H.W. Liebig Co. v. Leading Investments Ltd.

H.W. Liebig Co. v. Leading Investments Ltd.
Collection
Supreme Court Judgments
Date
1986-02-28
Report
[1986] 1 SCR 70
Case number
16860
Judges
Dickson, Robert George Brian; Estey, Willard Zebedee; McIntyre, William Rogers; Chouinard, Julien; Lamer, Antonio; Le Dain, Gerald Eric; La Forest, Gérard V.
On appeal from
Ontario
Subjects
Contract
Notes
SCC Case Information: 16860
Decision Content
H.W. Liebig Co. v. Leading Investments Ltd., [1986] 1 S.C.R. 70
H.W. Liebig & Company Limited Appellant;
and
Leading Investments Limited Respondent.
File No.: 16860.
1985: February 14, 15; 1986: February 28.
Present: Dickson C.J. and Estey, McIntyre, Chouinard, Lamer, Le Dain and La Forest JJ.
on appeal from the court of appeal for ontario
Contracts ‑‑ Real estate ‑‑ Listing agreement and agreement for purchase and sale ‑‑ Buyer unwilling to close ‑‑ Deposit held by broker ‑‑ Vendor’s action against buyer settled ‑‑ Relationship between two documents ‑‑ Interpretation of documents ‑‑ Whether deposit to be returned to vendor or commission to be paid to broker ‑‑ Judicature Act, R.S.O. 1980, c. 223, s. 36.
Respondent vendor listed property with appellant real estate broker. A buyer completed an agreement of purchase and sale and paid over a deposit to the broker. When the buyer refused to close the deal respondent brought an action against it for specific performance and in the alternative, for damages for breach of contract, and against the broker for the deposit. Appellant counterclaimed for its commission. The action between vendor and broker continued, but the action between the vendor and buyer was discontinued. The trial judge found that the agreement of purchase and sale governed and awarded appellant its commission but without interest or costs. The Court of Appeal reversed that decision and, given appellant's failure to find a buyer ready, willing and able to close, awarded respondent its deposit with interest and costs. The major issues here related to (1) the interpretation of the listing agreement regarding compensation to the broker and (2) the interpretation of the agreement of purchase and sale regarding such compensation and the relationship of the two documents.
Held (Estey, McIntyre and Chouinard JJ. dissenting): The appeal should be dismissed.
Per Dickson C.J. and Lamer and La Forest JJ.: The listing agreement governed. The bargain between vendor and broker was struck when the listing agreement was signed and its meaning was not altered by reading it with the agreement of purchase and sale. Indeed, the agreement of purchase and sale, read by itself, would not give the broker the right to claim its commission for there was neither privity of contract nor consideration between broker and vendor. The vendor, by signing the agreement of purchase and sale, intended to accept the buyer's offer; the clause in that agreement concerning the broker's commission merely confirmed the bargain struck in the listing agreement.
The operative word in the listing agreement was "sale" in the ordinary sense of transfer of property to another for a price. In the absence of evidence to the contrary, this ordinary meaning should not be displaced by a technical legal meaning used to reflect the rule that a court in the exercise of its equitable jurisdiction may order specific performance of an agreement of purchase and sale. The vendor is seeking a sale, not a lawsuit. This is supported by the general understanding of the nature of contracts of this kind.
Where the vendor has reneged, it is sufficient for the broker to establish the intended buyer ready, willing and able to buy. The vendor not having reneged, however, the broker was not entitled to his commission unless he could show the intended buyer was ready, willing and able to close on closing day. The listing contract between broker and vendor was not changed by the vendor's bringing an action against the intended buyer even though such action could affect the broker's rights by entitling him to a portion of the proceeds of investment either by virtue of quantum meruit or contract.
Per Le Dain J.: The event upon which the commission was payable was a completed sale. That event did not occur, not through any fault of the vendor, but because the purchaser was unwilling to complete the sale. The agent was, therefore, not entitled to the commission.
This conclusion is reached not by any presumed intention based on the "common understanding of men", as applied in Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277, which was properly repudiated in Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781, as being contrary to Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108, but on a consideration of the terms of the listing agreement and the agreement of purchase of sale, both of which are valid and binding in so far as the obligation to pay the commission is concerned, and must be considered together.
