Zaharko v. Milton, 2012 ABQB 141

Court of Queen ’ s Bench of Alberta Citation: Zaharko v. Milton, 2012 ABQB 141 Date: 20120229 Docket: 1201 00025 Registry: Calgary Between: Ted Zaharko, Ron Blaker, Cyndi Collins and 769115 Alberta Ltd. operating as Royal LePage Foothills Applicants - and - Helen Milton, Janis Risi, Joe Pap and Seabolt Holdings Ltd. operating as Sutton Group - Canwest Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] Invoking s. 44(2) of the Arbitration Act , Cyndi Collins, and others associated with Royal LePage Foothills, ask the court for leave to appeal an arbitral award made against them by the Calgary Real Estate Board. As the listing firm, they have a dispute with

another real estate sales firm, Sutton Group - Canwest, about the commission to which the latter firm is entitled; although the MLS offerposted by Royal LePage stated that any cooperating selling realtor would get 3.5% commission on $100,000 and 3% BalanceRemaining, Royal LePage argues that the selling firm - Sutton Group - should have realized that the posting meant to say 3.5%commission on $100,000 and 1.5% Balance Remaining.

They assert that the arbitration panel of CREB erred in law in awarding the full3% commission to Sutton Group on Balance Remaining by failing to: acknowledge that it had discretion to consider factors other than itsRules concerning the payment of commission; apply any equitable principles in their decision relating to the award; and, give any, or anyproper, reasons for their award. [2] The application for leave is denied. [3] The applicants correctly assert that CREB’s Rules and procedures, which have a strong privative cast, cannot exclude theirright to ask for leave to appeal the arbitral award: s. 3, Arbitration Act. [4] The applicants have not established that the arbitration panel committed any error of law.

The CREB Arbitration Panel waspart of a non-statutory, consensual, domestic, tribunal system set up by and resourced by volunteers. That panel was not required, as amatter of law, to give reasons for its decision. In all the circumstances here, which reflect the previously named factors, as well as thereference to CREB Rules, the reasons the arbitration panel gave were sufficient. The Panel’s failure to acknowledge, in its award, itsdiscretion to take into account factors other than posted commission rates does not constitute an error of law.

Similarly, assuming that thearbitration panel was entitled to apply equitable principles in deciding the dispute between the parties, the panel’s failure to comment onits treatment of equitable principles does not, in the circumstances here, constitute an error of law.

In any event, the last two issues wouldinvolve the application of legal principles to factual situations and therefore constitute mixed questions of fact and law; such issuescannot constitute errors of law. [5] In any event, even assuming that the CREB arbitration panel made the errors of law alleged, given the confined effect of thedecision appealed from and the relatively small amount of money involved, the applicants have not established that the importance to theparties of the matters at stake justifies an appeal.

Nor have the applicants established that the determination of the question of law atissue will significantly affect the rights of the parties: the very reference to the applicants to equity and discretion implies that the resultsin this case might not even have any future application to these parties, much less to other disputes between other CREB members. Cases and authority cited [6] By the applicants: Rankin v Alberta Curling Federation Appeals Committee 2005 ABQB 938, [2005] A.J. No. 1759;Fuhr Estate v Husky Oil Marketing Co. 2010 ABQB 495, [2010] A.J.

No. 884; Windjammer Homes Inc. v Generation Enterprises (BC SC), [1989] B.C.J. No. 278 (Sup. Ct.). [7] By the court: Baker v Canada (Minister of Citizenship and Immigration) (SCC), [1999] 2 S.C.R. 817;Farm Credit Canada v National Bank of Canada 2011 SKQB 321, [2011] S.J. No. 551; Arnason v Arnason 2011 ABQB 393, [2011]A.J. No. 712; Brick Protection Corp. v Alberta (Provincial Treasurer) 2011 ABCA 214, [2011] A.J. No. 819 1. Background (

a) Factual [8] On April 11, 2011, Cyndi Collins - a real estate agent with Royal LePage - signed a listing contract, or exclusive sellerbrokerage agreement, with the owner of real estate for the sale of that property. That agreement included

article 9.1 to the effect that theseller of the property would pay a brokerage commission of 7% on $100,000 and 3% on the Balance Remaining and, in

article 9.2 (

c) ofthe agreement that the listing broker could offer 50% of the commission outlined in

article 9.1 plus GST as compensation to cooperatingbrokerages. As would be expected, the agreement between Royal LePage and the owner of the property was not disclosed to personswho were not parties to the agreement. However, when Ms. Collins actually posted the listing to the MLS system, she stated that thecommission on the sale would be “3.5% on $100,000 and 3% Balance Remaining”. [9] Within days of the posting of the property on the MLS system, Joe Pap - a real estate agent with Sutton Group - had obtainedan offer to buy the property. As of April 26, 2011, the sale of the property had been finalized for a purchase price of approximately $1million.

