Two recent cases in the District Court in Brisbane have highlighted how agents can lose out in situations where they would ordinarily receive substantial commission.
Yong International sold a 35 ha vacant land development site at Redbank Plains in 2006 $9 million but after its receipt of a number of payments, the seller purported to terminate. The buyer sued and a settlement was reached that resulted in the seller retaining the $300,000 already paid.
Yong naturally enough, then claimed its commission of $226,000 and sued when the seller refused to pay.
Unfortunately for Yong, it had failed to complete a section of the PAMDA form 22a and the seller alleged that as a result, there was no valid appointment and it was not entitled to any commission.
The section left blank by the agent was “how the service is to be performed”. One would think that this goes without saying in the case of the sale of vacant land but the court did not agree.
The District Court upheld* the seller’s argument that the 22a appointment was invalid*. It reviewed a number of cases where failure to fully complete PAMDA forms had been excused pursuant to s 49 of the Acts Interpretation Act which provides that substantial compliance in relation to prescribed forms may be “sufficient”.
The District court got support for its position from a 2007 Supreme Court decision that considered (but did not rule on) the very same point.
The court went on to deal with the second argument namely that even if the appointment had been valid, the payments made by the buyer were not a “deposit” in respect of which the agent would have been entitled to payment pursuant to the terms of the form 22a, if the settlement did not complete.
Of the $300,000 that had been paid by the buyer to the seller, only $10,000 was specified to be a “deposit”.
However because there was nothing in the settlement deed which – using the language of the form 22a – amounted to a “forfeiture” of the deposit and the settlement deed did not constitute a “termination by mutual agreement” – none of the payments made to the seller were ones that attached any liability on the part of the seller to pay commission.
Yong failed in its lawsuit and was ordered to pay the seller’s legal costs.
In the second case**, Savvy Business on the Sunshine Coast introduced buyers for the sale in 2009 of a business, “the Fruit Shed”, in respect of which it had an exclusive agency.
There was an oral agreement between the buyer and seller but it was inconclusive and before the deal could be signed up – and just after the expiration of the exclusive agency – the seller sold to a third-party.
The agents sued the seller alleging that there was an implied term because of the authorisation in the signed form 21a, that the seller would enter into a contract with the buyer introduced by the agent during the exclusive agency period.
The District Court on appeal from a magistrate’s court decision, affirmed that there is no obligation on the seller to enter into a contract with a buyer introduced by an agent, even if it is subject to exclusive agency arrangement.
“No commission unless there is a signed contract” was the applicable law and there is no implied agreement that the seller must refrain from steps that would prevent an agent earning commission in respect of the property.
* Yong International P/L v Gibbs [2010] QDC 423
** Russtar P/L v Hamilton [2010] QDC 419
0 Comments