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IN THE HIGH COURT OF SOUTH AFRICA

(CAPE OF GOODHOPE PROVINCIAL DIVISION)

“REPORTABLE'

CASE NO. 7250/2003

In the matter between:

TYRONE SELMON PROPERTIES (PTY) LTD Plaintiff

And

PHINDANA PROPERTIES 112 (PTY) LTD Defendant

JUDGMENT DELIVERED ON 23 SEPTEMBER 2005

DLODLO, J

INTRODUCTION

1. The Plaintiff, Tyrone Selmon Properties (Pty) Ltd. is a private company duly registered in accordance with the company Laws of the Republic of South Africa. The Plaintiff was at all material times represented by Mr. Tyrone Selmon. The Defendant, Phindana Properties 112 (Pty) Ltd. is a private company duly registered in accordance with the company Laws of the Republic of South Africa. The Defendant was at all material times hereto represented by its sole director, Mr. Antonie Karsten.

2. The Plaintiff’s claim is for commission due to it in terms of an oral mandate given to it by the Defendant to find a purchaser for the Defendant’s property, which mandate was allegedly fulfilled by the Plaintiff, being the effective cause of the deed of sale concluded between the Defendant and one Mr. Pietro Ferrero. The Defendant denies that the Plaintiff fulfilled its mandate.

3. The Defendant instituted a counterclaim for damages against the Plaintiff on the basis that the Plaintiff misrepresented to it that Mr. Ferrero was liable for VAT on the purchase price, and to Mr. Ferrero that he was not liable for VAT on the purchase price. By such misrepresentation the Plaintiff allegedly breached its contractual, alternatively legal duties to the Defendant and thus caused the Defendant to suffer damages, being the amount of VAT that the Defendant was liable to pay to the Receiver of Revenue. The Defendant also disputed that the Plaintiff was at the time of the transaction the holder of a valid Fidelity Fund Certificate contemplated in Section 26 of Act 112 of 1976. Mr. Coughlan appeared for the Plaintiff and Mr. Joubert for the Defendant.

BACKGROUND

4. During and about September 2002 and at Hout Bay the Defendant gave a verbal mandate to the Plaintiff to find a purchaser for the Defendant’s immovable property being a portion of Erf 8735 situated at Hillcrest, Hout Bay, and the Plaintiff accepted the mandate. Consequent to the aforesaid mandate the Plaintiff introduced one Mr. Pietro Ferrero to the Defendant and to the said property on or about 8 November 2002. This introduction resulted in Mr. Ferrero purchasing the said property from the Defendant for the sum of R6 500 000.00. In terms of clause 7 of the said deed of sale, the defendant agreed to pay the Plaintiff’s commission in the sum of R300 000.00 upon registration of the said property, which registration took place on or about 14 March 2003. The Plaintiff alleges that the Defendant accepted the offer to purchase and concluded the deed of sale on the basis that the full asking price was R6 500 000.00 inclusive of VAT and that the Defendant would be liable to pay the VAT on the asking price of R6 500 000.00.

5. It is common cause that the Defendant was at the time of sale a VAT vendor and that as such it was liable in terms of Section 7(2) of the Value Added Tax Act No. 89 of 1991 to pay VAT on the sale. It is further common cause that the Defendant paid an amount of R798 245.50 as VAT on the sale to the Receiver of Revenue. The Plaintiff alleges that it has performed its obligations in terms of the mandate given to it and it claims the sum of R300 000.00 from the Defendant. The sum of R300 000.00 is currently held in trust by attorneys Malan Laas and Scholtz Incorporated, the conveyancers who registered transfer. The money is so held in terms of an order of this Court granted under case number 2305/2003 pending the outcome of this matter.

6. The Defendant denies that the Plaintiff has performed its mandate. The Defendant alleges that in terms of the mandate the Plaintiff was informed that the Defendant was a VAT vendor and instructed that the purchaser would be responsible for the VAT liability. The Defendant further alleges that the Plaintiff failed to perform its mandate in that it negligently, alternatively, intentionally omitted to inform Mr. Ferrero that he was responsible for the VAT payment and accordingly counterclaims for damages of R798 245.50, being the amount of VAT which it paid over to the Receiver of Revenue. Whilst the Defendant admits that the Plaintiff was an estate agent but it pleads further that it had no knowledge of whether the Plaintiff had a valid Fidelity Fund Certificate and it accordingly puts the Plaintiff to the proof thereof.

