This article is Part 6 in our Claiming Commission series

Last week, we discussed the decision in Jacquelyn Ann Hardman v Warehouse Finder CC, primarily dealing with the issue of what happens to outstanding commission when an estate agent leaves an agency and there is still commission owing to them.

This week we analyse the decision in Property Knight (Pty) Ltd v Van Niekerk and Others.

The facts of the case are as follows:

1. On 6 September 2021, a seller (VW Trust) concluded a written agreement of sale of a property to a purchaser (Mary Tshabalala) for an amount of R1 500 000. The sale agreement provided for payment of commission calculated at 5% inclusive of VAT on the purchase price to Agency B (Virtual Realty Group (Pty) Ltd).
2. At the time of the conclusion of the sale agreement, Agency A (Property Knight) employed a certain person as an intern estate agent (Bernard). However, it appeared from the sale agreement that Bernard, acted as an agent on behalf of the Trust and he had offered the property for sale to the purchaser via the agency of Agency B.  Importantly, it appears from the court case judgement, that Bernard had set up Agency B.  A firm of attorneys (VGV) was instructed to attend to the transfer of the property.
3. On 12 October 2021, Agency A instituted urgent proceedings in the Magistrates Court in which it sought to interdict VGV from paying the commission to Bernard and Agency B, and an order directing VGV to pay the commission to Agency A on registration of transfer of the property. This application was dismissed on 23 November 2021.
4. On 30 November 2023, having received a copy of the order dismissing the urgent application, VGV informed Agency A’s attorney (Fotoh) that it would proceed to pay the commission over to Agency B’s attorneys.
5. On 1 December 2021, Fotoh sent correspondence to VGV in which he stated that he was of the view that the order dismissing the urgent application did not permit VGV to pay the commission over to Agency B’s attorneys. Fotoh further stated in the correspondence to VGV that “the seller’s position is that Bernard must provide a valid FCC under Agency B at the time of the sale, failing which [VGV] must pay the commission to the seller”
6. On the same date, Agency B’s attorney (Moosa) in response to Fotoh’s correspondence advised VGV that he was of the view that VGV was contractually bound to pay the commission over to Agency B on registration of transfer, and that in light of the dismissal of the urgent Magistrate’s Court application, there was no longer a live dispute between Agency B and Agency A as regards the entitlement to payment of the commission. Moosa further advised that unless the commission was paid into his firm’s trust account by close of business that day (that is 1 December 2021) urgent proceedings would be launched against VGV for failure to pay over the commission to Agency B.
7. Agency A sued Agency B in the Magistrate’s Court. The position of Agency A and B was quite clear.  Agency B was of the view that on a proper interpretation of the terms of the sale agreement, Agency B was entitled to payment of the commission because the sale agreement identified Agency B as the party to which the commission is payable.   Agency A was of the view that it was entitled to payment of the commission because Bernard (a) was the effective cause of the sale; (b) was employed by Agency A at the time that the sale was concluded; and (c) held a fidelity fund certificate that identified him as an intern estate agent operating under the supervision of Agency A.
8. The Magistrate ultimately found that Agency A had failed to make out a case that it was entitled to payment of the commission in that Agency A was not referred to at all in the sale agreement, and that Agency B is entitled to payment of the commission on the basis of the terms of the sale agreement. Consequently, the Magistrate ordered that VGV pay the commission to Agency B. The Magistrate further ordered that Agency A pay Agency B’s costs on an attorney client scale, and VGV’s costs on a party and party scale.
9. Agency A appealed to the High Court. The High Court indicated that the question to be answered was whether on a proper interpretation of the sale agreement, Agency B or Agency A was entitled to payment of the commission
10. In the appeal case, Agency A still contended that notwithstanding the terms of the sale agreement, it was entitled to payment of the commission because Bernard, as the effective cause of the sale, was employed by it and held a fidelity fund certificate that identified him as an intern estate agent operating under the supervision of Agency A.
11. Acting Judge Adhikari and Judge Binns-Ward were quite certain that it was clear from the terms of the sale agreement that the commission was to be paid to Agency B on registration of transfer. The sale agreement was unambiguous in this regard. The sale agreement did not contain a single provision that could reasonably be interpreted as entitling any party other than Agency B to payment of the commission. There was no reference at all to Agency A in the sale agreement.  Further, none of the evidence established that it was the common intention of the parties to the sale agreement, that Agency A be entitled to payment of the commission.
12. Hence, Agency A lost the appeal to be paid commission.

