Sunderland v. Toronto Regional Real Estate Board

Sunderland v. Toronto Regional Real Estate Board
Court (s) Database
Federal Court Decisions
Date
2023-09-25
Neutral citation
2023 FC 1293
File numbers
T-595-21
Decision Content
Date: 20230925
Docket: T-595-21
Citation: 2023 FC 1293
Toronto, Ontario, September 25, 2023
PRESENT: Chief Justice Paul Crampton
PROPOSED CLASS PROCEEDING
BETWEEN:
MARK SUNDERLAND
Plaintiff
and
TORONTO REGIONAL REAL ESTATE BOARD, THE CANADIAN REAL ESTATE
ASSOCIATION, RE/MAX ONTARIO-ATLANTIC CANADA, INC. o/a RE/MAX
INTEGRA, CENTURY 21 CANADA LIMITED PARTNERSHIP, RESIDENTIAL
INCOME FUND L.P., ROYAL LEPAGE REAL ESTATE SERVICES LTD., HOMELIFE REALTY SERVICES INC., RIGHT AT HOME REALTY INC., FOREST HILL REAL ESTATE INC., HARVEY KALLES REAL ESTATE LTD., MAX WRIGHT REAL ESTATE CORPORATION, CHESTNUT PARK REAL ESTATE LIMITED, SUTTON GROUP REALTY SERVICES LTD. and IPRO REALTY LTD.
Defendants
ORDER AND REASONS
I. Introduction
[1] Mr. Sunderland, the representative plaintiff in the underlying action, claims unspecified aggregate damages on behalf of all persons who sold residential real estate listed on the Multiple Listing Service (“MLS”) owned and operated by the defendant Toronto Regional Real Estate Board ( “TRREB” ), dating back to March 11, 2010 (the “Relevant Period”).
[2] In support of his claims, the plaintiff alleges that certain of the defendants (defined below as the “Brokerage Defendants”) and their “co-conspirators” contravened subsection 45(1) of the Competition Act, RSC, 1985, c C-34 (the “Competition Act”). They have allegedly done so by conspiring, agreeing or arranging with each other to fix, maintain, increase or control the price for the supply of buyer brokerage services (“Cooperating Broker Services” or “Buyer Brokerage Services”) that they provide to purchasers of residential real estate in the Greater Toronto Region (“GTA”). The plaintiff further alleges that the other defendants (defined below as the “Association Defendants” and the “Franchisor Defendants”), have respectively aided, abetted and counselled that purported breach of section 45, contrary to subsections 21(2) and 22(1) of the Criminal Code, RSC 1985 c C-46. The plaintiff makes this same allegation in the alternative against the Brokerage Defendants.
[3] In the three present Motions, brought by each of the three abovementioned groups of defendants, respectively, the defendants seek various types of relief, including an Order striking the plaintiff’s Fresh as Amended Statement of Claim (the “Statement of Claim”) for failure to disclose a reasonable cause of action. The defendants also seek an Order dismissing the plaintiff’s action.
[4] For the reasons that follow, I have concluded that the Statement of Claim discloses a reasonable cause of action against the Brokerage Defendants with respect to the alleged arrangement to “control” prices for the supply of Cooperating Brokerage Services in the GTA during the Relevant Period. However, it does not disclose a reasonable cause of action with respect to the claimed “fixing, maintaining, or increasing” of those prices. Accordingly, the latter allegations will be struck from the Statement of Claim.
[5] I have also concluded that the Statement of Claim discloses a reasonable cause of action against the Association Defendants and the Brokerage Defendants for allegedly aiding, abetting and counselling the impugned arrangement. However, it does not disclose a reasonable cause of action against the Franchisor Defendants. Accordingly, this latter aspect of the Statement of Claim will be struck.
[6] In the course of reaching the foregoing conclusions, I determined that a defendant may arguably be said to have “engaged in” conduct section 45 of the Competition Act, and within the meaning of section 36, even if that defendant is not a “competitor.”
[7] Finally, I have concluded that it is not plain and obvious that the allegations in the Statement of Claim are time-barred as of two years prior to the filing of the initial Statement of Claim, on April 1, 2019.
[8] Having regard to the foregoing, and for the reasons further explained below, the Motions of the Brokerage Defendants and the Association Defendants will be dismissed, except insofar as they concern allegations with respect to the “fixing, maintaining or increasing” of the above-mentioned prices. The Motion of the Franchisor Defendants will be granted as it relates to their request to strike the Statement of Claim to the extent that it concerns them.