THE PLAINTIFF’S EVIDENCE

7. Mr. Tyrone Selmon testified that when he received the mandate to sell the Defendant’s property, Mr. Karsten stated that he wanted R6 500 000.00 for the property. According to Mr. Selmon there was definitely no mention made to him of the fact that the Defendant was a VAT vendor and it was definitely not mentioned that the purchaser would have to pay VAT on the purchase price. On 9 November 2002, Mr. Selmon introduced the property to Mr. Ferrero. The latter according to Mr. Selmon was suitably impressed with the property and he duly submitted a written offer to purchase the property for the sum of R6 250 000.00. When the offer was presented to Mr. Karsten, he was very impressed and excited. Mr. Karsten even made a telephone call to his advisor but his mood changed because he realized that the Defendant had to pay VAT on the purchase price. Mr. Selmon and Mr. Karsten then had a discussion.

8. The discussion culminated to an agreement. It was agreed that in order to make the sale viable for the Defendant, who was paying the VAT, the Plaintiff would try and convince Mr. Ferrero to increase his offer to R6 500 000.00 and the Plaintiff would agree to reduce its commission to R300 000.00. Prior to the aforementioned agreement Mr. Selmon suggested that Mr. Karsten telephone Mr. Theron Smith (a tax attorney) for further advice. Mr. Karsten did telephone Mr. Smith and had the Defendant’s VAT implications discussed with him.

9. Mr. Selmon testified further that he then telephoned Mr. Gelling (Mr. Ferrero’s assistant) and informed him that it had then become apparent that the Defendant had a VAT liability when selling the property and that in order to secure the sale Mr. Ferrero would have to increase his offer by an amount of R250 000.00 and the Plaintiff would reduce it’s commission. Mr. Ferrero agreed to pay the sum of R6 500 000.00 and the written offer to purchase was accordingly amended and signed by Mr. Ferrero on 9 November 2002. Mr. Selmon then took the amended offer to Mr. Karsten for signature and the latter signed on the same day. According to Mr. Selmon when Mr. Karsten signed the amended offer to purchase, he was fully aware that the Defendant was responsible for the VAT liability. Mr. Selmon told the Court that he did not thereafter anticipate any dispute regarding the issue of VAT because it was agreed that the Defendant would be liable therefor. According to Mr. Selmon, when the agreement was concluded, all the parties (that is, Mr. Selmon, Mr. Karsten, Mr. Ferrero, Mr. Gelling and Mr. Smith), understood that the Defendant was responsible for the VAT liability.

10. It was Mr. Selmon’s testimony that it was precisely because the Defendant was paying the VAT that Mr. Karsten requested a meeting with Mr. Ferrero so that he could present Mr. Ferrero with the option of purchasing the shares of the company as opposed to the property. Mr. Selmon testified that had Mr. Ferrero chosen to purchase the shares then the Defendant would have avoided having to pay VAT on the transaction. Mr. Selmon testified that had he been instructed by Mr. Karsten that Defendant was a VAT vendor and that any purchaser would have to pay the VAT, then he would definitely not have omitted to inform the purchaser thereof.

11. Mr. Gelling in his testimony confirmed that after the initial offer to purchase had been presented to Mr. Karsten he had received a telephone call from Mr. Selmon. Mr. Selmon had informed him that Mr. Karsten could not accept the offer of R6 250 000.00 because there were certain VAT liabilities for the Defendant and in order to secure the sale, he would have to reduce his commission and Mr. Ferrero would have to increase the purchase price. According to Mr. Gelling, Mr. Ferrero agreed to increase his offer to R6 500 000.00 and the offer to purchase was then amended accordingly and signed by Mr. Ferrero. Later that day, Mr. Gelling received a telephone call from Mr. Selmon informing him that Mr. Karsten wanted a meeting to discuss the option of Mr. Ferrero purchasing the company rather than the property. At the meeting on the following day, it was clear to all persons present that it was the Defendant who was responsible for VAT liability on the sale. It was at this meeting that it was represented to Mr. Ferrero by Mr. Karsten that if he elected to purchase the shares rather than the property, then he would not have to pay transfer duties and the Defendant would have to pay VAT. According to Mr. Gelling this was subsequently confirmed in a letter from the Defendant’s attorneys to Mr. Ferrero’s attorneys, stating:

“Our client’s preference is that your client purchases the shares and this would result in an enormous saving on VAT that our client would be liable to pay should your client insist on purchasing the property.”

Mr. Gelling was adamant that there was no dispute at the meeting regarding who was liable for the VAT. It was quite clear that the Defendant was liable for the VAT.

12. Mr. Theron Smith also testified. He confirmed that he had received a telephone call from Mr. Selmon who informed him that he had a seller who wanted to enquire about VAT implications on the sale. Mr. Smith advised Mr. Karsten that if the property was sold the Defendant would have to pay the VAT liability on the sale. He (Mr. Smith) further advised Mr. Karsten that the Defendant would either have to pay the VAT on the sale or he could de-register the Defendant as a VAT vendor.

