WARNING TO ALL THOSE TRADING AS ESTATE AGENTS AND THE PUBLIC

By Mfundisi

8th March 2016

In the case of Austin Banda trading as Land Sales & Property Transfers V Stephen Leonard Aipila (Commercial Case No 28 of 2015, Lilongwe), Justice Mtalimanja has delivered a well reason judgement that ought to be taken as a warning to Malawians, especially those who are involved in land transactions, either as estate agents or lawyers or as sellers or buyers of land or fixed properties. This post provides a commentary of the case and draws out excerpts which contain what I view to be the key findings and statements that the court makes. In terms of style, I have extracted paragraphs from the judgement and below each paragraph provided a commentary. The commentary is in Italic and has Com: at the beginning. I have deliberately used different fonts to distinguish my commentary with the words of the judge. The excerpts from the judgement are preceded by a paragraph number.

BRIEF SUMMARY OF THE FACTS OF THE CASE

The plaintiff, an estate agent sued the defendant for the sum of K2.8 million being 10% commission of a sale of property transaction, damages for breach of contract and costs of the action. The defendant, who was the owner of the property sold denied liability for the plaintiff’s claim in its entirety and prayed that the claim be dismissed with costs.

The court then went on to consider the evidence in detail as well as the applicable law. The court found that the evidence disclosed that there was an agency agreement between the Plaintiff and the Defendant and that the Plaintiff would have otherwise been entitled to his 10% commission [paragraph 56]. We start off after the court has analysed the evidence and start making its findings:

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55. The defendant conceded that the plaintiff advised him right at the outset that he will charge an estate agency commission of 10% of the sale price of the property. The plaintiff contends that the defendant accepted this condition. PW 2 testified that he informed the defendant that the plaintiff charges a commission of 10% of the purchase price for his services of identifying buyers for clients. PW4 also testified that he informed the defendant that the plaintiff will charge a commission of 10% of the purchase price and the defendant accepted this.

56. I am persuaded by and do believe these pieces of testimony and find that the defendant was duly informed prior to the transactions that the plaintiff will charge him a commission of 10% of the purchase price for his services of identifying a buyer on his behalf. As I have already found, there was an agency relationship between the plaintiff and the defendant. But for the observations below, the plaintiff would have been entitled to receive 10% commission of the K28 million, as consideration for the estate agent services he rendered to the defendant in the agency relationship.

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Com: The defendant was disputing that there was an agency agreement between the parties. Here in paragraph the Court is making a finding that there was. The Court then says that it would have awarded the Plaintiff his claim were it not for the findings of illegality that follow. In other words, were the Plaintiff a properly registered agent, he would have won the case hands down.

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64. The law (Section 3 of the Land Economy Surveyors, Valuers, Estate Agents and Auctioneers Act, Act No. 5 of 1989) provides that:

“(1) ... no person shall practise under any name, title or style containing the words land economy surveyor, valuer, estate agent or auctioneer, for the purpose of gain, make any other use of such name, title or style, unless he is registered under the Act as a land economy surveyor, valuer, estate agent or auctioneer,

(2) any person who contravenes this section commits an offence and is liable upon conviction, to a fine of K2000 and to imprisonment for 1 year.”.

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Com: This means that unless a person is registered under the Act cited above as an estate agent, that person is committing an offence if he purports to act as an agent without registration. He can be charged with a criminal offence.

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65. Section 8 of the Land Economy Act outlines the qualifications for registration in any of the specified capacities. In terms of this section no person is eligible for registration as an estate agent unless he either has attained the age of 22 years, has passed a qualifying examination approved by the Board of Registration and has not less than 2 years post qualification practical experience or articled pupillage in the work of an estate agent. If not, the person shall satisfy the Board that he possesses a qualification which in the opinion of the Board furnishes a sufficient guarantee of the possession of the requisite knowledge and skill for the efficient practice of the work of an estate agent.

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Com: The above provides qualifications for one to be registered as an estate agent. As can be seen, not every Dokiso and Mangaliso can qualify. They need to sit and pass for a qualifying examination and must have 2 years of post-qualification practical experience or be under pupillage of a registered estate agent. However the law allows those who have not sat for an examination but do possess a qualification which in the opinion of the Board of Registration is sufficient for that person to practice.

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66. In my understanding, the requirement for registration under the Act is not merely for purposes of revenue collection by the State. As the long title of the Land Economy Act shows, the object of this legislation is to provide for the registration, regulation and control of land economy surveyors, valuers, estate agents and auctioneers. The provision of qualification requirements shows that the intention of the legislature was to regulate and control the practice of the work of an estate agent (as well as the other categories) so that not every other person should practice as such without the Board ascertaining that that person is suitably qualified. Section 8 ensures that only those persons deemed qualified by the Board after satisfying the conditions get to be registered.