What the agent was required to do to earn his commission was to procure a valid offer to purchase. That was the consideration for the vendor's obligation to pay the commission but it was not the event upon which the commission was payable. That event was "any sale or exchange". It is clear from the terms of the listing agreement and the agreement of purchase and sale that what was contemplated was a completed sale out of the proceeds of which the commission would be payable. This results from the following provisions in the two agreements: the stipulations in the listing agreement that "the said commission is to be paid on the date set for completion of the sale" and that "for the purpose of this agreement a sale shall be deemed to include the entering into of an agreement to exchange this property or the granting of an Option to Purchase this property during the currency of this listing, if said exchange or option is subsequently completed"; and the provision in the agreement of purchase and sale that the commission is to be deducted from the deposit on the date set for completion of the sale and the vendor's solicitor is to pay the agent any unpaid balance of commission from the proceeds of the sale.
Where the event upon the occurrence of which the commission is payable is a completed sale, and the sale is not completed, the agent must show, in order to be entitled to the commission, that the purchaser was willing, ready and able to complete the sale. In other words, he must be able to show that it was not through his fault or that of the purchaser that the sale was not completed. This the agent could not show in the present case. There is an obvious difference between the case where the sale is not completed through the fault of the vendor and the case where it is not completed through the fault of the purchaser. It would not be reasonable to imply a term in the vendor's obligation to pay the commission, that in the case where the purchaser refused without justification to complete the sale, the vendor must go to the hazard and expense of a lawsuit to enforce its completion. Where the vendor successfully sues for specific performance or damages in such a case the agent should have a right to recover for his services, but it is not a claim, as in the present case, to enforce the vendor's obligation to pay a commission in accordance with the terms of the listing agreement or the agreement of purchase and sale.
Per Estey, McIntyre and Chouinard JJ., dissenting: The agent was entitled to its commission, whether or not the transaction closed. The terms of the listing agreement and the agreement of purchase and sale, when construed together, were consistent, compatible, complementary and provided for payment of commission upon the happening of the same event‑‑the agent's procuring a "valid offer" on the terms recited in the listing agreement or other terms accepted by the vendor.
The word "sale", in this case, was better interpreted as "binding agreement for sale" than as "completed sale". The commission was expressed to be payable upon the agent's having procured a valid offer. The commission, too, was stated in both the listing agreement and the commission slip appended to the agreement for sale to be payable on "the date set for the completion" of the sale. These words would have no purpose unless the parties intended the obligation to arise irrespective of whether completion actually occurred. Indeed, the parties expressly prescribed the condition of performance before the liability for commission arose in the case of an agreement for exchange or option but did not prescribe such a condition in the case of contract for sale. The obligation to pay a commission under the listing agreement, therefore, arose "on the date set for completion" once a valid offer had been procured and not "on the date of completion". The agent did everything required of him by the listing agreement and was entitled to his commission. It was not necessary to base the agent's entitlement to commission on the commission clause in the agreement of purchase and sale given its compatibility with the clause in the listing agreement.
The offer was valid so as to trigger the obligation to pay the commission as defined by the listing agreement. Firstly, the vendor accepted the offer. Secondly, the vendor did not plead the invalidity of the agreement either in law generally or by reason of non‑compliance with the licensing agreement. Thirdly, and most significantly, the vendor instituted an action pursuant to the agreement procured for it by the appellant agent in the Ontario courts to enforce that contract against the purchaser and the agent. The vendor was not in a position to say that the agreement of purchase and sale was anything less than a binding contract made pursuant to a valid offer procured by the agent. The right to seek recovery for any losses that occurred through the purchaser's failure to complete this valid and binding contract was simply voluntarily given up. This Court accordingly was left without any information as to what the vendor may have recovered by way of settlement. No amendments were made to the pleadings as against the agent. The vendor, after asserting its rights by an action and then settling, sought to secure the fruits of the action from the agent. Ordinary equitable principles, however, would not allow it to take this benefit at the expense of the unpaid agent who made its recovery possible and who had no part in reaching that settlement.
