In dual agency, agent had duty to strongly encourage legal advice

Ontario civil | Agency


In dual agency, agent had duty to strongly encourage legal advice

Action by family-owned company for damages from agent and broker and return of commission taken in sale of real property. Brokerage admitted vicarious liability for actions of agent. Agent was directly involved as dual agent in negotiations for lease of property and took $6,750 pursuant to agreement. Lease agreement contained option to purchase for $900,000 and with guarantee of three years’ rent. One year and one-half later, agent told plaintiff he had offer to purchase from current tenant. Negotiations ensued but family was concerned about $933,250 purchase price, which they believed was low, and $700,000 vendor take back mortgage. Agent took father of plaintiff family to see accountant the following day and he signed agreement for purchase and sale. Agent knew father had not spoken to lawyer. Rest of plaintiff family was not happy with terms of agreement and plaintiff refused to complete. Negotiations led to increase in purchase price by $30,000 and sale completed. Agent took 5% commission and tax, amounting to $49,462. Action allowed in part. Agreement of purchase and sale was different than lease agreement, so agent was obligated to explain his role as dual agent but failed to do so. Agent held himself out as an expert and plaintiff trusted him, so this was a fiduciary relationship. Option to purchase was not an agreed-upon price. Agent breached duty in not even recommending that plaintiff make counteroffer. Agent failed to provide accountant with option to purchase so he could compare it to offer. Had he done so, he would have advised father that option to purchase was better than offer on table. In dual agency, agent had duty to strongly encourage legal advice, which agent did not do, even though he knew father had little understanding of vendor take back mortgage and rest of family was opposed to it. Agreement of purchase and sale did not include any entitlement to commission and there was no evidence of oral agreement. Given these facts and breach of agent’s duties, there was no entitlement to commission for sale. Had option to purchase been exercised at time of sale, price would have been $900,000 plus base rent for remainder of lease, which totalled $971,250. Actual sale price was $963,250. While this suggested an $8,000 loss, reality was that option to purchase was never exercised and there was no way of knowing if it would have been. There was no way to quantify actual damages, if any. Plaintiff would be entitled to compensation for fees paid to real estate lawyer to negotiate $30,000 increase, but did not provide any breakdown of these fees. Plaintiff entitled to $49,462 repayment of commission taken, plus interest.
1005139 Ontario Ltd. v. Abraham (May 31, 2012, Ont. S.C.J., Minnema J., File No. 08-CV-42927) 217 A.C.W.S. (3d) 519 (11 pp.).

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