"Business Common Sense" Determines Winner Of Commission Dispute

• Published date: 24 June 2021
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Arbitration & Dispute Resolution, Trials & Appeals & Compensation, Real Estate
• Law Firm: Gardiner Roberts LLP
• Author: Mr James R.G. Cook

When courts have to decide whose version of a conversation is more likely to have occurred, recourse must often be had to the surrounding circumstances and any available contemporaneous documentation. In addition, in assessing the conduct of parties in a commercial dispute, the courts will sometimes apply a lens of "business common sense" when reviewing the historical evidence.

In Notsch-Kupcho v. NY Brand Studio Inc, 2021 ONSC 4271 (CanLII), Justice F.L. Myers was faced with this situation in a dispute involving a telephone conversation between a commercial real estate broker and his client over the amount of commission the client agreed to pay.

The sole issue in the dispute was whether the client had accepted an offer made by the broker to reduce his commission from 1.5% to 0.75% (a difference of $127,500), on a transaction involving the purchase of a building in Toronto for $17 million. There was no question that the buyer had agreed to pay a commission. The only issue was the amount.

The transaction unfolded over the course of February-May 2020. The broker and his younger brother, a registered sales representative, had a prior relationship with their buyer client. The client signed a written Buyer's Representation Agreement which provided for a 1.5% commission, but as events unfolded a receiver became involved as the seller of the building. The client felt it was doing more of the work negotiating with the receiver, and the purchase was going to cost more than originally anticipated.

There was some precedent for the broker agreeing to reduce his commission on prior deals, and the client asked for the opportunity to make a similar proposal in connection with the purchase of the building from the receiver.

A pivotal series events ensued:

• By email dated May 13, 2020, the broker's son offered to reduce their commission to 0.75% to help make a deal.
• The client responded via email to advise that he was going to speak with his business partner, but he did not formally accept the offer. He expressed annoyance over having to deal with the younger sales representative rather than his older brother, the broker.
• The sales representative tried calling the client immediately and left a voice mail message.
• On May 14, 2020, the broker and the client spoke by telephone for about 20 minutes. Neither one took notes or followed up the call with an email or text message.
• On May 15, 2020, the client agreed to purchase the building for $100,000 more than its prior offer.
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