See you in court: Recent court cases involving licensees
No basis of fact or law for conspiracy claims against licensee
In the case of Tsai v Li, 2019 BCSC 1317, a seller alleged that the buyer conspired with the limited dual agent to obtain the home at a reduced price. After learning that the buyer, who was paying $5.1 million, had assigned the contract for a price of $5.7 million, the seller refused to complete and sought rescission of the contract and damages. In addition to conspiracy, the seller also alleged that the agent breached fiduciary duties and was negligent.
The case against the buyer and agent was dismissed. The judge preferred their evidence over that of the seller, finding that the agent performed the mandate given him, made no misrepresentations, and did not profit or benefit from the transaction other than receiving commissions. He found there was no nefarious plan. The case largely turned on credibility, with the judge preferring the evidence of the buyer and agent, as it was corroborated by independent witnesses, consistent with documentary evidence and accorded with business reality.
Loss Prevention take-away: Good record keeping will help you to successfully defend and resolve disputes. For more tips see Brent Johnston’s article in the June 2017 Risk Report “Good Record Keeping – it’s for your protection.”
Limited dual agent failed to disclose information to seller
Youyi Group Holding (Canada) Ltd v Brentwood Lanes Canada Ltd., 2019 BCSC 739 was a complicated dispute over commercial properties. After entering into contracts to sell two commercial properties, the seller learned that the property could be rezoned for high-density residential development.
The seller’s principal alleged that the limited dual agent conspired with the buyer and breached a fiduciary duty by failing to provide him with the zoning information. The seller argued that the contracts had been repudiated or were unenforceable because of various alleged wrongdoings by the buyer and limited dual agent. When the seller refused to complete, the buyer sued for specific performance.
Credibility was a central issue in this trial. The Court found that the buyer and agent lacked credibility as a result of inconsistencies in evidence, lack of corroborating documents, and the fabrication of evidence. The Court found that the contracts were part of a transaction intended to be used for unlawful purposes or otherwise tainted by illegality and as such, for reasons of public policy, declined to enforce them against the seller.
Although the Court dismissed allegations of conspiracy and negligent or fraudulent misrepresentation, the licensee was found liable for breach of fiduciary duty and breach of contract. Given that the contracts were not enforceable and the properties had increased in value, the Court found the sellers had not suffered a loss. Despite this, the licensee was ordered to pay nominal damages of $1 and the seller’s costs.
Loss prevention take-away: Know who you act for and understand the fiduciary duties you owe to your client. Never forget the most basic requirement as set out in Real Estate Rule 3-4: A licensee must act honestly and with reasonable care and skill.
Property manager failed to follow instructions
A property manager (PM) met with mixed success in the recent case of Morton, 2019 BCPC C-7010. The owners of a rental home commenced a small claims action against their PM for failing to properly screen and evict tenants in a timely way. They sought damages of approximately $35,000 for repairs to the home and loss of rental income.
The PM was successful in limiting some liability as a result of a clause in the management contract that stated the PM would not be liable for damages to the home caused by acts or omissions of the tenants. In addition, the contract had a clause limiting liability except for wilful misconduct or gross negligence.
Although both clauses enabled the PM to avoid some liability, he was found liable for breaching a term in the contract that stated the PM was to lease the home “subject to any written instructions from the owner” and the owners had specifically instructed the PM that he was not to sign a lease with the upstairs tenant (who had left the premises in bad shape) before consulting them. He failed to do this and as a result was responsible for approximately $11,000 in damages.
Loss prevention take-away: Consider including clauses in your management contract that limit your liability. Be familiar with the terms in your contract and do what you have agreed to do.
Licensee exonerated for allegations of failing to disclose past grow op
In Beacock v Moreno, 2019 BCSC 955, the buyer made numerous allegations against the limited dual agent including misrepresentation and negligence in failing to disclose that the home had been used as a marijuana grow operation in the past.
The judge found that the sellers had been aware when they listed the property in 2005 that it had previously been used as a grow op. However, in completing the Property Disclosure Statement (PDS), they indicated “no” to the question “Are you aware if the premises or property have been used as a marijuana grow operation…?” Their evidence was that the agent had told them that the PDS only concerned grow ops while they owned the property (not before). This was denied by the agent, who had no knowledge of or reason to suspect a prior grow op.
The buyer gave evidence that after his inspector reported to him that there was evidence of a past grow op, the agent assured him that it definitely had not been a grow op and he had nothing to worry about. This was also denied by the agent.
This case largely turned on findings of credibility.
The judge found the licensee to be a credible witness and accepted his evidence in its entirety. He was forthright when he could not recall details and his imperfect memory was consistent with events and discussions that had occurred 13 years earlier. He did not embellish or exaggerate. He relied on notes in his calendar and documentation to refresh his memory, but the judge found he had a clear recollection of key discussions. All claims against him were dismissed.
Loss prevention take-away: Make it a part of your everyday practice to keep notes and to document advice or information you provide.