Duties
Licensee to Principal
(1) Statutory Duties
- Section 35 sets out misconduct by licensees and Real Estate Services Act Rules sets out the duties
- If acting for both parties
o Appendix 3 of Law Society of BC Professional Conduct Handbook: allows for parties with
different interest to act for opposing parties
o Rule 5-10: Disclosure of representation and relationship
o Rule 5-8: Requirement for the disclosure to be in writing
o Need to deal with parties impartially and full disclosure, EXCEPT: What the buyer is willing to
pay or terms seller willing to accept in price or terms, if two buyers, what other buyer is offering,
motivation of buyer or seller unless authorized by the party, personal information.
o Also will disclose defects about the physical condition of the property and will not negotiate on
either party’s behalf.
(2) Duties in Contract and Tort
- (a) Obey instruction: where the licensee disagrees with a principals instruction the should cease acting
for the principal (Glasner v Royal LePage)
- (b) Exercise Care and Skill: Rule 3-4 reasonable care and skill
o (i) Standard of care: that of a reasonable real estate agent within the particular marker and
community (Nixon). BUT if you hold yourself out as having particular expertise, you will be
held to a higher standard (Ballie v Charman)
o (ii) Property Valuation: Not a standard of a qualified appraiser but must be reasonable range
(Nixon)
o (iii) Verifying Material Facts: When facts are material and there is some reason to have a doubt,
they should be verified (Fletcher v Hand)
o (iv) Marketing Material: they have a duty to exercise a degree of care and skill that is expected of
such an agent in the circumstances (Price v Malais). They also have to exercise some care and
skill in the way in which they prepare the purchase contract
- (c) Fiduciary Duty: The professional has discretionary power, it can be exercised to affect the
beneficiary’s interest, the beneficiary is vulnerable to the person exercising this (Lac Minerals)
o (i) Presumption of real estate agent as fiduciary: determined by looking at the nature of the
relationship, is there trust and reliance (R v Gurin and Bali v Sharman). Onus is on the licensee
to rebut the presumption (DeJesus v Sharif)
o (ii) Cannot act for two principles without consent (Knock Estate, Rule 5-10 and CPS). Must be
direct to be fiduciary, otherwise simply agent (Knock).
o (iii) No secret profit: Rule 5-11, if you get remuneration other than what is set out in the K, you
have to disclose it (Ballie v Charman)
o (iv) Cannot put interest in conflict with principal’s interest
o (v) Full Disclosure: Rule 5-10 need disclosure of representation and relationship. Must disclose
anything that could influence the principals conduct, test is objective (Ocean City v A&M
Holdings)
Licensee to Third Parties
- (1) Duty owed to People not Parties: Hedley Byrne
- (2) Latent Defects:
o (a) Rule 5-13: Requires anyone providing trading services to disclose any latent defects which
they may know about.
- (3) Misrepresentations
o (a) Rule 5-10: disclosure of representation and relationship
o (b) Liabilities arise where it can be assumed that they know about the material facts Betker v
Williams
o (c) Must verify material facts before relying on them and making representations, Fletcher v
-
Hand
(4) Reasonable Reliance: Where the party has relied on the licensee reasonably, will be held to be liable
for negligent misrepresentation and negligence (Bango v Holt)
Is this a Mortgage?
(1) Is this a legal mortgage?
- Section 224 LTA sets out the Definition: In this Division, "terms" includes covenants, conditions,
representations, warranties, grants and assignments.
- Section 231 LTA: effect of a mortgage is that only an interest in land passes, but a mortgagee is entitled
to all the rights as if the mortgagor transferred the land. When you sign a mortgage, only an interest in
the land passes
- Does it fit with the form of a legal mortgage as set out in Section 225 of LTA
o (2) A mortgage must be in 2 parts.
o (3) Part 1 of the mortgage must be in the form approved by the director and must contain the
following:
 (a) the parties to the mortgage;
 (b) the legal description of the mortgaged land;
 (c) the signatures of the mortgagor and witness in accordance with Part 5;
 (d) the terms that, if contained in the mortgage, are required by regulation to be included
in Part 1 of the mortgage;
 (e) other information required by the director.
o (5) Part 2 of the mortgage must consist of all other terms of the mortgage and must be adopted in
one of the following forms:
 (a) the set of standard mortgage terms prescribed under section 227 that was in effect at
the time the mortgage was executed;
 (b) a set of standard mortgage terms filed under section 228;
 (c) a set of mortgage terms that is expressly set out in Part 2 of the mortgage.
