Québec – industry association’s arbitration bylaw binds only members, allows litigation against non-members – #139

In Hypotheca Courtier hypothécaire SSM Inc. v. Re/Max Imagine Inc., 2018 QCCQ 7956, Mr. Justice J. Sébastien Vaillancourt of the Court of Québec summarily dismissed a defendant’s objection to his jurisdiction, holding that the clear wording of an arbitration bylaw adopted by the Québec Federation of Real Estate Boards (the “Federation”) bound only its members. Members were still free to initiate court proceedings against non-members for disputes otherwise covered by the arbitration procedure. The detailed arbitration procedure also stated that any decisions issuing from the arbitration procedure were not to serve as precedents.

Hypotheca Courtier Hypothécaire S.S.M. Inc. (“Hypotheca”), a real estate and mortgage broker, sued two (2) real estate brokers, Re/Max Imagine Inc. (“Imagine”) and Royal Lepage Triomphe (“Triomphe”), as well as a real estate buyer for Hypotheca’s fee allegedly due as a percentage of the value of real estate purchased by the buyer through Imagine and Triomphe.

Hypotheca had a signed, exclusive agreement with the buyer to find real estate and to arrange a mortgage, in exchange for the fee. Despite having found real estate suitable for purchase and despite an accepted offer and successful inspection, Hypotheca was unsuccessful in finding a mortgage for the buyer. Faced with Hypotheca’s declared inability to find a mortgage for him, the buyer announced he was no longer interested in the real estate. A few months later, Hypotheca learned that the buyer had gone through with the purchase of the same real estate at a similar price supported by a mortgage negotiated through Imagine and Triomphe. Despite Hypotheca’s demands for payment, Imagine and Triomphe refused to pay Hypotheca its fee and Hypotheca instituted litigation in Court of Québec.

Triomphe defended the action, asserting that the Court of Québec had no jurisdiction because the Federation’s Bylaw on arbitration.

Vaillancourt J.C.Q. summarily dismissed Triomphe’s objection. He agreed that the Federation had adopted an internal bylaw, called the “Conciliation and Arbitration Bylaw” (the “Bylaw”).

The stated intention of the Bylaw appears at section 1.4:

1.4 The intention of this Bylaw is to ensure that disputes between members be dealt with on the basis of the criteria established for the real estate brokerage industry as a whole and that they be judged by an arbitration council that is familiar with the ways and customs of real estate brokerage, while respecting the rules set forth in Book VII of the Code of Civil Procedure (dealing with arbitration).

Though the Bylaw’s stated intention is to apply criteria established for the industry and that decision makers be familiar with the “ways and customs”, the Bylaw expressly eliminates any anticipated role of the arbitration awards as precedents: “7.15 The arbitration decision does not constitute a precedent.”

The Bylaw did not apply to all disputes between all real estate brokers. The Federation limited the Bylaw’s application to members of the Federation (referred to by its acronym “QFREB” in the English version or “FCIQ” in the French version):

1.1 All members of the Federation agree to be bound by the terms of the present Bylaw.

1.2 The present Bylaw shall apply to any dispute between the following QFREB members:

a) between real estate agencies;
b) or between real estate agencies and brokers acting on their own account as defined in the Real Estate Brokerage Act (L.R.Q., c. C-73.2);
c) or between brokers belonging to the same real estate agency;
d) or between brokers acting on their own account; Brokers involved in a dispute must be members on the date of the brokerage operation that is the subject of the dispute.

1.3 The present Bylaw applies to any dispute between a broker and his/her real estate agency, upon written consent by the two (2) parties.

Because Triomphe was not a member of the Federation, the Bylaw did not bind it and Vaillancourt J.C.Q. dismissed Triomphe’s objection.

Vaillancourt J.C.Q. amplified the clear wording of the Bylaw by citing Mtre. Alexandre Dumas’ “Le droit du courtage immobilier au Québec, Droits et Obligations des courtiers immobiliers, des Agences et de leurs dirigeants”, Wilson & Lafleur, 2017, at page 329 in which the author reiterates that the Bylaw applies only to disputes between members. Mtre. Dumas noted that membership in the Federation was not obligatory and this situation would lead to different rules if and when disputes arose between members and non-members. While he acknowledged that arbitration was ‘always possible’, Mtre. Dumas noted that the Bylaw did not apply in such cases and the Superior Court and the Court of Québec retained their full jurisdiction.

On the merits, Vaillancout J.C.Q. dismissed Hypotheca’s action against each of Defendants. He noted that, among other facts, the buyer had committed no fault in sourcing an alternative solution once Hypotheca confirmed it was unable to deliver on its own obligations. No contract prevented the buyer from contacting another broker or obliged to pay Hypotheca a fee if and when he did buy the real estate.