EVIDENCE FOR THE DEFENDANT

13. The business of the Defendant is, in terms of its certificate of incorporation, that of “real estate activities” and Mr. Karsten is a property developer. The Defendant was registered as a VAT vendor by Mr. Karsten at the time of his acquiring the property. He was aware of the fact that there would be VAT payable on the purchase price when he sold the property. The VAT issue arose also in respect of the purchase of the property from Boldprops 108 (Pty) Ltd. According to Mr. Karsten the issue of VAT arose in respect of the Anchorprops 205 (Pty) Ltd. transaction. Mr. Karsten testified that he specifically told Mr. Selmon that the property was owned by a company which was VAT registered, and that the asking price was R6,5 million net, i.e. excluding VAT but including commission to be negotiated.

14. When Mr. Selmon presented Mr. Ferrero’s first offer Mr. Karsten re-iterated that his asking price was R6,5 million and also that he in fact preferred a sale of shares which would have entailed that no VAT (or transfer duty) would be payable as long as the company stays a tracing entity. According to Mr. Karsten when Mr. Selmon presented an increased offer of R6,5 million, the commission was negotiated and Mr. Selmon was asked to write the words “excluding VAT” next to the purchase price. According to Mr. Karsten, Mr. Selmon declined, stating that it was not necessary since Clause 4 of the contract sufficiently dealt with the issue of VAT. Mr. Karsten also understood that Mr. Ferrero was aware that he was liable for VAT on the purchase price, since Mr. Selmon assured him that the issue was addressed in the contract and he assumed that it would have been discussed with the purchaser. Mr. Karsten added that he would not have accepted the offer had he thought that the purchaser is not liable for VAT on the purchase price.

15. At the meeting held the next day in order to pursue the possibility of a sale of shares, it appeared that Mr. Ferrero was not aware of his obligation to pay VAT on the purchase price but was under the impression that he was liable for transfer duty. In discussions and correspondence thereafter, it transpired that the Defendant and Mr. Ferrero could not agree on the sale of shares and there was a dispute regarding VAT liability on the purchase price. The issue of VAT liability could not be resolved and the parties (the Defendant and Mr. Ferrero) agreed that the dispute be referred to arbitration, but that registration of transfer was to be proceeded with. In order to pass transfer, the Defendant had to pay the VAT component to the Receiver of Revenue. A dispute later arose as to whether or not, by passing transfer of the immovable property, the Defendant did so on the basis that the purchase price is VAT inclusive.

16. Mr. Karsten testified that he had been advised that due to the Plaintiff’s misrepresentations to Mr. Ferrero regarding the issue of VAT, he cannot succeed in his claim against Mr. Ferrero and that his only remedy is to claim the damages he suffered from the Plaintiff who acted as his agent. He confirmed that, given Mr. Selmon’s evidence that Mr. Ferrero was under the impression that he had to pay transfer duty, it would have been quite possible to persuade Mr. Ferrero to increase his offer by another R250 000.00 since that would have made no difference to what he expected to pay in any event. He feels that the Plaintiff did not attempt to achieve the highest possible price. The most important aspect of the evidence of Shirley Karsten was that she specifically recalled having requested Mr. Selmon to insert the words “excluding VAT” next to the purchase price and that Mr. Selmon responded by saying that, that issue was covered by Clause 4 of the contract.

THE APPLICABLE LAW

17. An estate agent who wishes to claim commission must allege and prove:

1. Compliance with the provisions of Section 26 of the Estate Agency Affairs Act relating to the required fidelity fund certificates and fidelity insurance;

Estate Agency Affairs Act 112 of 1976 S34A

Maree v Botha 1992(3) SA 230 (T)

2. A mandate to find a purchaser or seller.

Botha v Smith 1976 (4) SA 885 (A); Baring Eiendomme BK v Roux (2001) 1 ALL SA 399 (SCA)

A mandate is normally given by the seller, but that is not necessarily the case. A mandate may be express or implied. Muller v Pam Snyman Eiendomskonsultante (Edms) Bpk (2000) 4 All SA 412 (C); 2001(1) SA 313 (C) As a general rule the mandate does not entitle the agent to conclude a contract on behalf of the principal or to receive moneys on the principal’s behalf;

Bird v Summerville 1961(3) SA 194 (A)

3. Due performance of the mandate. What due performance is depends on the terms of the mandate.

Phillips v Aida Real Estate (Pty) Ltd. 1975(3) SA 198(A) In the absence of special terms, it involves:

1. An introduction by the agent of a purchaser to the seller;

Vanarthdoy (Edms) Bpk v Roos 1979(4) SA 1 (A)

2. Establishing that the purchaser was, when the contract was signed, willing and able to purchase the property. (Beckwith v Foundation Investment Co. 1961 (4) SA 510 (A).

