Warren Jack Property Broker CC t/a Warren Jack Property Group and Another v Venter (CA 156/2011) [2012] ZAECGHC 59 (27 July 2012)

IN THE HIGH COURT OF SOUTH AFRICA NOT REPORTABLE

EASTERN CAPE, GRAHAMSTOWN

Case No.: CA156/2011

Date Heard: 18 June 2012

Date Delivered: 27 July 2012

In the matter between:

WARREN JACK PROPERTY BROKERS CC t/a

WARREN JACK PROPERTY GROU...First Appellant (First Defendant a quo)

BARRY WOOD …....................Second Appellant (Second Defendant a quo)

and

RODNEY DAVID VENTER …....Respondent/Cross-Appellant (Plaintiff a quo)

JUDGMENT

EKSTEEN J:

[1] This is an appeal which concerns the payment of money in terms of the Estate Agency Affairs Act 112 of 1976, as amended (herein referred to as “the Act”). The respondent was employed by the first appellant, an estate agent, from approximately October 2006 to March 2008. There is some dispute in respect of the exact status of the respondent, however, the respondent alleges that he was employed as a “candidate estate agent entitled to earn commission.” It is common cause between the parties that at all times material hereto he was not possessed of a fidelity fund certificate issued by the Estate Agency Affairs Board (herein referred to as “the Board”) in terms of the Act.

[2] The respondent alleges that it was a material term of his contract of employment that he would be entitled to 50% of all commissions received by the first appellant in respect of property transactions successfully facilitated by the respondent for and on behalf of the first appellant.

[3] Subsequent to his employment with the first appellant the respondent entered into a further agreement (herein referred to as “the arrangement”) with the second appellant. It is not in dispute that the second appellant was a duly registered estate agent in the employ of the first appellant and possessed at all times material hereto of a valid fidelity fund certificate issued by the Board. The respondent alleges that the second appellant was employed on identical terms as to remuneration to that concluded between the first appellant and the respondent and which is set out above.

[4] In terms of the arrangement the second appellant and the respondent would, from the date of their agreement forth, share all commissions payable to either of them by the first appellant in respect of property transactions successfully facilitated by either of them on behalf of the first appellant. The respondent contends further that the first appellant was aware of the arrangement with the second appellant and gave effect to the arrangement by splitting the commissions which fell due from time to time to either the respondent or the second appellant. He contends accordingly that the first appellant became party to the agreement.

[5] In his evidence the respondent refers to the arrangement as a partnership and explains that he and second appellant worked together. It is not necessary for purposes hereof to decide whether the arrangement in fact constituted a partnership in legal terms. They met at the office each morning where they worked through all leads and documents at their disposal and from there they planned their day. He says that initially they travelled together meeting their various appointments with clients, listing new properties and generally pursuing their business as estate agents. Later on, he says, in order to maximise their efforts, they resolved to work separately during the day, still within the arrangement, each working on different deals to the other, thus earning more money. In cross-examination he summarised the position as follows: “Well Barry and I started a partnership in November 2006 and it was agreed as that partnership that whatever we brought to the pot, whatever we worked on independently or together, would be

split equally” (sic).

[6] In due course the relationship between the second appellant and the respondent soured and they agreed to terminate the arrangement (herein referred to as “the termination agreement”). There is some dispute as to the date and the terms of the termination agreement. On either version, however, the parties agreed that despite the termination of their arrangement they would continue to share commissions in respect of certain transactions not yet concluded and which they had worked on during the subsistence of the arrangement.

[7] In due course the respondent issued summons against the appellants in which he claimed that certain commissions due to him have not been paid to him. The claim relates to three property transactions to which I shall refer as the Aspen transaction, the Komatsu transaction and the Max 4 transaction respectively. Save to the extent set out later herein, the particulars of the individual transactions are not material to this judgment. Suffice it to say that each claim relates to the payment of estate agents commission. In respect of the Aspen transaction and the Komatsu transaction the respondent contends that they were covered by the termination agreement and that 50% of the commission payable in respect of these transactions accrued to the first appellant whilst he and the second appellant each became entitled to one half of the remaining 50% in accordance with the arrangement. He contends in respect of the Max 4 transaction that the commission received was indeed split in this manner, however, the respondent contends that this transaction falls outside of the termination agreement and that he was the proximate cause of the transaction. He accordingly claims that the second appellant was not entitled to share in this commission and that he is entitled to 50% of the total commission.

