Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/407986
30 | fall 2014 mbabc.ca MortgageBroker on August 1, 2014 the BC supreme Court decided that a person who arranges a single mortgage, at the invitation of the borrower, is not a mortgage broker for purposes of the Mortgage Brokers Act ( MBA) (see AZTA Management Corporation v. Cro Agencies Ltd. 2014 BCSC 1462). is decision is of course significant in determining whether unregistered persons in such circumstances are able to collect commissions. As was the situation in the AZTA case, oen a person who brokers on an isolated occasion is involved in a transaction involving a very large amount of money. e transaction, again as was the case in the AZTA case, oen relates to a commercial mortgage (e.g., major housing developments, shopping malls). e amount of commissions at stake in such situations are correspondingly large. e facts in the AZTA case were that the borrower and the plaintiff knew each other, although not closely. e borrower approached the plaintiff to ask if the plaintiff was able to assist in locating a lender for a specific, significant construction project. e plaintiff indicated interest, promptly made some inquiries, and located a lender. A loan for $6 million was made and the plaintiff sent an invoice for a fee of $630,000. As the invoice was not paid, the plaintiff sued. e court found that there was not sufficient agreement on essential terms to say that the parties had entered into a fee agreement. It did however, order that a fee of $95,000 was payable by the borrower on the basis of the market value of the services provided by the plaintiff. e decision as to the amount of fee which would be payable le the question as to whether the plaintiff, by virtue of not being a registrant under the MBA, was disqualified from receiving any fee at all. e court avoided answering the general question of whether a person can collect a commission if they are required to be a registrant under the MBA but are not so registered. Instead it decided that in the circumstances of the case before it, there was no need for the plaintiff to be registered under the MBA and so not being registered was not an impediment to collecting the commission. e court came to this conclusion because, based on the following, the plaintiff was not "carrying on business as a mortgage broker," a requirement for enforcement stated in s. 21 of the MBA: a. ere was no evidence whatsoever that the plaintiff made it his practice to hold himself out as a mortgage broker or as a person who was available to locate lenders. b. e plaintiff was a businessman with his own interests. He was specifically contacted by the borrower and solicited to find a lender. It was an isolated transaction. It occurred at the behest of the borrower and the borrower's agent. c. To engage in a single transaction cannot be said to constitute carrying on a business. d. e purpose of the MBA to protect the public is not offended. is was a case where a sophisticated borrower specifically sought out and requested the plaintiff to find a lender. e borrower had sufficient commercial experience to be able to deal knowledgeably with the lender. e. It would be an affront to common sense and fairness to permit the defendants to have engaged the plaintiff in the manner they did and to then ask the court to enable them to deny any responsibility to pay for the services he provided to them. ere is little which can be said to differ with the outcome in this case. Courts are required to apply legislation, where it exists, in the form it exists. e court in this case did exactly that. e difficulty arises because of a serious gap in the MBA. e Act determines who needs to be a registrant by focusing on the frequency with which a person arranges mortgages for others, it does not pay due mind as to the value of any mortgage arranged. Courts interpreting and applying the MBA very oen mention the purpose of the MBA is to protect the public. In doing so they oen cite the following paragraph from the Supreme Court of Canada's decision in Cooper v. Hobart, [2001] 3 S.C.R. 537: e regulatory scheme governing mortgage brokers provides a general framework to ensure the efficient operation of the mortgage marketplace. e Registrar must balance a myriad of competing interests, ensuring that the public has access to capital through mortgage financing while at the same time instilling public confidence in the system by determining who is "suitable" and whose proposed registration as a broker is "not objectionable". All of the powers or tools conferred by the Act on the Registrar are necessary to undertake this delicate Supreme Court ruling exposes gap in Mortgage Brokers Act e Act determines who needs to register as a mortgage broker by focusing on the frequency of mortgages arranged, not the value Ray Basi Director of Policy & Education rbasi @ mbabc.ca