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Introduction
It is not
unusual for most adults and corporate bodies in Nigeria to have had a business
dealing with an Estate Agent for the sale, purchase or lease of a property. In
Nigeria, the fees/commission for most Estate Agents is usually 10% of the total
proceeds of sale or purchase price or rental value of the property.
unusual for most adults and corporate bodies in Nigeria to have had a business
dealing with an Estate Agent for the sale, purchase or lease of a property. In
Nigeria, the fees/commission for most Estate Agents is usually 10% of the total
proceeds of sale or purchase price or rental value of the property.
As a result of
the remuneration accruable to Estate Agents in Nigeria, it is not surprising
that Estate Agency in Nigeria is populated by all manner of characters. In
point of fact, Estate Agency in Nigeria is not regulated and anybody (including
Legal Practitioners and make-up artistes) can hold himself out to members of
the public as an Estate Agent.
the remuneration accruable to Estate Agents in Nigeria, it is not surprising
that Estate Agency in Nigeria is populated by all manner of characters. In
point of fact, Estate Agency in Nigeria is not regulated and anybody (including
Legal Practitioners and make-up artistes) can hold himself out to members of
the public as an Estate Agent.
Although the
Nigerian Institution of Estate Surveyors and Valuers (NIESV) and the
Association of Estate Agents of Nigeria (AEAN) are making efforts to regulate
Estate Agency in Nigeria through the protection of property purchasers and
vendors by preventing quacks from holding out themselves as Estate Agents,
the efforts of these organizations have not achieved any significant effect.
Nigerian Institution of Estate Surveyors and Valuers (NIESV) and the
Association of Estate Agents of Nigeria (AEAN) are making efforts to regulate
Estate Agency in Nigeria through the protection of property purchasers and
vendors by preventing quacks from holding out themselves as Estate Agents,
the efforts of these organizations have not achieved any significant effect.
Given that
almost everyone has to engage the services of an Estate Agent at some point, I
intend to give a bird’s eye view of how members of the public can avoid
disputes arising from the services of an Estate Agent especially with regards
to the payment of estate agency fees. In discussing this important issue, I
shall review the recent decision of the Court of Appeal in the case of S.D.V.
Nigeria Limited v. P.K.O. Ojo & Anor (2016) LPELR-40323 (“SDV’s case”).
almost everyone has to engage the services of an Estate Agent at some point, I
intend to give a bird’s eye view of how members of the public can avoid
disputes arising from the services of an Estate Agent especially with regards
to the payment of estate agency fees. In discussing this important issue, I
shall review the recent decision of the Court of Appeal in the case of S.D.V.
Nigeria Limited v. P.K.O. Ojo & Anor (2016) LPELR-40323 (“SDV’s case”).
SUMMARY OF THE
FACTS OF S.D.V. NIGERIA LIMITED v. P.K.O. OJO & ANOR
FACTS OF S.D.V. NIGERIA LIMITED v. P.K.O. OJO & ANOR
P.K.O. Ojo was
the 1st Respondent in this appeal and Claimant at the High Court of Lagos State
(“lower Court”). SDV Nigeria Limited was the Appellant and 1st Defendant at the
lower Court, whilst SCOA Nigeria Limited was the 2nd Respondent in the appeal
and 2nd Defendant at the lower Court.
the 1st Respondent in this appeal and Claimant at the High Court of Lagos State
(“lower Court”). SDV Nigeria Limited was the Appellant and 1st Defendant at the
lower Court, whilst SCOA Nigeria Limited was the 2nd Respondent in the appeal
and 2nd Defendant at the lower Court.
P.K.O. Ojo, a
registered Estate Agent, claimed that he introduced a property, which was up
for sale to one Adebola Adejobi who subsequently brought the property to the
attention of the Managing Director of SDV Nigeria Limited. According to P.K.O.
Ojo, Adebola Adejobi was an employee of SDV Nigeria Limited, but in the course
of the trial of the suit, SDV Nigeria Limited established that Adebola Adejobi
was the Managing Director of its sister company (a separate legal entity) and
not its employee. SDV Nigeria Limited subsequently bought the property from
SCOA Nigeria Limited and P.K.O. Ojo requested for his Agency Fees in the sum of
$1,250,000.00 (One million, two hundred and fifty thousand US Dollars) from SDV
Nigeria Limited, but SDV Nigeria Limited rejected the request on the ground
that it did not appoint P.K.O. Ojo as its Estate Agent and P.K.O. Ojo was not
responsible for its purchase of the property.
registered Estate Agent, claimed that he introduced a property, which was up
for sale to one Adebola Adejobi who subsequently brought the property to the
attention of the Managing Director of SDV Nigeria Limited. According to P.K.O.
Ojo, Adebola Adejobi was an employee of SDV Nigeria Limited, but in the course
of the trial of the suit, SDV Nigeria Limited established that Adebola Adejobi
was the Managing Director of its sister company (a separate legal entity) and
not its employee. SDV Nigeria Limited subsequently bought the property from
SCOA Nigeria Limited and P.K.O. Ojo requested for his Agency Fees in the sum of
$1,250,000.00 (One million, two hundred and fifty thousand US Dollars) from SDV
Nigeria Limited, but SDV Nigeria Limited rejected the request on the ground
that it did not appoint P.K.O. Ojo as its Estate Agent and P.K.O. Ojo was not
responsible for its purchase of the property.
