An exclusive agent appointed to a development project has won commission from the developer on all of its sales notwithstanding that most contracts were validly terminated due to a missed Sunset Date.
Northwalker Realty Pty Ltd was appointed by developer TFM in February 2016 to market 106 apartments in its two-tower Xanadu project in Wolli Creek, in Sydney’s south.
The strata plan was not registered until July 2021, after the “Sunset Date” under each contract.
Only 6 of the 30 off-the-plan contracts signed up by Yvonne Liu – the agency’s owner – proceeded to completion.
Of the remaining 24 sales, 19 were rescinded by their buyers notifying termination pursuant to the sunset clause; and 5 were rescinded by mutual agreement with the developer.
Liu had secured the exclusive appointment ending in October 2018 on a 5.5% commission with 2.2% of that payable “on exchange” and the balance on settlement.
She established display suites and prepared marketing materials for an online and print advertising campaign spending $146k for which she claimed reimbursement.
TFM exercised its right to extend the Sunset Date on the grounds specified in the relevant clause, by 12 months to the end of June 2020. It then sought its buyers’ agreement to a further 12-month extension.
Of the 19 buyers who rescinded their deals, 9 had a Sunset Date of June 2020 and 10 had June 2021.
Liu sued for commissions on all 30 contracts, not just the 6 that completed.
Because the agency appointment specified that commission will be payable should the seller release a buyer from a contract, TFM’s opposition to the claim was mainly directed to that in respect of the 19 contracts that had been rescinded.
Liu alleged that all 19 rescissions were as a result of the developer’s delay by failing to “use its best endeavours” – as it agreed in each contract to do – to achieve registration of the strata plan before the Sunset Date applicable to each contract.
She further relied on the express term in the agency appointment that required commission to be paid “if the sale is not completed owing to the default of the Principal after the parties have entered into a binding contract”.
When the matter came before the NSW Supreme Court, Justice Mark Richmond had to consider first whether the appointment was in respect of the entire project – as a single parcel – or for the sale of individual apartments.
That issue – which arose because the appointment defined the “Property” by reference to its address and did not refer to the 106 units to be constructed – was decided in the agent’s favour having regard to all of the circumstances the sales the agent in fact made.
It transpired that the reason for the developer’s delay in completion of the project was substantially due to its inability to meet obligations to its financiers. There was also an unexplained delay of approximately 208 days from March 2017 to October 2017 and another of 188 days from August 2018 to March 2019.
Did these events constitute a failure on the developer’s part to “use its best endeavours” vis a vis its buyers to complete the build and secure registration of the project on time?
And if so, did that entitle the agent to commission because – having regard to the agency appointment – each buyer’s rescission had been “owing to the default” of the vendor?
The court answered the first question by concluding that TFM failed to use reasonable endeavours to achieve registration by each Sunset Date.
“Absent evidence from TFM to explain these delays, it is reasonable to attribute responsibility to TFM given that the engagement of a builder was a matter within TFM’s control and a necessary step to take to achieve registration by the Sunset Date”.
“I conclude that it is more likely than not that had TFM used all reasonable endeavours to promptly construct the building and register the strata plan, the strata plan would have been registered by 30 June 2020”.
As to the second question, it noted that where an agency agreement is silent regarding what is to occur if the contract is not completed, it is implied that the agent will only be entitled to its commission if non-completion is due to the default of the vendor.
The same answer was forthcoming. The developer had been a “default” in this instance because it had failed to do something – use its best endeavours to progress the project – that it had a duty or obligation to do.
Agent Liu recovered the entire commission on all 30 contracts and was awarded reimbursement of her expenses of $146k.
Judgment was given in the amount of $1.5 million.
Northwalker Realty Pty Ltd v TFM Chatswood Land Pty Ltd (No 2) [2022] NSWSC 1409 Richmond J 27 October 2022 Read case
