Date: 20011212
Docket:T-2202-96
Neutral citation:2001 FCT 1369
BETWEEN:
CLIFT'S MARINE SALES (1992) LTD.
and 706930 ONTARIO LTD.
Plaintiffs
- and -
MOORCO INCORPORATED, LESLIE SUTHERLAND,
KERI ALLEN, also known as KERI CALLEN,
also known as KERI-LYNN CALLEN,
SEAN ALLEN, also known as SEAN CALLEN,
1037542 ONTARIO LIMITED, ANGELO SANTANGELO,
CLIFT'S MARINE SALES INC., And The Owners and
all others interested in The Ship "STRICTLY BUSINESS"
and The Owners and all others interested in The Proceeds
of Sale of the Ship "STRICTLY BUSINESS"
Defendants
[1] A yacht broker, who introduced a prospective purchaser to the owner of a vessel, claims to be entitled to a commission on a sale subsequently made by the owner to an associate of the person introduced by the broker. The main issue in this action is whether the owner is contractually liable to the broker to pay a commission on the sale to the associate.
[2] At the start of the trial, the Plaintiffs advised that the action was being discontinued without costs as against the Defendants Keri and Sean Allen, 1037542 Ontario Limited and Angelo Santangelo. The Plaintiffs also abandoned any claims sounding in conspiracy and unlawful means. In the circumstances, the remaining Defendants, Moorco Incorporated ("Moorco") and Leslie Sutherland ("Sutherland") advised that they would not be proceeding with their cross-claim against their co-defendants.
[3] The trial of the action was conducted in accordance with the simplified action procedure set out in Rule 299 of the Federal Court Rule, 1998 which requires that evidence-in-chief of the parties be adduced by affidavit and that any deponent of an affidavit be made available for cross-examination at the hearing. Eight affidavits were filed by the parties and five deponents were cross-examined at trial. The testimony of one witness, Sean Callen, was obtained by commission and the transcript of his evidence was admitted on consent as an exhibit in these proceedings.
[4] What follows is a synopsis of the evidence adduced by the parties. Issues relating to the credibility of witnesses are dealt with in the analysis portion of these reasons.
I - THE FACTS
Background facts
[5] Over a number of years, several companies operated a yacht brokerage business known as Clift's Marine Sales from the same office at 1 Port Street East, Port Credit, Ontario. Before 1989, a George Clift operated a business though an Ontario corporation named Clift's Marine Sales Ltd. ("CMS Ltd."). In 1989, Rene Blanchet ("Blanchet") and Donald Robertson ("Robertson"), both yacht brokers by trade, entered into a business venture to purchase the assets, name and goodwill of CMS Ltd. Their yacht business subsequently operated under the company name of Clift's Marine Sales Inc. ("CMS Inc.").
[6] On July 12, 1991, the Defendant Moorco entered into a Vessel Listing Agreement with CMS Inc. by which that company was appointed exclusive listing agent for the sale of the Defendant Ship "STRICTLY BUSINESS" (the "vessel"), a vessel constructed to the 53' Roberts Motorsailer design. Sutherland, the vessel's Manager, negotiated the agreement with Robertson and agreed to list the vessel at a price of $399,000 and to pay a standard 10% commission on the selling price.
[7] The agreement provided that CMS Inc. would act as agent for a minimum period of 90 days, after which the agreement would automatically be renewed unless 15 day's written notice of cancellation was received by the company. The agreement also granted CMS Inc. protection on introduced customers for a period of 90 days after the expiration of the agreement.
[8] Due to financial difficulties brought about by the recession in 1990, CMS Inc. was unable to pay its debt to CMS Ltd., which had by that time changed its name to 706930 Ontario Ltd. As a result, in or about December 1991, CMS Inc. transferred its assets, including its book of brokerage business, to a company newly incorporated by George Clift named Clift's Marine Sales (1992) Ltd. ("CMS 92 Ltd."). The book of brokerage business included the vessel listing agreement for the "STRICTLY BUSINESS". It appears that neither Moorco nor Sutherland were ever informed, either formally or informally, of the transfer of the listing to the new company.
[9] Robertson continued on with CMS 92 Ltd. as a yacht broker. He was actively involved in marketing the vessel on the company's behalf, such as placing advertisements in boating magazines distributed across Canada and the United States and displaying pictures of the vessel at the company office. Despite the company's best efforts, the vessel languished on their inventory list for a lengthy period of time.
[10] In the Fall of 1995, Blanchet, who had quit back in 1990, joined the company as an independent broker and soon became involved in promoting the vessel. He recalls in particular having attended the 1996 Toronto International Boat Show where he displayed a picture of the vessel. Shortly after Blanchet's arrival, Robertson left CMS 92 Ltd. to start his own company, Oxford Auto Sales.