P.K.O. Ojo
subsequently commenced an action for his agency fees against SDV Nigeria
Limited and SCOA Nigeria Limited at the High Court of Lagos State and
Honourable Justice Gbajabiamila delivered judgment in his favour by awarding
him the sum of $1,250,000.00 (One million, two hundred and fifty thousand US
Dollars) as his agency fees in respect of the purchase transaction.
subsequently commenced an action for his agency fees against SDV Nigeria
Limited and SCOA Nigeria Limited at the High Court of Lagos State and
Honourable Justice Gbajabiamila delivered judgment in his favour by awarding
him the sum of $1,250,000.00 (One million, two hundred and fifty thousand US
Dollars) as his agency fees in respect of the purchase transaction.
SDV Nigeria
Limited (“SDV”) was dissatisfied with the decision of the High Court of Lagos
State and it filed this appeal against the said decision. The fulcrum of SDV’s
argument at the Court of Appeal was that it was not obliged to pay P.K.O. Ojo
any sum as agency fees since it did not appoint P.K.O. Ojo as its agent and it
did not become aware of the property by virtue of P.K.O. Ojo’s introduction.
SDV also contended that Adebola Adejobi was not its employee and he had no
mandate to engage the services of P.K.O Ojo as its Estate Agent. SDV further
argued that P.K.O. Ojo was unable to present any documentary or credible oral
evidence showing that he was duly appointed as an agent of SDV.
Limited (“SDV”) was dissatisfied with the decision of the High Court of Lagos
State and it filed this appeal against the said decision. The fulcrum of SDV’s
argument at the Court of Appeal was that it was not obliged to pay P.K.O. Ojo
any sum as agency fees since it did not appoint P.K.O. Ojo as its agent and it
did not become aware of the property by virtue of P.K.O. Ojo’s introduction.
SDV also contended that Adebola Adejobi was not its employee and he had no
mandate to engage the services of P.K.O Ojo as its Estate Agent. SDV further
argued that P.K.O. Ojo was unable to present any documentary or credible oral
evidence showing that he was duly appointed as an agent of SDV.
The Court of
Appeal agreed with SDV’s arguments and it consequently set aside the lower
Court’s decision principally on the following grounds:
Appeal agreed with SDV’s arguments and it consequently set aside the lower
Court’s decision principally on the following grounds:
1.
Agency cannot be created through a third party in
between the agent and principal, and P.K.O. Ojo could not establish a credible
and direct link between himself and SDV;
Agency cannot be created through a third party in
between the agent and principal, and P.K.O. Ojo could not establish a credible
and direct link between himself and SDV;
2. The issue of estate agency fees is an important
element of agency relationship and P.K.O. Ojo was unable to establish that he
agreed on a particular agency fees with SDV.
element of agency relationship and P.K.O. Ojo was unable to establish that he
agreed on a particular agency fees with SDV.
3. K.O. Ojo was unable to show that his introduction of
the property to SDV was the efficient cause that brought about the purchase of
the property by SDV.
the property to SDV was the efficient cause that brought about the purchase of
the property by SDV.
Nimpar, JCA who
read the lead judgment of the Court of Appeal particularly held as follows:
read the lead judgment of the Court of Appeal particularly held as follows:
“Continuing on
the defect of the 1st Respondent’s case, the issue of fees was undecided
throughout the period he claimed to have acted for the Appellant. The issue of
fees is one important element which must be settled in agency relationship. In
estate agency the important element is the commission to be paid. That cannot
remain fluid or uncertain.”
the defect of the 1st Respondent’s case, the issue of fees was undecided
throughout the period he claimed to have acted for the Appellant. The issue of
fees is one important element which must be settled in agency relationship. In
estate agency the important element is the commission to be paid. That cannot
remain fluid or uncertain.”
Nimpar, JCA
further held thus:
further held thus:
“To be entitled
to commission an agent needs to go beyond merely introducing a property, I rely
on the old English case of Miller, Son & Co. v. Co. v. Ratford (1903) 19
TLR 575 where the court held thus:
to commission an agent needs to go beyond merely introducing a property, I rely
on the old English case of Miller, Son & Co. v. Co. v. Ratford (1903) 19
TLR 575 where the court held thus:
“It is
important to point out that the right to commission not arise (sic) out of mere
fact that the agent had introduced a tenant or purchaser. It is not sufficient
that the introduction was causa sine qua a non. It is necessary to show that
the introduction was the efficient cause in bringing about the letting and the
sale.”
important to point out that the right to commission not arise (sic) out of mere
fact that the agent had introduced a tenant or purchaser. It is not sufficient
that the introduction was causa sine qua a non. It is necessary to show that
the introduction was the efficient cause in bringing about the letting and the
sale.”
