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 First Appellant

WARREN JACK PROPERTY GROUP (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.

3

[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

5

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.

7

[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 –

i) sells or

purchases

or publicly

exhibits for

sale

immovable

property or

any

business

undertaking

or

negotiates

in

9

connection

therewith or

canvasses

or

undertakes

or offers to

canvas a

seller or

purchaser

therefor; or

ii) 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

iii) ...

iv) ...

(b) ...

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

i) ...

ii) 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)).

11

[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

(b) ...

(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.

13

[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 (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.

15

[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

17

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.”

19

[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

21

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

23

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:

25

I agree. It is ordered accordingly.

________________________

D VAN ZYL

JUDGE OF THE HIGH COURT

NHLANGULELA J:

I agree.

__________________________

Z M NHLANGULELA

JUDGE OF THE HIGH COURT

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