An estate agent should caution not to assume that commission is payable simply because he was the effective cause of a sale. The parties in this matter did not enter into a written mandate, and although the agent successfully concluded the sale, the Court disallowed the claim for commission as the agent could not prove that he was entitled thereto, whether by tacit or implied agreement. There is no assumption that, in the absence of agreement, the ‘usual’ rate will apply.
Tekenpraktyk CC (‘the CC’) conducted business as an estate agency. Mr Human was the sole member of, and estate agent at, the CC.
Human testified that one Mr Van der Laan (‘VDL’) gave him an oral mandate to sell an industrial property for a net amount of R 5 million. In February 2011, one Mr Kalan (‘Kalan’) contacted Human as he was interested in purchasing a property close to the industrial property for which Human alleged he had the oral mandate. Human thought that VDL’s property would be of interest to Kalan and thereafter arranged a meeting with VDL and Kalan at the property
At the meeting, VDL confirmed that he was looking for a net amount of R 5 million and Human advised Kalan that the asking price was R 5,5 million, anticipating that his commission would be R 500 000,00. It appears from the facts that there was no express agreement with VDL in respect of commission and that Human assumed that the amount above R 5 million would constitute the commission.
At the same meeting, VDL and Kalan realised that they had met before, late in 2009. They had then discussed the problem of a fence wall on different adjoining properties that each of them owned. During that meeting, it was mentioned that VDL had another industrial erf
(the one relevant to the present dispute) that was available for sale. Kalan intimated that he was interested, but never inspected the property or communicated further with VDL in this regard.
Following this 2011 meeting, Kalan intimated that the asking price was too high and asked whether the price was negotiable. Human indicated that it was. Kalan then indicated that he would discuss it with his bosses and took VDL’s telephone number, with Human’s permission. Human testified that he thereafter cautioned VDL that if he (VDL) did a deal with Kalan without Human's involvement, he would sue VDL for commission. The reason for this warning was that Human had previously dealt with Kalan and on that occasion Kalan had gone directly to the seller to conclude a sale, creating difficulties with regard to his entitlement to commission.
In November that year, Human learned that the property had been sold by VDL to a company that Kalan represented, for R 5 million.
Human instituted proceedings against VDL for payment of commission. VDL argued that he never gave Human a mandate and that in any event, the effective cause of the sale was triggered by events where Human was not involved. These were that a business acquaintance of Kalan sought to buy a property, and that VDL’s property again came up in that discussion, as Kalan was aware of the possible availability of the property after the 2009 meeting with VDL. The business acquaintance did not have adequate finances to pay for the property. Kalan and the acquaintance, together with VDL, then arranged that the property would be bought in a company of Kalan’s and the finances arranged between them, through that company as purchaser.
Was Human the effective cause of the sale?
The Court held that Human was the effective cause of the sale. This was because:
o Human arranged the meeting between VDL and Kalan in February 2011.
In doing so he did more than merely bring together parties who were
known to each other and had previously been negotiating around the
same erf. It was apparent that the 2009 discussions did not lead to any
transaction. There was no inspection of the erf, no telephone numbers
were exchanged and the discussion, at best, was the expression of an
interest which went no further. Thus some 16 months later, when the
events of February 2011 unfolded, it was not a continuation of the
November 2009 discussion and constituted a fresh introduction of the
parties on the site of the erf with a view to concluding a sale. The
finalisation of the sale in November 2011 was directly linked to the
February 2011 meeting and discussion which Human initiated.
Was there an agreement re the commission?
The arrangements for the payment of commission made at the February 2011
meeting were quite loose. Human's view was that if he sold the property for R 5,5
million, he would be entitled to R 500 000,00 as commission, but if the property was
sold for any other amount, then the commission payable would be discussed with VDL.
The evidence indicated that the mandate was that VDL wanted R 5 million, while the
amount of the commission that Human would earn was not discussed at all or
The Court therefore concluded that it could not order the claimed commission to be
paid to Human, despite him being the effective cause of the sale. This was because:
o Human has not shown any basis for the payment of commission other
than that he assumed it would be R 500 000,00, which could in any event
only be so if the sale was for R 5.5 million;
o The alternative argument, that commission was then due at the
customary or prevailing rate of commission, could also not succeed, as
this was not the case that Human argued or provided evidence on.
Neither was a case made out that there was a tacit or implied agreement
between the parties to this effect.
The Court accordingly concluded that Human was the effective cause of the sale but had not proved a basis on which a certain amount of commission was due to him