The Passenger Rail Agency of SA (Prasa) successfully fought off a nearly R3m claim concerning alleged unpaid electricity fees after a Supreme Court of Appeal (SCA) ruling.
The SCA last week dismissed the claim brought by property company Community Property Company (CPC) in Durban. The company said it paid the eThekwini municipality millions in electricity fees on Prasa’s behalf from 2013 to 2017, believing Prasa would pay this back. However, Prasa successfully argued the alleged contractual basis for the company’s claim did not exist.
In 2007, Prasa was tasked with providing a railway service for a development project called Bridge City, which involved the building of a shopping centre in the northern part of Durban. The original company that started the project, Crowie Projects, had an arrangement with the railway agency.
A year later, Crowie sold the shopping business to CPC for nearly R800m. Eventually, the project was completed in 2009. Prasa completed its operations in 2013.
In 2017, CPC sent an invoice for about R3.5m in electricity charges it had paid on Prasa’s behalf. Prasa said the amount CPC billed should be taken off the income Prasa was being paid by other arrangements. But CPC said there were no such claims. The dispute went unresolved and CPC initiated its high court claim in 2019.
In the high court, CPC said it paid the municipality the electricity charges for the mall, which included Prasa’s consumption. When CPC took over the project from Crowie, CPC said it believed the original arrangement with Prasa would remain in place. This included a provision that said Prasa would pay for electricity consumption charges.
CPC also argued that Prasa was “unjustifiably enriched” at CPC’s expense: Prasa was using electricity at the expense of CPC, without paying and it was impoverished as a result.
Prasa opposed CPC’s claim, noting it had paid the municipality directly and was not in arrears. More importantly, Prasa said the contractual provisions that CPC relied on were based on a contract between Crowie and Prasa, not CPC and Prasa. The agency also said if CPC had concerns regarding unjustified enrichment, CPC should sue the municipality.
While the case was ongoing, the mall was damaged during the July 2021 riots, which caused millions of rand in damages. The mall had to be shut down completely and was reopened only in April 2023.
In that same year, the Durban high court ruled in CPC’s favour, but cut down the claim from R3.5 to R2.6m. Prasa appealed to the SCA.
On Thursday, writing for a unanimous court, SCA judge Glenn Goosen overturned the high court’s ruling. “CPC was not entitled to rely on [a contract Prasa had with Crowie] to claim any amount from Prasa,” Goosen wrote.
This was because Crowie had never “ceded” its contractual claims with Prasa to CPC when Crowie sold the business.
As Goosen noted, the only point regarding Prasa that was raised when CPC bought the mall in 2008 was that CPC would have to enter into arrangements directly with Prasa. At the time, Prasa had not yet completed its operations. Goosen noted the situation CPC now found itself in was “anticipated” in 2013 when Prasa completed its operations. Yet, despite more than a decade passing, “those agreements were not concluded”.
He said that “nothing is known about the basis upon which CPC supplied electricity to Prasa” for CPC to claim it was impoverished by Prasa’s alleged nonpayment.
He noted that during negotiations Crowie had offered to indemnify CPC for any expenses incurred as a result of Prasa’s operations, but CPC had waived this and thus “exposed itself to risk”. Goosen said this was presumably because CPC thought it would enter into direct arrangements with Prasa. But, as Goosen noted, these never materialised.
As a result, Prasa’s appeal was upheld with costs.
Prasa, a state-owned entity, has invested R4.6bn in rebuilding its network after years of theft, corruption and vandalism, with a focus on in retail projects around the country.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.