- Courts are willing to look at the entire agreement to ascertain the intention of the parties as opposed to
just the contract. As long as the parties understand what the obligations are and registered in a form that
the legislation requires, then the courts will not take a nit-picky approach. Richmond Savings v Nijjer
o Don’t need to expressly state the interest rate and principle, can use place holders. The parties
clearly stated that repayment on these terms would be contemplated with each future
advancement, manner was just unusual, Nijjer
- Fundamental terms: length, frequency, interest rate, property has to be clearly identified and then the
register of title, penalty or default provisions, defined sum/amount of payment
- Standard Mortgage Terms: 3 ways they can be acquired
o (1) Director of land title can proscribe mortgage terms, these are the default terms S. 227
o (2) Anyone can apply to the registrar to file their own express mortgage terms, S. 228
o (3) If an individual or entity relies on mortgage terms frequently, the registrar can require them
to file a set of standard terms, S. 230
(2) Is this an equitable mortgage?
- Section 44 of LTA: Rules of equity prevail over the rules of law so the courts can decide that even if
something is not a legal mortgage, is an equitable mortgage
- Section 33 LTA: Equitable mortgage is not registrable
- 3 ways to create an equitable mortgage, Royal Bank v Mesa Estates
o In equity a mortgage is created in K where evidence in writing for valuable consideration to
execute a legal mortgage or that certain property is to stand as security for a certain sum
o (1) Equitable or future interest
o (2) Legal mortgage fails: debtor has not executed an instrument that is sufficient to make a legal
mortgage so out of fairness should recognize one anyway
-
o (3) Deposit of duplicate indefeasible title
 Creates an equitable mortgage as it burdens the property, since you cannot do anything
with it until the document is returned. Section 189, 195
 But need to look at objective intent of the deposit, not always deposited for the purpose
or creating a mortgage: can be for safekeeping or a negative covenant, to security for an
undertaking not to sell or mortgage the land until an obligation to the bank is discharged
or released (Royal Bank v Mesa Estates).
Was the mortgage intended Royal Bank v Mesa, look at the objective intent
Elements (Royal Bank v Mesa Estate):
o Clear words of pledge, mortgage or charges
o Words of seizure and sale or of foreclosure
o A mortgage debt stated of ascertainable eg. fixed sums
o Provision for the holder of the duplicate title documents to require production by the deliverer of
a registrable form of legal mortgage or charge, either on request or on the happening of a stated
event such as default.
o Any suggestion that a registrable form of legal mortgage was ever asked for
Is it a disguised form mortgage?
- If the agreement has an option to repurchase, the court will decide if it’s actually a disguised form
mortgage.
- Courts will look at the complete nature of the transaction and the surrounding circumstances Krieck v
Wansbrough
- If the documents are clear and unambiguous and it does not portray an equitable mortgage, will not be
found Blackby v Rabson
Why would you want an equitable mortgage?
- Mortgagee – Equity of Redemption
o Section 44 LEA: rules of equity prevail
o Section 16 LEA: have to redeem within the time ordered by the court or forever be deprived of
your stake in the land
o So court may give the debtor reasonable time to repay the mortgage after the legal time has
finished.
o This right can be extinguished in 3 ways
 (1) A lapse in time under the Limitation Act, usually 6 years
 (2) An order of foreclosure or sale by the court
 (3) An actual sale under the mortgage document itself
- Mortgagor – Right to Foreclose
o If the debtor does not redeem within the reasonable time specified by the court, can get an order
absolute and foreclose on the property
o After a mortgagor has defaulted, a mortgagee can apply for a decree of foreclosure that will
direct the mortgagor to exercise his/her equitable right to redeem within a reasonable time,
usually 6 months, or be forever deprived of it and the estate in land.