Adhikari and Binns-Ward also highlighted the following, which is important for property practitioners (PP) to take note of:

1. The Estate Agents Board (as it was then, now the PPRA), had issued an intern’s FFC in respect of Bernard in his capacity as intern in the employ of Agency A.
2. There was no evidence that Bernard held a FFC as an employee or intern of Agency B.
3. The regulations to the Property Practitioners Act, impose strict constraints on the ability of an intern to act as an estate agent, save under the direct supervision of a suitably qualified full status estate agent. The judges noted strongly that the regulatory provisions in question are directed at the protection of the public and it is therefore in the public interest that they be properly policed and enforced.
4. IMPORTANT TO NOTE: Part of the order made by the court, was that due to the non-compliance with the Estate Agency Affairs Act and the Property Practitioners Act by both Bernard and Agency B, “…that they are questions deserving of investigation by the Property Practitioners’ Regulatory Authority, which is the statutory successor to the erstwhile Estate Agents Affairs Board. We shall therefore direct that the Registrar forward a copy of this judgment to the Chief Executive Officer of the Authority for the attention of the Authority’s Board.”

Some comment on this case next week .

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

For more information on all of CPMD’s courses, click HERE

This article is Part 5 in our Claiming Commission series

Last week, we discussed the decision in City and Atlantic Real Estate CC t/a REMAX Living v Michael Ian Frain Smith, Alison Carol Smith and Kapstadt International Properties CC, primarily dealing with the important issue of effective cause.

This week we analyse the decision in Jacquelyn Ann Hardman v Warehouse Finder CC.

The facts of the case are as follows:

1. In December 2014, Hardman entered into a written contract of employment to work for the defendant as a property broker.
2. In terms of this agreement the plaintiff was responsible for facilitating the conclusion of transactions between buyers and sellers or landlords and lessees, as the case may be, for which she was in turn remunerated on the basis of commissions earned on the transactions that she was responsible for their conclusion.
3. With regards to commission payable, in the event of Hardman leaving the employ of Warehouse Finder, her employment contract said as follows: “If the plaintiff resigns from employment or if the agreement is terminated in accordance with clause 8 above or for any other reason the Plaintiff shall be entitled to any commissions that became due to him up to the date of his termination. This commission will subsequently be paid when it becomes payable.”
4. Clause 11.5 of Hardman’s employment contract provided that commissions are only payable on the last day of the month following the transfer of a property and the successful conclusion of a transaction, as long as the employer has been paid the commission by the seller.
5. Clause 2.1.15 of Hardman’s employment contract defined the phrase ‘termination date’ as follows: Termination date is defined as meaning the date on which the employee ceases for any reason to be employed by the employer.
6. The plaintiff gave evidence that prior to the events giving rise to this matter in August 2017, she had a dispute with her principal regarding the manner in which certain aspects of the business was being conducted.
7. On 3 August 2017, Hardman was presented with a notice to attend a disciplinary enquiry on two misconduct charges, the one being for conduct detrimental to the maintenance of good working order and/or bringing the company name into disrepute, and the other for gross insubordination and/or gross insolence. The enquiry was scheduled for 7 August 2017.
8. In anticipation of the scheduled disciplinary hearing, Hardman consulted with her employment law attorney and referred an unfair labour practice dispute to the CCMA on 4 August 2017.
9. Hardman’s attorney approached Warehouse Finder to try and settle the matter. It was proposed that Hardman resigns voluntarily, instead of going through the disciplinary hearing. It was however stated that the resignation is tendered with the proviso that the plaintiff received a written undertaking that her commissions in respect of two transactions (Transaction 1 and Transaction 2), payable in the ‘normal course of business’, would be paid.
10. Warehouse Finder responded to this proposal on 4 August 2017 as follows: ‘We agree to accept Jacquelyn Hardman voluntary resignation on the following conditions ….’ The conditions listed were that the defendant would honour the commissions due to the plaintiff ‘as per her employment contract’, provided she does not correspond, influence or attempt to move a number of clients specifically listed for a period of 12 months from signature, she withdraws the CCMA case, and that she honours the restraint in her employment contract. It was stated that if this was not agreed to, the disciplinary hearing would proceed on 7 August 2017.
11. The parties concluded a settlement agreement, recorded in a letter drawn up by the plaintiff’s attorneys and signed by both parties on 7 August 2017.
12. As a result, Hardman resigned on 7 August 2017 and she immediately started working for another agency the following day. Her new employer was a direct competitor of the defendant in the exact same area as she previously serviced whilst employed with Warehouse Finder.
13. A dispute arose between Hardman and Warehouse Finder with regards to the settlement agreement concluded between the parties. This was due to the fact that when Hardman starting working at her new agency, she proceeded to advertise four commercial properties of previously existing clients of the defendant, which the plaintiff conceded she knew was also clients of the defendant.  The defendant considered this as a breach of the restraint undertaking provided by the plaintiff in the settlement agreement which ultimately resulted with the plaintiff’s attorneys giving notice on 13 September 2017 that the settlement agreement was cancelled.
14. The landlord in Transaction 1 paid the commission invoiced by Warehouse Finder to Warehouse Finder on 29 August 2017. The commission in respect of Transaction 2 was paid by the landlord on 6 October 2017.  Both Transaction 1 and 2 were brokered by the plaintiff but paid to the defendant after the employment of the plaintiff was terminated with the defendant and in the case of Transaction 2, only after the settlement agreement had also been cancelled.
15. The plaintiff argued that prior to her resignation, that her commission in respect of both Transactions became due and payable notwithstanding that payment was deferred once the commissions had been received by the defendant from the respective landlords. The plaintiff also agreed with this point.
16. The plaintiff testified that when a property broker employee resigns after commission has become due but before it has become payable (i.e before the full commission is received by the defendant from its client), such a property broker would forfeit his right to any commission.
17. Judge Collis had the following to say, “This testimony on the forfeiture of the commission upon resignation of an employee is, however, not provided for in the contract of employment. Furthermore, there is nothing in the express terms of the contract of employment that suggests that the plaintiff (or any property broker) would forfeit commissions that became due prior to resignation but only paid after termination and then automatically forfeited by the property broker.”  Judge Collis ruled that, “In the absence thereof the plaintiff must be given the benefit, as we now know that the defendant firm has been paid the commission in respect of transactions successfully brokered by the plaintiff.”