II. The Parties
A. The Proposed Representative Plaintiff and the Class He Represents [9] Mr. Sunderland is a resident of Toronto, Ontario. In August 2020, he sold a property that had been listed on the MLS. He and the purchaser were represented by separate brokerages.[1] However, the total commission he paid for brokerage services (5%) included a 2.5% commission that was ultimately paid to the buyer’s brokerage, for Cooperating Brokerage Services.
B. The Defendants [10] The plaintiff identifies three broad groups of defendants, as follows.
(1) The Brokerage Defendants [11] The brokerage defendants are Royal LePage Real Estate Services Ltd., Right at Home Realty Inc., Forest Hill Real Estate Inc., Max Wright Real Estate Corporation, Harvey Kalles Real Estate Ltd., Chestnut Park Real Estate Limited, and iPro Realty Ltd. (collectively, the “Brokerage Defendants”).
[12] The Brokerage Defendants are real estate brokerages licensed to trade in real estate. They are alleged to have contravened section 45 of the Competition Act, by entering into an “arrangement” to fix, maintain, increase or control the supply of Cooperating Brokerage Services in the GTA during the Relevant Period.
(2) The Franchisor Defendants [13] The defendants RE/MAX Ontario-Atlantic Canada, Inc. o/a RE/MAX Integra , Century 21 Canada Limited Partnership, Residential Income Fund L.P., Sutton Group Realty Services Ltd., and HomeLife Realty Services Inc. (collectively, the “Franchisor Defendants”) are franchisors of real estate brokerage services.
[14] Each of the Franchisor Defendants is alleged to have multiple franchisee real estate brokerages in the greater Toronto area (“GTA”).
[15] The plaintiff alleges that the Franchisor Defendants have encouraged, counselled, aided, abetted, assisted and required their franchisees to enter into and maintain the “arrangement” that the plaintiff claims to contravene section 45 of the Competition Act
(3) The Association Defendants [16] The plaintiff alleges that TRREB and the Canadian Real Estate Association (“CREA”) (collectively, the “Association Defendants”) are not-for-profit professional associations whose membership includes the Brokerage Defendants, brokers and salespersons. The plaintiff further alleges that the Association Defendants are controlled by, and act for the benefit of, their members.
[17] According to the plaintiff, TRREB owns and operates the Toronto Multiple Listing Service (“Toronto MLS”). He adds that CREA is the registered owner of certain other MLS marks, including the MLS®, Multiple Listing Service® and REALTOR® marks; and that CREA licenses those marks to its member real estate boards.
[18] As with the Franchisor Defendants, the plaintiff claims that the Association Defendants have encouraged, counselled, aided, abetted, assisted and required their members to enter into and maintain the “arrangement” that is alleged to contravene section 45 of the Competition Act.
III. Background
[19] A comprehensive overview of residential real estate industry and its principal participants is provided in Commissioner of Competition v Toronto Real Estate Board, 2016 Comp. Trib. 7, at paras 51–78 [TREB]. The following summary will be limited to the matters addressed in the Statement of Claim, as well as non-contentious matters that were addressed in the parties’ written or oral submissions, and that do not appear to be in dispute.
A. Provincial Legislation [20] In Ontario, real estate brokers and agents are regulated by the Real Estate and Business Brokers Act, 2002, SO 2002, c 30, Sched C (“REBBA”). Among other things, the REBBA requires all brokerages and salespersons trading in real estate in Ontario to be registered: REBBA, s. 4(1). The REBBA also requires brokers to be remunerated by “an agreed amount or percentage of the sale price or rental price, as the case may be, or a combination of both”: REBBA, s. 36(1).
[21] Pursuant to s. 31(2) of REBBA, no broker or salesperson shall accept any remuneration for trading in real estate from any person except the brokerage which employs that individual. The full text of the foregoing provisions of the REBBA is reproduced at Annex 6 below.
B. Ontario Real Estate Association (“OREA”) [22] OREA is a professional association that serves its approximately 79,000 members through a variety of publications, educational programs (including real estate registration courses), and special services. It also makes standard forms, including the standard form real estate listing agreement (“OREA Listing Agreement”), available to its members.
C. Brokers, Salespersons, Brokerages and Agents [23] S. 1(1) of the REBBA defines the term “broker” to mean “an individual who has the prescribed qualifications to be registered as a broker under this Act and who is employed by a brokerage to trade in real estate.” The term “salesperson” is defined in essentially the same way, except that such individuals are registered as a salesperson, rather than as a broker. For the purposes of the Statement of Claim, the term “salesperson” means both a “broker” and a “salesperson”, as defined above.