- If there are multiple creditors, may want to gain some kind of equitable advantage over other registered
charges. Try to say some type of special claim
Are there issues with your mortgage, what protections are available to you?
- (1) Is the interest rate clear?
o Section 6: no interest is recoverable unless the mortgage shows the amount, the rate calculated
yearly/half yearly, or the rate not calculated in advance but at the end of the term
 Purpose is to protect a mortgagor from having concealed from him the true rate of
interest, Kilgoran
-
-
o Where the interest rate is clear, then the courts do not consider payments blended and the
protection afforded by Section 6 can be avoided, Kilgoran
 Courts only treat payments as blended where there has been an inconsistency in the
mortgage documents or ambiguity in the way in which the payments occur.
(2) Is there a fine for going into default?
o Section 8: prohibited from paying a fine that is greater than what is owed on the principle. Once
in arrears, cannot charge a default.
 Purpose of this section is to protect property owners against abusive lending practices,
while recognizing that generally speaking parties are entitled to freedom of K, Reliant
Capital v Silverdale
o If on the face of the document it is clear that the increase in rate comes about due to lapse of time
not default, then its ok. Section 8 only protects against interest increases that are levied as a
result of the default not those that are based on other agreed upon factors, Reliant Capital v
Silverdale
(3) Is the interest rate criminal?
o Section 347 makes 2 offences (1) if you enter into an agreement at a criminal rate or (2) you
receive payment at a criminal rate then you are guilty of an indictable offence. The criminal rate
of interest is 60%
o When looking at if an agreement violates, should look at the time the transaction is entered into
but when looking at if the payment of the interest is illegal, look at the time the payment is
received Degelder Construction v Dancorp
o Interest includes all commissions and fees, Degelder Construction v Dancorp
o A rate cannot become criminal by the act of a debtor, if otherwise would have been legal, Nelson
v CTC Mortgage
Pre-Closing and Closing problems
(1) Is the vendor able to deliver “marketable title”
- This is a title which can be enforced at all times and under all circumstances, be forced upon an
unwilling purchaser who is not compelled to take a title with defects, clouds or the reasonable threat of
litigation to mar peaceful possession – Perell
- Clause 9 and 11
o (9) Vendor agrees to provide title free and clear of all encumbrances except for: reservations to
the Crown, utilities, and existing tenancies
o (11) Vendor agrees to provide the purchaser’s lawyer the signed documents to give effect to the
K
- An encumbrance is only clear when it is actually cancelled in the register (Chen)
- Where an encumbrance interferes with the use/enjoyment of the property it is a serious defect on title,
only when material is the title not good (Chen / Price)
o Can the vendor convey substantially what is required by the K. Does not permit repudiation for
the encumbrances which are merely minor and insubstantial (Chen).
(2) Are the parties RWA to complete the transaction?
- Section 4, 5, 7 PLA: vendor to deliver registrable interest (4), transferor must deliver registerable title
(5), transferor to register own title (6) and transferor to provide registrable description in a form that is
agreeable to the registrar (7)
- Tendering: the person seeking SP has to be RWA to complete on the day of closing unless they amend
the K (Norfolk v Aiken)
- When money is needed to clear title, vendor does not have to actually clear title, they only have to show
that they are able to remove it (Seguss v Fawcus)
(3) If assistance is needed from the other party to effect closing, then agreement on closing procedures must be
obtained well before the closing date (Norfolk)
- Clause 13 and 14: have knowledge of and are agreeing for your lawyer to close, giving them
undertakings.
(4) Does size matter?
- If you can see the delineation of the property, then size does not matter, Kuhirtt v Lamb
- It does matter if you are purchasing a per unit amount, like thought you were getting 10 acres at 100K
but only got 9.5 – material deficiency depends on the purchasers intended use
(5) Is time of the essence
- Clause 12: Time will be of the essence unless the balance is paid.