The English case Dennis Reed, Ld. v. Goody is no support for an expansive interpretation of a contract such as the listing agreement here, given the fact that this approach was already set aside by the Court of Appeal in Christie Owen & Davies Ltd. v. Rapacioli.
Cases Cited
By La Forest J.
Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108; Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277, considered; Gladstone v. Catena, [1948] 2 D.L.R. 483, [1948] O.R. 182; Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781, distinguished; Loveridge v. Cooper, [1959] O.W.N. 81, 18 D.L.R. (2d) 337; Alex Duff Realty Ltd. v. Eaglecrest Holdings Ltd. (1983), 146 D.L.R. (3d) 731; Tilden Rent‑A‑Car Co. v. Clendenning (1978), 83 D.L.R. (3d) 400; Inchbald v. Western Neilgherry Coffee, Tea and Cinchona Plantation Co. (1864), 17 C.B. (N.S.) 733, 144 E.R. 293; Jaques v. Lloyd D. George & Partners Ltd., [1968] 1 W.L.R. 625; C and S Realties of Ottawa Ltd. v. McCutcheon (1978), 84 D.L.R. (3d) 584, 19 O.R. (2d) 247; Nigro v. Wilson, [1924] N.Z.L.R. 834; Prickett v. Badger (1856), 1 C.B. (N.S.) 296, 140 E.R. 123; Carsted v. Gass (1980), 116 D.L.R. (3d) 550; James v. Smith, [1931] 2 K.B. 317n; Martin v. Perry and Daw, [1931] 2 K.B. 310; Copeland v. Wedlock (1905), 6 O.W.R. 539; Ramm v. Cooper, [1955] O.W.N. 525; Re Brethour and Morris Ltd. v. Shields Construction Co., [1958] O.W.N. 128, referred to.
By Le Dain J.
McCallum v. Hicks, [1950] 2 K.B. 271; Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277; Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781; Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108; Ramm v. Cooper, [1955] O.W.N. 525; C and S Realties of Ottawa Ltd. v. McCutcheon (1978), 19 O.R. (2d) 247; Loveridge v. Cooper (1959), 18 D.L.R. (2d) 337.
By Estey J. (dissenting)
Loveridge v. Cooper, [1959] O.W.N. 81, 18 D.L.R. (2d) 337; Gladstone v. Catena, [1948] 2 D.L.R. 483, [1948] O.R. 182; Township of Nelson v. Stoneham, [1957] O.W.N. 109; Howell and Howell v. Kenton Agencies Ltd., [1953] O.W.N. 248; Re Brethour and Morris Ltd. v. Shields Construction Co., [1958] O.W.N. 128; Royal Trust Co. v. Toronto Transportation Commission, [1935] S.C.R. 671; Murray v. Saskatoon (No. 2) (1951), 4 W.W.R. (N.S.) 234; Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277; Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108; Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781.
Statutes and Regulations Cited
Judicature Act, R.S.O. 1980, c. 223, s. 36.
Authors Cited
Oxford English Dictionary, vol. 9, Oxford, Clarendon Press, 1933, reprinted 1961, "Sale".
APPEAL from a judgment of the Ontario Court of Appeal (1981), 34 O.R. (2d) 175, allowing an appeal from a judgment of Eberle J. Appeal dismissed, Estey, McIntyre and Chouinard JJ. dissenting.
P. B. C. Pepper, Q.C., for the appellant.
A. Sternberg, for the respondent.
The judgment of Dickson C.J. and Lamer and La Forest JJ. was delivered by
1. La Forest J.‑‑The question in this case is whether a real estate broker may recover his commission from a vendor despite the fact that an intended purchaser found by the broker refuses to complete the transaction after entering into an agreement of sale.
