Ruling by the Press Ombud
17 October 2017
This ruling is based on the written submissions of Mr Mark Leathers, on behalf of McNaught and Co, and of Mr Hein de Lange, Re/Max franchisee, as well as those of Susan Smuts, legal editor of the Sunday Times newspaper.
The complaint is about a story in Sunday Times of 24 September 2017, headlined Gran alleges sin of commission – Re/Max agent takes R92 000 cut of buyer’s money, even though the seller pulled out.
Complaint
The complaint is that the reporter did not contact either the relevant estate agency, Re/Max Advance, or the conveyancer, McNaught & Co, for comment, which resulted in a one-sided article causing severe commercial harm.
The text
The article, written by Wendy Knowler, said that recently widowed Mirinda Ellis was made to pay estate agent commission of R92 000 after she had paid the full purchase price of R950 000 for a house on Durban’s Bluff, even though the deal fell through after the seller had a change of mind.
The journalist wrote, “After the seller's sudden, last-minute cancellation, Ellis expected to be refunded in full, and when she queried why her refund was R92055 short, the conveyancers, McNaught & Co, told her that the money had been paid to the estate agents, Re/Max Advance Bluff, as sales commission.”
Attorney Sean Chelin was appalled that she was made to pay the agent's commission when she was not the party who reneged on the deal, and challenged the estate agency and the conveyancing attorneys on what they had done.
“The conveyancers − who are Re/Max Bluff's conveyancers of choice − told me that the agency was entitled to be paid the commission from Mrs Ellis's funds, even though the seller was to blame for the sale not proceeding, by virtue of clause 19.4 of the agreement of sale,” Chelin reportedly said.
The clause read, “In the event of the purchaser having paid a deposit to the conveyancers ... and provided all suspensive conditions contained in this agreement have been fulfilled, the purchaser and the seller agree that the conveyancer is authorised ... to pay Re/Max Advance their sales commission, plus VAT, from the deposit. In this regard, upon the conveyancer making payment, the purchaser, seller and Re/Max Advance indemnify the conveyancer and hold them harmless in connection with all and any claims that may arise with regard to the deposit or the payment of the estate agent's commission.”
Knowler quoted Chelin as saying Re/Max claimed that the terms of the contract were explained in detail to Ellis before she signed – an allegation which Ellis denied.
“The agent asked me to sign it on my car's boot outside the house. I said I hadn't read through it yet but she assured me that it was just a standard sale contract − nothing out of the ordinary. I did everything on time and did not breach the contract in any way, but I'm the one being penalised, with no thought or care about how this will impact my family,” Ellis said.
Chelin argued it was highly unusual for property sale agreements to enable the claiming of commission from the party who did not default. He reportedly added that the offending clause was not even a standard Re/Max clause.
The story also contained comment by Re/Max CEO Adrian Goslett.
The arguments
Smuts says neither Re/Max Bluff nor McNaught have challenged the factual basis of the story; they also did not deny holding Ellis to the terms of the contract.
She submits it is accepted journalistic practice for consumer journalists to approach the head office of franchises for comment concerning complaints about franchisees. “Head office would decide whether to respond to the complaint or to refer it to the franchisee,” she submits.
Knowler accordingly approached Goslett for comment, who did not refer the journalist to the franchisee. In fact, he said that he had read all the correspondence and has had an opportunity to speak to the owner of the Re/Max office, the conveyancer and an independent attorney.
The legal editor adds that the story was based largely on correspondence between Ellis, her conveyancer, Re/Max Bluff and McNaught & Co. “This correspondence makes it clear that Re/Max Bluff and McNaught & Co intended to hold Mrs Ellis liable for the agent’s commission even though she was not responsible for the cancellation of the sale. There was no need to ask for comment when we already had the correspondence that set out their respective positions,” she argues.
She denies that the article was in breach of the Press Code and concludes that the story made it clear that Re/Max Bluff and McNaught were within their legal rights to act in the way they did, even if this was unfair to Ellis.
Smuts also notes that Sunday Times has published a follow-up article stating that Ellis has been reimbursed following intervention by Goslett.
In response, the complainants inter alia say:
· It is not true that the seller pulled out of the deal – it was Ellis who cancelled the sale;
· A franchise is an independent legal entity under its own management and control, and therefore the newspaper should have asked it for comment. Goslett was not involved in the sale, and his comments could only have been based on hearsay;
· The independent attorney did not have all the information at his disposal;
· The story was written in a biased way to create sympathy for Ellis;
· The story created the impression that Re/Max took advantage of a widow;
· It is incorrect to state that McNaucht & Co intended to hold Ellis liable – a conveyancer is not strictly a party to a sale agreement and it merely gives effect to any lawful provision in an agreement;
· The story created the incorrect and unfair impression that McNaught and Co was biased towards Re/Max; and
· The follow-up story unfairly stated that Ellis had been refunded after Goslett’s intervention.
Analysis
Firstly, the relevant correspondence on which Smuts says Knowler based her story.
Chelin wrote to Knowler, saying inter alia the following: “I have since received an email from the conveyancers (Mr Mark Weathers, an attorney at McNaught & Co), advising that Remax ‘were vindicated in their conduct’ that ‘The clause is not against public policy, the commission being earned on conclusion of the agreement and fulfilment of any suspensive conditions, it being explained in detail to ALL purchasers and the purchaser having full right of recourse against the seller in such circumstances…’ and that ‘To attempt to recover from the agents here would not be productive as they naturally have the defense of a contract behind them’. I have also received an email from Mr Hein de Langer, one of the owners of Remax Bluff, stating that ‘Re/Max do not believe that we have done anything wrong’.”
Also prior to publication, Goslett sent an e-mail to the journalist in which he confirmed that he had spoken to the owner of the Re/Max office, the conveyancer as well as an independent attorney.
He inter alia added:
· It is difficult for him to give an opinion on the matter as franchisor as he was not party to this transaction, adding that the relevant franchise was independently owned and operated;
· The Re/Max network did not have one, standard contract for all franchises;
· Whether or not he agreed with the specific agreement was a moot point as both the purchaser and the seller agreed to the conditions of the contract between them;
· It is the seller who has not fulfilled the obligation to the agreement and should be sued for delivery; and
· If he were the purchaser he would also be upset at suffering a financial setback due to the seller’s actions and would immediately pursue legal recourse against the seller.
After publication some more correspondence followed, but as it had no impact on the publication of the story I am not taking it into account.
I agree it would have been better if Knowler had asked De Lange himself for comment. However, I am not convinced that her omission constituted a breach of the Press Code, as she did communicate with Goslett (Re/Max’s CEO) – who indicated that he did speak to the owner of the relevant Re/Max franchise.
I also take into account that the journalist had the following documented:
· Chelin’s statement that:
o McNaught & Co had advised that Remax were “vindicated in their conduct”;
o De Lange retorted that “Re/Max do not believe that we have done anything wrong”;
· Goslett’s comments, which were greatly sympathetic to Ellis.
Given all of the above, I believe that the journalist did not act unethically or contrary to the Press Code, as she accurately recorded the information at her disposal.
Finding
The complaint is dismissed.
Appeal
The Complaints Procedures lay down that within seven working days of receipt of this decision, either party may apply for leave to appeal to the Chairperson of the SA Press Appeals Panel, Judge Bernard Ngoepe, fully setting out the grounds of appeal. He can be contacted at Khanyim@ombudsman.org.za.
Johan Retief
Press Ombud