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[2016] ZAGPPHC 699
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Attorneys Fidelity Fund Board of Control v Intibane Mediates and Others (56341/2010) [2016] ZAGPPHC 699; 2016 (6) SA 415 (GP) (26 July 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
Reportable:
Yes
Of
interest to other judges: Yes
Revised.
26/7/2016
Case
Number: 56341/2010
In
the matter between:
ATTORNEYS
FIDELITY FUND BOARD OF
CONTROL
Plaintiff
and
INTIBANE
MEDIATES
First
Defendant
ROMEO
TSHEPO
RAMOTHIBE
Second
Defendant
ERF
49-1 MENLYN (PTY)
LTD
Third
Defendant
HEAD
BROTHERS STEEL FABRICATING &
ENGINEERING
(PTY)
LTD
Fourth
Defendant
WILLIE-BROWN
VAN DER
WALT
Fifth
Defendant
JUDGMENT
POTTERILL
J
BACKGROUND
[1]
The plaintiff ["AFF"] issued summons against the first
defendant ["lntibane"] and second defendant ["Ramothibe"].
Ramothibe being the managing director, owner and controlling mind of
lntibane, for breach of fiduciary obligations when fulfilling
a
mandate to investigate and advise on the acquisition of immovable
property by taking "secret commission" pursuant to
the
acquisition of the property.
[2]
The AFF did not seek any relief against the third ["Erf 49-1"]
and fourth defendants ["Head brothers"];
the sellers of the
property.
[3]
The fifth respondent is the attorney in whose trust account the
commission of RS. 5 million on the sale transaction is being
retained. No relief is sought against him.
[4]
Erf 49 -1 and Head brothers took default judgment against Intibane on
the basis that it was not entitled to commission due to
its lack of
an estate agent's fidelity fund certificate.
[5]
lntibane was de-registered and Ramothibe has passed away.
[6]
The AFF amended its particulars and set out 4 causes of action now
against Eri 49 -1 and Head Brothers. The person acting on
behalf of
Eri 49 -1 and Head Brothers was their director Mr Du Plessis Roome
["Roome"]. For ease of reference Eri 49
-1 and Head
Brothers will collectively be referred to as Roome.
[7]
The causes of action are:
7.1. Roome had the legal
duty to disclose the agreements between Intibane and Roome disclosing
the commission and due to the delictual
non-disclosure the AFF
suffered damages.
7.2. In the alternative
Roome misrepresented to the AFF that its bottom line for the selling
price of the property was R3
7 ,
5 million whereas it was in
fact R 3 2 million. Due to the misrepresentation the AFF suffered
damages in the amount of the commission.
7.3. In the alternative
lntibane's misrepresentations to the AFF induced the AFF to act on
the misrepresentations and they never
would have bought the
properties for the amount of R37,5 million; never for more than R 3 2
million.
7.4. In the alternative
Roome initially first induced Intibane with R7 million if lntibane
could sell Roome's properties for R50
million. This inducement was
made with the intention of inducing lntibane to promote Roome's
properties. This inducement was unlawful
and a contravention of s 3
of the prevention of Combatting of Corrupt Activities, no 12 of 2004
["Corruption Act"]. There
was a further inducement in that
Roome agreed with lntibane that any excess received for the
properties over and above the sum
of R3 2million would go to lntibane
provided that it did not exceed R 6million. This second inducement
also unlawfully contravenes
the Corruption Act.
[8]
The AFF called
7
witnesses and Roome closed its case without
calling any witnesses.
CHRONOLOGY
AS SUMMARY OF EVIDENCE
[9]
The following chronology serves as background to the mater. The
evidence is not summarised because this chronology sets out
the
common cause facts flowing from the evidence.
[10]
The Attorneys Fidelity Fund is represented by the Attorneys Fidelity
Fund Board of Control and is a statutory body established
by the
Attorneys Act 53 of 19
7
9.
[11]
In 2009 the Law Society of South Africa ["LSSA"] approached
the AFF with a request that the board acquire for the
LSSA new head
quarters. The purpose was to procure one building that could
accommodate all the divisions that were then spread
over two
buildings.
[12]
In 2009 the LSSA was keen to acquire an erf and to construct a
building at a business park approximate to the R21 Highway ["R
21 site"].
[13]
On 21 August 2009 Ramothibe was appointed by the LSSA as consultants
and developers for the R21 site.
[14]
On
7
September 2009 the AFF approved the acquisition of the
R21 site subject to conditions, to be resolved by joint committee of
members
of the AFF and LSSA finance committees.
[15]
The AFF Exco meeting on 15 November 2009 resolved to recommend that
Mgxaji, Badal, Moorehouse and Stansfield constitute the
ad hoc
Building Committee of the AFF. The Board of AFF adopted this Exco
recommendation.
[16]
The AFF appointed their own consultants, Boogertman & Partners,
due to the significant investment it was to make. The consultants
were mandated to assess the R 21 site that Ramothibe had recommended.
Boogertman criticised the R 21 site for
inter alia,
the erf
being so small that the proposed buildings would not fit on the site
and it was a business park versus an office park.
[17]
2 February 2010 - Meeting of joint AFF and LSSA Building Committee.
Boogertman presents its report of 3 December 2009:
17.1. Daya accused
Boogertman & Associates of being conflicted.
17.2. The LSSA
representatives confirm that Ramothibe was to remain consultants to
the LSSA.
17.3. Daya proposes a fee
structure agreement for Ramothibe.
17.4. The meeting
resolved that Ramothibe to respond to the Boogertman report,
including the possibility of purchasing or renting
an existing
building.
[18]
On 3 February 2010 Daya in writing advised Ramothibe of the
resolutions taken by joint building committee on 2 February 2010.