Facts
2. The facts for the purposes of this appeal may be briefly stated. By a listing agreement dated February 5, 1974 the respondent vendor, Leading Investments Limited, gave the appellant real estate broker, H.W. Liebig & Company Limited, exclusive authority to sell certain vacant lands in the County of Halton, Ontario, for $521,000 or such lesser amount as might be acceptable to the vendor, such authority to expire on April 30, 1974. The agreement had been drafted by the broker, Liebig. Two paragraphs of the agreement deal with the commission to be paid the broker for its efforts. They read as follows:
I agree to pay a commission of 5% of the sale price on any sale or exchange howsoever effected during the currency of this authority. It is understood and agreed that the said commission is to be paid on the date set for completion of the sale, if the said listing Broker or his sub‑agents procure a valid offer on the terms and conditions set out in this listing agreement or on such other terms or conditions as I may accept or, if the property is sold by me or anyone on my behalf within 90 days after the expiration of this authority to anyone who has been made aware of the property, through the marketing activities of you or your sub‑agents during the term of this authority.
...
For the purpose of this agreement a sale shall be deemed to include the entering into of an agreement to exchange this property or the granting of an Option to Purchase this property during the currency of this listing, if said exchange or option is subsequently completed.
3. A month after the listing agreement was made the broker was successful in obtaining an offer from New Forest Investments Limited. By the agreement of purchase and sale, the latter unconditionally agreed to purchase the lands from Leading for a total consideration of $453,000, the transaction to close on May 31, 1974. Pursuant to this agreement New Forest paid the broker the sum of $15,000 as a deposit to be put in trust. The vendor, Leading, accepted the offer by signing a clause at the foot of the agreement in the following terms:
I hereby accept the above Offer and agree to and with the Purchaser to carry out the same on the terms and conditions above mentioned.
I agree to pay the Agent a commission of 5% of the sale price for having procured this Offer, said commission to be deducted from the deposit on the date set for completion of sale and I irrevocably instruct my Solicitor to pay direct to the said Agent, any unpaid balance of commission from the proceeds of the sale and further instruct the agents to remit any balance of monies to my Solicitor herein.
4. The transaction did not go through; this, it was conceded by the present parties, was owing to the default of the purchaser, New Forest, which subsequently released any claim it might have to the deposit.
5. Counsel engaged in some discussion regarding the intention of the parties as revealed by oral and documentary evidence of what transpired between them. In particular reference was made to three other transactions between the parties at about the same time, in two of which wording was added in the commission clause expressly stating that the commission was payable only if the transaction was completed. But counsel for the appellant, Liebig, rightly conceded that this was only of marginal relevance. He presented these facts largely as showing that the vendor was experienced in the area. In the absence of other evidence, no other weight can properly be attached to them in view of the fact that the other transactions were completed later than that with which we are concerned. In any event, the case was not argued on that basis. As counsel for Liebig himself put it, "this case falls to be decided not on the credibility of witnesses but rather on the interpretation of two documents". That, he added, was the "narrow point of the law" it sought to have determined.
6. I agree that there are no special considerations militating in favour of Leading. Though Mr. Miller, who controls it, does not appear to have had the benefit of counsel in dealing with this transaction, it is clear that he is an experienced business man. But while there is thus nothing in the particular context requiring consideration, it must be remembered that the words used in a document are not to be interpreted in a vacuum. One must at least advert to the kind of document that is in question and the common understanding of people about such documents.
7. On July 10, 1975, Leading brought action against the defaulting purchaser, New Forest, for specific performance of the agreement and against Liebig for the deposit. Liebig counterclaimed for $22,650 as commission for having procured a binding agreement of sale, together with interest and costs. The action between the vendor and the intended purchaser was settled, but the only real information we have about the terms of the settlement is that the purchaser released the deposit.
8. The action between the present parties went to trial on the question whether Leading was entitled to the $15,000 deposit or whether Liebig was entitled to its commission of $22,650 plus interest and costs. The trial judge, Eberle J., held in favour of Liebig. In his view the agreement of purchase and sale was the controlling document and he construed the clause therein signed by Leading as entitling Liebig to its commission on the completion of that agreement. He, however, awarded no interest or costs.
9. This judgment was reversed by the Ontario Court of Appeal (Brooke, Wilson (now of this Court) and Morden JJ.A.) In its view the governing document was the listing agreement the words of which, having regard to the expectations of the parties in entering into such an agreement, meant that to succeed the broker had to procure a purchaser who at the date fixed for closing was ready, able and willing to complete the transaction. This the broker failed to do. Leading was, therefore, awarded $15,000 with interest and costs.
