NGUNDU v JOCKSTAR INVESTMENTS (PVT) LTD

HIGH COURT, HARARE

[Civil Trial HH 628-16]

June 27 and 29 and October 19, 2016

TSANGA J

Agency – How created – Real estate transactions.

A real estate agent had advertised an immovable property for sale in the press. Plaintiff responded to the advertisement, paid the estate agent, and signed an agreement of sale with him, without coming into contact with the seller. The agent having failed to transmit the full purchase price to the seller, plaintiff sued the seller claiming that the estate agent was the seller’s agent.

Held, that the existence of agency is a question of fact unless such facts can be interpreted in only one way. In real estate transactions, agency is created in any one of three ways: (i) by a principal’s manifestation of the intent that the agent shall act for him, (ii) by the agent accepting responsibility to act; and (iii) by the principal having the right to control the venture or direction in which the transaction is going.

Cases cited:

Aida Real Estate Ltd v Lipschitz 1971 (3) SA 871 (W), referred to

Doyle v Gibbon 1919 TPD 220, referred to

Farmers’ Co-op Society (Reg) v Berry 1912 AD 343, referred to

High Court Sheriff v Kwekwe Consolidated Mines (Pvt) Ltd HH 39-15 (unreported), referred to

Lasagne Investments (Pvt) Ltd & Ors v Highdon Investments (Pvt) Ltd & Ors 2010 (2) ZLR 296 (H), referred to

Minister of Agriculture and Land Affairs and Another v De Klerk and Others 2014 (1) SA 212 (SCA), referred to

Monzali v Smith 1929 AD 382, referred to

Nyamambi v Ncube HB 82-15 (unreported), referred to

Smit v Botha 1976 (4) SA 885 (A), referred to

Books cited:

Christie RH Business Law in Zimbabwe (1st edn, Juta & Co Ltd, Cape Town, 1998) p 326

West’s Encyclopaedia of American Law (2nd edn, Thomson Gale, Farmington Hills, 2004)

Articles cited:

Grohman JM “Reassessment of selling Real Estate: Broker’s Agency Relationship with the Purchaser” St John’s Law Review (1986) Vol 61, No 4, 560-590

Hopper BL “The Selling of Real Estate Broker and the Purchaser: Assessing the Relationship” Brigham Young University Law Review (1992) Vol 1, No 4, 1135-1154, 1142

NB Munyuru, for the plaintiff

G Machingambi, for the defendant

TSANGA J:

The dispute is characterised by a claim and counter-claim with the following issues having been referred to trial. As regards the claim in convention the issues are:

(a) Whether or not the plaintiff paid the full purchase price of US$ 17 000 to the defendant.

(b) Whether or not Nispen Properties was the agent of the defendant or the plaintiff.

(c) Whether or not the plaintiff is entitled to an order for specific performance in respect of the stand or alternatively payments of the current market value of the property together with interest at the prescribed rate.

(d) Who should pay costs of suit and on what scale.

As regards the claim in reconvention two issues call for resolution:

(a) Whether the plaintiff breached the sale agreement between the parties by failing to pay the full purchase price despite demand.

(b) Whether the defendant is entitled to an order cancelling the sale agreement between the parties together with a tender of the refund of the deposit paid by the plaintiff.

The evidence of the parties

Mr Ngundu’s evidence in chief was that on 1 June 2011, he saw the property through a newspaper advert placed by a company called Nispen Properties. The property was being advertised for US$ 17 000. He responded to the advert by going to Nispen Properties whom he said had printed a contract of sale between him and Jockstar. However, it did not contain figures. He paid US$ 11 000 into Nispen Properties’ trust account. Of this amount US$ 10 000 was for the deposit and US$ 1 000 was for administration fees. It is not in dispute that the deposit he paid was duly transmitted to Jockstar and that thereafter an agreement between Jockstar and Mr Ngundu was also subsequently signed following this payment. Although he signed the agreement, Mr Ngundu did not himself go to Jockstar. It was Nispen Properties through Mr Musandiriri who went in his stead. In terms of the agreement of sale, once the deposit had been paid, the balance was to be paid in instalments over a stipulated period as follows:

1. US$ 2 234 on 17 July 2011

2. US$ 2 234 on 17 August 2011

3. US$ 2 234 on 17 September 2011

He had also subsequently paid the balance of the purchase price to Nispen Properties. Whilst Mr Ngundu said that in total he had paid a sum of
US$18 000, he acknowledged that he had not stuck to the stipulated payment schedule and that his last payment was made on 23 December 2011. He produced receipts evidencing payment to Nispen properties of the balance of the purchase price as follows:

17 June 2011 US$ 1 100

14 July 2011 US$ 1 170

16 August 2011 US$ 1 100

6 September 2011 US$ 1 200

17 October 2011 US$ 1 170

22 November 2011 US$ 1 000

14 December 2011 US$ 700

23 December 2011 US$ 660

He acknowledged that the payments were out of time but said that he took refuge in the clause that penalised late payments which he said he was confident would kick in. In terms of the relevant clause, 10 per cent per annum would be levied for such late payments. He also said that at the time, Nispen Properties had indicated that they were not sure when the stands would be serviced.