[24] A “brokerage” is stated to be “a corporation, partnership, sole proprietor, association or other organization or entity that, on behalf of others and for compensation or reward or the expectation of such, trades in real estate or holds himself, herself or itself out as such”: REBBA, s. 1(1). Brokerages can be independent, or they can be franchisees, operating one or more offices under the manner of a corporate franchisor.
[25] All brokerages are required to have a “broker of record” who is responsible for the brokerage’s compliance with REBBA and its regulations: REBBA, s. 12(2).
[26] The term “agent” is not defined in the REBBA. I understand that it means a person who is registered as a salesperson and who is employed by a brokerage to trade in real estate.
[27] Brokers, salespersons and agents who are retained by a seller of residential real estate are known in the industry as “listing” brokers or agents (“Listing Brokers”), whereas those who are retained to represent a buyer are known as “cooperating” brokers or agents (“Cooperating Brokers”).
[28] It appears to be common ground between the parties that a listing agreement is between a seller and a listing brokerage (“Listing Brokerage”), rather than between the seller and a particular salesperson. Likewise, a buyer seeking assistance from a particular salesperson will enter into a contract with that salesperson’s brokerage (“Cooperating Brokerage”), rather than with the salesperson. Consequently, all commissions paid in connection with residential real estate transactions are paid to brokerages, who in turn remunerate the salespersons in question.
[29] As discussed below, it appears to be the general industry practice in Ontario that sellers pay their Listing Brokerage a commission which covers the services provided by both the Listing Broker and the Cooperating Broker. The Listing Broker then pays part of that commission to the Cooperating Brokerage.
D. TRREB Rules and CREA Rules [30] In addition to the requirements imposed by the REEBA and OREA, brokerages in the GTA are subject to rules promulgated by TRREB and CREA.
[31] The plaintiff alleges that, to become a member of TRREB, brokerages and the brokers/salespersons they employ must agree to abide by TRREB’s rules (“TRREB Rules”). Likewise, to become a member of CREA, brokerages, and brokers/salespersons they employ must agree to abide by CREA’s rules (“CREA Rules”).
[32] The plaintiff further alleges that TRREB, CREA and OREA have entered into a contractual relationship known as the “Three Way Agreement” under which TRREB’s members are required to become members of both CREA and OREA. Pursuant to that same agreement, TRREB’s members allegedly agree to be bound by CREA and OREA’s rules, in addition to TRREB’s Rules.
[33] The plaintiff also claims that the TRREB Rules and the CREA Rules include rules relating to the commissions paid by residential real estate sellers whose properties are sold through the Toronto MLS. These rules apparently oblige a seller of residential real estate listed on the Toronto MLS to make an offer of commission to any Cooperating Brokerage acting for a prospective buyer, thereby making the seller responsible to pay for the Cooperating Brokerage services used by the buyer.
[34] The plaintiff maintains that, pursuant to the TRREB Rules and the CREA Rules, an offer of commission made by a seller to a Cooperating Brokerage must be a blanket offer, open for acceptance by all Cooperating Brokerages accessing the Toronto MLS.
[35] It appears to be undisputed that CREA has also promulgated rules regarding the use of its MLS marks. In this regard, real estate brokerages in Canada and the salespersons they employ, including TRREB’s member brokerages and salespersons, must agree to adhere to CREA Rules regarding the use of those marks.
IV. Issues
[36] For the purposes of this Motion, the issues are as follows:
a)Does the Statement of Claim disclose a reasonable cause of action under section 45(1) of the Competition Act?
b)Does the Statement of Claim plead conduct capable of constituting aiding, abetting or counselling a criminal conspiracy within the meaning of sections 21(1) and 22(1) of the Criminal Code?
c)Does section 36 of the Competition Act apply to a defendant that is made a party to an impugned arrangement by virtue of sections 21(1) and 22(1) of the Criminal Code?
d)Are the plaintiff’s claims statute barred as of April 1, 2019?
V. Relevant Provisions of the Competition Act and the Federal Courts Rules
[37] The sole cause of action in this proceeding is for recovery of damages under paragraph 36(1)(a) of the Competition Act, as a result of conduct by the Brokerage Defendants that is alleged to be contrary to subsection 45(1) of that legislation. In the alternative, the plaintiff claims that the Brokerage Defendants aided, abetted and counselled their salespersons to contravene subsection 45(1).
[38] The plaintiff also claims that the Association Defendants and the Franchisor Defendants are liable as parties to the alleged contravention of section 45(1), by virtue of having aided, abetted and counselled that contravention, within the meaning of sections 21(1) and 22(1) of the Criminal Code, respectively.
