MORTGAGEBROKER mbabc.ca fall 2015 | 31
unregisteredbroker
No Registration, No
Commission
WHAT HAPPENS WHEN A COURT is asked
by a non-registrant to enforce an agreement to
pay a mortgage brokering commission?
e British Columbia Provincial Court in
Babich v. Babich, 2015 BCPC 175 (CanLII)
provides some guidance. e case involved
two brothers who had filed a number of
claims and counterclaims against each other.
Amongst these was a claim by one brother that
the other owed him $3,000 for "brokerage fees
for placement of three mortgages."
e Court dismissed this claim on the
basis that the brother making the claim failed
to prove that there was an agreement for the
payment of commission. However, the Court
went on to say that even if the agreement had
been proven, it could not be enforced because
the agreement would be void due to being an
illegal contract. e Court said:
e Claimant is not a registered mortgage
broker and section 21 of the Mortgage Brokers
Act makes it an offence for a person to carry on
business as a mortgage broker unless that person
is registered under the Act. Enforcing such a
contract would be enabling the Defendant in the
commission of an offence, and the court will not
enforce an illegal contract.
is case should not be seen as an invitation
for a registrant to make an agreement with a
non-registrant for payment of commission, take
the benefit of the agreement, and then refuse
to pay the commission on the basis that the
agreement is illegal and enforceable. Very fine
differences in facts can lead to very different
outcomes. For example, the British Columbia
Supreme Court in AZTA Management
Corporation v. Cro Agencies Ltd. 2014 BCSC
1462 allowed a commission where the claimant
had brokered a single mortgage at the invitation
of the borrower. e Court decided that the
person in those circumstances was not carrying
on business as a mortgage broker and so did not
need to be registered. It did reduce the amount
of commission from the $630,000 claimed on
the basis of a contract to $95,000 on the basis
of the market value of the services provided.
e Court said there simply wasn't enough
agreement as to the terms for there to be an
enforceable contract.
e safest route for a registrant to take is
to not engage a non-registrant in mortgage
brokering activity, for example by making fee
agreements. Aside from the fine distinctions
which can provide very different outcomes
in civil courts as to whether a brokering
commission is payable, the engagement of
a non-registrant by a registrant in mortgage
brokering activity may trigger regulatory
action. e Registrar might consider the
engagement or agreement to be the registrant
conducting business in a manner prejudicial to
the public interest.
A non-registrant is not entitled to be paid a commission — usually
BY RAY BASI