He said he had not gotten any letters cancelling the agreement and that in terms of clause 9.2, all written correspondence was supposed to have been mailed or hand-delivered to him at his address, which was house No 2876 Wadyegora Crescent in Ruwa. His claim, he said, was therefore essentially based on the fact that he paid the full purchase price through Nispen Properties as the seller’s agent who had the mandate to sell the property.

He acknowledged in cross examination that whilst he had proof that he had paid Nispen Properties the balance of US$ 7 000 he had no proof that the latter had transmitted the balance of the purchase price to Jockstar. In response to the question whether the US$ 1 000 had been a charge for finding him property to buy, his firm position was that the property was already there and had been advertised in the Herald and as such it could not be argued that the agent had to find him property to buy. In further response to the enquiry whether Nispen Properties, through its representative, would be coming to give evidence, Mr Ngundu said that he had discovered that they had since closed shop and were nowhere to be found. Additionally, when he had failed to find Nispen Properties, he had gone to Jockstar who had insisted that he pay US$ 7 000 as this had not been transferred to them. He also confirmed in cross examination that he had sold the property to Josiah and Fungayi Chakanyeka sometime in 2012 and that what he was seeking was for the property to be transferred to him to enable him to further transfer to the Chakanyekas. He also emphasised that after Nispen Properties had received his initial deposit of US$ 10 000, he had no reason to suspect that they would not get the remainder of the purchase price through Nispen Properties, who, in his view, were the seller’s agents.

Mr Antony T Parehwa gave evidence on behalf of the defendant. The core of his evidence was that Mr Musandiriri of Nispen Properties had come to Jockstar and indicated that he had a purchaser for a stand. He had agreed to him bringing the cash and it was on that basis that an agreement of sale had been prepared as well as an acknowledgement of receipt of the cash deposit. Contrary to Mr Ngundu’s evidence who said that the agreement had been drawn up at Nispen Properties, Mr Parehwa stressed that it had been drawn up at Jockstar after the deposit had been paid as they would not have processed an agreement before then. What is common cause is that the agreement with Jockstar had been signed by the parties after the deposit was paid.

The form acknowledging receipt of cash had also been produced by Jockstar and had been signed by Mr Musandiriri as purchaser’s representative whilst Mr Parehwa had signed on behalf of Jockstar. He also stated that he knew Mr Musandiriri as a former employee of Pride Real Estate, an agency of Jockstar that had exclusive agency to sell its stands. He said that at the time Mr Musandiriri came to him, he had left about a year earlier to start his own agency, Nispen Properties. Given the fact that Jockstar is a developer, he said that it was common for people to come with knowledge that stands were being sold and equally common for such purchasers to come through various fora. Furthermore, given the fact that Mr Musandiriri had previously worked for Pride Real Estate, he said he would have been privy to the fact that stands were being sold. Pride Real Estate who were the sole agents were also said to have been flighting adverts at the time.

His main point was the fact that Mr Ngundu had come through Nispen Properties did not make the latter Jockstar’s agent. He stressed that at no time had Nispen Properties been appointed as its agent, nor had it ever received a mandate to advertise the stand. He highlighted that the advertisement in any event had not been specific to their stand and that in no way could it be linked to Jockstar.

Among a myriad of properties in the advertisement of 1 June 2011 that appeared under Nispen Properties, the stand in question was simply described as follows:

“Mt Pleasant Heights

US$17 000

2015 sqm, servicing is in progress

terms acceptable.”

The payment of US$ 1 000 as administrative fee was said to be a private agreement between Nispen Properties and Mr Ngundu. He said that if there had been an agreement with Nispen Properties to act as Jockstar’s agent, then the common practice would have been to pay a commission, which is generally five per cent of the purchase price. He was therefore adamant that Nispen had come to them as purchaser’s representative.

He additionally said that in terms of the agreement, the balance of the purchase price was to be paid to Jockstar. This, however, was by implication as it was not specifically stated as such in the agreement.

When the balance of the purchase price remained unpaid, he said three letters had been dispatched to Nispen Properties. His explanation as to why the letters of demand had gone to Nispen Properties instead of directly to Mr Ngundu was that since the initial deposit had come through Nispen Properties, he had surmised that the purchaser would continue to act through this agent in paying the balance. He stressed that he was only seeing the receipts in court for the first time of the payment of the balance of the purchase price by Mr Ngundu through Nispen Properties as he had concluded that this had not been paid since there had never been any response to the letters of demand that were sent to them. His evidence was that the letters had been initialled as received by an official at Nispen Properties. He was emphatic that at no time had Jockstar ever received any communication from Nispen Properties regarding the progress of the sale.