[ 10 ] On April 27, 2011, Joe Pap invoiced Royal LePage for his share of the commission; he calculated his share according to the information posted on the MLS system. More or less immediately upon receiving Mr. Pap’s invoice, Royal LePage contacted Mr. Pap to let him know that they perceived a problem. Specifically, Royal LePage contended that the commission payable by them should, despite the wording on the MLS system, mirror the agreement they had signed with the seller of the property, i.e. 3.5% on the first $100,000 and 1.5% on the remainder.

The difference in the two positions is approximately $14,000.00; Royal LePage has paid the commission invoiced by Mr. Pap, under protest. [ 11 ] As both brokerages are members of the Calgary Real Estate Board, they formally agreed to submit their dispute to private arbitration arranged by CREB. CREB Rules provide that the arbitrations that they arrange are “conclusive and binding”: Rule 1.03.2.

In compliance with that Rule, the submission a member makes for an arbitration includes a standard paragraph to the effect that the applicant “shall abide by the Arbitration Award”; here, that formal acceptance was included, as item 7, in Royal LePage’s submission to the Arbitration Panel. [ 12 ] The members of the CREB arbitration panels are all volunteers. [ 13 ] The arbitration was held on December 13, 2011. On December 13, 2011, a letter was sent to the parties including the following: DECISION THAT the commission claim brought forth by Royal LePage Foothills be denied.

THAT the $500.00 security deposit submitted by Royal LePage Foothills be forfeited in its entirety. THAT the $500.00 security deposit submitted by Sutton Group CanWest be returned in its entirety. REASONS It was the unanimous decision of the Arbitration Panel that the commissions be paid in full to Sutton Group CanWest as stated on the MLS* data information sheet at the time of sale, as per CREB*’s Rule and Regulation 5.00 (2). The letter was signed by the Chairperson of the Arbitration Panel and by each member of the Panel. [ 14 ] The Rule referred to in the arbitral award reads as follows: 5.00

(2) The Seller’s Brokerage shall pay the Buyer’s Brokerage the commission as detailed on the most recent MLS* data information in accordance with sub-section (1). (June 2004). [ 15 ] Rule 1.03.09 of CREB reads as follows: APPEAL OF DECISION

A decision of an Arbitration Panel may not be appealed. [ 16 ] A CREB arbitral tribunal is under no express obligation to give reasons for its award. (

b) Legal [ 17 ] Section 44(2) of the Arbitration Act reads as follows: Appeal of award 2) If the arbitration agreement does not provide that the parties may appeal an award to the court on a question of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that (

a) the importance to the parties of the matters at stake in the arbitration justifies an appeal, and (

b) determination of the question of law at issue will significantly affect the rights of the parties.

(3) Notwithstanding subsections (1) and (2), a party may not appeal an award to the court on a question of law that the parties expressly referred to the arbitral tribunal for decision.

(4) The court may require the arbitral tribunal to explain any matter.

(5) The court may confirm, vary or set aside the award or may remit the award to the arbitral tribunal and give directions about the conduct of the arbitration.

(6) Where the court remits the award to the arbitral tribunal in the case of an appeal on a question of law, it may also remit to the tribunal the court’s opinion on the question of law. 2. Applicants ’ right to ask for leave to appeal [ 18 ] The applicants assert, and I agree with them, that CREB Rules and procedures cannot prevent the parties from exercising their rights under s. 44(2) of the Arbitration Act. 3.

Errors of law - mandatory pre-requisite to granting leave to appeal [ 19 ] In circumstances such as those present here, where there is a strong privative element arising out of the fact that the CREB Rules stipulate that there is no appeal from a decision of one of its arbitral tribunals, and because the parties explicitly agreed that they would not appeal CREB’s arbitral award, the Arbitration Act states that, prior to the court exercising its discretion to give leave to appeal an award, the applicant must establish that the arbitration panel committed an error of law.

Each of the three alleged errors of law committed by the arbitration panel here will therefore be examined in turn.

a) Failure to give any, or adequate, reasons [ 20 ] Obviously, a tribunal which gives reasons for its decision is being helpful not only to the parties, but to any other persons

who may be interested in the decision or affected by the decision, and also to a court which must consider whether an appeal can be launched from that decision.

However, in the circumstances here, where there are strong privative features, the court must decide whether the CREB arbitration panel was required, as a matter of law, to give reasons. [ 21 ] Even the decision in Rankin on which the applicants rely, includes the following sentence at para. 82: “ Although the failure to give reasons in a consensual tribunal is not, in and of itself, fatal to the tribunal’s decision, it creates difficulties on review of the decision.” [ 22 ] In addition to the comment in Rankin , I note that paras. 43 and 44 of the Supreme Court’s decision in Baker suggest that there was no obligation on this panel to give reasons.