- Section 31 of LEA: Explicitly allows courts to apply equitable principles when dealing with TOE clause
o It is a very process oriented rule and is based on the parties behavior. The courts are willing to
not rely on it when it would be unjust or inequitable to do so
- Failure to comply with TOE constitutes a breach and allows enforcement of remedies for the other party,
EXCEPT where it would be unjust or inequitable to rely on the clause (Salama)
o It gives certainty, does not replace the equitable considerations
- TOE can be waived by behavior or by words, and then the obligations becomes that parties fulfill
obligations within a reasonable amount of time but if they wish to rely on it, the must reassert and give
notice (Shaw)
- When you have amended the K then you have to give notice to the other party specifically that you are
relying on time is of the essence (Ambassador)
o BUT: Mere extensions do not waive ToE without some other unjust/inequitable reason
(Sorenson)
- (4) If neither party is ready, willing and able to complete, then time ceases to be of the essence, even
though expressed in the K (Norfolk)
o ToE does not apply where both parties are not RWA to complete; however, it can be re-asserted
where one party does become RWA and gives notice to the other party
Pre-Closing
(1) Anticipatory Breach
- If it is clear the other party will not be able to complete their contract, you don’t have to wait for them to
breach to bring an action (Roy v Kloepfer), you need to give them notice that you are accepting their
breach, Norfolk
(2) Options
- The non-breach party has 2 options (Norfolk, Smelhago):
o (1) Disaffirm: This is where the accept the breach, the K comes to an end so you can retain the
deposit or seek damages
 If breach is accepted, cannot swap claim for SP later
 Includes difference in price and out of pocket expenses
o (2) Affirm: This is where they affirm the K and reject the breach. The obligations of the parties
continue. Can seek SP and damages, damages in lieu or SP or abatement and SP
 SP can always be converted to a claim for damages
 Claim for SP can be seen as an election to affirm the K (Smelhago)
o The right to elect at a future date can be asserted at the time of breach (Norfolk)
(3) Remedies
- Section 24 LEA: give the court equitable jurisdiction to do whatever they want
- They can assess damages based on different times and based on different facts
-
SP and Damages
(4) Specific Performance
- Tender: Where seeking specific performance, claimant must be RWA to complete (Norfolk)
- Vendor: Difficult for a vendor to obtain this, as theoretically they can go out and find another purchaser.
Must prove something unique about that deal or purchase
- Purchaser: Must show that object is unique and damages are not an adequate substitute
- Uniqueness: the extent to which a substitute would not be available
o Commercial property is less unique then residential and bare land is less unique then land with a
structure, Rostrum v Wafler
o Commercial could be unique, must look at circumstances, Cormack v Harwardt
o Bare land may also be unique, Tropiano v Stonevalley Estates
- Onus: is on the party seeking SP to prove uniqueness and can be both objective and subjective
considerations.
- Test: SP should not be granted absent evidence that the property was unique such that a substitute would
not be readily available. Smelhago
o Must ask: (1) Is there evidence that the land is especially suitable for the purchaser? (2) Is there
evidence that a substitute is not readily available? (3) Are damages comparatively inadequate to
do justice? (696966 v 686967)
o Factors to consider: The fact that they are intended it to be their home, have to prove the notion
of no readily available substitute at the time of breach. It doesn’t have to be an exhaustive search,
also have to show that damages are inappropriate (Serebrennikov citing John E Dodge)
(5) Damages in lieu of SP
- Awarded when (1) the vendor cannot perform due to circumstances outside their control (2) where the
court doesn’t think it is appropriate to award SP
- Quantum: based on the difference between the K price and the land value at the date of trial
- Assessment: Claim for SP simply postpones the consequences of the breach, so damages assessed at
trial, Smelhago
o Mavetric: Assess at time of breach, unless there is a compelling reason not to
(6) Common law damages
- The fundamental principle in assessing damages for breach of contract is that the plaintiff is to be placed
in the same position they would have been in had the contract been performed (Richter v. Simpson,
Mavretic v. Bowman). The innocent party has an obligation to mitigate their losses (Hargraves v. Brar).