Most importantly, Judge Collis made the following point:

“To hold otherwise (that Hardman was entitled to her commission), would be absurd as it will mean that any employee who would have successfully brokered a transaction and has not yet been paid his commission, would be prevented from terminating their services prior to being paid.  Not only would this be against the provisions of section 22 of our Constitution, but it will also not make commercial sense.  What purpose would it otherwise serve for a property broker to work hard on a transaction, only to forfeit the commission to be earned on a successful transaction when they elect to terminate their services.”

Warehouse Finder was ordered to pay Hardman outstanding commission of R524 213.25 plus interest plus costs of the court case.

Some important points for property practitioners (PP) to note:

1. It is important to ensure that your employment contract covers the eventuality of leaving your agency and what happens to any outstanding commission.
2. As a PP, it is important for you to understand when you will be entitled to commission and when and how it will be paid, in the event of you leaving your agency.
3. A restraint of trade is notoriously difficult to enforce, but it is just good business practice, not to poach clients and stock of the agency that you have left, when moving to a new agency.

Some more interesting case law next week.

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

For more information on all of CPMD’s courses, click HERE

This article is Part 4 in our Claiming Commission series

Last week, we discussed 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.

This week, we turn our attention to the decision in City and Atlantic Real Estate CC t/a REMAX Living v Michael Ian Frain Smith, Alison Carol Smith and Kapstadt International Properties CC.

The facts of the case are as follows:

