Joint Mandates & Effective Cause: RE/MAX Living v Kapstadt Commission Dispute

The College of People Management and Development_Joint Mandate Commission Disputes: What Property Practitioners Must Know

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

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