Here, the statutory right of appeal is extremely limited, and the importance of the decision to the parties in the situation here is not at all of similar importance to the decision to deport the mother of two Canadian-born children as was the case in Baker . The CREB arbitration panel is a voluntary, domestic, consensual tribunal with no connection to public authority. Indeed, there is nothing to suggest that an individual is unable to sell real estate in Calgary unless that person agrees to be bound by CREB’s rules.

There are obviously advantages to being a member of CREB, but there are apparently no catastrophic results from not being a member of that organization. In other words, there is nothing in the circumstances here that suggests a level of justiciability that attracts an obligation to provide reasons. [ 23 ] Nonetheless, whether it was legally required to or not, the arbitration tribunal did give reasons and those reasons are set out above. [ 24 ] Are the reasons given here sufficient? [ 25 ] I conclude that the reasons given by this CREB arbitration panel are, in the circumstances here, sufficient.

Although the reasons given may be characterized as terse, brief, succinct, laconic or even lamentably sparse, all qualifiers which have been the subject of judicial commentary, the reasons themselves set out the reasoning of the arbitration panel and are intelligible to the parties to the arbitration. In other words, even if the CREB panel were obliged in law to give reasons, which it was not, in the circumstances of this arbitration, the reasons given were sufficient.

b) Failure to acknowledge discretion [ 26 ] The applicants state that the arbitral tribunal failed to acknowledge that, in coming to its decision, it had the discretion to take into account factors other than the CREB rules. [ 27 ] CREB rules do indicate that an arbitral tribunal can take factors other than the stated amounts of commission “into account at their discretion”. [ 28 ] Discretion is a problematic tool of decision making. When assessing the exercise by courts of their discretion, a reviewing court must determine whether the discretion was applied judicially.

Where a domestic tribunal is charged with settling a dispute, it is probably safer for all concerned if the tribunal bases its decision on the rules which bind all parties to the dispute rather than on some nebulous discretion. [ 29 ] In any event, it is not clear that the panel here did not take discretion into account even though it based its eventual decision on the rules that were known to all parties.

Since the panel had the discretion to take factors other than the listed commission into account, they could not be considered to have committed an error if they chose not to take any factors other than the listed commission rates into account. [ 30 ] Indeed, while the reasons the panel gave for the making of the award are not absolutely transparent to a stranger to the real estate commission culture it may be, for example, that the tribunal was of the view that since the sale had been legally finalized prior to the commission problem arising that it was too late to try to determine if a different commission result could be entertained, or it may be

that the tribunal did not agree with the applicants’ view that the commission structure that was posted to the MLS system was glaringly exceptional. As to that last potential factor, the court observes that the failure of the respondents to provide evidence on the application to contradict the applicants’ position that the mistake in the MLS posting was glaring and exceptional is not relevant: this court is not the arbitrator so this court is not making any assessment of the applicants’ representations concerning the type of posting made to the MLS system. [ 31 ] In

summary on this point, the failure of the CREB arbitration panel to state in reasons which it was not required to give that it acknowledged that it had discretion to consider matters other than CREB rules was not an error of law.

c) Failure to apply equity [ 32 ] Invoking the right of a court to relieve against mistake, as set out in Windjammer Homes Inc. , the applicants say that the arbitration panel here failed to apply the equitable principles relating to rescission for unilateral mistake. [ 33 ] One problem with that approach is that it imposes on a volunteer group of lay people the obligation to act like a court; clearly, when groups choose to adopt an alternative type of dispute resolution to that available in the court system, they are not, and should not be, expecting a duplication of a court system.

In the circumstances here, the parties were content to have their dispute settled by a group of people from their own community who had experience with the operations of the real estate brokerage system. [ 34 ] Another problem with that approach is that, as the Windjammer decision points out, equitable jurisdiction is available to a court to deal with a situation where, as the case itself emphasizes, “one party, who knows or ought to know of another’s mistake in a fundamental term, remains silent and snaps at the offer, seeking to take advantage of the other’s mistake”.

In other words, the key factor in a decision on unilateral mistake is whether the one party knew or ought to have known about the mistake; those are issues of fact. At the best, therefore, the issue of whether the equitable principle of rescission based on unilateral mistake should have been applied here is a mixed question of fact and law on which no appeal can be heard.

d) Summary - error of law [ 35 ] In

summary, the applicants have not established that the arbitration panel committed any one of the three errors of law alleged. [ 36 ] In any event, however, establishing an error of law is only a mandatory pre-requisite to a court’s consideration of whether leave should be granted to appeal the decision of this panel. The case law explains why courts are loath to interfere in the decisions of domestic tribunals which provide consensual arbitrations; see, for example, para. 8 of Arnason. I will then turn to the two additional statutory factors which the applicants must address on the leave application. 4.