Ronstan Investments (Pty) Ltd. v Littlewood (2001) 3 ALL SA 127 (A); 2001(3) SA 555 (SCA)

This does not apply where commission is claimed from the buyer;

Aida Uitenhage CC v Singapi 1992(4) SA 675(E)

3. Establishing that a valid contract of sale was concluded; Brayshaw v Schoeman 1960(1) SA 526(A)

4. Establishing that the introduction was the effective cause (causa causans) of the contract; Van Aswegen v De Clercq 1960(4) SA 875 (A)

Van Heerden v Retief 1981(1) SA 945(A)

Nach Investments (Pty) Ltd. v Knight Frank SA (Pty) Ltd (2001) 3 All SA 295 (SCA)

4. The commission payable. This depends on the terms of the mandate. If nothing was said, the plaintiff may rely on an implied term to the effect that the commission was payable according to the generally accepted tariff. Muller v Pam Snyman Eeindomskonsultante (Edms) Bpk (2000) 4 All SA 412 (C); 2001 (1) SA 313 (C) The agent may base the claim for commission on a provision in the sale if such provision was a stipulatio alteri and the agent accepted the benefit.

Jurgens Eiendomsagent v Share 1990(4) SA 664 (A)

Adenia Eiendomme (Edms) Bpk v LPD Ondernemings Bpk (1997) 4 All SA 85 (T)

See also: Contract for the Benefit of Third Parties.

18. The law relating to estate agents as set out supra from case law has ordinarily been fully commented upon by Joubert in his very useful work “The Law of South Africa/Volume 9 First Reissue Volume/Estate Agents/Introduction page 381”. It is in my view apposite to set out infra Mr. Joubert’s commentary and the case law he refers to:

“381 Nature of estate agency under common law. The contract between a principal and an estate agent is not a contract of employment, (Gluckman v Landau & Co. 1944 TPD 261 267) nor is it the ordinary contract between principal and agent. Although an estate agency contract bears many of the characteristics of agency and involves many of its obligations, it is actually a contract for a special service (Mackenzie v Flight 1922 TPD 407 409). The owner agrees to pay the estate agent a commission if the estate agent introduces a purchaser who is prepared to accept the terms either indicated in advance or then imposed. The agent has no authority to conclude the contract of sale and the owner is under no obligation to sell. The estate agent has no power to create contractual relations between his principal and the third party; he is under no obligation to conduct the actual negotiations or to see to the completion of the ultimate contract of sale (Van Zyl & Seuns (Edms) Bpk v Nel 1975 (3) SA 983 (N)). In short, an estate agent is an agent authorized to negotiate the sale or purchase of immovable property. The service expected of him is the introduction of a person who is able, both legally and financially, to purchase.”

19. Clearly the law seems to be that the usual contract between the principal and the estate agent is that the latter is entitled to an agreed or customary commission if he succeeds in introducing to the principal a person who is able, both legally and financially, to purchase and who is willing to purchase, and the introduction is the efficient/effective cause of the conclusion of the sale. No obligation is imposed on the agent nor is he expected to do anything. The contract is merely a promise binding on the principal to pay a sum of money on the happening of a specified event, which involves the rendering of some service by the agent (Luxor (Eastborne) Ltd. v Cooper 1941 AC 108 quoted with approval in Gluckman v Landau & Co. supra).

20. In Burt v Ryan 1926 TPD 680 it was held inter alia that if an agent is given a mandate by his principal to sell property, the principal is entitled to claim exact performance of the terms of the mandate. However, should the agent fail to find a person who will purchase on the terms of the mandate but introduces a person who negotiates with the principal and the seller agrees to accept a lower price; the agent is entitled to commission even though he has not performed the original mandate. The principle applied in Burt v Ryan case supra is clearly that either the seller must be taken to have tacitly novated his original mandate, or the agent must be regarded as having substantially performed his mandate.

EVALUATION OF EVIDENCE AND APPLICATION OF LAW TO FACTS

21. Mr. Joubert submitted that in terms of Clause 4 of the deed of sale (Exhibit TS5), the purchaser is obliged to pay VAT on the purchase price and that therefore in the absence of a claim for rectification, it stands as an incontrovertible fact that Mr. Ferrero is liable to the Defendant for the payment of the VAT component. In Mr. Joubert’s submission Mr. Selmon wrongly represented to Mr. Ferrero that he need not pay VAT on the purchase price and the direct consequence was that the Defendant suffered financial loss in that he had to pay VAT himself to the Receiver of Revenue. Mr. Joubert contended that Mr. Selmon through what he termed misrepresentation breached not only his contractual duties towards the Defendant, but also his fiduciary duties.

