Agents' entitlement to commission and more than one effective cause of sale

In the recent Queensland District Court decision of Podium Project Marketing Pty Ltd v B Global (Aust) Pty Ltd [2024] QDC 219, the District Court of Queensland examined a real estate agent’s entitlement to its commission in circumstances where it was engaged to sell residential lots in a development on the basis of an open listing and had engaged various entities to act as sub-agents to identify and secure buyers.

Background

In this matter, defendant property developer appointed the plaintiff sales agent as its non-exclusive agent for the sale of 60 lots in a development pursuant to three Property Occupations Form 6 Appointments (the Form 6s).  Pursuant to the Form 6s, the agent was appointed on a continuing basis and the commission for the sale of each lot was $40,000 plus GST, 50% of which was payable when a sale contract became unconditional and 50% at settlement. 

Each appointment was on the basis of an open listing of the lots, described as follows:

            When you must pay the agent

            The agent is entitled to the agreed commission if the agent is the effective cause of sale.

            When you don’t have to pay the agent

If the client sells the property privately and the agent is not the effective cause of sale ie: purchaser did not contact the agent, did not attend open house inspections etc.

The first and second Form 6s did not authorise the agent to appoint sub-agents to assist it to identify buyers.  However, the third Form 6 included an express term to this effect. 

The agent engaged various entities to act as sub-agents who identified buyers for 33 of the 60 lots.  The identification of these buyers by the sub-agents resulted in the developer entering into sales contracts for those lots. 

The developer admitted that it knew the agent would use sub-agents to locate buyers of lots in the development and it did not object to this process. 

The agent issued proceedings against the developer seeking payment of commissions it alleged were owed to it by the developer. In turn, the developer issued a counterclaim against the agent for the return of commissions that it had already paid to the agent on two grounds: firstly, that the agent was not the effective cause of the sales and secondly, the agent was not entitled to claim or retain commissions on sales because the individual salespersons who located buyers and were the effective causes of sale were not licensed real estate agents, nor employees of such an agent who were registered as real estate salespersons.      

Issues to be considered at trial

The parties agreed on the issues requiring determination as follows:

1. As a matter of law, what is required for a party to be the effective cause of sale?
2. Whether the agent was the effective cause of sale irrespective of the authorisation, ratification or acquiescence of the sub-agents involved in the sale.
3. Whether the developer authorised, ratified or acquiesced to the agent’s use of sub-agents.
4. Whether the authorisation of the use of sub-agents was subject to the sub-agents or their salespersons being lawfully entitled to sell property and claim commissions in Queensland.
5. Whether the agent was the effective cause of sale, having regard to the answers to the above issues.
6. Whether, under sections 55 and 89 of the Property Occupations Act 2014 (Qld) (the Act), the agent is not entitled to claim the commissions because of the lack of registration or licensing of individual salespersons.
7. Whether the agent is required to refund the commissions already paid to it by the operation of the POA (sections 55 and 89) by reason of the lack of registration or licensing of individual salespersons.

What is required for a party to be the effective cause of sale?

In deciding whether the agent was the effective cause of sale, the Court referred to authorities which demonstrated that an agent may be the effective cause of sale whether it is the sole cause of the sale or an effective cause of sale, among other causes.

In LJ Hooker Ltd v Adams Estates Pty Ltd, [1] Jacobs J said: [2]

“Effective cause” means more than simply “cause”. The inquiry is whether the actions of the agent really brought about the relation of buyer and seller and it is seldom conclusive that there were other events which could each be described as a cause of the ensuing sale. The factual inquiry is whether a sale is really brought about by the act of the agent.

The Court said that, whether either or both agents involved with a potential sale was an effective cause of sale cannot be determined by simply comparing the amount of work done by each agent.  Rather, the work done by each agent must be considered in the process of evaluating all of the circumstances which may have had some causal relationship with the sale. [3]

Did the developer authorise or acquiesce the appointment of sub-agents?

The Court found that the developer authorised, impliedly or by acquiescence, the agent’s use of sub-agents to secure contracts for the sale of the lots the subject of the first and second Form 6s in circumstances where the developer knew prior to the first appointment of the agent that it intended to use sub-agents to assist it to find buyers and secure contracts of sale, and expressly authorised the use of sub-agents in the third Form 6. [4]

Was authorisation conditional upon the sub-agents or their salespersons being lawfully entitled to sell property and claim commissions in Queensland?

The Court found that it was not a condition of the Form 6s that salespersons engaged by the agent’s sub-agents hold a real estate agent’s license or registration certificate as a real estate salesperson in circumstances where:

1. such a condition was not an express term of the Form 6s;
2. that a salesperson who introduced a buyer was not registered would not automatically enable a buyer to cancel a contract of sale; and
3. it was not necessary, in order to give business efficacy to the Form 6s, that such a term be implied into those contracts. [5]

Was the agent the effective cause of sale?

In this instance, the Court found that the agent was the effective cause of each of the sales in circumstances where it provided details of the development and the lots to its sub-agents, set up its website so that documents could be (and were required to be) lodged online, and liaised between its sub-agents and the developer. [6] The Court said that the fact that the buyers were located by the sub-agents (which were consequently themselves also effective causes of the sales) does not mean that the agent was not also an effective cause of the sales. [7]

Does s 89 of the Act preclude recovery or retention of commissions?

Section 89(1) of the Act provides that a person is not entitled to sue for, recover or keep a reward or expense for the performance of an activity as a property agent unless, at the time the activity was performed, the person:

1. either:
   1. if the person performed an activity as a property agent — held a property agent licence; or
   2. …; and
2. was authorised under the person’s licence to perform the activity; and
3. was properly appointed under part 4 by the person to be charged with the reward or expense.

The Court found that section 89 does not prohibit the payment of commissions to a person where any activities leading to a sale were performed by another person, whether or not employed by the first person, who was not, at the time of performing the activities, the holder of a property agent’s licence or a salesperson’s registration certificate. [8] Accordingly, the agent was entitled to recover and keep the commissions payable to it by the developer for its activities in securing buyers of the relevant lots. [9]

Conclusion

In accordance with the above, the Court held that the agent was entitled to recover and/or keep its commissions in relation to the sales of the relevant lots. [10] The developer’s counterclaim for the recovery of the commissions paid to the agent was dismissed. The developer was ordered to pay the agent’s costs plus interest on the judgment sum.

The Courts will closely examine the role agents perform in sale transactions to determine whether they are the effective cause of sale and entitled to commission. As this case demonstrates, an agent may be regarded as the effective cause of sale in circumstances where it has not sourced or had any direct contact with the buyer, but its actions have constituted a causal link between the seller and buyer.

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