Style of Cause:

Mulligan V. Stephenson, 2016 BCSC 1941

 Reasons

The BC Supreme Court conclusions on the above case law summarized the agency relationship as well as disclosure requirements in Real Estate transactions.

In relation to the concept of Fiduciary Duty, court emphasized that “when one party is obliged to act for the benefit of another, and the obligation carries with it a discretionary power, the empowered party becomes a fiduciary”. When such relationships are created, equity takes place with the purpose of controlling the relationship and holding the empowered party to the fiduciary’s instructions and established standard of conduct. In the case of the Realtor-Client, for instance, that doesn’t mean that realtor must act for the client under unlawful instructions. In fact, Realtors have the professional obligation to decline acting for the client all together in case a conflict of this nature arises.

Within the scope of the Realtor-Client relationship, the above fiduciary attributes are undoubtfully present and, therefore, this relationship is bound by confidence. Some categories of relationships such as solicitor-client, executor-beneficiary, doctor-patient, and director-corporation are historically recognized as fiduciary by nature since there is a strong presumption of fiduciary obligation. Realtor-Client agency relationship is also included herein. However present, fiduciary presumption may be rebutted by evidence to the contrary. This means that the burden of proof is shifted in cases involving a per se fiduciary duty. In real estate agency, the onus is on the defendant realtor to rebut the legal presumption. This means that to succeed, the Realtor must prove that the relationship was not one of trust and confidence, which by all accounts is extremely difficult to accomplish in the context of real estate agency.

The scope of a Realtor’s duty is guided by professional conduct rules as well as many case laws on the subject matter. “The fundamental undertaking of a realtor is to act, loyally and transparently, in the best interest of the client”. A real estate professional is bound by both contractual and fiduciary obligations in relation to the represented client. Such obligations include but is not limited to making full disclosure of all material facts within the Realtor’s knowledge which may affect the value of the property or the client’s decisions. Courts have determined that the test of what a Realtor must disclose is not subjective, as some may think, but rather objective and determined by “what a reasonable man in the position of the agent would consider, in the circumstances, would be likely to influence the conduct of his principal”.

Fiduciary duty is not found to be breached by the Realtor just because the property wasn’t sold by the best possible price and as expected by the Client. However, it is required the transaction to be conducted in a righteous manner and the price paid to be adequate and advantageous to the client, considering the circumstances.

Further, a Realtor is obliged to maintain the Client’s confidences as the duty of confidentiality is at the center of the fiduciary principle. Therefore, a Realtor must not only act only within the client’s scope of authority, but also avoid conflicts of interest and disclose information during the relationship, not according to the Realtor’s personal interests, but to meet he Client’s needs and interests in the transaction. As in any other contractual relationships, here too these implied duties can only be changed if both parties agree otherwise and to some extend.

Supreme Court of Canada analyzed the concept of Conflict of Interest in a solicitor-client relationship in the paramount case of Galambos v. Perez, 2009 SCC 48, [2009] 3. Same principles apply in the context of a Realtor-Client as both relationships are marked by utmost trust by contract and by nature. Whenever there is a risk that the Realtor’s representation of the client can be materially and adversely affected by the Realtor’s own interests or even by the Realtor’s duty to another client, a former client or any other third person, a conflict of interest can be established.

Both Mulligan and Galambos case laws represent the best in recognizing the fiduciary duty of a Realtor-Client relationship. It is common sense that compensation is an equitable monetary remedy which is intended to restore to the plaintiff what has been lost because of the fiduciary breach. However, a compensatory award for non-pecuniary loss can also apply which was the Court’s verdict in Mulligan. Even though the loss could not be specifically determined in pecuniary terms, the award was meant to compensate the clear breach by the Defendants in relation to the Plaintiff’s rights as a client.