[19]
24 February 2010 - First "NON-DISCLOSURE AND AGENCY COMMISSION
AGREEMENT" between Roome and Ramothibe; not signed
by Roome.
[20]
1 March 2010 - Ramothibe's report on alternative premises for LSSA.
"Option
/" is buildings 6 and
7 ,
Glen Manor
Office Park [Roome' s property]. It advises that no agents are
involved in the sale and promotes these properties in
glowing terms;
''highly recommend"
the Glen Manor property as the
''best
buy for the LSSA and an excellent investment
..."
[21]
1 March 2010 - Ramothibe tax invoice to the LSSA for R 2 3 8 459,50,
plus detailed bill for a consultation on R21 site.
[22]
8 March 2010 - Second "NON-DISCLOSURE AND AGENCY COMMISSION
AGREEMENT" signed by both Roome and Ramothibe. It is
the same as
the first, save for the additional manuscript "special
condition" inserted by Roome.
[23]
19 March 2010 - LSSA management meeting where Daya reports that the
LSSA Manco is positive about Roome's property and that
he [Daya] has
requested the AFF to relieve Boogertman & Associates from their
brief.
[24]
31 March 2010 - Interim meeting of AFF Board of Control:
24.1. Noted the
recommendations of the joint AFF / LSSA Finance Committee meeting
held on 2 6 October 2009.
24.2. Noted that the AFF
had resolved on 16 November 2009 that Messrs Mgxaji, Badal and the
AFF' s executive and financial directors
would constitute an
ad
hoc
building committee to execute the recommendations.
24.3. Daya reports that
an existing building, Roome's property, was identified and that the
AFF's consultant would inspect the Menlyn
property.
[25]
12 April 2010 - Site visit to Roome's property by members of building
committees.
[26]
In an e-mail dated 13 April 2010 from Boogertman to Daya, John and
Andrew (the building committee of AFF) the following remark
is made:
"The quoted
building cost is RIO 000 per bulk meter, but the buildings only
total 2 600 m
2
Cost is tallied at RSO
million which translates to about R20 000 per bulk meter, not R10
000. lntibane used the land area, not
building area in their
calculation. Maybe they should first confirm their calculations
before we advance too far?"
In
a further e-mail Boogertman also makes the following remark:
"Right next door
to the Glen Manor Development [Roome 's property}, in the new Menlyn
Main development precinct. There exists
an opportunity to own
a
part of 7 500 m2 sectional title building, with a full green star
rating at a
total development cost of R21 100 per BULK meter.
...
This can in no way be compared to the value of R20 000 per
"BULK meter" that the Glen Manor development offers, with a
mere 2 500 m2 of B-grade office area.
...
Thus for the same R50
million investment, one can own a AAA grade, fully 'Green' building
in the most prestigious development in
PTA, in Menlyn Main."
[27]
On 15 April 2010 Daya wrote to John Moorhouse (executive director of
AFF) and Mr. S. Mgxaji (Chairman of the Board of the AFF)
that
Boogertman's mandate should be ended because they were acting
unethically because they failed to disclose that they were punting
a
building in which they had acquired an interest the previous day.
"We
have no recieved (sic) written advices from [Ramothibe} that the
owner of the bwldings at Glen Manor Office Park is already
in
discussions with third parties who have shown an interest in the
buildings."
[28]
19 April 2010 - Response by Moorehouse of AFF to Boqwana:
28.1. Advising that the
AFF building committee had resolved to retain the services of
Boogertman & Associates.
28.2. Advising that Rhode
& Associates CC had confirmed the Boogertman estimate of value in
the sum of approximately R 25,7
million, roughly half of the proposed
purchase price of R51 million, as a result of which the AFF Building
Committee had resolved
to commission a sworn valuator, the
appointment to be settled in consultations with the LSSA.
[29]
27
April 2010 - Roome emails to Daya
''unless I get
something in writing from you by Saturday, 1 May 2010, that indicates
your serious intention to soon make an offer
to purchase, I will be
forced to let the property out again and offer the building to estate
agents':
[30]
28 April 2010 - E-mail Daya to Roome, copied to Ramothibe, advising
that he would be holding urgent telecom with LSSA and AFF
the next
day
"to discuss your concerns".
[31]
AFF appoints a valuer; Mcintosh.
[32]
28 April 2010 - E-mail Daya to Ramothibe and Roome, attaching e-mail
from Stansfield advising the AFF's valuer (Mcintosh) needs
further
information from Roome in order to finalise his report so that AFF
can make an offer:
"Mr du Plessis has put us on terms and I
take that seriously':
[33]
6 May 2010 - E-mail exchange between Daya and Roome. Roome requires
agreement by not later than Monday, 10 May 2010.
[34]
6 May 2010 - ADDENDUM TO THE NON-DISCLOSURE AGREEMENT, signed by
Roome on 6 May 2010 [ie, prior to Mcintosh's advisory memo
of
7
May 2010] and by Ramothibe on
7
May 2010:
34.1.
"The owner
of the property will be paid R32 million':
34.2.
''Any amount in
excess of
[R3 2 million]
will be deemed to be agency
commission':
34.3.
''lntibane will
be entitled to place this agency agreement before the attorneys
representing the seller
..."
[35]
7
May 2010 - Advisory memo from Mcintosh to Daya and
Stansfield, advising on range of purchase prices for negotiation
purposes between
R 24,5 million and R3 5 million. Estimated values
(after refurbishment) of R 28 million and R3 2 million are mentioned.
[36
]
7
May 2010 - Letter Daya to Mgxaji and Moorehouse of AFF,
reporting on LSSA building committee meeting following the report
from Mcintosh,
requesting the AFF to
''immediately communicate an
offer in writing for RJ5 million':
recommending negotiating a
purchase price
''up to a maximum of R4-0 million".