Offer to purchase by the Callens
[11] According to Blanchet, in early June 1996, a man and a woman who identified themselves as Sean and Keri Allen came to the office of CMS 92 Ltd. and expressed interest in two 53' Roberts motorsailers listed by the company, including the "STRICTLY BUSINESS". It was only discovered much later that the "Allens" were in reality Sean Callen ("Callen") and his wife Keri-Lynne Callen ("Mrs. Callen").
[12] Blanchet answered the questions put to him by the Callens and showed them pictures of the two vessels. The Callens told him that they would think about it and call him back. After providing their contact information, the Callens left. Later that same day, Callen called Blanchet and asked him to arrange an appointment to view the 53' Roberts near Sarnia, Ontario.
[13] Blanchet had never dealt with the owner of the vessel. In fact, there had been little, if any, contact between Clift's Marine and Sutherland since the vessel was listed. According to Blanchet, he telephoned the number on file for Sutherland and reached his wife, Alice Sutherland ("Mrs. Sutherland"). Blanchet says that Mrs. Sutherland informed him that the vessel was berthed behind the Sutherlands' residence at Mooretown, Ontario. Blanchet claims that he came to an agreement with Mrs. Sutherland on a date for an appointment to view the boat.
[14] The Sutherlands dispute Blanchet's claim that any arrangements were made through Mrs. Sutherland. They both maintain that it was Sutherland who first spoke to Blanchet. In any event, there is no dispute that one of the Sutherlands agreed to allow the vessel to be inspected at an appointed time.
[15] At some later date in June 1996, Blanchet met the Callens at his Port Credit office for the purpose of travelling together to Mooretown to view the vessel. Blanchet drove the Callens to the Sutherland's residence in his vehicle and, once there, he introduced himself, as well as the "Allens", to Mrs. Sutherland.
[16] According to Blanchet, he handed his business card to Mrs. Sutherland and left an additional one on the main cabin binnacle of the vessel. He says that at the time his card would have displayed the company's name, Clift's Marine Sales (1992) Ltd., and telephone and fax numbers, which were identical to those on the listing agreement, except for a change in area codes from 416 to 905. In cross-examination, Blanchet remained adamant that he had left the two cards during his visit. Mrs. Sutherland denies that she was ever given a business card by Blanchet and she maintains that she never came across a business card in the vessel.
[17] Blanchet and Callen proceeded to view the vessel. While they carried out an inspection, Mrs. Sutherland volunteered information regarding the boat's condition, handling and history to Mrs. Callen. Blanchet says that Mrs. Sutherland advised him that her husband would decide on what terms and price to sell the vessel.
[18] According to Blanchet, the Callens met with him on June 19, 1996 to complete a written offer to purchase the vessel for $208,500 plus 8% PST ($16,680) for a total of $225,180, with a $5,000 deposit. Callen claims that he was not present when the offer was signed, but he readily admits having instructed his wife to make the offer on his behalf. The offer was made in the name of "Keri Allen" on a CMS Ltd. form. Blanchet could not explain, when questioned in cross-examination, why he would have used the CMS Ltd. form other than to say that he was probably not paying attention to the heading.
[19] Blanchet transmitted a copy of the offer by fax on June 19, 1996 to the Sutherlands' residence, together with a covering sheet and letter. On June 20, 1996, Blanchet received a telephone call from Sutherland who told him that the offer was being rejected as too low. Sutherland told Blanchet that he believed that he could obtain "a little more". Blanchet invited Sutherland to write the amount of the price he was prepared to accept on the copy of the offer, initial it, and fax it back to him.
[20] The next day, Sutherland instructed Blanchet to make a verbal counter-offer to the Callens for $225,000.00, net of commission and tax. Although Blanchet had strong misgivings, he conveyed Mr. Sutherland's proposal to Callen on June 22, 1996. Blanchet claims that Callen balked at the higher price and replied that he would never pay that much for the boat.
[21] It is unclear whether Callen was given an opportunity to read Blanchet's affidavit before his deposition. He maintains that he was willing to negotiate a higher amount with Sutherland and asked Blanchet to increase his offer to $249,000, which he believed was full listing price. He claims that Blanchet advised him that a mistake had been made in the listing and that the correct price was in fact $279,000. Callen says that he became suspicious that Blanchet was trying to take advantage of him. He insisted that Blanchet submit his revised offer to Sutherland, however he heard nothing until one week later when Blanchet simply reported that Sutherland had "stood his ground".