[8] The court a quo held in favour of the respondent in respect of the Max 4 transaction and the Komatsu transaction and held against him in respect of the Aspen transaction. This gave rise to the appeal and the cross-appeal respectively, currently before us.

[9] On behalf of the appellants it was contended on the pleadings and at the trial that the respondent was precluded from enforcing any of his claims, whether resulting from the arrangement with the second appellant or otherwise by virtue of the provisions of section 34A of the Act. The court a quo dealt with this argument as follows:

“(6) Section 34A of the Estate Agency Affairs Act (the Act) states that no estate agent shall be entitled to any remuneration or other payment in respect of or arising from the performance of any act unless at the time of the performance of the act a valid fidelity fund certificate has been issued to such agent. The section is clearly meant by the Legislature to regulate the relations between the client and agent. In casu when First Defendant employed Plaintiff he was aware that he did not have a certificate. It could be the reason he suggested he work together with Second Defendant. First Defendant gave evidence acknowledging how Plaintiff had some expertise with regard to

property matters, this flowing from his experience of having worked with him previously. So, in essence, Plaintiff was working under him (First Defendant) as a principal, and not for his own account.

(7) The First Defendant’s company benefitted immensely from the contributions of Plaintiff. He (First Defendant) further testified that he introduced the Plaintiff to one Mr Denton, who was their client, and told him that Plaintiff would be handling their project on the company’s behalf. Effectively, Plaintiff was to engage Mr Denton as a representative of First Defendant. He did not as a candidate agent, work for his own account. At the conclusion of the deal, it was not the Plaintiff himself who was to receive payment from their client. Payment was made out to Warren Jack Property Brokers CC. It is so that First Defendant cannot make use of Plaintiff’s knowledge and experience to advance the business, and when he has to be remunerated, be heard to say that Plaintiff was still not in possession of the Fidelity Fund certificate. In my opinion, section 34A of the Act was never intended to regulate the working arrangements between individual agents.

[10] In the appeal before us the appellants persist in their stance. Mr Buchanan, on behalf of the respondent, argues, however, in line with the judgment of the court a quo, that it could never have been the intention of the Legislature that section 34A should apply to an agreement between agents inter se. This, it is argued, would, on the facts of this case, be unconscionable. The Act regulates the conduct of estate agents, so the argument goes, for the benefit of members of the public in order to protect them against unregistered agents.

[11] It is accordingly necessary to consider the terms of the Act. In the preamble to the Act the purpose of the legislation is stated as follows:

“To provide for the establishment of an Estate Agency Affairs Board and an Estate Agents Fidelity Fund: for the control of certain activities of estate agents in the public interest; and for incidental matters.”

It seems to me that, on a proper reading of the preamble, it declares merely that the Act intends to control certain activities of estate agents and to do so in the public interest. I do not think that this advances the debate materially.

[12] In the body of the Act provision is made for the establishment of the Board and for an estate agents fidelity fund. Section 16 of the Act provides for the issue of fidelity fund certificates to persons in the industry and for registration of estate agents with the Board. Section 26 of the Act then proceeds to stipulate:

“No person shall perform any act as an estate agent unless a valid fidelity fund certificate has been issued to him or her and to every person employed by him or her as an estate agent and, ...”

[13] “Estate agent” is defined in section 1 of the Act as follows:

‘”Estate agent” –

(a) means any person who for the acquisition of gain on his own account or in partnership, in any manner holds himself out as a person who, or directly or indirectly advertises that he, on the instructions of or on behalf of any other person –

sells or purchases or publicly exhibits for sale immovable property or any business undertaking or negotiates in connection therewith or canvasses or undertakes or offers to canvas a seller or purchaser therefor; or

lets or hires or publicly exhibits for hire immovable property or any business undertaking or negotiates in connection therewith or canvasses or undertakes or offers to canvas a lessee or lessor therefor; or

...