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Com: Here the court is saying the purposes of registration is not for revenue collection only but to also ensure that only qualified and registered agents are allowed to transact in land transactions. In other words, the reason for registration are:

1.    To ensure that the registered estate agents pay the requisite fees as well as tax

2.    Protection of all people dealing in land transactions

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68. The testimony of all the witnesses herein establishes that the defendant instructed the plaintiff, in the capacity of an estate agent, to find potential buyers for the property. The evidence further shows that the plaintiff accepted and performed the instructions and is now claiming payment for the work so performed as an estate agent. Clearly the plaintiff held himself out and operated as an estate agent for gain, notwithstanding the fact that he is not duly registered under the Land Economy Act. I therefore find that the plaintiff was practicing as an estate agent in contravention of the Act. Further, I find that the plaintiff entered into the agency agreement here in issue with the defendant in the capacity of an estate agent without being registered as such.

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Com: The evidence has shown that the Plaintiff was not a registered estate agent according to law and had no power to act as an agent for the plaintiff in this matter. Put simply he was doing so illegally.

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Conclusion

76. From the foregoing, I find that the agency agreement between the plaintiff and the defendant was illegal for contravening statute and was therefore void ab initio. The plaintiff cannot enforce it. I therefore dismiss the plaintiff’s action in its entirety.

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Com: This means that this is an illegal contract. The Court cannot enforce an illegal act. In other words, the Plaintiff has lost the case.

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77. The outcome of this matter has greatly exercised my mind. I am mindful of the sense of moral injustice that the plaintiff is likely to feel about being precluded by the law from recovering fees for services duly rendered to the defendant. However, as per the words of Lord Mansfield in the case of Holman v Johnson(1775) 1 Cowp 341 at 343, where he said that:

“The objection, that the contract is immoral or illegal as between the plaintiff and defendant sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is found in general principles of policy, which the defendant has advantage of, contrary to the real justice, as between him and the plaintiff, by accident if I may so say. The principle of public policy is this; ex dolo malo non oritur actio. No Court will lend its aid to a man who founds his cause of action upon an immoral or illegal act. If, from the plaintiff’s own stating or otherwise, the cause of action appear to arise ex turpi causa, or the transgression of a positive law of this country, then the Court says he has no right to be assisted. It is upon that ground the Court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault potior est conditio defendentis”.

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Com: Here the court is lamenting that there is in a sense moral injustice to the Plaintiff in that he did indeed do his part and ordinarily should be paid for his labour. However, the law is clear that no action can arise from an illegal action or an illegality. The Court quotes from an old case [the older the better in law as it shows it has withstood the test of time] in which the judge in that case encountered a similar moral dilemma. But as the Court puts it: “No Court will lend its aid to a man who founds his cause of action upon an immoral or illegal act.” In other words, once the Court finds that the Plaintiff acted illegality, the Court will throw away the claim even if it would have otherwise succeeded on the facts. The reason of doing this is not to reward illegality.

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78. Further, I must for the record state that I take notice of the fact that the real property industry in Malawi has witnessed an observable boom in recent years, and this has in turn led to the mushrooming of many Land Economy Surveyors, Valuers, Estate Agents and Auctioneers especially in the major cities here in Malawi. This Court hopes that, unlike the plaintiff herein, all these are duly registered under the Land Economy Act and are operating lawfully in the country, principally for two reasons. Firstly, for the protection of the public from persons practicing in the specified categories without the requisite qualifications. Secondly, that they will not have to one day undergo the rather unfortunate experience of the plaintiff in the instant matter in being barred from enforcing a claim for payment of services duly rendered.

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Com: Here the court is sounding a warning and putting it on record for posterity. The warning is to other estate agents practising as well as the general population, having taken judicial notice of their boom. The Court expresses the hope that the other estate agents practising their trade are duly registered because if they are not they are operating illegally.

The Court says that the law is firstly protecting the public from person who are not qualified to practice (some of them may be unscrupulous and may not have an idea of what they are doing). Secondly it is advice to estate agents that they should avoid zimene awona anzawo mu case imeneyi.

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In conclusion then, the Plaintiff lost his case because he was acting illegally. From an illegal action, no right at law can accrue, that is the law. The court’s warning is therefore timely to all of us. How many adverts do we see of estate agents advertising for properties? These adverts are in the papers, on Facebook, almost on every media that is accessible to the public. For the avoidance of doubt, the warning is to:

1.    The general public to be generally aware

2.    Those who are selling property. Make sure you are dealing with registered agents. Demand proof of registration and the registration must be current

3.    Those buying property. As above, demand proof.

4.    Lawyers engaged in transfer of title. As above, demand proof.

5.    Those transacting as estate agents - if you are not registered you are acting illegally and breaking the law. At best you cannot enforce any claim for a commission as was the case here. At worst you may be arrested and charged with an offence. Remember ignorance of the law is no defence. If you hold yourself out as an agent, you will be deemed to know the requirements of an agent. Forewarned is forearmed.

The Court is doing this to ensure it protects everyone; the buyers, the sellers as well as the estate agents themselves. As it is said, the law may appear to be slow in its action. However the long arm of the law will eventually catch up with you. Never be fooled; the wheels of justice may grind slowly, but the surely do grind. And when you are in the path of the grinding law; there can only be one winner; the law.