Signature Real Estate (Pty) Ltd. vs. Charles Edwards Properties And Others - (10 Jun 2020)

Sstrict or literal interpretation of provisions has to be consistent with object of Act

Civil

The appeal concerned the application of Section 34A of the Estate Agency Affairs Act 112 of 1976, which precludes an estate agent from claiming commission when, at the time the commission was earned, the estate agent had not been issued with a valid fidelity fund certificate by the regulatory statutory body, the Estate Agency Affairs Board (the Board). In the present case, Signature Real Estate (Pty) Ltd (Signature), an estate agency, was not in possession of a fidelity fund certificate in its name at the time the disputed commission between it and the third respondent, Atlantic Seaboard Realty (Pty) Ltd (Atlantic), was earned. Signature was in possession of a fidelity fund certificate which erroneously described it. However, Signature was entitled to be issued with the certificate, as it had complied with the requirements of the Act, and that the reason the certificate in its possession contained a mis-description was due to an error on the part of the Board. The Board conceded this.

During April 2018, Signature and Atlantic jointly brokered a lease agreement in terms of which they were each to receive 50 per cent of the commission due in terms of that agreement. After the full amount of the commission was paid to Atlantic, it refused to pay Signature the latter’s share of the commission, on the basis that Signature was not in possession of a valid fidelity fund certificate when the commission was earned. Signature launched an application in the Western Cape Division of the High Court, seeking, among others, payment of the commission. That court dismissed Signature’s application and concluded that the peremptory nature of Section 34A rendered it irrelevant that Signature and its estate agents might well have been entitled to be issued with fidelity fund certificates as at 1 January 2018, as that would be contrary to the clear wording of Section 34A. Consequently, the court a quo held that Signature was precluded by the provisions of Section 34A from claiming commission. The question on appeal was whether under the high court’s application of Section 34A to the facts of the case was correct.

The general object of the Act is to control certain activities of estate agents in the public interest through the establishment of the Board and the Estate Agents Fidelity Fund (the fidelity fund). The fidelity fund is established in terms of Section 12(1) of the Act. Its purpose is to reimburse persons who, in certain circumstances, have suffered financial loss due to mis-appropriation of trust monies by estate agents. The monies in this fund are, in the main, contributed by all registered estate agents who, in return, are issued with valid fund certificates. In other words, a fidelity fund certificate is issued in exchange for compliance by an estate agent with the relevant requirements set out in the Act, which include payment of a stipulated amount into the fund. In this way, members of the public are assured of reimbursement in the event of misappropriation of their monies by an estate agent.

The Act provides a regulatory framework for estate agents. One of the key components of that framework is an estate agent’s trust account. In terms of Section 32 of the Act, every estate agent is required to open and keep one or more separate trust accounts with a bank into which money held or received by or on behalf of such estate agent shall be deposited. The estate agent is required to notify the board of the details of such a bank account or accounts.

In terms of the Board’s rules, an application for a fidelity fund certificate for the following year must be made not later than 31 October of each year. Signature had complied with this and all other requirements of the Act. But for the error on the part of the Board, Signature was entitled to, and would have been issued with, a valid fidelity fund certificate for the period 1 January-31 December 2018. So viewed, the purpose of the Act was served.

Accordingly, the Supreme Court of Appeal overturned the decision of the high court. The court further encouraged estate agents not adopt a supine attitude in the face of the Board’s errors in issuing fidelity fund certificates, but do what is reasonably within their power to have the situation rectified. In the circumstances, the Court upheld the appeal.

Tags : PROVISION APPLICABILITY PUBLIC INTEREST