[22] Callen was not the only one to suggest that Blanchet was being duplicitous. Sutherland claims that Blanchet called him on June 22, 1996 and suggested that the purchase price would be more palatable to the "Allens" if the transaction was in cash, thereby avoiding the payment of GST. Sutherland says that Blanchet confided to him that 70% of his business was done this way. He claims that he was uneasy with what Blanchet was proposing and refused to go along with it.
[23] When confronted with their allegations in cross-examination, Blanchet vehemently denied acting improperly or "playing games".
[24] At Callen's request, Blanchet called Sutherland on July 8, 1996 to inform him that the "Allens" were still interested in the vessel. Sutherland told Blanchet that he would consider lowering the price "a little bit". Blanchet was disheartened because he was lead to believe that the Callens would not buy unless the price was discounted significantly. During the same conversation, Sutherland mentioned to Blanchet that he was considering cancelling the listing agreement. Although Blanchet urged him to reconsider, all Sutherland would say was that he would think about it.
[25] On July 9, 1996, Callen called Blanchet and asked that the $5,000 deposit be refunded. Blanchet says that he understood that the Callens had simply lost interest in the vessel. Callen claims however that the reason he backed out was because he did not trust Blanchet and wanted nothing more to do with him. At any rate, the deposit was reimbursed shortly thereafter.
[26] On July 11, 1996, Blanchet called Sutherland to confirm that the "Allens" were no longer interested in the vessel. Aware that the listing was in jeopardy, Blanchet sought to persuade Sutherland to continue with his company and offered to make the agreement non-exclusive. Once again, Sutherland remained non-committal.
Termination of Vessel Listing Agreement
[27] Claiming dissatisfaction with the company's performance, Sutherland decided to terminate the agreement. He says that he expected to be able to sell his vessel on his own since he had recently met someone from Germany who appeared interested in the vessel. He believed that the individual would be prepared to buy, although probably not until the following year at the earliest.
[28] On July 15, 1996, Sutherland faxed a copy of the vessel listing agreement to Moorco's solicitor, William Tennyson ("Tennyson"), and instructed him to prepare a notice to terminate the agreement "as soon as possible". That same day, Tennyson prepared a letter addressed to CMS Inc. giving notice effective immediately. His secretary told him that she attempted to fax a copy of the notice to the company, but that the transmission would not go through. She also told him that she attempted to call CMS Inc. by telephone, but couldn't reach anyone at the office. Tennyson therefore arranged to send the letter that day by first class mail to CMS Inc. using the post office box address reflected in the listing agreement.
[29] The letter of termination was eventually received, not by Clift's Marine, but by Robertson at his office at Oxford Auto Sales. Robertson explained that the post office box address had been opened and remained in his name. He says that after leaving CMS
92 Ltd., he continued to receive some mail for the company. It was his practice to simply fax CMS 92 Ltd. a copy of any misdirected correspondence and to throw out the original.
[30] Robertson specifically recalls coming across the letter from Tennyson on July 22, 1996 and immediately faxing it to CMS 92 Ltd. He acknowledged in cross-examination that the letter may have been received at his office a few days earlier since he did not usually open his mail on a daily basis. Robertson became suspicious that "something was going on" when he read the letter. In his experience, notices of termination were uncommon in the industry and even then most clients would simply phone rather than going to the trouble of formalizing it in writing. He decided to call Clift's Marine and share his concerns.
Sale of vessel by Moorco to Santangelo
[31] Sutherland says that some time during the period of July 31 to August 3, 1996, he received a telephone call from a Mr. Angelo Santangelo ("Santangelo") who asked to see the vessel. The phone call came "out the blue", according to Mrs. Sutherland.
[32] Sutherland inquired whether Santangelo had heard about the vessel from someone at Clift's Marine or from someone who had been shown the vessel by Clift's Marine. According to Sutherland, Santangelo denied knowing anyone associated with Clift's
Marine and claimed that he had heard about the vessel from an automobile salesman from Sarnia. Satisfied with the response, Sutherland agreed to set up an appointment.
[33] On August 4, 1996, Santangelo attended at the Sutherlands' residence. After viewing the vessel and bargaining over the price, Santangelo offered to purchase the vessel for $150,000, plus GST, conditional upon a further inspection at a later date.
[34] Sutherland claims that by that point he had become anxious to sell the vessel. He was troubled by the fact that Santangelo was only the second person to make an offer to buy the vessel in over five years. He was also concerned about having to incur maintenance and winterizing expenses for the vessel and additional costs to dredge the dock after the boat was hauled out which he estimated at approximately $29,000. Resigned to the fact that Santangelo's offer was the best he could obtain at that time, Sutherland accepted the offer.
