Effective Cause in Commission Claims: Key Lessons from Neumann v Edelstein

The College of People Management and Development_Effective Cause in Commission Claims: Key Lessons from Neumann v Edelstein

This article is Part 3 in our Claiming Commission series

Last week, we discussed Section 49 of the Property Practitioners Act No 22 of 2019.  This week we will analyse the impact of the decision in the case William Martin Neumann v Edelstein Farber Grobler Inc.  The decision was handed down on 5 February 2025.  There were three main issues for the court to decide:

  1. Validity of the plaintiff’s FFC;
  2. Effective cause; and
  3. The amount of commission payable.

The facts of the case are as follows:

  1. In 2002, SARS published a document requesting information (RFI08/2002) for 12 000m² of office space that SARS required to lease. Let us call this Building A.
  2. In March 2003, Broll responded to the RFI, listing the plaintiff (Neumann) as the broker. Neumann worked for Broll at the time.  Broll also listed Broker T and Broker H as additional contacts.  SARS contacted Neumann as Neumann had previously dealt with SARS and he had a pre-existing relationship with SARS.
  3. As a completely separate occurrence, Broker T was provided with a six month sole mandate from ESKOM (landlord) to find a tenant for Megawatt Park, with the available space being 39 000m². Let us call this Building B.
  4. So, we have two separate clients – SARS is looking for space for 12 000m² (Building A) and SARS contacted Neumann in this regard, and ESKOM is looking to find a tenant for available space of 39 000m² (Building B) and ESKOM contacted Broker T in this regard. Both Neumann and Broker T work for Broll.
  5. Between March and November 2003, SARS decided to increase the size of the space that they required from 12 000m² to 39 000m² (Building A).
  6. On 18 November 2003, a lease agreement was concluded between SARS and ESKOM.
  7. Neumann was of the view that although he did not solely conclude the lease agreement for Building B, he was the sole cause of an agreement being reached between SARS and ESKOM.
  8. Neumann’s claim was for full commission of 12 000m² of space at Megawatt Park and a share of the commission for the remaining 27 000m².

Let us deal with the three main issues:

  1. FFC

The Defendant argued that the Plaintiff did not hold a valid FFC while acting as a broker for the 12 000m² deal during the period of March 2003 to May 2003.  During cross-examination, Neumann confirmed that in 2003 he applied for his FFC timeously but was only issued with his FFC on 18 October 2003.  He therefore did not have a valid FFC while doing work for the 12 000m² deal during the period of March 2003 to May 2003, but this was due to the Estate Agency Affairs Board delaying the issue of the FFC.

The Court referred to Section 26 of the Estate Agency Affairs Act, which said that you cannot act as an estate agent without a valid FFC.  The Court was of the view, that the fact that Neumann did not have a FFC was not his fault, but rather the fault of the Estate Agency Affairs Board not issuing the FFC timeously.  Hence, the lack of a valid FFC would not prevent Neumann from claiming commission.

  1. Effective cause

Neumann argued that he engaged with SARS extensively in order to obtain the lease mandate.  Broker T and Broker H confirmed that they were aware of Neumann’s engagement with SARS but that they were not aware that the Plaintiff had received the mandate to find SARS leased premises, until the capacity was increased to 39 000m²

The defendant argued that Broker T and Broker H solely pitched for and obtained the sole mandate to market Megawatt Park for Eskom for a tenant.  Furthermore, that when the 12 000m² tender came out; Neumann, Broker T and Broker H agreed to work together to prepare the tender documents.

The Judge referred to the very famous 1948 case of Webranchek v IK Jacobs & Co Ltd, where the Court said that an agent can be considered an effective cause if “… the sale is chiefly attributable to the efforts of plaintiff; in other words that those efforts constituted dominant or an effective cause of the sale…”

The Judge in the present case said although Neumann did not introduce the clients (being SARS and Eskom) to one another, nor did he show Megawatt Park to SARS, he had informed Broker T and Broker H about the tender for SARS in the first place which resulted in them tendering Megawatt Park to SARS when the request was amended from 12 000m² to 39 000m² and in the signing of the ultimate lease.

Acting Judge Curlewis said, “To argue that the Plaintiff did not have an effective cause in the signing of the ultimate lease and that he did not see his mandate to its finality would be incorrect.”

In other words, Neumann was considered to be an effective cause of the transaction.

  1. The amount of commission payable

Acting Judge Curlewis was of the view, that the calculation of the commission would be as per the employment contract with Broll.

Hence, Neumann was considered to be an effective cause of the lease agreement being concluded.  Neumann was not prevented from claiming commission due to not holding a valid FFC as this was the result of the EAAB not issuing the FFC timeously. 

Acting Judge Curlewis ordered Neumann to be paid commission as follows:

As Broll had received the full commission on the ultimate lease representing the full

39 000m² of space, Broll needed to pay commission per the employment contract between Broll and its brokers.  Neumann was entitled to 50% the total commission calculated on

12 000 m² of space and the broker portion of the commission calculated on the remaining 27 000m² was to be divided equally between the three brokers being Neumann, Broker T and Broker H.

Some more interesting case law next week.

You are welcome to email me on graeme@cpmd.co.za

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