THE REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA 
WESTERN CAPE HIGH COURT, CAPE TOWN

CASE NO:3762/2008

In the matter between:

KENNETH STEVEN RABSON 							Plaintiff
and
LANCE REAL ESTATE CC  							1" Defendant

JUDGMENT : 8 JUNE2011

Koen, AJ

1. On 10 January 2005 the Plaintiff ("Mr Rabson") purchased Unit 703 in a sectional title scheme known as Atlantic Views from the second defendant ("the developer"). The unit was sold off-plan, which is to say that at the time the agreement was concluded construction work had not yet commenced. The estate agent involved in introducing Mr Rabson to the developer was the first defendant. The first defendant's sole member was Mr Lance Cohen who represented the first defendant at all material times. I shall refer to the first defendant and Mr Cohen interchangeably in what follows as "the agent" unless the context requires mc to be specific.

2. Mr Rabson alleges that prior to the conclusion of the sale the defendants represented to him that the price required by the developer was R3.9 million; that the unit had not been sold before and that he would be the first purchaser thereof; and that the unit represented an excellent investment which could be sold within a few months at a significant profit.

4. Mr Rabson contends that he relied upon the alleged fraudulent misrepresentations, purchased the unit for a price of R3.9 million and paid transfer costs based on this amount. Had he known the true facts he would not have paid R3.9 million for the property but only R 3.1 million and transfer costs based on this amount.
5. In consequence of the misrepresentations and non-disclosures Mr Rabson alleges he has suffered damages. He claims payment in this action from the agent and the developer of the amount of R 800 000 being the difference between the amount he paid for unit 703 and the amount he would have paid had he known the true facts. He also seeks to recover the increased amount he paid in respect of transfer costs, this being R 3200. Mr Rabson also claimed the increased costs of registering a mortgage bond of R 2400, but this claim was not pursued. Finally, Mr Rabson claims interest on the increased amount of R 800 000 he paid for the unit in respect of a mortgage bond he registered over the unit to finance the purchase. This amounts to R 161 819.69.

7. Around the beginning of October 2004 the scheme known as Atlantic Views came on to the market. The developer appointed the agent as his sole agent for all of the units in the scheme. The mandate given by the developer to the agent was an oral one. The developer prepared a brochure which was made available to the agent for use in marketing the units. The brochure given by the developer to the agent included a "Price List", dated 1 October 2004, which reflected the price for unit 703 as R 3.1 million.
8. Mr Rabson testified that he met the agent around the beginning of January 2005. He enquired after unit 703, going to some lengths to establish that the unit was being sold by the developer, off-plan, and that he was the first purchaser to buy directly from the developer. The agent gave him the necessary assurances in this respect, and even stated that the fact that the developer would countersign the written agreement of sale would demonstrate that he was the first buyer. The last mentioned aspect of Mr Rabson's evidence was not challenged in cross-examination by counsel for the agent.

10. I have no hesitation in rejecting both of their evidence in this regard. It is quite apparent from each and every relevant document which came into being after the sale to Mr Rabson was concluded, that the developer, the agent and Dr Lazard considered the sale to Dr Lazard to be extant. Not a shred of the documentary evidence referred to by the parties points the other way. It is unnecessary to go into detail. It is more than clear from the conveyancer's file that during March 2005 Dr Lazard was engaged in obtaining guarantees for payment of the price of the unit, that he furnished his FICA documents to the conveyancer, and that he had telephone discussions with the conveyancer about the transfer. He would not have acted in this manner had he believed that his agreement was no longer in force. It is also quite clear from the documents that the agent advised the conveyancer that Dr Lazard had "re-sold" the unit to Mr Rabson. Indeed, as late as 7 April 2005 the agent wrote to the conveyancer referring to the purchase of the unit by Mr Rabson from Dr Lazard. Although it was common cause that there had been no re-sale, and that the agent's letter regarding a re-sale to Mr Rabson was wrong, this letter written by the agent controverts the suggestion that the sale to Dr Lazard had been cancelled prior to 10 January 2005.

12. No evidence was led on behalf of the developer. How it came about that unit 703 was the subject of parallel valid sales was not explained. For reasons to which I was not made privy Dr Lazard chose not to enforce his rights under the agreement. Fortunately, this is not a matter which has any bearing on the case.

14. On the other hand Mr Rabson gave his evidence clearly, rationally and thoughtfully. He made concessions were these were necessary. He did not attempt to evade questions under cross examination. He impressed me as being a person of high intelligence and honesty. Where his evidence conflicts with the evidence of the agent, or Dr Lazard, I unhesitatingly accept his.
15. Mr Rabson testified that he considered that the greatest potential for realising a profit on the property lay in him purchasing directly from the developer and thus being the "first" purchaser (the financial wisdom of his approach is borne out by the fact that within months of the developer having sold unit 703 to Dr Lazard for R3.1 million, it was sold to Mr Rabson for R3.9 million). He did not want to hold on to the unit for any length of time but to buy it, and sell it, within a short space for a profit. The fact that unit 703 was almost immediately placed on the market after Mr Rabson took transfer underscores his intentions in this regard.

18. In my view Mr Rabson has established on the probabilities that he conveyed to the agent that he wished to buy directly from the developer, and that he wished to be the first purchaser. It is common cause that he was not the first purchaser - Dr Lazard was. And it is common cause that this fact was concealed from him by the agent, notwithstanding the obvious relevance and import of the question.
19. There is no dispute about the fact that the developer required a price of R 3.1 million for the unit. This is what his price list stated and this is the amount he actually received. The balance of R 800 000 landed up in the hands of the agent. This unusual state of affairs came about, according to the agent, as a result of an agreement he concluded with the developer shortly after the sale to Dr Lazard had been cancelled, and shortly before the sale to Mr Rabson was concluded.

22. There is no doubt that both misrepresentations were material and that Mr Rabson was induced by them into contracting. On this score neither defendant contended otherwise. It follows that I find that the agent induced Mr Rabson to contract by the fraudulent misrepresentations adverted to above, and that it is liable in delict to Mr Rabson for damages.
23. Mr Rabson could tender no evidence of any complicity on the part of the developer in the fraudulent misrepresentations made by the agent to him. The question which thus arises is whether the developer can be held vicariously liable for the delict of the agent.

29. What remains for consideration is the determination of the amount of the damages proved by Mr Rabson. Mr Rabson claims the difference between the amount he was induced to pay by virtue of the fraudulent misrepresentation, and the price he would have paid had the fraud not been perpetrated upon him. In the circumstances of this case I have little doubt that this is an appropriate measure of damages.
30. Mr Rabson also claims the additional transfer costs he was obliged to pay in terms of the sale agreement. Transfer costs are based on the purchase price. Because this was R 800 000 more he was thus obliged to pay an additional amount of R 3200. In my view this amount forms part of his damages and he is entitled to recover it.

31. I take a different view, however, when it comes to the additional interest Mr Rabson paid, because he chose to finance the purchase by way of a mortgage bond. This amount was calculated to be R 161 899.69. The agreement of sale did not provide for the financing of the purchase price by way of a mortgage bond and there was no evidence led by Mr Rabson to suggest that the defendants could reasonably have foreseen that the purchase price was to be financed by way of a mortgage loan. I do not consider, therefore, that Mr Rabson is entitled to recover the amount of additional mortgage interest he paid.

33. In the circumstances I make the following order: