Court Of Appeal Summaries (October 27 To 31, 2014)

Ariston Realty Corp v Elcarim Inc, 2014 ONCA 737

[Juriansz, LaForme and Lauwers JJ.A.]

Counsel: D.A. Taub and E. Gersh, for the appellants/respondents by way of cross-appeal B.B. Skolnik, for the respondent/appellants by way of cross-appeal

Keywords:

Contract Law, Real Estate, Contract Interpretation, Listing Agreement, Holdover Clause, Commission, Quantum Meruit, Director and Officer Liability

Facts:

The appellants and respondents by cross-appeal were two real estate investment firms ("Elcarim") and their sole officer and director ("Mascall"). The respondents and cross-appellants were a real estate brokerage firm ("Ariston") and a commercial real estate broker and principal at the firm ("Natale").

Elcarim and Ariston entered into a listing agreement for the sale of a property owned by Elcarim. The agreement provided the following holdover clause:

"I agree to pay you a commission of 5% of the sale price of my property on completion of any sale ... effected during the currency of this agreement from any source whatsoever, or on any sale ... effected within six months after the expiry of this agreement with any party to whom you or your representatives or co-operating brokers have introduced my said property during the term of this agreement, provided you have notified me in writing prior to the expiry of this agreement of the name of such party you or your representatives or co-operating brokers have introduced to the property...."[Emphasis added.]

Ariston introduced Context Development Inc. ("Context") to Mascall, but did not provide written notification that it had introduced Context to the property. Three and a half months after the listing agreement expired, Context signed an agreement of purchase and sale of the property. Ariston submitted an invoice to Elcarim for commission on the sale. Elcarim did not pay and Ariston commenced an action for payment.

The trial judge found that Natale and Context's broker ("Struys") had introduced Context to Mascall for the purpose of discussing the property during the term of the listing agreement. The trial judge held that Ariston's failure to provide written notice of Context's introduction to Mascall was of no significance. She held Elcarim and Mascall personally, liable for the unpaid commission, together with interest.

Holding:

Appeal allowed. Cross-appeal allowed, in part.

Issues:

(1) Did Ariston introduce Context to the property, as required to claim commission under the terms of the listing agreement?

(2) If yes, is Ariston's failure to provide Elcarim with written notice of the introduction a bar to its claim for commission under the listing agreement?

(3) If yes, is Ariston instead entitled to compensation from Elcarim on the basis of quantum meruit?

(4) Is Mascall personally liable for any compensation owed by Elcarim to Ariston?

Reasoning:

(1) Given Ariston's failure to provide written notice of the alleged introduction, discussed below, Juriansz J.A. felt he did not need to determine whether the introduction requirement was satisfied.

(2) Contracts are to be interpreted in accordance with the intentions of the parties, as evidenced by the words used, and in light of the underlying context of the agreement. The trial judge misinterpreted the holdover clause to require that Elcarim was aware Ariston introduced Context to the property, regardless of whether written notice of the introduction was provided. In doing so, she effectively replaced the requirement of written notice with a requirement of actual notice. Such an interpretation did not accord with sound commercial principles and good business sense. The requirement of written notice, rather than actual notice, is intended to promote commercial certainty and to reduce the potential for litigation. The provision of written notice was a condition precedent to Ariston's entitlement to commission on a sale executed after the expiry of the listing agreement.

(3) Ariston could not claim its commission on the basis of quantum meruit for services provided pursuant to the listing agreement during the term of the agreement. Such services were governed by the agreement. The existence of the agreement was a juristic reason for refusing Ariston's claim for its commission on the basis of quantum meruit. However, Ariston could claim reasonable compensation for the services provided after the expiry of the listing agreement. The trial judge found that Natale continued to assist Elcarim after the expiry of the listing agreement. Elcarim accepted these services with full knowledge that the listing agreement had expired and that Natale expected to be paid for its efforts to close the deal with Context. Juriansz J.A. valued the services provided by Natale after the listing agreement expired at $20,000.

(4) The trial judge erred in ruling that Mascall was personally liable for payment of the commission. There was no basis for doing so. While Mascall was no doubt the directing mind of Elcarim, the evidence fell far short of establishing that she had acted in pursuit of some interest separate from that of the corporations, as...