TAKE AWAY FROM
THE COURT OF APPEAL’S DECISION IN SDV’S CASE
THE COURT OF APPEAL’S DECISION IN SDV’S CASE
The first and
major lesson from the Court of Appeal’s decision in SDV’s case is that a
Principal must have agreed on the agency fees payable to the Estate Agent prior
to the appointment of the Estate Agent and this must be documented. This is
because a Principal can shirk his obligation to pay agency fees where there was
no agreement as to the agency fees payable prior to the closing of the
transaction.
major lesson from the Court of Appeal’s decision in SDV’s case is that a
Principal must have agreed on the agency fees payable to the Estate Agent prior
to the appointment of the Estate Agent and this must be documented. This is
because a Principal can shirk his obligation to pay agency fees where there was
no agreement as to the agency fees payable prior to the closing of the
transaction.
Second, where
an Estate Agent is dealing with a Principal who is a corporate body, it is
important that the Estate Agent obtains a letter of instruction from the
company, as against dealing informally with an employee/representative of the
company. This is because agency cannot be created through a third party in
between agent and principal.
an Estate Agent is dealing with a Principal who is a corporate body, it is
important that the Estate Agent obtains a letter of instruction from the
company, as against dealing informally with an employee/representative of the
company. This is because agency cannot be created through a third party in
between agent and principal.
In addition, in
the case of Nigeria Dynamic Ltd v. Ibrahim (2002) 8 NWLR (Pt. 768) 63
the Court of Appeal held that the mere fact that the Respondent had a
discussion with officers of the Appellant on the sale of an asphalt plant was
not enough to establish a contractual relationship between the Respondent and the
Appellant. The Court of Appeal further held that for a contractual relationship
to exist, the Respondent must prove that the officers of the company had the
authority to create a contractual relationship on behalf of the company.
Mangaji, JCA explained this point beautifully at page 86 Paragraph A-D of the
judgment where he held thus:
the case of Nigeria Dynamic Ltd v. Ibrahim (2002) 8 NWLR (Pt. 768) 63
the Court of Appeal held that the mere fact that the Respondent had a
discussion with officers of the Appellant on the sale of an asphalt plant was
not enough to establish a contractual relationship between the Respondent and the
Appellant. The Court of Appeal further held that for a contractual relationship
to exist, the Respondent must prove that the officers of the company had the
authority to create a contractual relationship on behalf of the company.
Mangaji, JCA explained this point beautifully at page 86 Paragraph A-D of the
judgment where he held thus:
“In order to
establish a legal relationship with a legal entity it takes more than a common
discussion between a party and an officer of the company in order that it may be
bound by its officer’s representation.”
establish a legal relationship with a legal entity it takes more than a common
discussion between a party and an officer of the company in order that it may be
bound by its officer’s representation.”
It should be
noted that the Court of Appeal in SDV’s case did not make any reference to its
decision in Nigeria Dynamic Ltd v. Ibrahim (Supra), but the decision in
this case supports the decision in SDV’s case.
noted that the Court of Appeal in SDV’s case did not make any reference to its
decision in Nigeria Dynamic Ltd v. Ibrahim (Supra), but the decision in
this case supports the decision in SDV’s case.
Third, for an
Estate Agent to be entitled to his fees, he must be able to establish that his
introduction of the property to his principal was the efficient cause that
brought about the purchase or letting of the property by the principal.
Therefore, where the principal is able to establish that he purchased the
property as a result of an external factor, the Estate Agent will not be
entitled to receive agency fees in respect of the transaction.
Estate Agent to be entitled to his fees, he must be able to establish that his
introduction of the property to his principal was the efficient cause that
brought about the purchase or letting of the property by the principal.
Therefore, where the principal is able to establish that he purchased the
property as a result of an external factor, the Estate Agent will not be
entitled to receive agency fees in respect of the transaction.
Lastly,
although the law permits parties to establish an agency relationship in five
different ways, it is important for parties to always ensure that their
appointment of an Estate Agent is documented and duly acknowledged by both the
Principal and Estate Agent before the commencement of the provision of estate
agency services.
although the law permits parties to establish an agency relationship in five
different ways, it is important for parties to always ensure that their
appointment of an Estate Agent is documented and duly acknowledged by both the
Principal and Estate Agent before the commencement of the provision of estate
agency services.
Conclusion
It is expected
that the decision in SDV’s case would help to ensure that parties who intend to
enter into an Estate Agency relationship are explicit with regards to the terms
governing their relationship.
that the decision in SDV’s case would help to ensure that parties who intend to
enter into an Estate Agency relationship are explicit with regards to the terms
governing their relationship.
It should be
noted that this article is for general information only. It is not offered as
advice, on any particular matter, whether legal, procedural or otherwise. If
you have any questions about this article, please contact the author on
foa@abdu-salaamabbasandco.com
noted that this article is for general information only. It is not offered as
advice, on any particular matter, whether legal, procedural or otherwise. If
you have any questions about this article, please contact the author on
foa@abdu-salaamabbasandco.com
Ed’s Note – This article was originally
posted by the author here
posted by the author here