[37]
10 May 2010 - E-mail Stansfield to Mcintosh advising that he has been
authorised on behalf of AFF to make an offer of R28 million
and
enquiring whether Mcintosh will represent the AFF in its negotiations
with the seller.
[38
] 10 May 2010 - E-mail Daya to Moorehouse and others, expressing
disquiet at news that the AFF intended starting negotiations
at R28
million, and setting up urgent teleconference for 13h00 on 11 May
2010,
"to discuss how we are to proceed herein':
[39
] 11 May 2010 - E-mail Mcintosh to Stansfield recommending an opening
bid of R 30 million representing a premium over market
value of R4,5
million, but that ' ..
the opportunity cost of securing a new
building would support offering up to RJ5 million':
[40]
11 May 2010 - E-mail Stansfield to Roome confirming mandate to offer
R30 million, representing a premium of R4,5 million over
the value of
the buildings in their present condition of R 2 5,5 million according
to Mcintosh.
[41]
11 May 2010 - SMS Roome to Daya: R30 million is
"completely
unacceptable and I don't know whether you are seriously interested':
[42]
11 May 2010 - E-mail Daya to Moorehouse and other AFF building
committee members, attaching the SMS from Roome, and advising:
42.1. Telcon at 13h00
unanimously resolved that the chairman of the fund (Mgxaji) and
co-chair of the LSSA (Boqwana ) will constitute
the negotiating team
to meet personally with Roome and negotiate a final offer.
42.2.
"We must do
nothing to jeopardise this matter and leave the negotiations to
Messrs Mgxaji and Boqwana as resolved':
[43]
12 May 2010 - E-mail exchange between Stansfield and Etienne Horn
(vice chair of AFF), and others:
43.1. Horne: ' ..
I am
a wee bit uneasy with the way things are developing and the pressure
being brought to bear on the fund':
43.2. Stansfield: ' ..
if
the committee wishes to offer a figure in excess of the RJS million
ceiling as determined by the valuer, Board of Control approval
must
be obtained':
[44]
13 May 2010 - Meeting of LSSA Manco
Daya
reports that ':..
the independent valuator, Grant Mcintosh, had
evaluated the building in its current form at R35 million"
[contrary to valuation in report].
Meeting
resolves that Boqwana and Mgxaji to meet with Mcintosh before
entering into negotiations with Roome to determine the maximum
amount
to be offered.
[45]
13 May 2010 - Roome, Boqwana, Mgxaji met at airport to further
negotiate sale of property.
[46]
13 May 2010 - E-mail Ramothibe to Roome ':..
to confirm our
agreement that we have signed on 7 May 2010 wrt the Non-Disclosure
that contains an Agency and Commission Agreement
..."
''As per our agreement
... DBR Trust will be paid a sum of RJ2 million from the sales by the
AFF and LSSA and any excess
...
will be paid to lntibane
Mediates deemed to be commission
[up to R 6 million]
and
anything above that will be paid to the DPR Trust".
[47]
14 May 2010 - Covering e-mail to Ramothibe to Roome:
"Find
attached letter as per agreed, for your attention. Please sign and
send it to Raj':
The
draft letter, purporting to be written by Roome, reads:
"I
indicated that I wanted R40 million. You wanted to know my bottom
line. is indicated that if a written offer is made no
later than
Tuesday next week, I am prepared to offer a further incentive and
settle at R37 500 000".
"I
am therefore placing you on terms
..."
[48]
14 May 2010 - E-mail Roome to Daya attaching the draft letter signed
by Roome.
[49]
14 May 2010 - Telecon Daya/ Boqwana to Mcintosh. Daya requests
Mcintosh to motivate an offer of R3
7.
5 million to Boqwana and
to the AFF.
[50]
17 May 2010 - E-mail Mcintosh to Stansfield advising that, in the
light of Roome's price of R3 7,5 million
"the business
decision taking into account all costs and benefits for the AFF/LSSA
becomes critical
..." and that ':..
to close the dear:
recommending agreement on the figure of R3 7,5 million
"to
reach a final agreement/ settlement".
[51]
17 May 2010 - AFF Exco meeting. Stansfield reports that Mcintosh
"supports"
the price of R 3 7,5 million. Mgxaji
advises that the purchase price has been agreed at R3 7,5 million.
[52]
17 May 2010 - E-mail Stansfield to Raj Daya and others confirming the
Exco decision to purchase at R 3 7,5 million, following
the
recommendation of Mcintosh.
[53]
18 May 2010 - E-mail Stansfield to Roome confirming acceptance of the
offer of R3
7 ,
5 million and advising that Mr De La Rey of
Maluleke Msimang Attorneys would draw up a deed of sale.
[54]
19 May 2010 - Discussion between Roome and Mr De La Rey. No reference
to commission. Preparation of first draft of deed of
sale by Mr De La
Rey.
[55]
20 May 2010 - E-mail Stansfield to De La Rey advising that CP Fourie
will sign the offer to purchase on behalf of Attorneys
Fidelity Fund
as he is Pretoria-based.
[56]
20 May 2010 - First draft of deed of sale forwarded by De Law Rey to
Stansfield.
[57]
21 May 2010 - Revised deeds of sale forwarded by De La Rey to AFF and
Roome.
[58]
24 May 2010 - E-mail Ramothibe to Roome, headed
"New wording
for the deeds of sale"
and attaches new wording for clause
11 of the deeds of sale:
"Dear Dup,
Raj drafted the
amended wording that you must (sic) the transfer attorneys included
in the agency commission. Please find attached
the wording, for your
attention".
"No agency
commission is payable by the Purchaser. Any commission agreement
between the Seller and any third party is a private
and confidential
agreement between the Seller and the third party and does not create
any legal obligations on the Purchaser':
[59]
24 May 2010 - Meeting between De La Rey and Roome, at which the new
agency commission clause proposed by Roome is provided
to De La Rey.