[39] Subsection 36(1) of the Competition Act provides as follows:
Recovery of damages
Recouvrement de dommages-intérêts
36 (1) Any person who has suffered loss or damage as a result of
36 (1) Toute personne qui a subi une perte ou des dommages par suite :
(a) conduct that is contrary to any provision of Part VI, or
a) soit d’un comportement allant à l’encontre d’une disposition de la partie VI;
(b) the failure of any person to comply with an order of the Tribunal or another court under this Act,
b) soit du défaut d’une personne d’obtempérer à une ordonnance rendue par le Tribunal ou un autre tribunal en vertu de la présente loi,
may, in any court of competent jurisdiction, sue for and recover from the person who engaged in the conduct or failed to comply with the order an amount equal to the loss or damage proved to have been suffered by him, together with any additional amount that the court may allow not exceeding the full cost to him of any investigation in connection with the matter and of proceedings under this section.
peut, devant tout tribunal compétent, réclamer et recouvrer de la personne qui a eu un tel comportement ou n’a pas obtempéré à l’ordonnance une somme égale au montant de la perte ou des dommages qu’elle est reconnue avoir subis, ainsi que toute somme supplémentaire que le tribunal peut fixer et qui n’excède pas le coût total, pour elle, de toute enquête relativement à l’affaire et des procédures engagées en vertu du présent article.
[40] In brief, subsection 36(1) permits the recovery of loss or damages suffered as a result of (a) conduct that is contrary to any of the provisions in Part VI of the Competition Act (which establishes various criminal offences), or (b) the failure of any person to comply with an order of the Competition Tribunal or another court under that legislation. It also permits the recovery of costs associated with investigating the matter and then bringing proceedings.
[41] Subsection 45(1) of the Competition Act creates an indictable offence for anyone who conspires, agrees or arranges with a competitor to do certain specific things. The provision states as follows:
Conspiracies, agreements or arrangements between competitors
Complot, accord ou arrangement entre concurrents
45 (1) Every person commits an offence who, with a competitor of that person with respect to a product, conspires, agrees or arranges
45 (1) Commet une infraction quiconque, avec une personne qui est son concurrent à l’égard d’un produit, complote ou conclut un accord ou un arrangement :
(a) to fix, maintain, increase or control the price for the supply of the product;
a) soit pour fixer, maintenir, augmenter ou contrôler le prix de la fourniture du produit;
(b) to allocate sales, territories, customers or markets for the production or supply of the product; or
b) soit pour attribuer des ventes, des territoires, des clients ou des marchés pour la production ou la fourniture du produit;
(c) to fix, maintain, control, prevent, lessen or eliminate the production or supply of the product.
c) soit pour fixer, maintenir, contrôler, empêcher, réduire ou éliminer la production ou la fourniture du produit.
[42] The various parts of section 45 that are relevant for the present purposes are reproduced in Annex 1 to these reasons.
[43] Subsection 21(1) of the Criminal Code deems everyone who does or omits to do anything for the purpose of aiding or abetting another person to commit an offence, to be a party to that offence.
[44] Likewise, subsection 22(1) of the Criminal Code deems everyone who counsels another person to be a party to an offence, to be a party to that offence if it is ultimately committed, regardless of whether it was committed in a way different from that which was counselled. The text of subsections 21(1) and 22(1) is reproduced in Annex 3 below
[45] Rule 221 of the Federal Courts Rules, SOR/98-106 (the “Federal Courts Rules”) authorizes the Court, on motion, to order that a pleading, or anything contained therein, be struck out, with or without leave to amend, on numerous grounds. These include that the pleading discloses no reasonable cause of action. The text of Rule 221 is reproduced in Annex 4 below.
VI. Assessment
A. Do the Pleadings Disclose a Reasonable Cause of Action? (1) General principles (a) Motion to strike [46] The test for assessing whether pleadings disclose a reasonable cause of action is whether “it is plain and obvious, assuming the facts pleaded to be true, that each of the plaintiffs’ pleaded claims disclose no reasonable cause of action”: Atlantic Lottery Corp Inc. v Babstock, 2020 SCC 19, at para 14 [Atlantic Lottery]; Jensen v Samsung Electronics Co Ltd, 2023 FCA 89, at para 15 [Jensen FCA], leave to appeal to SCC requested. In brief, “if a claim has no reasonable prospect of success it should not be allowed to proceed to trial”: Atlantic Lottery, at para 14.
