Warning issued as legal disputes over commission crank up

The director of Twomey Dispute Lawyers, Ben Twomey, said these types of commission disputes typically arise between a seller and an agent where there is an open listing and a lengthy process — and it’s an issue that “does seem to arise fairly often”.

While an agent will argue they were the effective cause of sale, the lawyer conceded that “being the effective cause of sale isn’t as simple as the agent introducing the buyer to the property”.

Instead, “the agent needs to show they were instrumental in bringing about the deal”.

Illustrating his point, Mr Twomey cited a case his firm had conducted for Gold Coast commercial agent Joseph Codianni, of Real Commercial Qld, just last year.

The case was brought against property seller Preetpal “Mick” Singh in the Southport Magistrates Court in 2019.

Mr Singh had refused to pay Mr Codianni $100,000 in commission for his involvement in the sale of Mr Singh’s commercial property at 35 Dominions Rd, Ashmore, to Imagine Education director Bill Adler for $3.2 million in September 2018.

Prior to the sale — and when Mr Codianni was the exclusive selling agent — two contracts to buy the property for $3.2 million were signed between Mr Adler’s company, Stonehaven, and Mr Singh.

However, both of these contracts were terminated due to the fact that Mr Adler’s company, Stonehaven, was unable to obtain finance.

Mr Codianni claimed that it was his idea to put in place an agreement for Imagine Education and Stonehaven to lease the property for five years, with Stonehaven given an option until 31 May 2019 to buy the property on the same terms as one of the previous contracts.

In September 2018, Stonehaven exercised the option and bought the Ashmore property for $3.2 million.

But, Mr Singh refused to pay Mr Codianni a commission, instead claiming that the agent was not the effective cause of sale because the transaction was a result of a call option deed drawn up by his solicitors and Stonehaven’s. He also went on to allege that it was a senior director with CBRE who had introduced him to Mr Adler when Mr Alder was looking to lease the subject property.

Despite Mr Singh’s claims to the alternative, Magistrate Grace Kahlert ruled in Mr Codianni’s favour, stating that the call option deed drawn up by solicitors for the defendant and Mr Adler did not negate Mr Codianni’s role as the effective cause of sale.

In her judgment, which was handed down in July 2021, Magistrate Kahlert said: “The efforts of Mr Codianni to get Mr Adler ... to offer to buy the property from the defendant for $3,200,000 flowed through such that he was in a real sense a significant and substantial cause of the ultimate sale in September, 2018.” 

Mr Codianni was awarded $100,000 plus interest (a total of $113,821) as a result of the judgment, but the commercial agent said it wasn’t about the money.

Having fought the case over a four-year period, the commercial agent said he had followed through with it “purely out of principal” — especially given the case ended up costing him $135,000 — upwards of the $100,00 commission he was owed.

“I wanted to send a message to the minority of wealthy sellers who don’t pay agents for a job well done in the knowledge that most agents or agencies are reluctant to enter a lengthy and costly court battle,” he shared.

“I was able to present the court with a significant amount of documented evidence that clearly showed I was entitled to the commission I was seeking.”

He acknowledged how “real estate agents run the only businesses that work effectively for free until a property sells and settles”.

“After putting in enormous amounts of my effort, expertise, and time, I wasn’t prepared to walk away,” he explained, noting that he had achieved a price for Mr Singh’s property of $500,000 over valuation plus an approximate additional $400,000 in rental income until settlement was reached.

Mr Codianni said the case was a “gamble” as he wasn’t sure if Mr Singh had the assets to pay him at the start.

“He bet that I would give up and walk away but he was wrong,” Mr Codianni said.

According to Mr Twomey, cases such as Mr Codianni’s will become more common in the current market — something he has chalked up to properties taking longer to sell.

His advice to agents? Document as much of the sale process as possible.

“When you’re alleging that you were the effective cause of sale, you need to give a chronology of all you did that contributed to the sale being brought about,” he said.

“You need to keep a chronology of everything that happened. Make detailed notes and have as much of it documented as you can.”

He added that “generally speaking, the law recognises that our memories aren’t perfect and if you’ve got a hotly contested case, you want to have as much stuff in writing as you possibly can”.

In Mr Codianni’s case, there was plenty of documentation to support his stance that he was owed commission: “What the court held was that without Joseph there was no deal,” he said.

“Joseph did a really good job. When the contracts fell through in the first few months, he put other options on the table such as the lease and call option deed, that led to the sale.”

Calling it “a resounding victory”, the lawyer concluded that the judgment reflected that documentation process.