[60]
25 May 2010 - Revised agreements forwarded by De La Rey to AFF and
Roome.
[61]
Shortly before 2 5 May 2010 - Daya telephones attorney Kalian and
requests him to assist Ramothibe concerning his commission.
[62]
25 May 2010 - Ramothibe forwards draft deeds of sale to Kalian.
[63]
27
May 2010 - E-mail Ramothibe to attorney Shirish Kalian:
"Mr
Roome ... has ... acknowledged that he will honour the agreement
between us".
''l hereby instruct
you to act on my behalf to finalise the commission due to my company
in terms of the agreement and the addendum
I have forwarded to you':
The
e-mail attaches the
''Addendum to non-disclosure Agreement"
signed on 6 May 2010 and
7
May 2010.
[64]
1 June 2010 - LSSA invoices AFF for the amount of R2 3 8 459,50 paid
by LSSA to lntibane.
[65]
1 June 2010 - CP Fourie signs sale agreements on behalf of AFF and De
La Rey informs Roome accordingly.
[66]
1 June 2010 - Ramothibe congratulates Daya on acquiring the Glen
Manor properties and requests appointment as project managers
and
consultants to undertake the renovations.
[67]
2 June 2010 - Ramothibe e-mail to attorney Kalian:
"I don't
trust
[Roome]
anymore
...
I think he is becoming
greedy".
"We
have a valid contract that he signed and the other shareholders are
aware of it …
"
[68]
4 June 2010 - E-mail Roome to Ramothibe requesting
''your attorney
Mr Kai/tan, for a correct commission agreement between lntibane
Mediates and two companies
that own the property
..."
and advising that"
I cannot sign the purchase agreement until
this issue is cleared up".
[69] 6 June 2010 - Roome
forwards to Raj Daya his e-mail to Ramothibe of 4 June which reads as
follows:
'Dear Tshepo, I have
asked you more than once and also asked your attorney Mr. Kallina,
for a correct commission agreement between
lntibane Mediates and the
two companies that own the property. The agreement must split the
commission up between the two properties,
R2.2m inclusive of VAT and
RJ.JM inclusive of VAT respectively for Stand 49/1 Menlyn Pty Ltd and
Head Brothers Steel Fabricating
and Engineering Pty Ltd. Please state
your VAT number, company number, Bank account details and the fact
that the commission is
payable against transfer by the transfer
attorney directly into your bank account. We can not reserve the
buildings any longer
for your buyer and I can not sign the purchase
agreement until this issue is cleared up. In view of the commission
issue, unless
cleared up by you by ! ! am on Monday 7 June 2010, I
will sign the purchase agreement but instruct the transfer attorney
to carry
on with the transfer and keep all commission payments back
until we are supplied with the correct information. The delays are
costing
us a lot of money and can't carry on any longer".
[70]
7
June 2010 -
Roome signs the sale agreements at De La Rey's office.
[71]
7
June 2010 - E-mail Ramothibe to Roome:
"I have
talked to Raj today and he told me that you guys talked last night
and asked to send you the two requested invoices
for our agreed
commission';
and enclosing the invoices.
[72]
8 June 2010 - E-mail Roome reply to Ramothibe: "...
it is my
turn to tell you we had an agreement':
"We are not
prepared to lose any further money on this deal':
''Please draw up 2 new
agreement between the owning companies and lntibane mentioning the
commission payable
..."
''l am sorry but today
it is my turn to tell you we had an agreement. So I suggest you
immediately register your company for VAT
-
it's a very simple
exercise. In any case it is fraud not to register for and pay VAT on
a turnover of this magnitude. In view of
the excessive commission you
claimed from the outset, I told you that I don't want to get involved
in any deceptive actions.
We are not prepaired
to loose any further money on this deal. Over and above the VAT
issue, you must please formally by letter cancel
the commission
agreement
between our trust and lntibane Mediates PTY L TD,
for the fact that the trust does not own the properties. Please draw
up 2 new
agreements between the owning companies and lntibane
mentioning the commission payable and the fact that it is
inclusive of VAT. Also send us 2 correct invoices mentioning the
amount of VAT
inclusive".
[73]
9 June 2010 - E-mail Ramothibe to Roome attaching two amended NON
DISCLOSURE AND AGENCY COMMISSION AGREEMENTS and tax
invoices.
[74]
2 9 June 2010 - Willie Brown van der Walt advises De La Rey that
transfer documents ready for signature. It is arranged that
CP Fourie
will sign on behalf of AFF as he is conveniently situated in
Pretoria.
[75]
30 June 2010 - The revised "NON-DISCLOSURE AND AGENCY COMMISSION
AGREEMENTS" which had been forwarded on 9 June 2010,
are signed
by Ramothibe and Roome.
[76]
5 July 2010 - Letter De La Rey to Willie Brown van der Walt, advising
that Fourie has signed all documents with the exception
of the TDS
forms,
"[t}he reason being that he, nor the Attorneys
Fidelity Fund has any knowledge of the contents of any Commission
Agreement
that exists or may exist between the seller(s) and any
third party ...".
This flows after Moorehouse alerted Mr.
Fourie that there is some form of commission according to the TDS
forms. Fourie also urges
that seller disclose the commission
agreement to AFF.
Reply
Willie Brown van der Walt to De La Rey:
"After consultation
with the seller and the Estate Agency and with reference to clause 11
of both Agreements of Sale the parties
rely on the contents of the
said clause concerning the confidentiality of the Commission
Agreements"
and enclosing TDS signed by Roome on 5 July
2010.
[77]
13 July 2010 - Meeting between De La Rey and Willie Brown van der
Walt at the Deeds Office.