22. The existence of Clause 4 remains a mystery and Mr. Selmon’s explanation that he did not scratch out Clause 4 because in his words “I would not do that in any case” is beyond my comprehension. I say so because Mr. Selmon did indeed deem it necessary to delete Clause 6, a clause that related to a mortgage bond once it became apparent that Mr. Ferrero was to pay cash. Clause 6 became not applicable and was scratched out. Why Clause 4 was not similarly scratched out remains extremely difficult to understand. Mr. Joubert submitted that the Plaintiff must be considered as having failed to fulfil its mandate and therefore disentitled from claiming its commission. Mr. Joubert asked the Court to infer from the circumstances set out infra that the Plaintiff has not shown that it was at all relevant times in possession of the necessary Fidelity Fund Certificate (given that the Fidelity Fund Certificate for 2002 was only issued on 12 September 2002). The circumstances I am referred to are the following:

    1. according to the paragraph 4 of the Particulars of Claim, the mandate was given “during and about September 2002”;

2. according to Mr. Selmon’s evidence, the oral mandate was quite possibly given before 12 September 2002; and

3. according to Mr. Karsten’s evidence, the oral mandate was given towards the end of April 2002.

In Mr. Joubert’s submission the Plaintiff has not proved compliance with Section 26 of the Estate Agency Affairs Act, 112 of 1976 and that alone disentitles him in terms of Section 34A, from claiming commission from the Defendant. Mr. Joubert in support of the latter contention, referred me to Ronstan Investments (Pty) Ltd. and Another v Littlewood 2001(3) SA 555 (SCA).

23. It is prudent that I deal first with the issue of the fidelity fund certificate and the alleged non-compliance in that regard by the Plaintiff with its concomitant disentitlement provided for by Section 34A of the Act. Mr. Selmon produced a fidelity fund certificate for the Plaintiff’s company for the year 2002 issued to the Plaintiff company by the Estate Agency Affairs Board. Among the challenges thereto by the Defendant, was that the Plaintiff’s name as reflected therein was stated as Tyrone Selmon Real Estate (Pty) Ltd instead of Tyrone Selmon Properties (Pty) Ltd. The Plaintiff’s evidence in this regard is quite clear in my view. The Plaintiff applied to the Board in the normal way for the issue of the certificate concerned and the certificate was indeed issued to the Plaintiff by the Board upon payment of the requisite fees to the Board. It was Mr. Selmon’s testimony that the Estate Agency Affairs Board had not declared the certificate to be invalid on basis of the error regarding the Plaintiff’s name. Mr. Selmon went further to testify that in fact, the Estate Agency Affairs Board had confirmed that the certificate was valid. I am of the view that this point regarding the validity of this fidelity fund certificate is neither here nor there. Nothing in effect turns on this point. Importantly the Defendant led no evidence to contradict or gainsay the Plaintiff’s averments regarding the validity of this certificate. The line of cross-examination the Defendant took on this aspect tended to cast suspicion on the facts as stated by the Plaintiff. It is indeed not enough to merely cast suspicion on the correctness of the facts that are prima facie established and mere theories or suggestions of invalidity will not avail the Defendant and remain insufficient to justify non-suiting the Plaintiff (Volkskas Bank Ltd. v Wilkenson and Three Similar cases 1992(2) SA 388 (C) at 396). It is certainly our law that the Defendant is obliged to at the very least, refer to facts or adduce evidence of such a nature and magnitude as to throw into judicially cognisable doubt the validity or legality of the certificate. In the absence of any rebutting facts by the Defendant in this regard Plaintiff’s prima facie evidence should be taken to be conclusive of the point in issue (Volkskas Bank Ltd. v Wilkenson and Three similar cases supra at 396). See also cases such as Hughes v Rademeyer 1947(3) SA 133 (A) at 138 and Nach Investments (Pty) Ltd. v Yaldai Investments (Pty) Ltd. 1987 (2) SA 820 (A) at 832, dealing with the so-called “ut res magis valeat quam pereat principle”. The purport of the latter principle is that when construing a document which is reasonably capable of an interpretation which will not render it invalid, then that interpretation is to be preferred. In the circumstances I hold that despite error in the name of the Plaintiff appearing on the face of the document, the fidelity fund certificate is valid and it relates to the Plaintiff in this instant matter. It follows from my finding that it is hardly necessary to even consider the so-called disentitlement contained in Section 34A of the Act.