- Based in contract, generally the difference between the agreed upon amount in the contract and the land
value at the date of breach.
- Damages in lieu and Common Law damages can be bundled together, Ansdell v. Crowther
o You are being compensated for the loss given the change in land value, in both common law and
damages in lieu
- Assessment: No rigid rules of when you assess damages, court can fix damages on the date found to be
appropriate, Ansdell v Crowther
o Mavertic: Damages should be assessed at the time of breach unless there are compelling reasons
to look to another time for assessment citing Richter v Simpson
o Smelhago: Damages were assess at the date of trial
(7) Statutory damages
- Section 37 PLA: Purchaser may get damages from loss of bargain from a vendor due to a defect in title.
(8) Damages in addition to specific performance
- Any out of pocket or other additional costs you have incurred due to breach. Must be a result of the
failure to perform of the other party
(9) Recession
- General Principle: seeks to put the parties back in the position they were before the K was made.
- Can get it for negligent and fraudulent misrepresentation or ES
- (a) Error in Substantialibus
o Where the purchaser is receiving something entirely different from what they bargained for
o Fraud is not necessary for ES, Redican v Nesbitt
o If the parties receive something completely different, can get ES, Cherris Estate v Bosa
- (b) Negligent Misrepresentation
o Test from Queen v Cognos:
 (1) There must be duty of care based on special relationship between the representor
 (2) The representation in question must be untrue, inaccurate or misleading
 (3) The representator must have acted negligently in making said misrepresentation
 (4) The representee must have relied, in a reasonable manner, on said negligent
misrepresentation
 (5) The reliance must have been detrimental to the representee in the sense that damages
resulted
o Caveat emptor applies unless the P can prove the vendor was acting negligently or fraudulently
(Cardwell v Perthen).
o The untrue statements don’t have to be dangerous defects or serious statements which make the
house unfit. Sufficient that the breach of K caused the P damages (Hanslo v Barry)
o Court may be willing to bend the test to find the parties negligent, where they were clearly
unreasonable and there was reliance (Aldred v Colbeck)
 The reasonable and intended meaning of the vendors’ statement was that the property
was fine (Aldred v. Colbeck).
- (c) Fraudulent Misrepresentation
o Test from Derry v Peek
 (1) A false representation or statement made by the D
 (2) Which was knowingly false, was in fact false
 (3) Which was made with the intention to deceive the P
 (4) Which materially induced the P to act and
 (5) Which cause the P damage
o An active concealment by the vendor of defects which would otherwise be treated as patent is
fraudulent and K is voidable by the P and caveat emptor does not apply (Gronau v Schlamp)
- PDS is often used to determine if the vendor made any misrepresentations. It does not call upon the
vendor to warrant a certain state of affairs, just requires them to state whether they are aware of the
problem. (Arsenault v Pedersen, Curtin v Blewett)
Post-Closing
Warranties
(1) Is there a warranty?
- Warranty: When the vendor knows something that the P does not, and the P relies on the vendor for that
knowledge, Fraser-Reid. They are statements which are not fundamental, they don’t go to the root of
the agreement but are important enough that they give rise to certain damages
(2) Must the warranty be in the K?
- No longer the presumption that everything will be merged after the conveyance Fraser-Reid
- Courts will look to see whether the parties had a common intention for the conveyance to be the final
resolution of the issue or would certain warranties carry on into the future
- Clause 18: entire agreement clause, which says there is nothing in the contract, other than what is set
out in it.
-
o There is a tension with this and courts willingness to look at things said and done beyond the K
Parole Evidence Rule: everything to be covered by the K has to be explicitly stated within and parties
cannot rely on extrinsic information to ether prove the K or supplement it.
o BUT equity is willing to look at a variety of different things to clarify the K or where there was
reliance by one party, will not use it to prove the existence of K
(3) Is the warranty implied or express?