Van
der Walt says,
"Sy klient is in
'n slap riem gevang
oor die groot bedrag
kommissie wat betaalbaar is."
[78]
14 July 2010 - A confidential memorandum by AFF management
(Stansfield and Moorhouse) is e-mailed to CP Fourie, referring to
the
information obtained by Stansfield from Mcintosh, which revealed that
Ramothibe and Raj Daya are neighbours.
[79]
15 July 2010 - LSSA Manco meeting. CP Fourie reports on why the TDS
forms have not been signed.
Resolved
to address a letter advising Ramothibe that LSSA regards the matter
in a very serious light.
[80]
19 July 2010 - CP Fourie signs the TDS forms.
[81]
21 July 2010 - Letter Raj Daya to the co-chairs of LSSA, referring to
the confidential internal memo produced by AFF management
on 14 July
2010, disputing receipt of any
''kick-back"
from
Ramothibe, and advising of prospective damages claims against
Stansfield and Moorhouse.
[82]
2 August 2010 - AFF Board meeting. Resolved that:
82.1. Opinion to be taken
on possibility of interdict or preservation order with regard to the
RS,5 million commission.
82.2. Moorehouse and
Stansfield required to report to the Board on what gave rise to the
memo of 14 July 2010.
[83]
3 August 2010 - Revised memorandum by management of AFF, omitting
reference to Raj Daya and Ramothibe being neighbours.
[84]
13 August 2010 - Letter Bowman Gilfillan to Willie Brown van der Walt
threatening urgent interdict to prevent payment of commission
to
Ramothibe pending action to be instituted.
[85]
16 August 2010 - Letter Willie Brown van der Walt to Bowman Gilfillan
undertaking to retain R5,5 million in an interest-bearing
account.
[86]
16 August 2010 - Further "NON-DISCLOSURE AGREEMENT" signed
by Ramothibe only:
''lntibane Mediates
undertakes to pay the sum of R250 000 to Du Plessis Roome upon
registration and transfer of the properties
..."
[87]
16 August 2010 - Pursuant to registration of properties Willie Brown
van der Walt advises Bowman Gilfillan, advising that following
a
consultation with Roome ':..
the sellers are contractually obliged
to pay the agent, lntibane Mediates Pty ltd, its commission due"
and advising that he has
"no other option but to release
the total amount of RS.5 million in favour of the agent".
[88]
2 6 August 2010 - Bowman Gilfillan advise Willie Brown van der Walt
that an urgent application would be launched shortly.
[89]
31 August 2010 - Letter Gildenhuys Lessing Malatji, Ramothibe's new
attorneys, to Willie Brown van der Walt and Roome, recording
that
Ramothibe had concluded a non-disclosure and agency commission
agreement on 30 June 2010.
[90]
13 September 2010 - Revised draft deed of cession signed by Raj Daya
on behalf of LSSA to AFF.
[91]
2 5 February 2011 - Interdict granted, restraining payment of R5,5
million, plus interest.
[92]
20 February 2012 - E-mail Mr Roome to Bowman Gilfillan:
92.1.
"The final
price of the RJ7,5 million was negotiated between myself, Mr Max
Boquana (chairman of the LSSA) and Mr Raj Daja
(executive manager of
the LSSA)':
92.2.
"It was
...
made clear to me by lntibane that they were consultants to the
LSSA and that the LaW Society acts on their recommendations only':
92.3.
"On the
original price of R50m (a price held before me by lntibane), I was to
pay lntibane R7m Finders commission':
92.4.
"I was
always very suspicious about their way of doing things
...':
ARGUMENT
ON BEHALF OF AFF
[93]
On behalf of the AFF it was argued that it is common cause that Roome
was aware that Ramothibe was acting on behalf of tl1e
AFF / LSSA.
Roome was also aware of the improprieties' committed by him and
Ramothibe:
93.1. The AFF was to be
persuaded to purchase the properties at a price significantly in
excess of what Roome was prepared to sell
them for to accommodate the
agreement between Roome and Ramothibe to earn commission on the sale
of the properties.
93.2. The non-disclosure
agreements between Roome and Ramothibe are atypical of any estate
agent's mandate. The confidentiality
clauses and the inflated figures
are proof of the improprieties.
93.3. As an experienced
businessman Roome knew the first selling price of R50 million and
later R43 million was significantly above
the market value of the
properties. The fact that he settled for 3 2 million is indicative
thereof that he knew the true value
of the property.
93.4. Roome did not
disclose to Mcintosh the agent's name who purportedly told him to
market the properties for R50 million. The
only plausible reason why
he would not divulge this information is because he knew his
agreements with Ramothibe were improper.
93.5. When the tax
invoices alerted the AFF for the first time that commission was
payable Roome' s attorneys declined to furnish
the commission
agreements between himself and Ramothibe as requested by the AFF;
there must thus be some improprietary otherwise
it would be
discovered.
93.6. Roome did not
discover the Addendum agreement despite discovering a variety of
other Non-disclosure and related agreements.
The AFF saw reference to
the Addendum agreement in an e-mail from Ramothibe. The AFF requested
this agreement from Roome. Roome
then answered that he did not have
the document and did not know its whereabouts. In the request for
further particulars for trial
Roome answered that they were
attempting to obtain the documents. The AFF then found the document
one week before trial in Ramothibe's
attorneys file. The relevance of
this agreement is the following clause:
''any amount in excess of
the sum of RJ2 million paid as the selling price by the AFF and the
LSSA wit be deemed to be agency commission
legally earned by lntibane
mediates in the exercise of their mandate to negotiate and sell the
property to the AFF and LSSA on
behalf of the DRP Trust".
The
AFF' s stance is that Roome deliberately did not discover this
centrally significant document because it undermined Roome' s
opposition to the action. Without him providing an explanation as to
why he did not discover this document, the Court must accept
that he
knew he acted improperly.