[47] A claim will fail to disclose a reasonable cause of action if it contains a “radical defect,” is “doomed to fail” or is “so clearly improper as to be bereft of any possibility of success”: Atlantic Lottery, at paras 89–90; Wenham v Canada (Attorney General), 2018 FCA 199 at para 33 [Wenham], citing Canada (National Revenue) v JP Morgan Asset Management (Canada) Inc., 2013 FCA 250 at para 47, leave to appeal to SCC in Wenham refused, 39518 (10 June 2021).
[48] In applying this test, the Court’s task “is not to resolve conflicting facts and evidence and assess the strength of the case”: Wenham, at para 28. The Court’s focus is on the pleadings, not on the evidence: R v Imperial Tobacco Canada Ltd., 2011 SCC 42 at para 23 [Imperial Tobacco]; Jensen FCA, at para 52. Those pleadings must be read generously, holistically, and practically, with a view to “err[ing] on the side of permitting a novel but arguable claim to proceed”: Imperial Tobacco, at para 21; Wenham, at para 34; Mancuso v Canada (National Health and Welfare), 2015 FCA 227 at para 18 [Mancuso], leave to appeal to SCC refused, 36889 (23 June 2016).
[49] Nevertheless, the court has an important screening role to play: Desjardins Financial Services Firm Inc. v Asselin, 2020 SCC 30 at para 74; Jensen FCA, at para 49; Mohr v National Hockey League, 2022 FCA 145 at paras 49 and 53 [Mohr FCA], leave to appeal to SCC refused, 40426 (20 April 2023). That role includes assessing whether the pleadings (i) are “sufficient to put the defendant on notice of the essence of the plaintiff’s claim” (Atlantic Lottery, at para 89), (ii) have adequately addressed “the constituent elements of each cause of action,” and (iii) provide enough facts or particulars to ensure that the trial proceedings will be “both manageable and fair”: Mancuso, at paras 18–19. See also Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57 at para 104 [Pro-Sys].
[50] Moreover, the presumption of truth that applies to pleaded facts:
“… does not extend to matters which are manifestly incapable of being proven, to matters inconsistent with common sense, vague generalization[s], conjecture[s], bare allegations, bald conclusory statements or speculation that is unsupported by material facts.”
Jensen FCA, at para 52(b), endorsing Jensen v Samsung Electronics Co Ltd, 2021 FC 1185 , at paras 81–82 [Jensen FC]. See also L’Oratoire Saint-Joseph du Mont-Royal v J.J., 2019 SCC 35, at paras 59–60.
[51] Where a cause of action advanced is under section 36 of the Competition Act, the Court will assess the sufficiency of the pleadings with respect to (i) the alleged “loss or damage suffered”, (ii) whether that loss or damage was as a result of “conduct contrary to part VI of the Act” (which establishes various criminal offences), and (iii) the cost of any investigation alleged to have been incurred in connection with the matter and the proceedings taken under that provision: see paragraphs 39–40 above: Jensen FCA, at para 19; Jensen FC, at paras 93 and 123.
(b) Elements and sub-elements of section 45 [52] In the present proceeding, the alleged “conduct contrary to part VI” of the Competition Act is conduct described in section 45(1) of that legislation.
[53] The elements and sub-elements of section 45 were recently described in detail in Difederico v Amazon, 2023 FC 1156, at paras 34 – 44 [Amazon]. They do not need to be fully reproduced here.
[54] In essence, section 45 is concerned with the objects or purposes of the impugned agreement, rather than with its effects: Container Materials Ltd et al. v The King, [1942] SCR 147 at p. 159 [Container Materials]; Mohr FCA, at para 38; R v Abitibi Power & Paper Co, [1960] QJ No. 7 at paras 119 and 126, 131 CCC 201 (QCQB) [Abitibi]; R v Armco Canada Ltd., [1974] OJ No 2200 at paras 146, 6 OR (2d) 52, (ONHCJ) [Armco]. See also R v Nova Scotia Pharmaceutical Society, [1992] 2 SCR 606 at 655 [PANS].[2]
[55] There are three constituent elements of section 45. These are: (i) a “conspiracy, agreement or arrangement”, (ii) with a “competitor”, (iii) to do one of the things set forth in paragraphs 45(1)(a) – (c), respectively: see paragraph 41 above.
[56] It is incumbent upon a plaintiff to plead sufficient material facts with respect to each of the constituent elements of those offences: Jensen FC, at paras 73, 75 and 94, aff’d Jensen FCA, at para 19; Rules 174 and 181.