10. Liebig sought and was granted leave to appeal to this Court.
The Issues
11. Liebig not only raises the correctness of the substantive decision of the Court of Appeal but also its award of interest. However, the major issues relate to:
1. the interpretation of the provisions of the listing agreement regarding compensation to the broker; and
2. the interpretation of the provisions of the agreement of purchase and sale regarding such compensation and the relationship of this document with the listing agreement.
General Considerations
12. Before entering into a discussion of the precise terms of the documents in question, it is useful to make some general observations about contracts between vendors of land and real estate brokers. There can, as Viscount Simon pointed out in Luxor (Eastbourne), Ld. v. Cooper, [1941] A.C. 108, at p. 119, be considerable difficulty in formulating general principles on the subject because there is no single pattern followed and the precise terms of the relevant contract must be examined. That consideration, however, should not be overstated, particularly having regard to the organization of the real estate sales business in Canada. The bulk of agreements are in standard form. In the present case, counsel for Liebig informed us that the wording in both the listing agreement and in the agreement of purchase and sale was that used in the standard forms of these agreements prepared by the Ontario Association of Real Estate Boards.
13. In addition, Viscount Simon's statement must not be viewed as an invitation to ignore the general nature of vendors' contracts with real estate brokers or the practice regarding them. Viscount Simon and, for that matter, the other judges in the Luxor case, do not do so. Lord Wright, for example, expressly stated at p. 139 that in construing the contract before him he took account of "the more general aspects of the course of business in these matters".
14. Now generally when a vendor seeks the service of a real estate broker, what he wants to do is to dispose of his property. He is not attempting to get an offer that will not go through, or to obtain a right of action against a purchaser. I am not the first to give expression to this obvious fact; see, inter alia, Dennis Reed, Ld. v. Goody, [1950] 2 K.B. 277, at p. 284, per Denning L.J. (C.A.); folld. Loveridge v. Cooper (1959), 18 D.L.R. (2d) 337, at p. 345 (Ont. C.A.)
15. The real estate broker knows this too. His whole business revolves on contingencies. He (or as often she) ordinarily operates on the basis that his remuneration is contingent on finding a purchaser for a property; the arrangement is not a contract of employment. "The contracts", as Lord Russell of Killowen put it in Luxor (Eastbourne), Ld. v. Cooper, supra, at p. 124, "are merely promises binding on the principal to pay a sum of money upon the happening of a specified event...." Counsel for Liebig put it that a listing agreement is rather like a hunting licence. I agree. But as in hunting, the broker may spend much time and effort but fail to achieve his goal in a particular case. Still, the venture is well worth it. There is other game and the prize is enticing. Real estate commissions are substantial. For a similar view, see Lord Russell of Killowen in the Luxor case, supra, at p. 124.
16. The real estate broker may seek to change the rules of the game by altering the words of the contractual documents which ordinarily emanate from him and often have been drafted at the behest of real estate associations. More often than not they are signed by the vendor without the benefit of legal counsel and often without even reading them. This has led some courts to interpret these documents contra proferentem (see Alex Duff Realty Ltd. v. Eaglecrest Holdings Ltd. (1983), 146 D.L.R. (3d) 731 (Alta. C.A.)), and others to hold that the signature of a party in such circumstances can only be relied on as manifesting assent to a document when it is reasonable for the party relying on the signed document to believe that the signer really did assent to its contents (see Tilden Rent‑A‑Car Co. v. Clendenning (1978), 83 D.L.R. (3d) 400 (Ont. C.A.))
17. I need not enter into a consideration of these cases. I simply mention them as illustrating the reliance of courts on the general background in assessing the intention of contractual parties. In this as in other situations the courts, in interpreting the contract, read its words in the context in which they are found. Many courts have echoed the sentiment of Lord Wright in the Luxor case, supra, at p. 137, that "language is imperfect"; words must necessarily take meaning from the context in which they are expressed.