93.7. This submission is
strengthened with the meeting at the airport on 13 May 2010 between
Roome, Boqwana and Daya and the confirmation
of what took place at
the meeting in a letter drafted by Ramothibe but finalised by Roome.
Roome had informed the meeting that
he wanted R40 million for the
properties but that his bottom line was R 3 7,5 million. Roome in
this letter informed the AFF to
make an offer of R 3
7 ,
5 not
later than the following Tuesday otherwise he would sell the
properties to another buyer. Roome understood that "bottom
line"
meant the lowest price he was prepared to accept for the properties.
Yet in the addendum agreement, concluded a week
before the airport
meeting the price was R3 2 million. He had thus contractually bound
himself to the R 3 2 million and anything
above that to go to
Ramothibe. He thus made a positive misrepresentation of fact to the
AFF.
93.8. Of note is the role
that Daya played in the negotiations, the drafting of letters and
agreements. The letter confirming what
transpired at the airport
meeting emanated from Ramothibe, yet he was not present at the
meeting. It was argued that it could only
have been drafted by Daya,
who attended the meeting, forwarded to Ramothibe and then to Roome.
Roome did not testify to the contrary.
The inference was that Daya,
as the neighbour of Ramothibe, was involved in promoting the
properties at an inflated price to provide
for commission to
Ramothibe and on the probabilities that Daya had a personal financial
interest in procuring the result. It was
obvious that only one
property, Roome's property, was promoted in glowing terms. Roome
pleaded that Daya knew of Ramothibe' s commission
and they discussed
the commission agreements on diverse occasions. The Addendum
agreement was signed by Ramothibe on 6 May 2010.
This is a day prior
to Mc lntosh's report dated
7
May 2010. Mcintosh had informed
Daya prior to finalising his report that he valued the property at R3
2 million. Yet the addendum
between Ramathibe and Roome reflected
this amount; the only inference is that Daya informed Roome and
Ramothibe of the amount.
On 24 May 2010 Ramothibe
informs Roome that according to Daya the commission clause must be
amended according to the wording provided
by Daya as follows:"
I
have talked to Raj today and he told me that you guys talked last
night and asked to send you the two requested invoices for our
agreed
commission."
"Our" implicates that more than one
person was to receive the commission.
93.9. Reliance was also
placed on Daya' s distinctive punctuation style which can be
summarised as a significant gap between the
end of a word, and a
comma or full stop. This is reflected in Ramothibe' s report in the
portion where Roome's properties are recommended.
This punctuation
also features in all the Non-disclosure agreements ["NOA"]
as well as the amended NOA. Even in the e-mail
dated 14 May emanating
from purportedly Ramothibe this typographical phenomenon can be seen.
The only inference is that all of
these documents were drafted by the
same author.
93.10. Daya promoted
Ramothibe as a preferred service provider to the LSSA and AFF for the
R 21 project and the recommendation for
a new headquarters for the
LSSA. Daya actively promoted Roome's properties. He also promoted the
properties for the price of R
51 million, R40 million and lastly R 3
7,5 million in an effort to improperly benefit Ramothibe to obtain a
secret and illicit
"commission". Roome was aware that
Ramothibe and Daya collaborated to improperly persuade the AFF to pay
a purchase price
well in excess of the price that Roome was prepared
to accept for the properties in order to secure the largest possible
commission.
In this knowledge Roome represented to the AFF that he
wanted R40 million and that his bottom line was R3 7,5 million. He
did this
while aware that the AFF was ignorant of the "commission"
as part of the purchase price.
[94]
It is thus the AFF's submission that it was induced by Roome' s
active representation of his bottom line into entering a contract
and
this misrepresentation entitled it to rescind the contract. However
the AFF is entitled to recover the damages while standing
by the
contract based on the fraudulent misrepresentation. Damages can also
be recovered on the basis of a negligent misrepresentation.
Roome's
silence amounted to a wrongful misrepresentation and as a seller he
had a greater duty to impart information within his
exclusive
knowledge.
The
commission fell within the exclusive knowledge of the seller and the
buyer would be entitled to the frank disclosure thereof
in accordance
with the legal convictions of the community - Mccann v Goodall Group
Operations (Pty) Ltd 19 9 5 ( 2 ) SA 718 (C)
at 72 6G; approved in
Axiam Holdings Ltd v Deloitte & Touche
2006 (1) SA
2
37
SCA)
at para [15].
Any
suggestion to the contrary offends one's sense of justice, is
untenable and the law cannot countenance it.
[95]
The causality lies therein that the AFF agreed to pay the R37,5
million because of Ramothibe's initial glowing report of Roome's
property and the pressure placed on the AFF, especially Daya, to
acquire the property. Furthermore Roome informed Mcintosh that
an
agent [without disclosing that it was Ramothibe] recommended to him
that the asking price of the property is R50 million. Roome
at the
airport meeting sought R40 million while he had a week earlier signed
a contract with Ramothibe setting out that the purchase
price should
be R3 2 million. Roome then pressured the AFF in his e-mail of 14 May
2010 to buy for R3 2 million. Daya persuaded
Mcintosh to recommend
purchasing at R3 2 million but Mcintosh testified he would never had
done so had he known that Roome had
agreed with Ramothibe to take R3
2 million.
[96]
Although the AFF' s
de facto
loss is in fact R 10 million
because the buildings were sold in 2012 /early 2013 for
27
,5
million the damages claimed are R 5,5 million being the difference
between the price it agreed to pay for the property and the
price it
would have paid but for the misrepresentations.
ARGUMENT
ON BEHALF OF ROOME
[97]
On behalf of Roome it was argued that the AFF's claim against Roome
is a claim in terms of the
lex Aquilia
and that harm is a
prerequisite to succeed with a claim. The AFF failed to prove that it
suffered harm and did not suffer patrimonial
loss.