(i) “Conspiracy, agreement or arrangement” [57] To properly plead the “act of conspiracy, agreement or arrangement,” or actus reus, a plaintiff should provide sufficient material facts with respect to either (i) two way communications reflecting a meeting of the minds or a concerted purpose regarding one or more of the matters described in paragraphs 45(1)(a) – (c), or (ii) a communication from one party followed by a course of conduct from which a meeting of the minds or a concerted purpose regarding those matters can be inferred: Jensen FC, at para 98.
[58] To properly plead the requisite mens rea, it is incumbent upon a plaintiff to provide sufficient material facts with respect to (i) a subjective intention to enter into the alleged agreement and knowledge of its terms, and (ii) an objective intention to do one or more of the things described in paragraphs 45(1)(a)-(c): PANS, at 659–660; Watson v Bank of America Corporation, 2015 BCCA 362 at paras 72–76 [Watson]; Shah v LG Chem Ltd, 2018 ONCA 819 at para 50 [Shah], leave to appeal to SCC refused, 38440 (17 October 2019). Nevertheless, to survive a motion to strike, it may suffice for a plaintiff to allege that the impugned agreement was entered into knowingly and voluntarily, so long as the pleadings also provide sufficient material facts from which the requisite objective intention may be inferred: Watson, at paras 100–102.
(ii) With a “competitor” [59] The term “competitor” is defined in subsection 45(8) to include “a person who it is reasonable to believe would be likely to compete with respect to a product in the absence of a conspiracy, agreement or arrangement,” regarding one or more of the matters described in paragraphs 45(1) (a) to (c). Given that each of the latter paragraphs use the term “the product,” it is readily apparent that the product in question is the product referred to in the “chapeau” or opening words of subsection 45(1). That is to say, the product in respect of which the parties to the alleged agreement compete: Mohr National Hockey League, 2021 FC 488 [Mohr FC], at paras 35 and 42. Consequently, plaintiffs who allege an agreement contrary to section 45 must plead sufficient material facts with respect to competition between the parties to the impugned agreement, in relation to that product.
(iii) The objects or subject matter prohibited by paragraphs 45(1)(a)-(c) [60] Paragraphs 45(1)(a), (b) and (c) establish three separate offences. The specific conduct prohibited by each of those offences is to conspire, agree or arrange with a competitor:
(a) to fix, maintain, increase or control the price for the supply of the product;
(b) to allocate sales, territories, customers or markets for the production or supply of the product; or
(c) to fix, maintain, control, prevent, lessen or eliminate the production or supply of the product.
[61] The requirement for a plaintiff to plead sufficient material facts with respect to each of the constituent elements of an offence includes the need to provide such facts with respect to each of the foregoing paragraphs that is alleged in a statement of claim: see paragraph 56 above.
(2) Analysis of the Plaintiff’s claims (a) The “agreement or arrangement” [62] The Statement of Claim asserts that one CREA Rule and four TRREB Rules, taken together (collectively, the “Buyer Brokerage Commission Rule”), constitute an “arrangement” that falls within the purview of section 45(1) (the “Arrangement”).
[63] The CREA Rule in question is Rule 11.2.1.3, which states as follows:
Rule 11.2.1.3: The listing REALTOR® member agrees to pay to the co-operating (i.e. selling) REALTOR® member compensation for the co-operative selling of the property. An offer of compensation of zero is not acceptable.
[64] During the hearing of this Motion, counsel to CREA explained that there are historical reasons for the presence of the word “selling” in the second line of the passage quoted immediately above, and that “everyone understands” that this should be read to mean “Cooperating Broker.”
[65] The four TRREB Rules that form part of the Buyer Broker Commission Rule are as follows:
R-705: The commission offered by the Listing Brokerage to a Co-operating Brokerage including any exclusions, incentives and/or adjustments shall be disclosed on TRREB’s MLS® System and be clearly and fully stated in the “Commission to Co-operating Brokerage” field. Where necessary these remarks may be continued in the “Remarks for Brokerage” field.
R-710: The publication of a MLS® Listing on TRREB’s MLS® System constitutes an offer by the Listing Brokerage to any Co-operating Brokerage that upon obtaining an Offer that is accepted for the MLS Listing the Co-operating Brokerage shall be entitled to earn the commission on TRREB’s MLS® System, subject to the arbitration provisions of the TRREB By-law and MLS® Rules or Policies. Publication does not constitute an offer by such Listing Brokerage to pay commission as principal except as set out in Rules R- 711, R-712 and R-713.
R-730: If a Member is unwilling to accept the commission offered on TRREB’s MLS® System, such Member may request a change before an Offer is signed, and shall not use the terms of an Offer or an Agreement of Purchase and Sale to include or modify such commission. Any agreed upon change shall be separate and in writing. A Listing Brokerage may unilaterally refuse to change such commission.