[35] Santangelo handed Sutherland a cheque from his company, Santell Sales for the deposit of $20,000. Santangelo then left, indicating that he would soon be in touch.
[36] Before long, the Sutherlands became concerned about the proximity of Santagelo's call to what they believed to be the expiration date of the 15 day waiting period. They had been operating under the assumption that the notice to terminate had been communicated to Clift's Marine on July 15, 1996, unaware of the transmission difficulties encountered by Tennyson. The Sutherlands decided, out of an abundance of caution, to prepare a statement for Santangelo's signature in which he would disavow any knowledge of Clift's Marine Inc. or any person introduced by the company.
[37] On August 11, 1996, Santangelo returned to the Sutherlands' residence with a friend to inspect the vessel. After the inspection was completed to his satisfaction, Santangelo was asked to sign the following statement:
I Angelo Santangelo hereby swear that I do not know any person at Clift's Marine Sales Inc. or anyone who has inquired as to the listing of this Roberts 53' custom Motorsaler (sic) known as "Strictly Buiness" (sic)
[38] Once Santagelo agreed to sign the statement, Sutherland prepared an invoice to Santell Sales for the sale of the vessel showing a purchase price of $150,000 plus $10,500 GST for a total of $160,500. At that point, Santangelo produced a paper bag containing $110,500 in cash and a cheque for $30,000. The Sutherlands claim that they were taken by surprise by the unusual method of payment and that it made them very uneasy. Notwithstanding his discomfort, Sutherland proceeded to endorse the invoice as paid in full. Santangelo then sailed away with the vessel with his friend at the helm. In her affidavit, Mrs. Sutherland noted that Santangelo did not appear to be very familiar with boats.
[39] Sutherland says that he was embarrassed by all the cash and wanted to avoid any gossip. He explained that his bank was located in a small town and that people often talked about everyone else's business. He therefore decided to make two separate deposits, the first one totalling $80,000 (1000 x $50.00 bills and the $30,000 cheque) on August 12 and the second one for the balance of the cash one week later.
Subsequent events to the sale of the vessel
[40] In September 1996, Blanchet was in Cobourg, Ontario on brokerage business when he happened to see the "STRICTLY BUSINESS"moored at the marina. Curious as to what the vessel was doing in Cobourg, Blanchet approached the marina manager to obtain some information. According to Blanchet, the marina manager told him that the registered owner of the vessel was a Les Sutherland. The manager also mentioned that he had seen the owner of the vessel driving a white Ford pickup truck. Blanchet found this strange since he recalled that the Callens had been driving a truck matching the same description when they visited his office back in June. Finally, the manager volunteered that the owner of the vessel had told him that he had recently purchased the vessel.
[41] Blanchet decided to investigate further. With his background in police work, he soon discovered that the registered owner of the Ford truck parked at the Cobourg marina was a Keri Callen. Putting two and two together, Blanchet came to the conclusion that his company must have somehow been defrauded by the "Allens" .
[42] On October 1, 1996, Mr. William Sharpe ("Sharpe"), solicitor for Clift's Marine Sales, wrote to Tennyson to apprise him of the information discovered by Blanchet and to request an accounting from Moorco. Sharpe's letter stated that sources confirmed that the vessel had been seen in the possession of the Allens in Cobourg, that the Allens were introducing themselves as the Sutherlands and that they were telling people that they had recently purchased the vessel.
[43] The Sutherlands say that they were shocked to learn on October 2, 1996 that the Plaintiffs were claiming a commission on the sale to Santangelo. Sutherland called Santangelo on October 6, 1996 to alert him of the allegations being made by Blanchet. He enquired whether Santangelo had arranged to have the Bill of Sale registered at the Toronto Ship Registry to reflect the change of ownership. Sutherland asked that he attend to it as soon as possible if he had not yet done so.
[44] On October 7, 1996, Tennyson wrote to Sharpe to advise that he had met with Sutherland. Tennyson's letter states that his client sold the vessel to Santangelo only after receiving written confirmation that the vessel did not come to his attention through any actions of Clift's Marine. The letter also states that the Sutherlands deny any knowledge of the reported actions of the Allens.
[45] On October 17, 1996, Tennyson received a copy of the Bill of Sale by fax from Santangelo showing that it had been registered by Santangelo on October 11, 1996 in the name of 1037542 Ontario Limited. Sutherland says that certain handwritten changes to the Bill of Sale, including the initials "LS", were not made nor authorized by him.
