Lew Geffen clashes with property tycoons - Property | Moneyweb

Lew Geffen clashes with property tycoons - Property Moneyweb

An ugly battle is unfolding over the Atlantic seaboard.

The beautiful Atlantic seaboard has become the scene of an ugly battle between property tycoon Lew Geffen and the operators of the Lew Geffen Sotheby's International Realty franchise owned by Hugo Jankowitz and Rob Stefanutto.

Until last week they operated the Atlantic Seaboard franchise which, according to Stefanutto, extended from De Waterkant to Bakoven. This was virtually the only sector of the SA property market to retain some life through the recession, though sales have slumped this year.

Last week Stefanutto and Jankowitz effectively had their business seized. This was after the Cape High Court ruled in favour of Lew Geffen Sotheby's International Realty Franchises in its urgent application for a ‘rule nisi’ judgement against the two operators.

A rule nisi is not unusual, but one party must demonstrate beyond doubt that unless action is taken immediately the business will suffer irreparable harm. Lew Geffen successfully argued that this franchise was under threat.

Geffen argued that Stefanutto and Jankowitz, through their company Moonstone, had secretly acquired Dogon Group Properties, a direct competitor of Lew Geffen Sotheby's International Realty in the Atlantic Seaboard area. The rule nisi was obtained in order to protect the business from sabotage by taking control of the franchise before the franchise holders were aware that their franchise agreement had been cancelled.

The order gave Geffen the right to take over the business, including the books and accounting records, office equipment, bank accounts and physical premises. Stefanutto was also interdicted from communicating with any of his agents, clients and the conveyance attorneys.

However, a rule nisi is an interim order which requires that the parties return to court to settle the issue. The parties returned to court three days later, at which point the judgement was overturned. According to Stephen Thomson, the attorney acting on behalf of Lew Geffen, this was on a technicality.

In business a lot can happen in three days when bank accounts have been stopped, proprietary information seized and staff see their boss escorted off the premises.

“Yes we have our business back, but it’s a business in tatters with nine months left on a franchise agreement that no one wants,” says Jankowitz.

Geffen has not wasted any time. He has set up shop down the road and incorporated Gail Gavrill and Rob McKee of Gail Gavrill International Properties and Brendan Miller of Better Homes in Sea Point. All the sales agents employed by the previous owners of the Sotheby’s franchise have been retained.

As far as Jankowitz is concerned, this is a travesty of justice. “Geffen lied in his affidavit. He hoodwinked a judge to obtain the court order. This franchise cost me R8m and in three days I have lost everything. Geffen has manipulated the legal system to suit his own ends. The original decision was totally wrong and was overturned – but the consequences are severe. It is unthinkable that this could happen in this day and age.”

Lew Geffen retorts that the actions were necessary “because Jankowitz and Stefanutto had committed several specific breaches of the agreement, the most serious being the purchase of a direct competitor, the Dogon Group...they were also overtly doing joint Dogon / Lew Geffen Sotheby's International Realty branding, again in contravention of the franchise agreement."

There is a history of bad blood between the franchisor and the franchisees. This particular battle was the culmination of a relationship that had soured to the point that in June this year the parties agreed to part company. As it turned out, this did not happen in the orderly fashion envisaged at the time.

Jankowitz bought into the franchise in 2007. He bought it from Rod Hemphill, who says he was forced into selling the business. “Geffen brought a number of applications to close me down,” says Hemphill, who was a multiple franchise holder at the time. “The last application he brought against me was dismissed.”

At this point Hemphill agreed to sell out. He had little choice as his franchise contract would not be renewed. Jankowitz, he says, was introduced to him by Lew Geffen.

Jankowitz remained a passive investor, while Rob Stefanutto, who had been involved with Hemphill, was the operator. Along the way they acquired Sanderman Estates in Camps Bay.

By 2009 Geffen was voluble in his unhappiness with the performance of the franchise. “"The performance of the franchise was at best pedestrian, especially considering that the Atlantic Seaboard is SA's premier property sales area,” says Geffen.

“This is a lucrative business, but we have had extensive problems with Mr Geffen,” says Stefanutto. “We were paying 13.5% of our pre-tax income; we were meeting targets and opening stores in the midst of a recession, but he told us we were not spending enough on the business.”

In March 2010 Geffen cancelled the franchise agreement, but the franchisees contested it and obtained a written undertaking from Geffen’s lawyers that the franchisor would not interfere in the running of their agency and would not contact their agents.

But still the tension simmered. In June the parties met to resolve their differences.

By this time Jankowitz had acquired the business of the Dogon Group on behalf of investors in a holding company. “This is what I do. I buy, sell and invest in businesses.”

Geffen, he says, was aware of this. “He was also aware that when the licence expired we would do something with Dogon. We discussed this with him and it is within our rights to do so,” says Jankowitz. At this meeting it was agreed that the franchisees would try to find a buyer for the business.

This meeting was recorded.

Jankowitz drew up a memorandum of understanding which was contested by Lew Geffen Sotheby's CEO Jason Rohde. “We must have exchanged at least 20 e-mails,” says Jankowitz, “but he did not revise the MOU. Next thing we knew they had found a potential buyer. I insisted that we could not go forward until we had agreed the MOU.”

The next thing the partners knew, a sheriff was serving the rule nisi order on them.

Meanwhile the Dogon Group remains within Jankowitz’s portfolio of investments, however founder Denise Dogon says she has been retained to run this business for the next three years, with an option to renew for another two.

Jankowitz and Stefanutto are pursuing a damages claim against Geffen. He, in turn, is pursuing a R3.5m damages claim against them.


Denny Crane

Denny Crane
It's not me ... yet. Denny Crane from the TV series Boston Legal. Click on picture if you're not sure who he is!