Marketing surcharge good in theory but agent to stand trial for error in PAMDA disclosure
The District Court has validated the payment of hefty advertising and administration surcharges above maximum commission rates on Queensland residential real estate transactions but confirmed that even minor disclosure errors will face severe punishment.
In an Office of Fair Trading appeal – said to be “representative” of 38 separate 2003 transactions – the payment of an “administration fee” to a developer consultant was approved in principle but the court ruled the selling agent must stand trial for disclosure shortcomings in the PAMDA form 27c that was presented to buyers prior to contract execution.
The developer’s total sales and marketing outlay was – pursuant to its earlier “administration agreement” with the marketer – set at $15,000 for vacant lots and for house and land packages, $25,000.
The marketer’s own take, was the balance of this fixed sum after cutting a cheque to Gold Coast agent Cross Country Real Estate for standard commission. In one of the two transactions at issue, the marketer’s get was $7,000 and in the other, about $10,000.
When presenting the PAMDA document to the buyer, the agent disclosed its commission and a consultant’s fee but did not reveal the identity of the consultant, which was an associate company, Park Trent Investments P/L.
Even though the non-disclosure of Park Trent’s identity was to conform with a confidentiality provision in the administration agreement, according to the appeal court, the failure to identify the company by name was fatal to the proper performance of the agent’s obligation.
Given that the relevant PAMDA section specified disclosure to only be effective if given in the approved form, the court held “the identity of the developer’s consultant must be apparent from the form itself” and not something a buyer has to ascertain when the form is compared to other documents or information.
Neither did the form accurately articulate how the marketer’s cut was arrived at.
Rather, the form 27c listed – somewhat obtusely – six different functions ranging from database management to public relations, the performance of each of which qualified the consultant to receive 1.5% of the sale price up to a maximum of 9%.
Unfortunately, this methodology bore no relationship to the formula in the developer–marketer agreement as described above.
Thus “there was no way that the prospective buyer could arrive at a realistic approximation of the benefit Park Trent expected to receive using their formula disclosed in the form 27c”.
The court ordered that the agent’s prosecution for the PAMDA alleged offences in the Southport Magistrates Court – which Cross Country sucessfully defended the first time round - be repeated within the next few months.
This was Cross Country’s second appeal, the first being in August 2006 when it unsuccessfully argued that the charges should be struck out because they were “out of time”.