- (1) Implied: court would imply a warranty of the fitness of the property if you signed the K for a
partially completed building. There was an implied warranty that the vendor would complete the
building
o There is no warranty for workmanship for built homes Fraser-Reid
- (2) Express: If you want a warranty for a completed building, must be in the K that it is of a certain
quality and you have to rely on those warranties
o If there is a term of the K which requires the vendor to do something, non-disclosure of noncompliance will be seen as a breach of an express warranty. Courts will read the condition as an
undertaking of promise that all work will be done or they will be told if it is not Fraser-Reid
o Courts have been willing to find sales brochures as being warranties as they are official
documents which are relied on Roberts v Montage
o PDS, even if not incorporated into the K, can be relied on to point to evidence of
misrepresentation
o To decide if it is a warranty look at whether the vendor assumes to assert a fact of which the
buyer is ignorant or merely states an opinion or judgment upon which the vendor has no special
knowledge and on which the buyer may be expected to have an opinion and to exercise
judgment, Roberts
(4) What happens if a warranty is breached?
- Generally a breach of a warranty only gives rise to damages, Fraser-Reid; Roberts
- Uncertain if a warranty amounts to ES so gives rise to recession or if it is a contractual condition which
that gives rise to damages and recession
- In general, caveat emptor applies post-closing unless there is an error in substantialibus or fraud
(Groneau v. Schlamp), or except: (Cardwell v. Perthen citing McCluskie v. Reynolds):
o (1) where the vendor fraudulently misrepresents or conceals;
o (2) where the vendor knows of a latent defect rendering the house unfit for human habitation;
o (3) where the vendor is reckless as to the truth or falsity of statements relating to the fitness of
the house for habitation;
o (4) where the vendor has breached his duty to disclose a latent defect which renders the
premises dangerous.
Remedies
(1) Recession
- Generally, caveat emptor applies and the P must protect using express conditions and warranties but
this rule doesn’t apply if there is fraud or ES (Redican)
- In general, caveat emptor applies post-closing unless there is an error in substantialibus or fraud
(Groneau v. Schlamp), or except: (Cardwell v. Perthen citing McCluskie v. Reynolds):
o (1) where the vendor fraudulently misrepresents or conceals;
o (2) where the vendor knows of a latent defect rendering the house unfit for human habitation;
o (3) where the vendor is reckless as to the truth or falsity of statements relating to the fitness of
the house for habitation;
o (4) where the vendor has breached his duty to disclose a latent defect which renders the
premises dangerous
- Recession is available if there is fraud or ES (Redican)
-
-
-
(a) Fraud
o Intention to induce the purchaser is the hallmark of fraud – intentional misrepresentations Eg.
Allen; Gronau
o Caveat emptor doesn’t apply where there is active concealment, Allen
(b) Error in Subtantialbus
o Where P receives something completely different than what was bargained for; where what was
received cannot be used for what P thought it could be used for Eg. Cherris Estates; Hyrsky
o A mistake as to the quantity has to be so substantial that it changes the quality of the subject of
the K, Hyrsky
 Size doesn’t matter where you can see the bounds of the property, you visually
understand how much you get not the quantity unless you are buying for per unit.
 Not doing your due diligence is not a reason to refuse recession
Warranty? If its contractual?
(2) Damages
- The fundamental principle in assessing damages for breach of contract is that the plaintiff is to be
placed in the same position they would have been in had the contract been performed (Richter v.
Simpson, Mavretic v. Bowman).
- (a) Assessment at breach
o Generally they are assessed at the date of breach, but the court may choose another date where it
feels the circumstances that demonstrate its appropriateness, Mavertic
- (b) Assessment at trial
o Courts can use their discretion and are willing to assess at the time of breach where the vendor
has gotten the benefit of the increase in property value. Courts are unwilling to allow them to
breach the K and keep the benefit, Smelhago
- (c) Mitigation
o The party who has suffered the loss should take steps to mitigate their damages, Baud Corp v
Brook
o Onus: the D has to prove that the P failed to mitigate, not reasonable in their actions (Davidson v
Miller)
 Must look at whether the actions of the P were appropriate in the circumstances, cannot
make the P prove that they were appropriate in the circumstances (Hargreaves v Brar)
- (d) Deposit
o Is taken into account when damages are being assessed