In an earlier news article, we discussed the risks of sellers blindly signing agent’s appointments which often incorporate provisions requiring the seller to pay commission on sales which have not settled.  The REIQ standard terms for agent’s appointments contain that quite hazardous obligation, together with other provisions which might excite the interest of the seller’s lawyer if the seller thought to take advice before signing the Form 6.

A particularly vivid demonstration on this occurred in the matter of Trappando Pty Ltd v Sunshine Group Pty Ltd [2023] QSC 87 in which the seller was found liable to pay their agent’s commission in the sum of $1,650,000 for a sale:

  • that did not settle;
  • where the deposit in its entirety was less than $750,000.

Briefly, the circumstances were that the agent was appointed by the Defendant by a Form 6 appointment, which relevantly provided that the commission would be (where there was a sale price over $6,300,001 plus GST), the amount of the sale price over $6M plus GST. 

The appointment went on to include the usual REIQ standard terms which provide that commission is payable:

  • if the contract settles;
  • if the contract is terminated because of the buyer’s default;
  • if the contract does not settle and any part of the deposit is liable to be forfeited (paid) to the seller;
  • the contract is terminated by the mutual agreement between the seller and the buyer.

The agent introduced a buyer at a contract price of $7,500,000.  Under the terms of that contract, a deposit of $750,000 was paid.

The seller terminated the contract, claiming to be entitled to the deposit of $750,000.  The agent claimed to be entitled to commission being $1,650,000.

The obvious outcome is that the agent was claiming commission some $900,000 in excess of the deposit. 

Ignoring for the time being the question of whether or not the seller could sue the buyer for that $900,000 as damages for breach of contract (there being some question in our mind about that given that the terms of the agent’s appointment were quite unusual), the buyer was put into external management and remained so, with at least some likelihood that there would be difficulties in any attempt to recover against it, and the result that the seller could well be $900,000 out of pocket for sale that did not proceed.

The seller appealed the decision, but was unsuccessful yet again, failing to disturb the order that it paid the entirety of the commission. 

This decision reflects the risks of signing Form 6 appointments to act which allow the agent to be paid commission in circumstances other than the settlement of the contract.  It also demonstrates the risks of a significant success fee being built into the agent’s commission, in those circumstances.

For advice in relation to agent appointments, please contact our property lawyers Peter Muller at peterm@qbmlaw.com.au and Jessica Murray at jessicam@qbmlaw.com