24. Focusing squarely on the issue of VAT I venture to mention that Mr. Joubert pertinently put the version of the Defendant, namely, that the issue of VAT arose between Mr. Karsten and Mr. Selmon, at the latest, when the offer on the property was made by Summer Symphonies on 8 November 2002. Strangely when Mr. Karsten testified under cross-examination, he told the Court that the issue of VAT did not arise when the offer of Summer Symphonies was made because he did not entertain the offer resulting in that matter not being taken any further. It was Mr. Karsten’s testimony that he had specifically informed all estate agents marketing the Defendant’s property that it was company owned and VAT registered and that the purchaser had to pay VAT. Mr. Karsten specifically singled out Seeff Properties as having been informed by him that the purchase price was R6 500 000.00 and that the purchaser would have to pay VAT on this amount. This evidence is, however, contradicted by an offer to purchase from the Pooth’s negotiated by Seeff Porperties (Exhibit TS20). This Exhibit states that the purchase price of R6 000 000.00 shall include any VAT that may be payable. The “Exclusive sole selling mandate” granted to Seeff Properties signed and dated by Mr. Karsten on 20 September 2002 also contradicts Mr. Karsten’s evidence on the issue of VAT. This mandate states that the Defendant instructs Seeff Properties to find a willing and able purchaser for the property for the sum of R6.5 million upon certain express terms. Although the terms mention that the Defendant will pay VAT on the brokerage, no mention is made regarding the payment of VAT on the purchase price or who will be liable therefor.

25. Mr. Karsten’s testimony that the Pooth’s (who put in an unsuccessful offer to purchase the property) were aware of the issue of VAT and specifically that they would be liable therefor before they made an offer on the property (offer made on 24 October 2002), was negated by Mr. Pooth. According to the latter the purchase price for the property had been R6 500 000.00 and he had never been informed by either Seeff Properties or by Mr. Karsten that VAT was payable. I hasten to mention that Mr. Pooth was called by the Plaintiff in rebuttal. One other strange aspect of Mr. Pooth’s evidence is that after his offer was accepted by Mr. Karsten, the latter then wanted him to pay VAT. According to Mr. Pooth’s evidence, he refused to pay VAT, and Mr. Karsten then suggested that he (Mr. Pooth) purchase the shares instead. Mr. Pooth testified that he found the subsequent conduct of Mr. Karsten to be bizarre and weird. It is indeed very strange that Mr. Karsten on failure to get Mr. Ferrero to pay Vat similarly held a meeting with him and persuaded him to rather purchase the shares. The same modus operandi was employed in the Pooth’s transaction.

26. It is important to return to Mr. Joubert’s submission with regard to Clause 4 of the Offer to Purchase. According to Mr. Karsten when the amended offer to purchase was presented to him his wife requested Mr. Selmon to insert “excluding VAT” next to the price. Mr. Selmon is alleged to have refused stating that it was covered by Clause 4 of the agreement. Mr. Karsten stated that he assumed that the purchaser would be paying the VAT and that had he known that the purchaser was not paying VAT, then he would not have accepted the offer. This is, however, not reconcilable with what is stated in his attorney’s letter (Exhibit TS11), namely, that:

“Our client’s preference is that your client purchase the shares and this would result in an enormous saving on VAT that our client would be liable to pay should your client insist on purchasing the property ”(My underlining). Mr. Karsten also wrote a letter to Mr. Ferrero dated 19 November 2002 stating:

“There are VAT implications for me when the property gets bought out of the company and a lot of transfer fees for you.” These are but examples of unsatisfactory aspects which called for an explanation from Mr. Karsten.

(27) It is abundantly clear that Mr. Karsten was well aware that in terms of the sale agreement between the Defendant and Mr. Ferrero, the former was liable to pay the VAT component on the purchase price. That is the reason why Mr. Karsten informed Mr. Ferrero in a letter dated 20 November 2002 that he was considering another offer “Where I am not exposed to VAT implications” (Exhibit TS41). Mr. Karsten also admitted that the Defendant was liable for the VAT in a letter from its attorneys to Mr. Ferrero’s attorneys dated 19 November 2002 wherein the said attorneys made an attempt to motivate the sale of shares (inter alia) by stating that it was their instructions that if the property is sold their client has a “…liability towards commission in the amount of R300 000.00 together with VAT payable between R600 000.00 and R800 000.00…” (Exhibit TS35). The VAT aspect must also be seen in the light of Mr. Karsten’s attitude namely, that the agreement with Mr. Ferrero was null and void. This attitude is documented in Exhibit TS35 (Mr. Karsten’s Attorney’s letter dated 20 November 2002) particularly the following extract therefrom:

“Not in a million Sundays would our Mr. Schoeman admit the existence of a binding contract when such instructions (sic) is clearly against our client’s instructions.” As early as 3 November 2002 Mr. Karsten had changed his version in this regard, hence his Attorney’s letter which read:

“Our client sought extensive legal advice and commercial opinion and in terms of new advices our client is now prepared to concede the validity of the contract which he previously disputed.”