[46] Sutherland decided in early October 1996 to tape-record any future telephone calls he would make or receive relating to the vessel. With the assistance of his wife, he recorded four telephone conversations with Santagelo between October 6, 1996 to March 13, 1997. Santangelo died in November 1997. In light of this, counsel for the Defendants sought to introduce the recorded statements by Santangelo to Sutherland into evidence, arguing that they were admissible as an exception to the hearsay rule. Counsel for the Plaintiffs objected. The recordings were received as exhibits, subject to the Plaintiffs' objection as to their admissibility which was taken under reserve.
[47] In his taped telephone conversations with Sutherland, Santangelo insists repeatedly that he is the owner of the vessel. He denies knowing anyone from Clift's Marine and expresses outrage that a person he calls "Clift" is poking around looking for information and making wild accusations. He says that it was just a coincidence that "the guy Allen" made an offer to purchase the same vessel as he did. The following is an extract from one of the recorded exchanges between Sutherland and Santangelo.
Santagelo : Listen, I understand that this guy is giving you a bit of problem ? Sutherland: Yep. Santangelo: But what does he want ? Sutherland: He wants commission. Santangelo; Well, how much is the commission he wants ? Sutherland: 10 percent of the purchase price of the boat. Santangelo: Really; eh ? Well, you know something, I went down, I talked to the guy that was on the boat and the other guy that went to see you, the guy that was living on the boat there for a couple of days, and his wife. He's the one that put the first offer. He went back there, and apparently he tells me he had a big fight with Clift, because the second time he went there, he offered them a hundred-and-forty, or whatever, or two-forty, or whatever, and he refused them. An then two-fifty, and they had a big fight over it. And then - you know, I don't know what really happened. I didn't even want to hear it. I don't know this guy, Clift, and I have never seen him. He probably knows me because I had a garage. I'm not sure if he knows me or not. But nevertheless - I don't know, how can I help you ? I'll help you in any way you want; you know ? Like I mean, I'll even bring the boat back there if you want it back. I don't care. Any way you want, you tell me. Sutherland: Well, I... Santagelo: I'll even go down with you and prove it to you that I do not know this man. You know what I'm saying ? I think I even told you this before. Sutherland: Well, you assured me that you weren't involved with the Allens. Santangelo: No, I'm not. No, I am not. It's just a coincidence that he was going to buy , apparently from the beginning; okay ? And then about a few weeks later, about two weeks later, I found out that the guy that I had driving my boat, he knew the guy, Allen; right ? Sutherland: Mm-hmm. Santangelo: And they got together using the boat for a while. I didn't care, because I was busy at my car lot. You know, they were - like, you know, this guy was going to take it down to Kingston for me. Sutherland: Yep. Santangelo: And then - he played around. I said, "Look, do what you want; I don't care." I trust the guy anyway. But apparently they were together for a while, so I don't know. But, you know, the point is: I have nothing to do with it, all.
[48] In his deposition, Callen acknowledges that he had been friends with Santangelo for thirty years. He states that both he and Santangelo had heard about the vessel being for sale from a man called Marcus Mitchell who they had met at a nudist colony. He adds that "we were looking" for a specific type of hull, apparently referring to Santangelo, and that "they" knew where all the hulls were in Ontario and the eastern seaboard of Canada.
[49] Callen says that he spoke to Santangelo after he decided not to buy the vessel from Sutherland. He claims that he told Santagelo about his problems with Blanchet and advised Santangelo that he didn't want anything more to do with the vessel. He also told Santagelo that he had dealt with a brokerage firm in Port Credit and maintains that "that's where I left it." When questioned whether he asked Santangelo to go and buy the vessel for him, he responds as follows:
A. No, I didn't, no. He had known about the boat and he basically - We've purchased things before and that's where I left it with him. He asked me, "Is that the right hull ?" I said, "Like I told you, they're all the right hulls, " and that's where I left it.
[50] Callen apparently knew why Santangelo needed the vessel but refused to answer, explaining that his life could be in danger if he answered the question. He intimated that there may have been another person behind the scenes, other than himself or Santangelo, who wanted the vessel.
[51] In 1999, Sean Callen and Keri-Lynne Callen were convicted of criminal offences relating to conspiracy with persons, including Angelo Santangelo and 1037542 Ontario Ltd. The convictions were the result of guilty pleas in which the Crown read into the record certain agreed facts. Those facts included an admission by Callen that he had attempted to import 2,200 pounds of cannabis oil into Canada, that he had been involved in the importation of cannabis since 1980 and that he had arranged for the transportation of drugs from the Caribbean to Canada on numerous occasions. The statement of agreed fact also included the following acknowledgment:
CALLEN also admitted he had purchased the "Strictly Business" vessel in Ontario with the proceeds of crime. CALLEN stated that the vessel had been registered under the name of 1037542 Ontario Limited, the company of an associate, Angelo SANTANGELO (deceased). CALLEN admitted that he is the rightful owner of the vessel.