...

(b) ...

(c) for purposes of section ... 26, ... includes –

...

any person who is employed by an estate agent as defined in paragraph (a) and performs on his behalf any act referred to in subparagraph (i) or (ii) of the said paragraph.’

The respondent is a person as envisaged in paragraph (c)(ii). It is clear, I think, that for purposes of section 26 the respondent is therefore an estate agent within the definition if he performs any act referred to in paragraph (i) or (ii) of paragraph (a) of the definition (herein referred to as “acts of an estate agent”).

[14] In 1984 a Full Bench of the then Transvaal Provincial Division of the Supreme Court considered the import of section 26. It was there concluded that the section did not have the effect of invalidating the contract of mandate of an estate agent who acts in contravention of its terms (see Noragent Eiendoms Beperk v De Wet 1985 (1) SA 267 (T)).

[15] This conclusion led to the enactment in 1986 of section 34A which was at that time formulated somewhat differently to its present wording. It then provided as follows:

“Any person acting contrary to the provisions of section 26 shall not be entitled to remuneration in respect of a transaction concluded by him as an estate agent while failing to comply with the provisions of section 26.”

[16] The Supreme Court of Appeal had occasion to consider the import of section 26 of the Act as read with section 34A (then in its original form) in Ronstan Investments (Pty) Ltd and Another v Littlewood 2001 (3) SA 555 where Nugent AJA (as he then was), writing a unanimous judgment of the court, at 562C-D said:

“In terms of s 26 it is a distinct and separate condition for performing the acts of an estate agent that a valid fidelity fund certificate should have been issued to the person concerned. The consequence of contravening that section is that the person concerned is not

entitled to remuneration from the performance of the act, and he or she also commits an offence in terms of s 34.”

[17] It was there recognised that the penalty for the contravention of section 26 was a prohibition on the recovery of remuneration. The wording of section 34A, as it was first introduced, however, gave rise to certain unintended and inequitable consequences which led to the amendment of the formulation of section 34A in 1998. It now provides as follows:

‘(1) No estate agent shall be entitled to any remuneration or other payment in respect of or arising from the performance of any act referred to in subparagraph (i), (ii) ... of paragraph (a) of the definition of “estate agent” unless at the time of the performance of the act a valid fidelity fund certificate had been issued —

(a) to such estate agent; and

(2) No person referred to in paragraph (c)(ii) of the definition of “estate agent”, and no estate agent who employs such person, shall be entitled to any remuneration or other payment in respect of or arising from the performance by such person of any act referred to in that paragraph, unless at the time of the performance of the act a valid fidelity fund certificate has been issued to such person.’

The wording of the section in its revised form strikes far wider than the original formulation. Of particular significance to this matter is the fact that it is no longer restricted to “a transaction concluded by” the person acting in breach of section 26. I shall revert later to the interpretation of the section in its present form.

[18] The purpose of the amendment to section 34A was discussed by C J Nagel in the Tydskrif vir Suid-Afrikaanse Reg 2008 vol 4 in the Article “Eiendomsagent: Sonder getrouheidsfondssertifikaat dog nie sonder vergoeding” at p. 769 where at p. 773 he states as follows:

“As gevolg van die beslissing in die Noragent-saak is artikel 34A in 1986 by die Wet ingevoeg deur Wet 40 van 1986 (die Taljaard-saak para 3). Dit het aanvanklik net bepaal dat ‘n person wat strydig met die bepalings van artikel 26 optree nie op vergoeding geregtig is ten opsigte van ‘n transaksie wat hy as eiendomsagent beklink terwyl hy in versuim is om aan artikel 26 te voldoen nie. Die huidige bewoording van artikel 34A soos hierbo aangehaal, is deur Wet 90 van 1998 ingevoeg aangesien die oorspronklike bewoording die problematiese gevolg gehad het dat ‘n firma verbied is om kommissie te eis uithoofde van ‘n transaksie wat deur een van sy agente (wat wel oor ‘n sertifikaat beskik het) onderhandel is, maar een van die firma se ander agente (sommige firmas het groot aantal agente in diens) nie ‘n sertifikaat gehad het nie. Hierdie baie onbillike posisie is met die 1998-wysiging verander.”