R-740: Commission offered to a Co-operating Brokerage on TRREB’s MLS® System shall not be altered between the time of registration of an Offer and final acceptance of that Offer.
[66] In brief, CREA Rule 11.2.1.3 requires every Listing Brokerage to pay compensation to the Cooperating Brokerage “for the co-operative selling of the property.” It further provides that an “offer of compensation of zero is not acceptable.”
[67] TRREB Rule 705 adds that for all properties listed on the Toronto MLS, the commission offered by the Listing Brokerage to the Cooperating Brokerage must be clearly and fully disclosed in the listing. TRREB Rule 710 supplements this by essentially creating a contractual entitlement to the commission displayed in the Toronto MLS, for Cooperating Brokerages. At paragraph 95, the Statement of Claim states:
In effect, Rules 705 and 710 require, for all properties listed on the Toronto MLS that:
a)the seller compensate the Listing Brokerage and the [Cooperating] Brokerage; and
b)the commission offered to the [Cooperating] Brokerage must be a blanket offer, open to all TRREB members, which is payable upon the closing of the transaction.
[Emphasis added.]
[68] Indeed, on its face, Rule 710 goes further and effectively deems a Cooperating Broker to have “accepted” the Listing Broker’s “offer” of the commission in question. In effect, Rule 710 appears to establish the existence of bilateral agreements between Listing Brokers and Cooperating Brokers, which fall under the broader “arrangement” and “scheme” alleged in the Statement of Claim. By agreeing to abide by TRREB’s Rules, Listing Brokers and Cooperating Brokers arguably may be said to have agreed to enter into such bilateral contracts.
[69] The Statement of Claim adds that TRREB Rules 730 and 740 “severely limit and impair the negotiation or alteration of the price for the supply of Buyer Brokerage services (i.e., the commission) which has been offered by a seller to Buyer Brokerages.”
[70] The Statement of Claim maintains that by joining and maintaining membership in TRREB and expressly agreeing to abide by the TRREB Rules and the CREA Rules, including the Buyer Brokerage Commission Rule, each of the Brokerage Defendants has agreed to enter and has entered into the Arrangement. It is further claimed that, at the time they joined TRREB, each of the Brokerage Defendants executed a TRREB Membership Application and Agreement. Pursuant to this, they allegedly executed a Certificate and Agreement of Brokerage & Broker/Salesperson Applicant, certifying that “if accepted as a Member [of TRREB], I agree to be bound by the By-Laws, MLS Rules and Policies of [TRREB], a copy of which has been received, read and understood by me” [emphasis added].
[71] The plaintiff’s allegation of the overarching Three Way Agreement between CREA, TRREB and OREA is also arguably relevant to this issue: see paragraph 32 above.
[72] In my view, the facts discussed above are sufficient to meet the pleading requirements for the “agreement or arrangement” element of section 45(1). They (i) are “sufficient to put the defendant on notice of the essence of the plaintiff’s claim,” (ii) have adequately addressed the issue of a communication reflecting a meeting of the minds or a concerted purpose - in this case each Brokerage Defendant’s written agreement to be bound by the Buyer Brokerage Commission Rule, and (iii) provide enough facts or particulars to ensure that the trial proceedings will be “both manageable and fair”: see paragraphs 49 and 57 above.
[73] Stated differently, it is not plain and obvious, assuming the above-mentioned pleaded facts to be true, that the Statement of Claim has no reasonable prospect of success with respect to the “agreement or arrangement” element of subsection 45(1). This is particularly so if one adopts the required generous approach that errs on the side of permitting a novel but arguable claim to proceed: see paragraph 48 above.
[74] For greater certainty, I consider it to be implicit that each Brokerage Defendant recognizes and understands that each other Brokerage Defendant must agree to the Buyer Brokerage Commission Rule. This is something that the plaintiff could seek to clarify through a request for leave to amend.
(b) With a “competitor” [75] The Statement of Claim asserts that the Brokerage Defendants are competitors in the market for the provision of Cooperating Brokerage Services for residential real estate in the GTA. In support of this assertion, the Statement of Claim states that TRREB members and CREA members include brokerages who compete with one another in the market for residential real estate services, including Cooperating Brokerage Services for residential real estate in the GTA. It is further maintained that, during the Relevant Period, each of the Brokerage Defendants provided Cooperating Brokerage Services in the GTA.
