GIBBS J.A. (for the Court, dismissing the appeal):— The issue
on this appeal is whether, on the facts and the terms of an
agency agreement, the agent, Realtech Realty, earned a
commission on obtaining financing commitments for a real estate
development to be undertaken by the principal, Dancorp
Developments. The trial judge held that the commission had
been earned and was payable and gave judgment therefor.
Dancorp Developments appeals the judgment.
Dancorp owned property on Farrow Street in
Coquitlam,
British Columbia, upon which it proposed to construct two
residential condominium towers plus associated facilities. In
order to carry out the construction it required mortgage
financing. It retained Realtech as its agent to obtain
mortgage financing commitments.
From Sovereign Life Insurance Company, Realtech obtained a
second mortgage letter of commitment dated October 25, 1988 for
$2,674,000 with conditions. The conditions were acceptable to Dancorp. From the Royal Bank of Canada, Realtech obtained a
first mortgage letter of commitment dated December 5, 1988 for
$6,775,000 with conditions. The bank accepted several
amendments proposed by Dancorp and Dancorp was thereupon in
agreement with the conditions. As of mid or late December of
1988, on the basis of the two commitment letters, Dancorp had
the required financing.
New cost estimates prepared for Dancorp in December of
1988 and January of 1989, however, showed that the committed
first and second mortgage funds would not be sufficient. With
the consent of Sovereign Life Insurance Company, Realtech
obtained a new letter of commitment from the Royal Bank, dated
February 8, 1989, for $7,730,000 to be secured by a first
mortgage. The same conditions and the same amendments applied
to the second Royal Bank commitment as had applied to the
first. Again Dancorp was in agreement, and again it had the
required financing. But later new estimates increased the cost
again and Dancorp, for the second time, required more funds
than the total of the commitments by the two lenders.
The new cost estimates, produced on February 13, 1989, led
to inconclusive discussions and negotiations with the two
lenders towards obtaining still larger financing commitments.
In due course Dancorp elected to abandon or withdraw from the
lending arrangements then in place and seek financing
elsewhere. It succeeded in arranging other financing and
proceeded with construction.
Realtech claims a commission of $130,000 for obtaining the
letters of commitment from Sovereign Life Insurance Company and
the Royal Bank. It rests its claim upon the terms of the
agency agreement. The agency agreement is dated October 27,
1988. These are the relevant clauses:
We further agree that if, during the term of this
agency, a lender and/or joint venturer is introduced to
the described property who is ready, willing and able to
lend and/or joint venture on the terms and conditions
contained herein or on other terms and conditions
acceptable to us whether or not such lender and/or joint
venturer is introduced by you, we agree to pay you a
service commission of One Hundred Thirty Thousand Dollars
($130,000.00) exclusive of any fees you may obtain from
such lender and/or joint venturer who agrees to make the
loan and/or joint venture. This service commission shall
be deemed to be earned upon loan and/or joint venture
commitment and will be paid as follows:
|
Initial Advance of Funds |
$50,000.00 |
|
|
Second Advance of Funds |
80,000.00 |
|
We further agree that if, within 6 months of expiry of
this Exclusive Agency, a lender and/or joint venturer who
was introduced to this project during the time of this
Exclusive Agency commits to lend on and/or joint venture
this project, the service commission will be paid to you
within 30 days of your giving notice.
The trial judge found that Realtech had performed in accordance
with these provisions and was therefore entitled to the agreed
commission. He said:
Upon the signing of those letters, the plaintiff had
done what it was retained to do, namely find lenders
ready, willing and able to lend on terms acceptable to the
defendant. The plaintiff did so.
The trial judge also found that the advent of increased costs
did not relieve Dancorp from the commission obligation. In
that connection he said:
In any event, the plaintiff was not responsible for
the increased costs that frustrated the loan commitments.
The risk of the change and conditions was that of the
defendant. If the defendant wanted to guard against such
a change, it could have made a reservation in the agency
agreement, provided the plaintiff would have accepted the
change.