[52] As a result of the conviction, the Attorney General of Canada obtained an order of forfeiture of property, including the "STRICTLY BUSINESS". When queried about the apparent admission of purchase and ownership of the vessel, Callen claimed that he only became the rightful owner of the vessel after Santangelo's death in November 1997. He says that he had previously loaned Santangelo a large sum of money and that after Santangelo's death in 1997, the deceased's estate agreed to transfer the vessel to Callen in satisfaction of the debt.
II - POSITION OF THE PARTIES
[53] Counsel for the parties made extensive and thorough oral submissions on the facts and the law. In summary, the Plaintiffs submit that, regardless of form, if any transaction was entered into during the protection period provided for under the vessel listing agreement, which conferred any interest in the vessel to the Callens, the Defendants have a contractual obligation to pay brokerage commission to the Plaintiffs. The Plaintiffs argue in the alternative that the Defendants were negligent in their dealings with Santangelo and breached the duty of care as between vendor and agent. They therefore claim damages for the wrongful acts of the Defendants.
[54] The Defendants deny that any commission is owed to the Plaintiffs. They contend that the Plaintiffs have no status, right or title to bring the action as there is no privity of contract between the parties. In the alternative, the Defendants submit that the listing agreement did not expressly prohibit a sale by the owner, even during the period of exclusivity. Further, they say, there is simply no evidence that the sale to Santangelo was brought about by the Plaintiff's efforts. In any event, they argue that the sale to Santangelo was completed after the expiration of the 15 day notice period in the agreement and that the sale to him does not give rise to a commission. Finally, they say that all reasonable steps were taken to satisfy themselves that Santangelo was not associated in any way with Clift's Marine.
III - ANALYSIS
[55] The Plaintiffs' action against the Defendants is for non-payment of a commission which the Plaintiffs allege was earned as a consequence of the sale of the vessel "STRICTLY BUSINESS" to Santangelo. At first glance, this case appears rather straightforward. The Plaintiffs introduced a prospective purchaser to the Defendants. The prospective purchaser made an offer, the deal fell through and the deposit was returned. The listing agreement was then terminated and the Defendants proceeded to sell the vessel to a third party without any assistance from the Plaintiffs. The Plaintiffs' claim to a commission would appear unfounded on these facts.
[56] Yet, in certain circumstances, a broker may be the procuring cause for the earning of a commission on a sale even though the owner sells the property to a third party without the broker's assistance. The law only requires that the broker be a "proximate cause" of the sale, not that the broker necessarily be involved in the final closing.
[57] Before turning to the facts, two legal issues need to be addressed. The first one relates to the right of the Plaintiffs to bring the action pursuant to the listing agreement. The Plaintiffs' claim is under a contract entered into between Moorco and CMS Inc. The Defendants submit that since there is no provision granting either of the parties the right to assign their rights and duties under the listing agreement, the Plaintiffs cannot advance a claim under the agreement.
[58] I disagree. A person is at liberty to transfer their rights, benefits and liabilities under a contract to another person so long as the assignment is absolute and the contract is not for personal services. Moreover, an assignment does not require the permission of the other original contracting party. It is undisputed that the Plaintiffs took over the listing agreement when the assets of CMS Inc. were transferred to them. The Plaintiffs continued to act for the Defendant Moorco for a five year period, without any objection being raised. The alleged breach of contract, and the right to sue, arose well after the assignment. In the circumstances, I conclude that the Plaintiffs are fully entitled to advance their claim in contract.
[59] The second legal issue relates to the admissibility of the hearsay statements of the deceased Santangelo. The Defendants seek to admit the tape recordings of telephone conversations between Sutherland and Santangelo as an exception to the hearsay rule, over the objections of the Plaintiffs. It is common ground that hearsay statements can be admitted, but only if the requirements of necessity and reliability are satisfied.
[60] In R. v. Starr, [2000] 2 S.C.R. 144, the Supreme Court of Canada cautioned that a distinction must be made between threshold and ultimate reliability. Threshold reliability is the key to admissibility, while ultimate reliability and weight are matters to decide only once the evidence has been admitted. In assessing threshold reliability, the analysis of the circumstantial guarantees of trustworthiness surrounding the making of the statement must be confined to the statement itself. The statement must relate "to a present existing state of mind and must appear to have been made in a natural manner and not under circumstances of suspicion".