[76] Assuming the foregoing facts to be true, they are sufficient to meet the pleading requirements for the “with a competitor” element of section 45(1). Once again, they (i) are “sufficient to put the defendant on notice of the essence of the plaintiff’s claim”, (ii) have adequately addressed the issue of why the Brokerage Defendants are competitors - in this case, because they compete with one another to provide Cooperating Brokerage Services in the GTA, and (iii) provide enough facts or particulars to ensure that the trial proceedings will be “both manageable and fair”: see paragraphs 49 and 59 above.
[77] It is not plain and obvious, assuming the pleaded facts to be true, that the Statement of Claim has no reasonable prospect of success with respect to the “with a competitor” element of subsection 45(1). In this regard, the plaintiff’s allegation that TRREB is controlled by its members may prove to play an important role in the ultimate analysis.
(c) The object and subject matter of the Buyer Broker Commission Rule [78] The Statement of Claim makes broad allegations with respect to “subsection 45(1)” of the Competition Act. However, the specific claims made are confined to the offence set forth in paragraph 45(1)(a). No claims are made with respect to the offences contemplated by paragraphs 45(1)(b) or (c). Consequently, the analysis below will be confined to paragraph 45(1)(a). Any claims that the plaintiff may have intended to advance with respect to paragraphs 45(1)(b) or (c) shall be struck for a failure to plead sufficient material facts.
[79] The Statement of Claim repeatedly states that the Arrangement constitutes a conspiracy, agreement or arrangement “to fix, maintain, increase or control the price for the supply of [Cooperating] Brokerage services for residential real estate in the GTA” during the relevant period: see, e.g., paragraphs 19, 47, 105, 130 and 159. However, this claim is a bald assertion with respect to the alleged conspiracy, agreement or arrangement to “fix”, “maintain”, and “increase” the price for the supply of Cooperating Brokerage Services. That is to say, the Statement of Claim does not plead any material facts with respect to the requisite object on the part of the Brokerage Defendants to do any of those things. I will address the allegation with respect to an agreement to “control” prices further below.
(i) The alleged Arrangement to “fix”, “maintain” and “increase” prices [80] Insofar as the alleged conspiracy, agreement or arrangement to “fix”, “maintain” and “increase” the price for the supply for Cooperating Brokerage Services is concerned, the allegations in the Statement of Claim simply address the interests of the Defendants and the effects of the Arrangement. Beyond the bald assertions mentioned immediately above, the Statement of Claim does not include additional material facts with respect to an object or a concerted purpose on the part of the Brokerage Defendants to “fix”, “maintain” or “increase” the price for the supply of Cooperating Brokerage Services.
[81] At paragraphs 100 and 101, the Statement of Claim maintains that the interests of the Defendants are “aligned and intertwined” in respect of the price of Cooperating Brokerage Services. Those interests are specifically alleged to be “in fixing, maintain[ing], increasing or controlling the price for the supply of residential real estate [Cooperating] Brokerage services in the GTA.” This is not a claim with respect to the requisite actus reus to fix, maintain or control such prices.
[82] In several other places, the Statement of Claim addresses alleged effects of the Arrangement. For example, paragraph 21 alleges that the Arrangement has thwarted competition by causing the plaintiff and class members to pay higher prices for Cooperating Brokerage Services than they would have paid absent the Arrangement. In a similar vein, paragraph 22 alleges that the Arrangement has impeded negotiations between sellers of residential real estate and Cooperating Brokerages, thereby frustrating competition and causing the plaintiff and class members to pay higher prices than they would have paid in the absence of the Arrangement. Other passages of the Statement of Claim make allegations with respect to the impact of the Arrangement on prices: see e.g., paragraphs 126(g), 129 and 151–154. Elsewhere, the Statement of Claim alleges reduced incentives to negotiate lower commissions, and the elimination of downward pressure on prices: see e.g., paragraphs 136, 137 and 150. Additional passages allege adverse impacts on the ability of market forces to determine prices: see e.g., paragraphs 138 – 140 and 151. Allegations are also made with respect to pressure on sellers not to deviate from the “standard” 2.5% to 3% commission offered to Cooperating Brokerages, and how this standard commission results from the Buyer Brokerage Commission Rule: see paragraphs 141–147.
[83] These allegations with respect to effects do not constitute claims with respect to the requisite actus reus to fix, maintain or control such prices: see paragraph 57 above.
[84] Beyond the foregoing allegations with respect to the interests of the Defendants and the effects of the Arrangement on prices, the Statement of Claim does not plead any sufficient material facts with respect to the requisite object or concerted purpose to fix, maintain or increase prices, as contemplated by paragraph 45(1)(a). In other words, the Statement of Claim does not plead sufficient material facts with respect to the actus reus of a conspiracy, agr