[19] In Taljaard v TL Botha Properties [2008] ZASCA 38; 2008 (6) SA 207, to which the author Nagel refers, the Supreme Court of Appeal considered the purpose of the enactment of section 34A. Nugent JA, again in a unanimous judgment of that court, stated at 209C-E:

“...[i]t was not enacted for the benefit of clients who have incurred a contractual obligation to pay remuneration to an estate agent who has performed his or her mandate – I have already held that the contract giving rise to the obligation remains valid notwithstanding the breach of section 26 – but rather to penalise estate agents who have breached the section. An estate agent who claims remuneration in conflict with section 34A might expose himself or herself to criminal sanction, and will be prevented from enforcing his or her claim, ...”

[20] Accordingly, the mischief which section 34A seeks to address is not to protect members of the public against unregistered estate agents, on the contrary, such members of the public enjoy no protection as the contract giving rise to their obligation to pay commission is valid and where a member of the public, unaware of the estate agent’s default, has paid out the commission he is bound by his contract. He cannot reclaim his money (see Taljaard supra). The purpose of the section is “to penalise estate agents” who have breached section 26. That the respondent has breached section 26 is common cause. The penalty, the Supreme Court of Appeal said, is that “an estate agent who claims remuneration in conflict with section 34A ... will be prevented from enforcing his or her claim.” It is the enforcement of the right contracted for which is struck by the section. Section 34A prohibits an estate agent from claiming any remuneration or other payment in respect of the performance of any act of an estate agent. Section 34A(2) imposes the same penalty on an employee who has acted without a fidelity fund certificate.

[21] I can find nothing in the structure of the Act or in the wording of section 34A of the Act to support the conclusion that the Legislature intended by section 34A only to regulate the relations between the client and the agent as opposed to relations between estate agents inter se. The contrary is true. (See Taljaard supra.) It matters not what the relationship between the parties is, if an estate agent has breached the provisions of section 26, as the respondent has, he is, subject to what is set out below, precluded from enforcing a claim for payment in respect of the performance of the acts of an estate agent.

[22] The matter does not, however, end there. I have recorded earlier that paragraph (c)(ii) of the definition of estate agent finds application in order to determine whether the respondent is an estate agent for purposes of section 26. The said paragraph does not find application to “estate agent” in section 34A. In those circumstances I am satisfied that the respondent was not an estate agent for purposes of section 34A(1) of the Act. He was, however, an employee as envisaged in section 34A(2). It is accordingly necessary to consider whether the respondent’s claim falls within the ambit of the prohibition in section 34A(2).

[23] In respect of the respondent’s claim relating to the Max 4 transaction the respondent relies solely on his own work in performing the mandate as agent on behalf of first appellant. In those circumstances I think that his claim is clearly precluded by section 34A(2). I would accordingly allow the appeal in respect of this transaction.

[24] The Komatsu transaction relates to the conclusion of a five year lease agreement. At the hearing of the matter it ultimately became common cause that the Komatsu transaction fell within the scope of the termination agreement. The respondent contended that he was actively involved in the negotiation of this transaction in its initial stages. His evidence in this regard is recorded as follows:

“We’ll come back to that as well. Can we just deal with Komatsu, what was the Komatsu deal about? ... Komatsu deal Barry and I on numerous occasions went and met with Komatsu at their old premises in Deal Party, and again Barry and I met on numerous occasions with Ian Parker on their site where Komatsu today are. I spent quite a lot time running around, organising plans. Barry also was involved and then again when we split up, Barry said that he would continue to run with it. And on a few occasions, when we did bump into one another in the office, I asked him on a few occasions how it was going with Komatsu as well as with Aspen and he said he was busy dealing with them.”