[61] In my opinion, Santangelo's statements do not satisfy the test of threshold reliability. They were all made after Santangelo was apprised of the Plaintiffs' allegations of wrongdoing. The possibility of concoction or concealment cannot be ignored. Moreover, Santangelo's statements on the telephone with Sutherland were mostly self-serving, without any apparent admissions against interest. There must be a foundation of trustworthiness to support the statements if they are to be ruled admissible and that element has not been established by the Defendants. In any event, I am not satisfied that the Defendants met the requirement of necessity. Although Santangelo's testimony is lost, the Defendants had the ability to establish the relevant facts through the evidence of the Sutherlands and Callen. In the circumstances, Santangelo's recorded statements are inadmissible and will not be taken into account.
[62] The Plaintiffs had the difficult burden of establishing, on a balance of probabilities, that they were the effective cause of the sale by the Defendants to Santangelo. The trial was complicated by often conflicting and sometimes dubious evidence of the witnesses. Ultimately, this case comes down to question of credibility.
[63] There is no dispute that Callen and Santangelo were close friends and had an ongoing relationship until Santangelo's death in 1997. It appears that Callen and Santangelo were both interested in buying a boat and were actively searching for one in 1996. Although the reason they needed a boat was not disclosed, I conclude that it was probably for the purpose of trafficking in drugs.
[64] The evidence reveals that Callen and Santangelo both learned at the same time that the "STRICTLY BUSINESS" was for sale. Evidently, a decision was made by one or both of them that Callen would attempt to buy the boat. The fact that Callen misrepresented his identity to Blanchet and instructed his wife to make an offer using an alias suggests to me that Callen was intent from the start to conceal his involvement in the transaction.
[65] Callen claims that he wanted nothing more to do with the vessel in June 1996 because of a general distrust of Blanchet. I am not at all satisfied that this was the case. Blanchet was clearly dealing with two unyielding parties who ultimately were unwilling to move from their positions. It was simply not in his interest to alienate his client or the prospective purchaser or to do anything that would sabotage the deal. It is more likely that Callen decided to back away from the purchase when he discovered that Blanchet was formerly a police officer.
[66] Despite Callen's denials, I am satisfied that he directed Santangelo to purchase the vessel on his behalf using Santangelo's name. His coy response that he "left it" with Santangelo leaves no doubt in my mind that Callen was delegating the task of purchasing the vessel to his friend and associate. It is also apparent that Santangelo obtained the name and coordinates of the owner, Sutherland, from Callen. No other reasonable explanation was provided as to how Santangelo could have come about this information.
[67] Santangelo's lack of familiarity with boats, Callen's exclusive possession of the vessel and Callen's admission in a statement read into criminal court that he "purchased" the vessel only serve to confirm the obvious - Santangelo was nothing more than a front for Callen.
[68] The more difficult question is whether Sutherland was an innocent pawn of these two con men, or whether he knew or ought to have known of their association when he had his company complete the sale to Santangelo. I conclude that Sutherland was likely aware of the relationship between Callen and Santangelo when the sale was completed or, at the very least, willfully blind to it.
[69] Sutherland's credibility was seriously undermined by the implausible explanations he provided for terminating the listing agreement and for proceeding with the sale to Santangelo. I was particularly troubled by the explanation given by Sutherland, which was repeated by his wife, for the pressing decision to sell the vessel in August 1996. I do not accept that circumstances changed so dramatically in one month that Sutherland would somehow feel compelled to sell the vessel at a price $65,000 lower than previously offered and refused.
[70] Why the urgency to sell at that point ? Just three weeks earlier, Sutherland was content to wait until the following year to sell the vessel to an acquaintance. The excuse of imminent and significant expenses was too convenient and struck me as contrived.
[71] Further, why didn't Sutherland go back to Blanchet to see whether the Callens were still interested in the vessel or whether there were other prospects ? Surely, he could have swallowed his pride and made the inquiry.
[72] I am also skeptical about Sutherland's reasons for terminating the agreement in mid-July 1996. Sutherland claims that one of the reasons for ending the relationship was that he was uneasy with Blanchet for proposing that there be a cash sale. Yet, ironically, one month later Sutherland proceeds to sell the vessel for cash handed to him in a brown paper bag. I find that Sutherland had already made up his mind to sell the vessel himself and save on commission when he terminated the listing agreement and that Clift's Marine's performance and Blanchet's conduct had nothing to do with his decision.