Discretionary basis for granting leave to appeal [ 37 ] As s-s. 44(2) of the Arbitration Act emphasizes, leave to appeal in the circumstances here should be given only if the court is satisfied about both of the two following additional factors.

a) Importance to the parties of the matters at stake [ 38 ] The applicants have fairly pointed out that Fuhr Estate rejected the weight of existing Alberta and other case law to the effect that the first element of the statutory test found in s. 44(2) of the Arbitration Act requires “some element of public interest”. As a Saskatchewan judge noted in Farm Credit Canada :

Analysis 42 In my opinion, the detailed parsing of the various condition precedents of s. 45 has resulted in irreconcilable decisions . If however one examines s. 45 as a whole and pays heed to the words used by the legislation, one can readily discern a legislative intent to filter out from the appeal process those questions of law which are not just frivolous but also those which do not go to the heart of the award. Also to be filtered out are matters which whilst affecting the rights of the parties to some degree, would not in the circumstances of a particular case, make a significant difference in the result.

I do not consider the decision in Chypiska as binding up me even though it arguably required evidence of the issue having ongoing impact on the parties. 43 In this case, I am satisfied that the determination of a question of law is such that it could result in the gain or loss for one or the other of the parties of several million dollars, which, given the nature of the arbitration as a whole is a materially relevant amount such that the question is important to each party and reasonably justifies the appeal.

Concurrently, it is reasonable in the circumstances to accept that the issue of law is such that its determination has the capacity to affect in a major degree this award. (Emphasis added) [ 39 ] Whether the decision in Fuhr Estate should be preferred to the decisions which it decided not to follow, what is clear is that the fact situation here does not, of itself, establish any importance to the parties. Here, the dispute between the parties did not amount to several million dollars as was the situation in Farm Credit Canada ; rather, it involved approximately $14,000.00.

Whether or not that amount was “important to the parties” is something which the applicants did not address. Therefore, even if the reasoning in Fuhr Estate were adopted, here there is no basis on which the court could conclude that the matter was important to them. [ 40 ] In any event, however, in order to obtain leave to appeal an arbitral award where there is no right of appeal, the applicant for leave must not only establish that the matter at stake is important to them, but must also satisfy the court on the second part of the test.

b) Determination of the question of law at issue will significantly affect the rights of the parties [ 41 ] It is a principle of statutory

interpretation that a court should strive to give meaning to each of the words chosen by a legislator to effect its purpose: Brick Protection Corp. , at para. 75 .

Here, the issue of whether the determination of the question of law at issue will significantly affect the parties must mean something different from whether the issue is of importance to the parties and must relate back to the preliminary issue of error of law. [ 42 ] For the reasons given above, since I have concluded that the arbitral tribunal made no error of law, there is no need to determine whether the applicants have also met the second part of the test for leave. [ 43 ] In any event, however, if I did have to address the second part of the test for leave, I have concluded that the meaning of the second part of the test must, in the context in which that requirement is adopted by the legislature in the Arbitration Act , include a component of ongoing assistance to the parties because the question of law, when decided correctly, will assist the parties, or others, in the future.

Otherwise, ss. 44(2)(

b) would have no meaning: if there had been an error of law, of course it would significantly affect the rights of the parties to correct the error, even if the error itself were not material in the specific circumstances, in order to guide their future conduct.

The parties, and other realtors, would presumably wish to know what the correct principles were, independent of any specific facts. [ 44 ] However, the applicants did not, in support of their application for leave to appeal, provide any evidence or even any argument to support a contention that this second part of the test has been satisfied in the circumstances here. [ 45 ] Moreover, by relying on the concepts of discretion and equity, the applicants themselves underline the unique, as opposed to the universal, that might be at play in this decision.

c) Summary [ 46 ] In

summary on this facet of the analysis, even if the legal approach advocated in Fuhr Estate were adopted, here, the applicants have not provide the court with facts or inferences establishing both that the issue was “important” to them and that a determination of the question of law in dispute would “significantly affect” the rights of the parties. 5. Conclusion [ 47 ] In conclusion, the court states that the applicants have not established that the arbitral tribunal committed any error of law.

If the court were wrong in that conclusion, the court concludes that the applicants have not satisfied both of the statutory tests for leave. Overall, the determination of disputes over commissions payable is a matter deep within the expertise of the particular arbitral tribunal that made the award here. It is difficult to imagine that any other tribunal would be in a better position to fairly resolve the dispute 6. Costs [ 48 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision. Heard on the 22 nd day of February, 2012.

Dated at the City of Calgary, Alberta this 29 th day of February, 2012. J.B. Veit J.C.Q.B.A. Appearances: George C. Stewart, Stewart and Stewart for the Applicants Ms. Risi, on her own behalf Mr. Pap, on his own behalf Other Respondents served, but not appearing