1. On 1 September 2021, RE/MAX Living, signed a written joint mandate with the Smiths together with Kapstadt International to market and find a purchaser for the property owned by the Smiths. The joint mandate did not specify the selling price.
2. The joint mandate stipulated that in the event of the property being sold by RE/MAX Living, or being sold to any other person introduced by it during the mandate period, RE/MAX Living, as the effective cause of the sale, would be entitled to the commission calculated at 3.5% plus VAT of the purchase price achieved. The joint mandate shall remain in force until 17h00 on 30 April 2022.
3. On 20 November 2021, RE/MAX Living approached Mr James Pears, an existing client of RE/MAX Living, to enquire whether he wished to view the property. Pears viewed the property on a few occasions with RE/MAX agents.  The RE/MAX agents also sent Pears sales information and statistics for the Camps Bay area, where the property was located.
4. Pears and his parents viewed the property on 7 December 2021 and 25 January 2022. Pears made an offer to the Smiths but his offer price was lower than the asking price and was rejected.
5. On 1 March 2022 Pears received a WhatsApp message from one of the agents advising him that the Smiths had received a higher offer from an American purchaser. The Smiths accepted the offer for a purchase price of R24 million.  Pears had returned to London by that time and informed the agent that he would not be increasing his offer.
6. It subsequently transpired that this American purchaser was introduced to the Smiths by Kapstadt. This transaction was abandoned in February 2023 as the American purchaser was unable to fulfil the terms of the transaction due to an unforeseen change in his personal circumstances.
7. During February 2023 the Smiths accepted an offer from Pears to purchase the property for a purchase consideration of R24 million. It is this occurrence that led to the dispute and court case.
8. In a voice message, during March 2023, Mrs Smith informed the RE/MAX agent that an agent from Kapstadt, had approached her (Mrs Smith) to arrange for a client to view the property. Mrs Smith told the RE/MAX agent that the client that was introduced by Kapstadt was Pears. Smith advised the RE/MAX agent that she had informed the Kapstadt agent that Pears had been introduced to the property by RE/MAX Living.
9. RE/MAX Living did not dispute that Kapstadt was entitled to receive commission from the Smiths, as the agent who sold the property. However, RE/MAX was of the view that it was also entitled to receive payment of commission.
10. Kapstadt was of the view that when the property was sold to Pears in February 2023, that this was more than 90 days after the mandate period had expired. Kapstadt also said that the property was in fact no longer listed for sale on RE/MAX’s website and was no longer being marketed by RE/MAX at the time Kapstadt was negotiating with Pears.  RE/MAX disputed this.
11. When the Smiths dealt with Kapstadt, they required sought an indemnity from Kapstadt ensuring that in future dealings with Pears, the Smith’s will be indemnified against any claim by RE/MAX Living for commission. In other words, the Smiths wanted to ensure that in the event of a claim for commission from RE/MAX, the Smiths would be indemnified by Kapstadt against this claim and not have to pay a double commission.
12. The judge said, “Turning to the burning question as to which party is the effective cause of the sale the estate agency must first prove on a balance of probabilities that they are the effective cause of the sale.”
13. The judge continued, “Therefore, an estate agent, in order to claim commission, needs to prove that they introduced the purchaser to the property, and that they were mandated by the principal. In short the estate agent is required to prove that their efforts were the causa causans (effective cause) of the sale in order to successfully claim a commission.”
14. The judge referred to the “but-for” test applied by Judge of Appeal Lewis in the case of Wakefields Real Estate (Pty) Ltd v Attree and Others. The idea with the “but-for” test, is to ask the question, “But for the intervention of Agent A, would there still have been a sale or transaction?”
15. In general, the factors that the courts take into account when evaluating whether or not an agent has been an effective cause of the transaction, would include, the time that has elapsed, the role that the agent played and the circumstances surrounding the transaction, such as ongoing communication with the buyer who eventually purchases the property.
16. The judge went on to say, “In summary, the Smiths accepted an offer for the property from Pears, through Kapstadt, knowing full well that RE/MAX Living had introduced Pears to the property on multiple occasions, and, it is submitted, with full knowledge that RE/MAX Living was involved. In the premises, the facts in this matter demonstrate that the dominant cause of the sale was the efforts of RE/MAX Living, and not the efforts of Kapstadt.”
17. The Smiths were ordered to pay commission to RE/MAX but remember that Kapstadt had indemnified the Smiths so that this meant that Kapstadt had to give the commission back to the Smiths.

Some important points for property practitioners (PP) to note:

1. Any mandate, other than a sole mandate, poses risks for all parties involved. Sellers are potentially exposed to double claims for commission.  PPs are potentially exposed to losing their commission.
2. PPs need to be aware of the Code of Conduct and its definitions, requirements and proscriptions. As an example, in this case, Regulation 34.6.3 is very important and it says:

No estate agent shall-

34.6.3 introduce a prospective purchaser or lessee to any immovable property or to the seller or lessor thereof, if he knows, or has reason to believe, that:

34.6.3.1 such person has already been introduced to such property or the seller or lessor

thereof by another estate agent; and

34.6.3.2 that there is a likelihood that his client may have to pay commission to such other estate agent, or to more than one estate agent, should the sale or lease be

concluded through his intervention;

In this particular case, Kapstadt had an ethical obligation to comply with the provisions

of Regulation 34.6.3 above.

Some more interesting case law next week.

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

For more information on all of CPMD’s courses, click HERE

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.

2. 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.

3. 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

For more information on all of CPMD’s courses, click HERE