[73] The Sutherlands say that they became concerned after receiving a phone call from Santangelo so close to the expiration date of the listing agreement and therefore arranged to have him sign a statement disavowing knowledge of Clift's Marine. In my view, the steps taken by the Sutherlands to satisfy themselves that Santangelo was not a client of Clift's Marine were insufficient in the circumstances. I find it surprising that the Sutherlands would simply accept the word of a stranger that he heard about the boat from a used car salesman. Santangelo's explanation was so vague that it ought to have raised a red flag. At a minimum, the Defendants ought to have checked with the Plaintiffs to satisfy themselves that Santangelo was not a client of theirs. In addition, the Sutherlands should have asked Santangelo whether he knew the "Allens" in light of their recent involvement.
[74] I am simply not satisfied that the Sutherlands have been truthful about their dealings with Santangelo. I find that they either knew or were willfully blind to the fact that Callen was behind the offer made by Santangelo. Based on the evidence before me and the inferences I have drawn from that evidence, I conclude that the Plaintiffs were the proximate cause of the sale of the vessel by Moorco and that the sale was completed within the 90 day protection period for introduced purchasers. The Defendants are in my view jointly and severally liable to the Plaintiffs because of their improper actions meant to deprive the Plaintiffs of their rightful commission.
[75] In light of the above findings, I need not determine when notice of termination of the listing agreement was effective. For the sake of completeness, I conclude that the Plaintiffs ought not benefit from their failure to provide formal notice of the assignment of the agreement. The notice of termination would have been communicated on July 15, 1996 had it not been for the change in area codes.
[76] As for the quantum of damages, the Plaintiffs are entitled under the contract to a 10% commission of the purchase price of the vessel from the Defendant Moorco. I am not satisfied however that the sale to Santangelo truly reflects the consideration paid for the vessel since the transaction was carried out in cash in suspicious circumstances. I would therefore award damages equivalent to a commission of 10% of the arm's length amount offered by the Callens and refused by the Defendants.
Conclusion
[77] For the above reasons, the action is allowed as against both Defendants. The Plaintiffs shall have judgment in the amount of $20,800, plus interest from June 1996 to present. The Plaintiffs shall submit concise written submissions on the question of costs within 5 days of the date of these reasons. A formal judgment consistent with these reasons shall issue once the Defendants have been afforded a reasonable opportunity to respond.
"Roger R. Lafrenière"
Prothonotary
Toronto, Ontario
December 12, 2001
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
COURT NO: T-2202-96
STYLE OF CAUSE: CLIFT'S MARINE SALES (1992) LTD.
and 706930 ONTARIO LTD.
Plaintiffs
- and -
MOORCO INCORPORATED, LESLIE SUTHERLAND, KERI ALLEN, also known as KERI CALLEN, also known as KERI-LYNN CALLEN, SEAN ALLEN, also known as SEAN CALLEN, 1037542 ONTARIO LIMITED, ANGELO SANTANGELO, CLIFT'S MARINE SALES INC., And The Owners andall others interested in The Ship "STRICTLY BUSINESS" and The Owners and all others interested in The Proceeds of Sale of the Ship "STRICTLY BUSINESS"
Defendants
DATE OF HEARING: TUESDAY, DECEMBER 5, 2000, AND
WEDNESDAY, DECEMBER 6, 2000
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR JUDGMENT BY: LAFRENIÈRE P.
DATED: WEDNESDAY, DECEMBER 12, 2001
APPEARANCES: Mr. William M. Sharpe
For the Plaintiffs
Mr. Nigel H. Frawley
For the Defendants
Page: 2
SOLICITORS OF RECORD: William M. Sharpe
Barrister & Solicitor
Box 1225
Ste. 304
1644 Bayview Avenue
Toronto, Ontario
M4G 3C2
For the Plaintiffs
Borden Ladner Gervais LLP
Barristers & Solicitors
Scotia Plaza
40 King Street West
Toronto, Ontario
M5H 3Y4
For the Defendants
FEDERAL COURT OF CANADA
Date: 20011212
Docket: T-2202-96
Between:
CLIFT'S MARINE SALES (1992) LTD.
and 706930 ONTARIO LTD.
Plaintiffs
- and -
MOORCO INCORPORATED, LESLIE SUTHERLAND, KERI ALLEN, also known as KERI CALLEN, also known as KERI-LYNN CALLEN, SEAN ALLEN, also known as SEAN CALLEN, 1037542 ONTARIO LIMITED, ANGELO SANTANGELO, CLIFT'S MARINE SALES INC., And The Owners andall others interested in The Ship "STRICTLY BUSINESS" and The Owners and all others interested in The Proceeds of Sale of the Ship "STRICTLY BUSINESS"
Defendants
REASONS FOR JUDGMENT