97.1. The LSSA and AFF
inspected the properties and minuted that it was satisfied with the
properties. They were presented by committees
consisting of
experienced lawyers.
97.2. There was no
evidence to show that either Roome or Ramothibe exercised any
influence over the management committees of the
LSSA or AFF. In fact
Ramothibe' s inane valuation of R51 million was rejected out of hand.
The pressure came from Daya, the chief
executive officer and there
was no evidence to suggest that undue pressure was exerted by the
co-chairs of the LSSA.
97.3. The AFF obtained
its own expert, Boogertman and Partners and they advised against the
purchase of the property. They also
advised that the market value of
the properties to be worth an estimated R 2 5,7 million.
97.4. The AFF obtained a
report from Rode Valuations which valued the property at an estimated
R 2 5,7 million.
97.5. Any influence that
Ramothibe could have exercised was nullified with the appointment of
Mcintosh. Mcintosh estimated the value
of the property between R 28
million and R3 2 million with a negotiation range of between R 24,5
million to R 3 5,2 million.
97.6. Mcintosh informed
Stansfield that he should make an offer of R30 million to test if the
sellers are serious. The AFF thus
made a free and willing offer. The
offer of R 30 million represented a premium of R4,5 million.
97.7. Stansfield was then
replaced as negotiator by the chairman of the AFF and the CO-chair of
the LSSA. Ramothibe was thus even
further removed and could not
exercise any control over the sale.
97.8. Mcintosh then
advised the AFF to agree to pay R 3
7
,5 million to reach a
final agreement.
97.9. Roome did give his
honest bottom line including the amount of his agent.
97.10. The decision to
purchase goods at a price accepted by the purchaser does not
constitute harm within the ambit of delictual
liability.
[98]
At the time of signing the deeds of sale the AFF knew of the agent
commission because Roome had insisted that a term be included
that
the sellers would be liable for any commission. There is nothing
untoward in the sellers agreeing to pay the commission. The
AFF must
thus have been aware that there is an agent, but through their
conduct they did not care who the agent was and what amount
the agent
would receive. This was not for the AFF a relevant consideration in
determining the purchase price. The only harm they
suffered was the
AFF' s own persistence to conclude the agreement.
[99]
It was argued that Roome did not have a legal duty to disclose to the
AFF that there was commission payable. Roome did know
that Ramotibe
was acting for the AFF. The AFF knew at the very least by
7
June
2010, date of sale, that an estate agent was involved. It was argued
it was common cause the Ramothibe assisted the sellers.
These facts
did not create a legal duty.
[100]
If there was a legal duty to disclose the relevant clause then they
complied by including it in the agreement of sale. Ramothibe
did not
after the introduction of Roome influence the sale or the price.
Therefore it was not unlawful or negligent of Roome not
to disclose
the identity of the agent.
[101]
The inclusion of an anticipated expense in the calculation of the
"bottom line" that a seller would accept can never
be
regarded as misrepresentation. It was argued that commission is
always paid out from the gross amount.
[102]
Putting pressure by referring to another buyer is sales talk only
amounting to puffery.
[103
] The AFF did not suffer harm because it elected for reasons peculiar
to itself to purchase the properties at the price so
advised by the
AFF' s own expert, Mcintosh. The AFF elected to proceed with the
agreements knowing all the facts they now rely
on. Thus even if
Roome' s conduct was wrongful and culpable it did not factually or
legally result in the diminution of the AFF'
s patrimony.
REASONS
FOR DECISION
[104]
On the common cause facts it was established that during the
negotiation process the AFF had no, and could not have had, any
knowledge that Ramothibe for his services would also earn an
inordinate amount of secret commission. It goes without saying that
Ramothibe had a duty to disclose this to the AFF. The question is
whether Roome as the seller had a legal duty to disclose this
fact to
the AFF.
[105]
There is in my mind no doubt that Roome can in law never be entitled
to the commission he agreed to with Ramothibe and should
be disgorged
thereof. Roome had a relationship with the AFF' s agent, Ramothibe.
He also had a relationship with the AFF directly;
he e-mailed them
and met with representatives of the AFF. He knew that Ramothibe was
acting on behalf of the AFF in obtaining premises.
He knew that as
incentive for Ramothibe to promote Roome' s properties Roome was
agreeing to commission in non-disclosure and confidential
agreements
to which the AFF was not privy. In assessing all these facts the
question to be answered is whether it is justified
for the AFF to
rely on the conduct of Roome.
[1]
[106]
The AFF could reasonably have expected Roome to inform it that
Ramothibe, their agent, was aspiring to secret commission that
was
inflating the purchase price. Roome would lose nothing; his real
bottom price of R 3 2 million would still be attained. Yet
Roome
found it necessary to conclude confidential NOA' s and Addendums
making it clear that Roome knew he was acting untoward.
These facts
command this inference, especially so with Roome not testifying to
the contrary. One only acts secretly if you knew
you had a duty not
to do so. Roome relied on the confidentiality of the agreements not
to provide them to the AFF; persisting with
secrecy towards the AFF.
Roome had no scruples to deceive the AFF about his real bottom line
and the secret commission until he
was annoyed that Ramothibe was not
splitting up the commission between the 2 companies that owned the
properties and was avoiding
paying VAT on the commission. He then for
the first time insisted on
"a correct commission agreement'
[p38 9].
[107]
I am accordingly satisfied that Roome on the common cause facts and
in the circumstances had a legal duty to inform the AFF
of the secret
commission. I am convinced that policy considerations would in these
circumstances place a legal duty on Roome, as
the seller, to inform
the AFF that his real bottom line price was R3 2 million and that
pressure was being placed on the AFF to
pay more to accommodate a
secret commission deal being induced by Roome and the AFF' s own
consultant. As an astute businessman
he knew that Daya was playing a
part in the whole transaction that was untoward. With no evidence to
the contrary, the only inference
is that Daya informed Roome that
Mcintosh's valuation was to be R3 2 million and that is why the
Addendum mentioned the properties
"highest best use at RJ2
million"
even before the valuation was available.