See Exhibit TS32

(28) I also ask myself a question, namely, why did Mr. Karsten inform Mr. Ferrero in writing that there were VAT implications for the Defendant when the property was sold and a lot of transfer fees for Mr. Ferrero? We now know, from Mr. Karsten’s own evidence, he was aware that either VAT or transfer duties was payable and never both. Mr. Karsten was clearly and intentionally misleading Mr. Ferrero. The reason for Mr. Karsten to do so was to try and persuade Mr. Ferrero to purchase the shares of the Defendant rather than the property, so that the Defendant (and Mr. Karsten) could avoid having to pay VAT on the transaction. The fact that Mr. Karsten is disputing his liability to pay the VAT contradicts the declaration signed by himself under oath when effecting transfer of the property to Mr. Ferrero which states that the full purchase consideration is R6 500 000.00 and that there is no agreement, condition or understanding between the Defendant, Mr. Ferrero or any other person whereby any further amount is to be paid. The purchase price of the property as acknowledged by the Defendant is the sum of R6 500 000.00. Mr. Karsten conceded under cross-examination that he was fully aware that if the price does not explicitly refer to VAT then Vat is deemed to be included in the price. The price of R6 500 000.00 as it appears in the agreement does not explicitly refer to VAT.

(29) It is prudent to refer (without elaboration) to some contradictions which emerged during the trial. Notably according to the Defendant’s plea, when the Plaintiff was given the mandate to sell the property, Mr. Karsten expressly informed Mr. Selmon that the company was VAT registered and that the purchaser would have to pay the VAT component. The following apparent contradictions are indeed of some importance:

1. In chief Mr. Karsten never stated that he had expressly informed Mr. Selmon that the purchaser would have to pay the VAT.

2. Under cross-examination he was asked if he had specifically told Mr. Selmon that the purchaser would have to pay VAT. Mr. Karsten’s answer was that he could not speculate on what Mr. Selmon should have or would have known.

3. Mr. Karsten also stated that he could not say whether Mr. Selmon was “non-informed”, (sic) whether he did not know what the VAT was and that he would be speculating.

4. Mr. Karsten later on presented a version that Mr. Selmon was told on various occasions that the buyer had to pay the VAT.

5. He (Mr. Karsten) gave it as a reason why Mr. Selmon omitted to inform Mr. Ferreo that he had to pay VAT, that Mr. Selmon did not understand how the VAT issue worked.

6. Mr. Karsten denied that he spoke to Mr. Smith regarding the issue of VAT but in an affidavit deposed to by himself earlier on, he stated that he had had a conversation with Mr. Smith and that “during this conversation various suggestions were made in order to reduce or minimize applicant’s VAT liability”. Interestingly the applicant referred to in the affidavit is the Defendant in the instant matter.

(30) Lastly, on this aspect I need to note for the sake of completeness that the testimony of Mr. Karsten to the effect that the issue of commission was not discussed when Mr. Ferrero’s offer was initially presented and that it was discussed at the second meeting when his amended offer was presented, is contradicted by his earlier evidence on affidavit, namely, that the issue of commission was discussed at the first meeting. Mr. Karsten testified that he was under the belief that in terms of Clause 4 Mr. Ferrero was liable for the VAT. However, at the meeting the following day, after the agreement was concluded, it became apparent to Mr. Karsten that Mr. Ferrero did not know that he had to pay VAT. My concern, however, is, if Mr. Karsten had in fact been told that Mr. Ferrero was in terms of Clause 4 of the agreement liable for VAT, why was Clause 4 not pointed out to Mr. Ferrero at the meeting? It is common cause that Clause 4 was only pointed out to Mr. Ferrero for the very first time in a letter dated 20 November 2002 addressed to him by Mr. Karsten’s attorney which stated that the attorney was instructed to bring Clause 4 to Mr. Ferrero’s attention (Exhibit TS48).

(31) I am of the view that the existence of Clause 4 should not be allowed to cloud the issues. I have reached an inescapable conclusion that the alleged reliance on Clause 4 was clearly an after thought on the part of Mr. Karsten or his advisors in order to try and convince Mr. Ferrero that he had to pay VAT, which would persuade him to rather buy the shares in the Defendant and not the property. Mr. Karsten had his own agenda. He clearly wanted to rid himself of the Defendant Company for certain reasons which must have been compelling on his part. The fact that Clause 4 was not scratched out as not applicable is nothing but an honest error on the part of the draftsman of the sale agreement. I was not impressed by Mr. Karsten as a witness. Apart from contradictions and inconsistencies in his testimony, he was vague, evasive and in my view, he is a classical example of an untruthful witness. On realizing that Mr. Ferrero was capable financially to even pay cash for the property, he clearly grew extremely greedy and was intent on extracting even more money from Mr. Ferrero. Mrs. Shirley Karsten was called to lend support to Mr. Karsten, her husband. Her evidence must be approached with caution. She is not totally independent. She understandably can easily conspire with her husband to the detriment of the Plaintiff. In any event, she testified on a rather limited issue. In my view she tried in vain to lend credibility to her husband’s version. She was not the best of witnesses. She appeared very nervous and uncertain about what she told the Court.

