.
105In Consulate Ventures, the Court stated that there “must be established some express, or sometimes implied request to do the work or some encouragement on the part of the defendant that may be said to have misled the plaintiff into the belief that a contract would result.”: citing G.H.L. Fridman, Restitution, 2d ed. (Toronto: Carswell, 1992), at para. 98.
106Ms. Lee admitted on cross-examination that if the original offer from Hollyburn resulted in a sale, she felt she would have had to pay Mr. Sharvit “something.” She also admitted that she believed Mr. Lee would have paid Mr. Sharvit something had he brought an offer that resulted in a sale. This suggests that Ms. Lee was aware that Mr. Sharvit was not acting gratuitously. However, Fufa made no express or implied request to Mr. Sharvit that misled him into believing that a contract would result. To the contrary, Ms. Lee expressly stated in her email to Mr. Sharvit that she would be hiring her own agent.
107Moreover, quantum meruit is an equitable remedy. I am reluctant to find that Mr. Sharvit is entitled to compensation for engaging in the type of conduct that the regulatory scheme is intended to prevent. The provisions of the REBBA and the Code of Ethics require registrants to follow the applicable rules to avoid creating the type of ambiguity and confusion that gave rise to this litigation. While the Plaintiffs argue that those provisions are to protect consumers in residential real estate transactions, as opposed to commercial real estate, neither the REBBA nor the Code of Ethics make this distinction.
108Between the end of the holdover period and the second approach from Hollyburn, there was no further agreement, no written communication, and no contact with the Plaintiffs. Ms. Lee understood that the Listing Agreement had expired. She could not reasonably be expected to think that there were outstanding obligations to the Plaintiffs. Ms. Lee was newly widowed with four children and was learning to run a business in a new country. Given the various agents approaching her about the Property, and the confusion generated by Mr. Ngai and Mr. Sharvit, it is not surprising that Ms. Lee completed an agreement with Hollyburn directly, with the assistance of a real estate lawyer.
109Even if I were inclined to find that Mr. Sharvit had a claim for quantum meruit, Mr. Sharvit provided no evidence upon which this could be assessed. Mr. Sharvit did not keep a record of his hours, work, or expenses. In his testimony, Mr. Sharvit insisted that he spent “three years” on the Hollyburn Sale, but provided no breakdown of his time and made no attempt to quantify his work or efforts in a manner that would permit assessment. There is simply insufficient evidence to demonstrate damages for quantum meruit: Briardown Estates, at para. 103.
Conclusion
110The action is dismissed, with costs to the Defendant. In the event that the parties are unable to agree to costs, I will receive cost submissions from the Defendant within 14 days of the release of this decision. The Plaintiffs’ responding cost submissions are due within 10 days of receiving the Defendant’s cost submissions. No cost submissions shall exceed five pages, plus a costs outline. If no submissions are received within this time frame, the parties will be presumed to have resolved costs between them.
Nishikawa J.
Released: May 22, 2019