With
this information Roome was prepared to accept R32 million as purchase
price and accommodate Ramothibe with R5,5 million as
secret
commission. It is quite true that in all sale agreements the seller
might start with a sale price higher than the market
value and will
in most instances have a bottom line price, but then the agent's
commission is reflected in the agreement and the
bottom line price is
known to the purchaser. This reflection of commission is most
definitely necessary where the agent of the
purchaser is, unbeknown
to the purchaser, also receiving a secret commission. Mr Roome had a
sufficient relationship of proximity
to the AFF to reasonably
contemplate that the AFF would not pay Ramothibe an exorbitant R 5,5
million commission secretly agreed
to by Roome as an inflated
purchase price.
There
is a reluctance to impose a legal duty for an omission due to the
recognition of a
laisses
faire
concept
of liberty that recognises that individuals are entitled to
''mind
their own business''.
The
protection afforded by the Bill of Rights might even bolster this
inhibition against imposing legal duties on private citizens.
[2]
I am not reluctant to impose a legal duty under these circumstances
because the legal convictions of the community would dictate
that
Roome did not have the right to mind his own business. Roome as the
seller should have disclosed to the AFF as purchaser that
he was
striking a deal with Ramothibe who had a close relationship with the
AFF. Roome's omission is accordingly wrongful.
[108]
I cannot find that there is any consideration that negates the legal
duty of Roome to disclose the secret commission. The
fact that the
sale agreement for the first time includes a commission clause that
the seller will pay the commission most certainly
could not alert the
AFF that the seller is paying RS,5 million of the purchase price to
their own consultant. The fact that the
AFF did not rescind the
contract but interdicted the commission from being paid out is a
legal remedy at their disposal to attack
the unlawful commission and
not the purchase price the AFF was prepared to pay for the buildings.
[109]
A negligent misrepresentation gives rise to delictual liability if
Roome breached his legal duty to act where he needed to
act
positively.
[3]
Roome's silence
can in the words of Navsa JA "undoubtedly" constitute
negligent misrepresentation.
[4]
[110]
Thus where there is a duty to speak, Roome negligently made a
misrepresentation to the AFF about the purchase price and commission
pertaining to the sale transaction by representing that his bottom
line price is in fact R 3
7 ,
5 million.
[111]
I am also satisfied that the inflated purchase price is a material
fact intrinsically relevant to the sale agreement.
[112]
It was submitted that there was no causal connection between the
misrepresentation and the averred harm because the AFF bought
the
property at that price on the recommendation of their own expert,
Mcintosh. There is accordingly also no harm suffered. On
the common
cause facts I am satisfied that the misrepresentation induced the
contract. Mcintosh testified that he would never have
advised the AFF
to clinch the deal at R37,5 million had he known of the commission
and the NDA's. He was only prepared to advise
to offer R 37,5 million
because Daya informed him that the LSSA was desperate for one
building, time had been wasted on the R 21
project, this property was
in the ideal location and time was of the essence otherwise they
would risk losing the properties. All
those factors plus the cost of
starting a search afresh can be seen as a premium that a business is
prepared to pay above market
value. In this instance it was personal
investment value that a company would attach to the property. The
market value of the property
was R32 million. Had Mcintosh in fact
known that the R3 7,5 million included R5,5 million commission he
would never have advised
that the AFF pay a premium of R 5,5 million
for commission for their own agent.
[113]
The AFF did in fact suffer patrimonial loss. They are R5,5 million
out of pocket, a reduction in patrimony, that they would
not have
paid, but for the misrepresentation. Roome was happy to sell for R 32
million and on the Mcintosh report and advise the
AFF would have been
happy to pay R 32 million. Mcintosh would have advised against
payment of R 3
7
,5 million had he known it included RS,5
million for commission. All the factors that led to the AFF to pay R
3
7
,5 :nillion was induced by the misrepresentation and caused
it to suffer R 5,5 million loss. In any event Roome should be
disgorged
of claiming the R 3,5 million loss.
[114]
I accordingly make the following order:
114.1. The third and
fourth defendants are to pay the plaintiff R5,5 million jointly and
severally the one to pay the other to be
absolved.
114.2. Interest on the
amount of R5,5 million per annum
a tempore morae.
114.3. The third and
fourth defendants are to carry the costs jointly and severally, costs
to include the costs occasioned by the
amendment brought on 24 May
2013.
____________________
S
POTTERILL
JUDGE OF THE HIGH COURT
CASE
NO: 56341/2010
HEARD
ON: 11 November 2014-14 November 2014 and 30 May 2016 - 3 June 2016
FOR
THE PLAINTIFF: ADV. J. MULLER SC
INSTRUCTED
BY: Bowman Gilfillan Attorneys
FOR
THE 3
rd
, 4
th
and 5
th
DEFENDANTS:
ADV. S.D. WAGENER SC
INSTRUCTED
BY: Johan van de Vyver Attorney
DATE
OF JUDGMENT: 26 July 2016
[1]
Volvo (SA)(Pty) Ltd v Yssel
2009 (6) SA 531
(SCA) at 537A-C.
[2]
Minister of Safety and Security v Van Duivenboden
2002 (6) SA 431
(SCA) para [19].
[3]
McCann v Goodall Group Operations (Pty) Ltd
1995 (2) SA 718
(C) at
726A-D.
[4]
Axiam Holdings Ltd v Deloitte & Touche
2006 (1) SA 237
(SCA) at
para [15].