The Ontario Superior Court of Justice has awarded damages to a former real estate agent of Max Wright Real Estate Corporation, operating as Sotheby’s International Realty Canada, after the company terminated his contract without notice.
The case focused on whether Sotheby’s could terminate the agent’s contract without notice and the appropriate compensation for damages. It also delved into the issue of contracts for independent versus dependent contractors.
The agent, LE, hired by Sotheby’s on June 10, 2021, had his contract terminated abruptly on July 5, 2022, without any prior notification. The court found that Sotheby’s had violated the contract terms by not providing notice until the contract’s one-year term end.
LE was subsequently hired by another real estate brokerage, Engel & Volkers, just six days after his termination from Sotheby’s.
Termination clause under scrutiny
Despite Sotheby’s argument that the contract contained an enforceable early termination clause, the court disagreed. The termination clause stated that either party could terminate the agreement “without cause, at any time with written notice to the other party.”
However, Justice Koehnen interpreted this to mean that the contract required a notice period equal to the remaining contract term.
The decision referenced a similar case from the Supreme Court of Canada, Hillis Oil & Sales v. Wynn’s Canada, which dealt with a comparable termination clause. The court applied the principle of contra proferentem, which favours the interpretation against the party that drafted the ambiguous clause.
The court noted that the law is “clear” that when a fixed-term contract is terminated, “the terminating party owes the non-terminating party damages equal to the amount that would have been earned under the contract for the duration of its term subject to the nonterminating party’s duty to mitigate unless there is an enforceable early termination clause.”
This is the case regardless of whether LE’s relationship with Sotheby’s is characterized as a dependent contractor relationship (as LE argued) or an independent contractor relationship (as Sotheby’s argued), the court said.
In terms of damages, LE sought $101,130.48, representing the remaining 11 months of his contract term.
The court, however, awarded him $30,411.41 and deducted the actual earnings from Engel & Volkers of $9,377.40, bringing the damages down to $21,034.01.
The court noted the sporadic nature of his earnings and the unrealistic nature of his initial claim given the actual figures.
Sotheby’s contention that damages should be net of expenses was rejected by the court. Justice Koehnen noted that LE’s expenses were not directly related to the number of properties sold and included costs like apartment rent and vehicle expenses.
LE sought costs of $43,364.46 including HST and disbursements. The court noted that the defendant’s bill for costs came in at $36,586.96 including HST and disbursements.
While the court noted it is not uncommon to see plaintiff’s costs come in higher, it called them “somewhat high given the real nature of the damages.” Although LE sought more than $100,000 in damages, that was “never realistic given his actual earnings.”
“I appreciate that at the lower scale of damages costs can be disproportionate to the amount recovered,” the court said. It settled on $25,000 including disbursements and HST as the appropriate amount to award to the plaintiff.
For more information, see Elder v. Max Wright Real Estate, 2023 ONSC 5661 (CanLII)