18. I have already related the general context and the common understanding of people about contracts for the sale of land by real estate brokers. Of course, as earlier stated, parties need not conform with the common understanding. So, in the Luxor case, supra, at p. 120, Viscount Simon mentions the case where an agent is employed in the strict sense of the word to sell a property, citing Inchbald v. Western Neilgherry Coffee, Tea and Cinchona Plantation Co. (1864), 17 C.B. (N.S.) 733, 144 E.R. 293, as an example; see also Lord Russell of Killowen and Lord Wright in Luxor, at pp. 128, and 147‑48, respectively. That relatively unusual arrangement bears no resemblance to the present case, but Viscount Simon (p. 120) also mentions the situation, more germane here, where the parties agree that the agent is to get his commission on procuring an adequate offer. But in considering whether such an agreement has been made, it is important to note that this will not be assumed in the absence of clear terms. The words of Lord Russell of Killowen, at p. 129 of the same case, underline this. He says:
It is possible that an owner may be willing to bind himself to pay a commission for the mere introduction of one who offers to purchase at the specified or minimum price; but such a construction of the contract would in my opinion require clear and unequivocal language.
19. Other judges, notably Lord Denning, have used similar language. In Dennis Reed, Ld. v. Goody, supra, real estate brokers sought, on the basis of the words in the contract, to recover their commission despite the fact that the proposed purchaser had withdrawn his offer. They strongly relied on the words of the contract that simply required that the agent "find a person ready, able and willing to purchase the...property". In rejecting this argument, Lord Denning said in part at p. 288:
So far, I have considered this particular clause only. But I would like to add that the various new clauses that have appeared seem to be capable of a similar interpretation. I can see no sensible distinction between instructions to "find a purchaser," "find a party prepared to purchase," "find a purchaser able and willing to complete the transaction," and "find a person ready, willing and able to purchase." The rights and liabilities of house owners in these cases should not depend on fine verbal differences. If estate agents desire to get full commission not only on sales, but also on offers, they must use "clear and unequivocal language": see Luxor (Eastbourne) Ld. v. Cooper, per Lord Russell. Such a claim is, indeed, so contrary to the ordinary understanding on these matters that I think that the estate agent who desires it should bring it specifically to the notice of the house owner and get his specific agreement to it.
20. In Jaques v. Lloyd D. George & Partners Ltd., [1968] 1 W.L.R. 625 (C.A.), he reiterated his views in the following passage at p. 630:
The principles which in my opinion are applicable are these: When an estate agent is employed to find a purchaser for a business or a house, the ordinary understanding of mankind is that the commission is payable out of the purchase price when the matter is concluded. If the agent seeks to depart from that ordinary and well‑understood term, then he must make it perfectly plain to his client. He must bring it home to him such as to make sure he agrees to it.
21. These and other cases underline that, in construing listing agreements, the words used must be read in the light of the general context and the common understanding of these agreements.
22. I am aware that there are statements in Christie Owen & Davies Ltd. v. Rapacioli, [1974] 1 Q.B. 781 (C.A.), that express the view that Lord Denning went too far in his statement of the law. I do not myself accept this view, but at all events, the contract there used more precise language than is ordinarily found in such transactions. It provided that the commission was payable on the agents' "effecting an introduction ... of a person ... ready able and willing to purchase". There is no comparable language here, and I would again draw attention to Lord Russell's statement, cited above, that "such a construction of the contract would ... require clear and unequivocal language". What is more it was the vendor, and not the purchaser, who reneged in that case.
23. With this background I turn now to the specific words used in the listing agreement and in the agreement of purchase and sale.
The Listing Agreement
24. The first part of the provision in the listing agreement, which is cited earlier, seems clear enough on its face. The vendor (Leading) agrees to pay the broker (Liebig) a commission of 5 per cent of the sale price on any sale or exchange howsoever effected during the continuance of the listing agreement. The operative word in the present case is sale but the implication of transfer in the word exchange should not be ignored. Indeed, I would have thought the primary meaning of sale was the transfer of property to another for a price. That is substantially what the Oxford English Dictionary tells us. It defines sale as:
The action or an act of selling or making over to another for a price; the exchange of a commodity for money or other valuable consideration.