[25] I think that this activity performed by the respondent falls within the functions envisaged in paragraph (a)(ii) of the definition of “estate agent”. For purposes of section 34A(2) the respondent’s claim arises, at least in part, from the performance by him of an act of an estate agent at a time when a valid fidelity fund certificate had not been issued to him. That being so I think he is precluded from claiming any remuneration or other payment in respect of or arising from the performance of these functions.

[26] In any event, the respondent’s claim as set out in the particulars of claim alleges that he was employed by first appellant on the basis that the respondent would be entitled to payment of 50% of all commissions in fact received by the first appellant in respect of property transactions successfully facilitated by the respondent for and on behalf of the first appellant. He would be entitled to such commission on the first day of the month following the month in which the commission was received.

[27] In its plea the second appellant pleads that the termination agreement provided for the continuation of the arrangement only in respect of transactions where payment of commission was in fact received by the first appellant from the client and paid to second appellant. It is pleaded further that no commission was received in respect of the Komatsu transaction nor paid to second appellant. No replication was forthcoming to these averments.

[28] On the pleadings therefore, on any version, the parties were agreed that the respondent would only become entitled to payment under the arrangement and the termination agreement when commissions had in fact been paid by the client at least to the first appellant. This position was confirmed by the respondent during cross-examination where he testified as follows:

“MR BEYLEVELD: Thank you M’Lady. Mr Venter, let’s start with, we can break up the three transactions, Komatsu. You have no evidence to dispute the contention by the defendants that no commission was ever paid in respect of any Komatsu deal? --- Correct.”

And later:

“MR BEYLEVELD: And the evidence will be if necessary, there never has been a payment in relation to Komatsu either from the principal which is Mr Parker or from, not the principal, the landlord or from the tenant which was Komatsu? --- As far as I am aware.

And we’re with each other that whatever commission you’re entitled to, you would only be entitled to if and when there had been a payment? --- Correct.

So can we leave Komatsu off the table for the purposes of our discussion? You must please respond. --- Yes.”

[29] Mr Buchanan, on behalf of the respondent, argues, however that the version which emerged from evidence of Mr Jack was that the client was not prepared to pay the full commission. Mr Jack testified, so the argument goes, that the client was only prepared to pay the amount of R31 350,00 which Mr Jack did not recover. The evidence of Mr Jack in this regard was as follows:

“What I am suggesting to you is, your firm should have recovered that and account it to Mr (intervention). ... No I don’t believe we were entitled to it.

Why not? --- Because I don’t believe that we were the effective cause and we did any work on it.

But you had an agreement from your client to pay? --- I didn’t have and he told me that he’d look at it and I decided not follow that up and continue with it, because it would have made him upset.

Well upset or not, it also makes your agents upset if they don’t get that to which they are entitled? --- Not if you look at the other deals that were put on the plate for them, I think they would accept it willingly, my decision.”

[30] On this basis Mr Buchanan submits that it was entirely inappropriate and impermissible for the first defendant to unilaterally frustrate payment of the portion due to the plaintiff from such deal, by the simple expedient of not pursuing the debt. This being so, so the argument goes, the plaintiff is patently entitled to his proportionate share of the R31 350,00 which amounts to R6 737,50.

[31] I do not think that this argument is open to the respondent. It is not the case which was pleaded and it is not the case which the appellant’s came to meet. The respondent was the first witness who testified in the trial and conceded the appellants’ case as pleaded. No effort was thereafter made on behalf of the appellants to pursue this matter further other than to prove that no payment was in fact received nor was any amendment sought on behalf of the respondent. For that reason too I am of the view that the respondent could not succeed in his claim in respect of the Komatsu transaction.

[32] Even if I err in respect of what is set out above in respect of the Komatsu transaction I think that there is a further reason why the respondent is precluded from claiming payment in respect of this transaction. The same reasoning will apply, perhaps even more so, in respect of the Aspen transaction.

