Nach Investments (Proprietary) Limited v Knight Frank South Africa (Pty) Ltd

The appellant was the owner of immovable property in Germiston that was let to a tenant. The lease agreement contained a right of pre-emption in favour of the tenant, providing that if the owner received an offer to purchase and wished to accept it, the owner must submit the offer to the tenant and grant the tenant a 30-day option to purchase on the same terms. In early 1996, the appellant appointed the respondent estate agent on an exclusive mandate for 120 days to sell the property. The mandate later continued on a non-exclusive basis. In 1998, the respondent found a purchaser willing and able to purchase at an acceptable price. A written offer was submitted to the appellant, who then submitted it to the tenant as required by the right of pre-emption. The tenant exercised the option and purchased the property. The respondent claimed commission, which the appellant refused to pay, arguing that commission was only payable if the property was sold to a person introduced by the agent.

• Whether an estate agent is entitled to commission when the property is sold to a third party who was not introduced by the agent but whose purchase was triggered by an offer procured by the agent
• Whether it is an implied term of an estate agency agreement that commission is only payable if the property is sold to a person introduced by the agent
• Whether the estate agent was the effective cause (causa causans) of the sale when the ultimate purchaser exercised a right of pre-emption

The appeal was dismissed with costs. The judgment of Goldstein J in the Witwatersrand Local Division granting judgment in favour of the estate agent for commission was upheld.

The binding legal principles established are: (1) An estate agent's entitlement to commission depends on the construction of the particular agreement between the parties according to ordinary principles of contractual interpretation, not on special rules of law applicable to estate agency; (2) Where parties agree that an agent will 'sell' property, this means the agent will bring about a sale between principals, and the agent earns commission if the property is sold to a willing and able purchaser and the agent was the effective cause of that occurring; (3) There is no implied term in law that an estate agent is only entitled to commission if the property is sold to a person introduced by the agent; (4) An estate agent is the effective cause of a sale (both causa sine qua non and causa causans) when the agent procures an offer that triggers a right of pre-emption and thereby induces the holder of that right to exercise it and purchase the property.

The court made observations about the concepts of causa sine qua non and causa causans, citing Van den Heever JA in Webranchek v L K Jacobs & Co Ltd 1948 (4) SA 671 (A) at 679, noting that: 'The distinction between the concepts causa sine qua non and causa causans is not as crisp and clear as the frequent use of these phrases would suggest; they are relative concepts. Where a causa sine qua non emerges as the only known causative factor, one is easily persuaded that it was also the causa causans ... It is only where a number of causes compete for recognition as the effective cause that the distinction has any meaning.' The court also observed that while the absence of an introduction by the agent does not preclude a claim for commission, it might in some cases make it more difficult to establish that the agent was the effective cause of the sale.

This case clarifies important principles regarding estate agents' entitlement to commission in South African law. It establishes that: (1) estate agency agreements are governed by ordinary principles of contract law and construction, not special rules; (2) there is no implied term that commission is only payable when the purchaser is introduced by the agent; (3) an agent can be entitled to commission if they are the effective cause of a sale, even where the ultimate purchaser is a third party who exercises a right of pre-emption; and (4) an agent who procures an offer that triggers a right of pre-emption, thereby inducing the holder of that right to purchase, is the effective cause of the sale. The case is significant for clarifying the 'effective cause' test in the context of pre-emptive rights and for confirming that estate agency law is not a special category with unique implied terms.