25. This interpretation is reinforced, if reinforcement is needed, by the common understanding of the import of this type of contract to which I have already referred. Some support for this view may also be deduced from the second paragraph of the commission clause which provides that a sale shall include an exchange or option if these are subsequently completed: see C and S Realties of Ottawa Ltd. v. McCutcheon (1978), 84 D.L.R. (3d) 584 (Ont. H.C.), per Henry J.
26. I am aware, of course, that lawyers frequently speak of an agreement of sale as being a sale. That approach flows from the fact that courts, under their equitable jurisdiction, have power to order specific performance of such agreements. The trial judge refers to this in his oral reasons for judgment relying on certain remarks in the judgment of Laidlaw J.A. in Gladstone v. Catena, [1948] 2 D.L.R. 483 (Ont. C.A.), at p. 487. The latter had in turn cited a statement from the New Zealand case Nigro v. Wilson, [1924] N.Z.L.R. 834, at p. 839, that "A sale is `effected' when made, a title in equity being created."
27. While the remarks of Laidlaw J.A. were later relied on in a number of decisions at first instance, the issue in Gladstone v. Catena, supra, as the Court of Appeal in the present case noted, was really whether a contract had been entered into at all. The question of the rights and obligations of the parties when a broker procures an intended purchaser who later reneges did not arise. Laidlaw J.A. was certainly not giving the opinion of the Court of Appeal on the issue with which we are concerned. Hogg J.A., who also sat, thought the words there used in the listing agreement meant the same as "completion of the sale". Henderson J.A. agreed with both.
28. To approach the issue in the way Laidlaw J.A. appears to have done involves transposing a doctrine intended to do equity so as to create an inequitable situation not contemplated by the parties. I do not think the technical meaning that lawyers may attach to a word for certain purposes should be substituted for the ordinary meaning of that word in everyday speech unless there is evidence that the parties intended to use it in that special or technical sense. I have not found the word defined in that sense in the Oxford Dictionary, and it flies against the ordinary understanding of people as to the meaning of the word, particularly, as has been judicially recognized, in the context of this kind of agreement. I realize, of course, that people will sometimes say they have sold a property when they have accepted an offer for it. But that is wishful thinking based on the normal sequence of events. If there is a chance that a proposed purchaser will renege, the vendor will wistfully inform you that he thought it was sold.
29. This is perhaps another way of saying that what the vendor seeks to obtain is a sale, not a lawsuit. All a lawyer means when he speaks of an agreement of sale as being a sale is that it ordinarily carries a right to specific performance. But that is obviously not what the parties have in mind in entering into the contract; they are thinking of a completed sale. The fact that a lawyer, if consulted by the vendor, would seek to make this understanding clear is merely a credit to his caution, a natural bent of lawyers supported in this instance, as we have seen, by some authority. This, however, does not alter the plain meaning of the words as used by ordinary people in an ordinary business setting.
30. Counsel for Liebig argued that it was sufficient for the broker to establish that he had procured a person who was ready, able and willing to purchase. That is certainly true where it is the vendor who reneges. In that case, the broker could recover either on a quantum meruit (see Prickett v. Badger (1856), 1 C.B. (N.S.) 296, 140 E.R. 123; Carsted v. Gass (1980), 116 D.L.R. (3d) 550 (Man. C.A.), or in contract: see, inter alia, the Luxor case, supra, at pp. 120, 126, 142. The action in contract may be justified, on several bases, including the fact that it is the vendor's own fault that the contract is not completed; see Dennis Reed, Ld. v. Goody, supra, at p. 285. In cases where the vendor has not reneged, however, the courts have not allowed the broker to obtain his commission unless he was able to show that the proposed purchaser was ready, able and willing to purchase at the time set for the completion of the sale: see James v. Smith, [1931] 2 K.B. 317n (C.A.); Martin v. Perry and Daw, [1931] 2 K.B. 310; Loveridge v. Cooper, supra; see also Christie Owen & Davies Ltd. v. Rapacioli, supra.
31. The fact that the vendor brought action against the person who agreed to purchase in no way changes the situation. The contract between the vendor and the real estate broker cannot be changed by the subsequent dealings between the vendor and his intended purchaser. This does not mean, however, that such actions may not affect the broker's rights. If, for example, the vendor sued and recovered a substantial amount from the intended purchaser, either by judgment or settlement, the broker could recover for his services to the vendor on a quantum meruit, or as we would now say, in restitution. Otherwise the vendor would be unjustly enriched from the efforts of the broker at the vendor's request.