(32) I was singularly impressed by the frank and straightforward manner in which the Plaintiff gave its evidence. Despite lengthy and at times gruesome and truth searching cross-examination of Mr. Selmon by Mr. Joubert, his evidence did not change its colour. It was systematic, coherent and to me comprehendible. The Defendant dismally failed to prove any fraudulent or negligent misrepresentations by the Plaintiff or any breach of its fiduciary duty which constituted its counterclaim. The counterclaim must therefore fail.

(33) Joubert (the Author) in his work set out supra deals with the payment of commission exhaustively and correctly points out that although it is possible that an estate agent will be entitled to commission merely on the introduction of a person offering to purchase the general balance of probability is against an arrangement of that sort. The principal ordinarily contemplates an actual sale of his property as the event upon which his promise to pay commission must be fulfilled. In the instant case Mr. Selmon in his capacity as an estate agent did not only introduce Mr. Ferrero as the person offering to purchase the property concerned, but a binding sale agreement came into being when Mr. Karsten on behalf of the Defendant signed the offer and thereby signified that his mandate had indeed been given effect to. Not only did the valid sale agreement come into existence, the property was indeed sold to Mr. Ferrero who bought same for cash and it was subsequently duly transferred to him. If Mr. Selmon had misrepresented the mandate he had to Mr. Ferrero, then certainly nothing prevented Mr. Karsten from refusing to accept the offer and putting the Defendant’s property back to the open market. It is still our law that where an estate agent has furnished the principal with a binding offer from a person able to purchase (as Mr. Selmon did in casu) and if a sale to that person results, that agent would have earned his commission and the principal cannot lawfully avoid paying the commission even if he should for any reason decide to cancel the sale.

See: Gluckman v Landau & Co. supra; Watson v Fintrust Properties (Pty) Ltd 1987(2) SA 739 (C).

It is common cause in casu that the introduction of Mr. Ferrero resulted in an offer which Mr. Karsten could not resist (he accepted it). The binding agreement became a reality and the sale took place. The written agreement between Mr. Ferrero and the Defendant (sale agreement) provides for the payment of commission to an estate agent, (the Plaintiff). Although the agreement is not signed by Mr. Selmon (as a party to it) it remains binding on the Defendant/principal.

See: Baker v Afrikaanse Nasionale Afslaers en Agentskap Mpy (Edms) Bpk 1951(3) SA 371(A)

In my view, the Plaintiff who bears onus to satisfy the Court that the event has occurred, which contractually entitles him to claim his commission from the principal, has indeed on the balance of probabilities discharged such onus.

See: Flashco (Pvt) Ltd v Fox and Carney (Pvt) Ltd 1980((1) SA 235(ZRA); Tony Morgan Estates v Pinto 1982(4) SA 171(W)

34. The Plaintiff has alleged and proved that:

1. there was compliance with Section 26 of Act 112 of 1976;

2. that a mandate given to him to find a purchaser was fulfilled, Mr. Ferrero was found and he bought the property on terms acceptable to the Defendant who signified his acceptance on the sale agreement;

3. that there has been due performance of the mandate; and

4. that therefore the agreed commission is payable to him.

34. Looking at the evidence holistically I am of the view that the Plaintiff has proved on a balance of probabilities that the sale agreement was concluded on the basis that the Defendant, accepted that it was liable to pay VAT on the transaction, and accordingly agreed to sell the property to Mr. Ferrero if he increased his offer to R6 500 000.00 and Plaintiff reduced its commission to R300 000.00. It is my conclusion therefore that evidence presented in casu has proved that the Plaintiff performed its mandate and must be taken to have earned its commission in the sum of R300 000.00.

COSTS

34. The general rule stands, namely, that the successful party is entitled to its costs. There is no justification for departure from this rule, nor has any argument been presented for any such possible departure.

ORDER

34. In the circumstances I make the following order:

1. The Plaintiff’s claim is hereby granted with costs, which costs are to include the costs of the interlocutory application under case number 2305/2003.

2. The Defendant’s counterclaim is hereby dismissed with costs.

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DLODLO, J

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