With Mr Ngundu having since sold the property to Josiah and Fungayi Chakanyeka, Mr Parehwa produced an agreement of sale which he said had been brought to Jockstar by the purchasers to confirm whether or not they were indeed the registered purchasers of the property. He revealed that the agreement of sale which bore Jockstar’s name was in fact a fake agreement of sale which had been prepared by Nispen Properties. Jockstar itself had never at any time entered into an agreement of sale with the Chakanyekas and neither had it ever signed any such agreement. He further highlighted that in any event the sale of the property by Mr Ngundu would not have been possible without the written approval from Jockstar as captured in clause 6.6 of the agreement. He also told the court in cross examination that a development fee of US$ 6 500 had not been paid by Mr Ngundu and that it was no longer necessary to pay because the contract with him had lapsed.

He told the court that as a counter-claim, Jockstar was averring breach of contract and offering to refund Mr Ngundu the US$ 10 000 he had paid. Since he had not paid the full purchase price they were equally seeking cancellation of the contract.

He was challenged in cross examination regarding the failure to send any reminder to the domicilium citandi et executandi that had been captured in the agreement of sale. He was also challenged on the fact that the letters sent to Nispen Properties following up on the payment were simply initialled by way of acknowledgement of receipt, thereby making it difficult to ascertain for a fact that they had been received since additionally there was no stamp by Nispen Properties acknowledging receipt. His response was that under the circumstances of the sale, it had been reasonable to assume that Nispen Properties was purchaser’s agent and that in any event the letters had been served in accordance with normal business practice.

Mr Josiah Chakanyeka also gave evidence on behalf of the defendant. He stated that sometime in February 2012 he and his wife had come across the stand in question being advertised by Elite Real Estate Agents. The seller was Mr Ngundu. It had emerged that the property needed to be ceded by Jockstar to Mr Ngundu. A visit to Jockstar had revealed that the property should not have been sold as it was under dispute. However, according to Mr Josiah, the lawyer handling the sale on behalf of Elite and the seller had arranged for the cession which they said would be done through Nispen Properties. It was in this context that Nispen Properties had produced the disputed agreement with Jockstar consenting to a cession which had turned out to be a fraud. It also emerged from his evidence that the Chakanyeka’s have a pending matter before the courts in which they have taken Mr Ngundu to court for failure to transfer.

The legal submissions

The plaintiff’s legal argument is premised on the general position that an agent generally acts on behalf of a seller and not the buyer. Against this backdrop, Mr Munyuru argued that Nispen Properties, acting as the agent of the seller, was the cause of the sale between Mr Ngundu and Jockstar. He emphasised that an individual is the seller’s agent if his efforts result in a sale. The cases of Aida Real Estate Ltd v Lipschitz 1971 (3) SA 871 (W) and Doyle v Gibbon 1919 TPD 220 were cited for this contention. Reliance was also placed on specific performance, arguing as plaintiff did that he performed fully his side of the bargain. It was argued that the plaintiff having fulfilled his side of the bargain, the defendant Jockstar, has a contractual duty to effect transfer. This Court was referred to the cases of Farmers’ Co-op Society (Reg) v Berry 1912 AD 343 at 350;
Lasagne Investments (Pvt) Ltd & Ors v Highdon Investments (Pvt) Ltd & Ors 2010 (2) ZLR 296 (H) in support of the thrust on specific performance where a party has fulfilled its end of the bargain. Plaintiff’s counsel also argued that the defendant had failed to prove that he was in default since the letters had not been served at the agreed address for service. He also argued that the plaintiff is justified to costs on a higher scale because the facts speak to such costs.

The defendant’s counsel on the other hand argued that the onus was on the plaintiff to prove agency since it is the plaintiff who has based his claim on the allegation that he dealt with Nispen Properties as the agent of Jockstar. Nyamambi v Ncube HB 82-15 (unreported) and High Court Sheriff v Kwekwe Consolidated Mines (Pvt) Ltd HH 39-15 (unreported) were cited by Mr Machingambi in support of its position on onus.

Defendant’s counsel relied on the definition of an agent as follows:

“A relationship which allows a principal to authorise somebody to carry out duties on his behalf”.2

Mr Machingambi argued that there was no evidence that Nispen Properties was expressly appointed to act on behalf of the defendant whether orally or in writing and neither was there any agency implied by conduct – see Monzali v Smith 1929 AD 382. In particular he emphasised that Jockstar was not even aware that Nispen had put up an advert to attract a purchaser. He also argued that agency could not be inferred from the mere fact that Mr Musandiriri once worked for Pride Estate Agent. He emphasised that agency is a creature of common law and that its existence depends not on labels, but on the factual circumstances. He also highlighted that the authorities cited by plaintiff’s counsel on the cause of the sale are misleading in that in reality they sought to address the question of when an appointed agent will be entitled to earn a commission from a principal. This observation on the thrust of the cases cited by Mr Munyuru is correct. They are indeed distinguishable from the facts in this matter.

This section of the article is only available for our subscribers. Please click here to subscribe to a subscription plan to view this part of the article.

Please click here to login