32. In a case where the purchaser is ready, able and willing to comply with the offer, the compensation to which a broker is entitled is the amount of the agreed fee, whether the action is grounded in contract or on a quantum meruit. It is different in a case where the broker brings an action on a quantum meruit to recover his appropriate share of a judgment or settlement obtained by the vendor against the purchaser. In such a case I would have thought a fair amount of compensation would be the agreed percentage of the amount received on the judgment or settlement, less the vendor's costs and probably a reasonable allowance for his efforts in proceeding with the claim. For a judgment is a very different thing from a sale; it involves many other risks and pitfalls. Consistant with these last remarks, I do not think the broker can force the vendor to institute a lawsuit: see, inter alia, Dennis Reed, Ld. v. Goody, supra; Carsted v. Gass, supra,
33. I need not enter further into this matter. In the present case a claim in quantum meruit or restitution was not pressed. We have no information about the settlement except that the proposed purchaser released his claim to the deposit. And that deposit in ordinary circumstances belongs to the vendor. It is recompense to him for the fact that his property was taken off the market for a time as well as for his loss of bargaining power resulting from the revelation of an amount that he would be prepared to accept.
34. The foregoing disposes of the arguments relating to the meaning of sale in the listing agreement. However, the listing agreement goes on to say:
It is understood and agreed that the ... commission is to be paid on the date set for completion of the sale, if the said listing Broker or his sub‑agents procure a valid offer on the terms and conditions set out in this listing agreement or on such other terms or conditions as I may accept....
These words, counsel for Liebig argues, indicate that payment of the commission is due when an offer is procured, though payable on completion. As I read this sentence, however, it is simply a direction regarding the manner in which the commission is to be paid when there is a sale or exchange as provided for in the first sentence of the clause. It is to be paid at the time of the completion of sale, on the basis of a valid offer on the terms and conditions set out in the listing agreement or on such other terms as the vendor may have accepted.
35. The argument that the words "procure a valid offer" were added to standard listing agreements by real estate boards in view of the use of similar words by Meredith C.J. in Copeland v. Wedlock (1905), 6 O.W.R. 539 (Div. Ct.), at p. 540, does not impress me. The agreement in that case was entirely different from that in the present case. What is more, whatever may have been the intention of the real estate boards in adding those words (about which we have no evidence except counsel's ipse dixit) is really not relevant. It is not what these boards may have intended a court might read into the clause that is determinative. It is what a court, from an objective standpoint, thinks both parties in the circumstances would have agreed to by the words used. And when one looks at these words in the light of the common understanding of people about this kind of contract, it becomes evident that this is not the meaning to be attached to them. Certainly they are far indeed from bringing home that meaning to the vendor.
36. I would, therefore, conclude that the listing agreement does not entitle the broker to his commission.
The Purchase and Sale Agreement
37. I shall at the outset baldly state that I agree with the Court of Appeal that the vendor and broker struck their bargain when they signed the listing agreement. What the vendor had in mind in signing the agreement of purchase and sale was to accept the intended purchaser's offer. There was, to be sure, a clause in the latter agreement stating that he would pay the broker the commission but he had already agreed to this. This was the reality of the situation traditionally dealt with under the rubric that there was no privity of contract between the vendor and the broker under that agreement. That the broker was not considered a party to the transaction is evident from the fact that Mr. Liebig, who (since he controlled Liebig) would ordinarily have signed for the broker, witnessed the vendor's signature. As well, as the Court of Appeal notes, there was no consideration flowing from the broker to the vendor.
38. As the Court of Appeal also notes, there is no evidence that the parties intended to amend the listing agreement and there is nothing in the agreement of purchase and sale to warrant that conclusion. It would have to be clearly established that the purchase and sale agreement had altered the bargain struck under the listing agreement: see Ramm v. Cooper, [1955] O.W.N. 525 (Ont. C.A.) Reading the two documents in harmony as counsel for Liebig asks us to d