[33] In respect of both the Komatsu transaction and the Aspen transaction the respondent relies on the provisions of the arrangement which I have set out above. In the case of the Komatsu transaction, as I have stated above, the respondent relies partly on his own performance of acts of an estate agent and partly on the performance by the second appellant. In respect of the conclusion of the Aspen transaction the respondent testified that the only involvement which he had with the Apsen transaction was that he worked in a partnership and was entitled to share in that partnership. In respect of the Aspen transaction he accordingly relies exclusively on the performance of acts of an estate agent by the second appellant who did at all times hold a valid fidelity fund certificate. Does the bar in section 34A(2) strike at such a claim?

[34] The relevant portion of section 34A(2) bars the recovery of any remuneration or other payment in respect of or arising from the performance by an employee of any act of an estate agent unless at the time of the performance of the act a valid fidelity fund certificate had been issued to such employee. The section is cast in wide terms. It is well established in the interpretation of statutes that a separate meaning must be given to each word used by the Legislature. It follows, I think, that a distinction must be drawn between “remuneration” on the one hand and “other payment” on the other and a different meaning must be attributed to payments “in respect of” the performance of acts of an estate agent from payments “arising from” such performance.

[35] “Remuneration” as I understand the term in the context of section 34A(2) refers to the reward which accrues to the employee as a direct result of the performance of an act of an estate agent by him. That is commission. “Other payment” contemplates different monetary benefits which he may obtain as a consequence of the performance of such acts, but which is not remuneration for such acts. I think that payments “arising from” the performance of an act of an estate agent is reference to money to which he becomes entitled as a direct consequence of the performance of such an act. That is commission. A payment accruing “in respect of” such an act, I think is more remote, it is a payment relating to the performance of such an

act, but which does not accrue as a direct result of the act.

[36] The essence of the arrangement was that second appellant and respondent would pool their resources to generate as much income as possible. Each would contribute his expertise and energy performing acts of an estate agent in order to earn commission from this activity for their joint benefit. All remuneration earned by either of them arising from the performance of the acts of an estate agent carried out by either of them would be shared between them. Each of them would share in the earning of the other by virtue of his own devotion to and pursuit of the estate agents profession through the performance of acts of an estate agent. In this manner each of them would become entitled to “other payments in respect of” the performance of the acts of an estate agent performed by himself in the arrangement but which flow from “remuneration” earned by the other “arising from” such acts performed by the other. A claim to recover such benefits, I think, is barred by the section 34A(2) of the Act.

[37] Where, accordingly, the respondent relies for his cause of action on the terms of the arrangement which was concluded on the basis that he would earn within the “partnership” from commissions which accrue to the second appellant arising from the second appellant’s endeavours by virtue thereof that he, the respondent, performs acts of an estate agent, either jointly with the second appellant or individually for their joint benefit, I think that the income generated from the arrangement constitutes “payments in respect of” the respondent’s performance of acts of an estate agent within the meaning of section 34A(2). In those circumstances I do not think that it assists the respondent to say that in the particular transaction under discussion, the Aspen transaction, viewed in isolation, he did not personally contravene section 26. I think therefore that the respondent’s claim in respect of both the Komatsu transaction and the Apsen transaction is barred by section34A(2).

[38] In the circumstances I would uphold the appellants’ argument in respect of section 34A. That being so it is not necessary to consider the further issues which have been raised in the appeal. In my view the appeal must succeed and the cross-appeal must fail.

[39] In the result I would make the following order:

1. The appeal succeeds.

2. The cross-appeal is dismissed with costs.

3. The order made by the court a quo is set aside and the following is substituted therefore:

“The plaintiff’s claim is dismissed with costs.”

4. The respondent is ordered to pay the appellants costs of the appeal, including the costs of two counsel.

5. The Registrar of the High Court, Grahamstown is directed to forward a copy of this judgment to the office of the National Director of Public Prosecutions.

________________________

J W EKSTEEN

JUDGE OF THE HIGH COURT

VAN ZYL J:

I agree. It is ordered accordingly.

D VAN ZYL

NHLANGULELA J:

I agree.

__________________________

Z M NHLANGULELA

Appearances:

For Appellants: Adv A Beyleveld SC & Adv I Bands instructed by Netteltons, Grahamstown

For Respondent: Adv R Buchanan SC instructed by Friedman Scheckter, Port Elizabeth