There are no grounds for setting aside the findings of the
trial judge. The evidence supports his conclusion that the two
lenders were ready, willing and able to lend. As well, the
evidence supports his conclusion that the terms proposed by the
lenders were acceptable to Dancorp. There is nothing to
suggest, nor was it argued, that the terms were unusual or
significantly different than those put forward by major lenders
in like circumstances.
Dancorp resists payment of the commission by invoking two
alleged principles from reported judgments on commissions on
real estate sales. The first is of a general nature to the
effect that the commission is not payable when the purchaser
reneges on the sale transaction. The second is that in order
to recover the agent must prove that the purchaser was ready,
willing and able to purchase on the date set for completion as
between vendor and purchaser.
Assuming, without deciding, that there are two such
principles of broad general application to real estate sales,
and assuming, without deciding, that both can be imported and
applied in non-real estate agency relationships, neither
assists Dancorp here.
As to the first, the proposition that if a purchaser
reneges commission is not payable, there are two answers.
Firstly, where the principle applies, the converse is true, if
the vendor reneges the commission will be payable: see
Columbia Caterers and W.E. Sherlock Company v. Famous
Restaurants (1956), 18 W.W.R. 577 (B.C.C.A.) per Coady, J.A. at
page 586, and Sheppard, J.A. at page 593. The reasoning behind
the judgments is that the agent will not be denied his
commission if he has performed the functions he contracted to
perform. The obvious translation of that rule to a principal
agent relationship outside of the specialized field of real
estate sales is that the agent will not be denied his
commission if his principal reneges or withdraws and thereby
frustrates completion of the transaction. Here it was Dancorp
which withdrew and although it had good commercial reasons for
doing so it cannot rely upon those reasons to defeat the
Realtech claim. The second answer is that a general rule such
as that advanced by Dancorp does not override the terms of the
agreement between the principal and the agent: see H.W. Liebig
& Company v. Leading Investments, [1986] 1 S.C.R. 70, a case
heavily relied upon by Dancorp. There, although he began his
judgment with some "General Considerations", La Forest, J., for
the majority, ultimately decided the case upon a construction
of the agreements between the parties.
The second principle advanced by Dancorp, that the
purchaser (here the lender) must be proven to have been ready,
willing and able to close on the agreed date, cannot prevail
over the wording of the agency agreement. Dancorp became
liable under the agency agreement when Realtech introduced
Sovereign Life Insurance Company and the Royal Bank on terms
and conditions acceptable to Dancorp. That point was reached
on February 8, 1989, a date which was "within 6 months of
expiry of this Exclusive Agency" as provided in the agency
agreement. Through its solicitors, Realtech demanded payment of
the commission on August 2, 1989. Payment was not made, hence
this litigation.
By way of summary, this passage from page 789 of Christie
Owen & Davies Ltd. v. Rapacioli (1974), 1 Q.B. 781 (C.A.),
adapted to the circumstances of the case at bar, serves to
dispose of the issues on this appeal.
It seems to me that the trend of the authorities
supports the three propositions enunciated by Mr. Hamilton
on behalf of the plaintiffs. (1) The decision as to
whether the commission is payable depends on the terms of
the contract and on ordinary rules of construction. (2)
When the agreement between principal and agent is for
commission to be payable on the introduction of a person
ready, able and willing to [lend], the commission is
payable if a [loan] actually results, but may become
payable when the transaction becomes abortive. (3)
Commission is payable when a person who is able to [loan]
is introduced and expresses readiness and willingness by
an offer to [loan on acceptable conditions].
In connection with the third proposition, it is to be
assumed that the offer is one within the terms that the
agent has been authorised to invite; also, that the offer
is not withdrawn by the [lender], but is refused by the
[borrower]. In my judgment, on the facts in this case,
the plaintiffs bring themselves within that proposition
and are entitled to the commission claimed.
The appeal is dismissed.
GIBBS J.A.
LEGG J.A.:— I agree.
HOLLINRAKE J.A.:— I agree.
