PRASA Corporate Real Estate Solutions (CRES) v Community Property Company (Pty) Ltd and Another

During 2007, Crowie Projects entered into a joint venture with eThekwini Municipality to develop the Bridge City precinct, which included an underground railway station, shopping centre, residential apartments and transport facilities. On 14 December 2007, Crowie Projects concluded the Railway Co-ordination and Operation Agreement with PRASA's predecessor, regulating construction and operation of the railway station beneath the shopping centre. Clause 17 of this agreement required PRASA to pay for electricity and other services consumed, and entitled Crowie Projects to pay such charges and recover them from PRASA if PRASA failed to pay within 7 days. On 12 September 2008, Crowie Projects sold the shopping centre business to CPC for approximately R738 million through a sale of business agreement (SOB). The SOB envisaged that certain rights and obligations from the Co-ordination Agreement would be ceded to CPC, and that tripartite agreements would be concluded between Crowie Projects, CPC and PRASA to regulate operations and costs. However, these envisaged cessions and agreements were never executed. Transfer of the shopping centre sections occurred on 31 March 2010, with PRASA operations commencing in 2013. CPC supplied electricity to PRASA via a sub-meter and paid eThekwini Municipality for the electricity consumed. In July 2017, CPC invoiced PRASA for R3,413,539.53 for electricity consumption charges from October 2013. PRASA suggested set-off against 'upside income' due to it under the Co-ordination Agreement, which CPC rejected. After failed negotiations, CPC instituted proceedings on 1 April 2019 claiming reimbursement of approximately R3.2 million paid to eThekwini for electricity consumed by PRASA.

• Whether CPC had a contractual right to claim reimbursement from PRASA based on clause 17 of the Co-ordination Agreement concluded between Crowie Projects and PRASA
• Whether the rights under clause 17 of the Co-ordination Agreement were transferred to CPC through the sale of business agreement
• Whether CPC could rely on an express, tacit or oral cession of rights under clause 17 in the absence of executed cession agreements envisaged by the SOB
• Whether CPC had an alternative claim against PRASA based on unjustified enrichment
• Whether the essential elements of an enrichment claim were established, particularly impoverishment of CPC
• Whether prescription applied to portions of the claim relating to charges from October 2013

The appeal was upheld with costs. The order of the KwaZulu-Natal Division of the High Court, Durban was set aside and replaced with an order dismissing the application with costs.

Where parties to a sale of business agreement expressly contemplate that certain rights under existing contracts will be ceded to the purchaser through formal cession agreements to be executed, and such agreements specify which rights will be transferred and in what manner, the purchaser does not acquire those rights in the absence of execution of the contemplated cession agreements. A party cannot rely on tacit or oral cession where the parties have agreed to a specific form for effecting the cession, and non-variation clauses preclude variation by oral agreement. A contractual right vested in a third party (the cedent) cannot be enforced by a party who has not acquired that right through proper cession. In claims based on unjustified enrichment, the plaintiff bears the onus of establishing all four essential elements: (1) enrichment of the defendant; (2) impoverishment of the plaintiff; (3) enrichment at the plaintiff's expense; and (4) absence of legal causa. Where a plaintiff may have an alternative contractual remedy (such as an indemnity) against a third party for the expenses incurred, the plaintiff must establish that such remedy is not available in order to prove the element of impoverishment in an enrichment claim. The existence of a potential indemnity or alternative remedy defeats a claim of impoverishment unless the plaintiff proves such remedy is unavailable.

The Court made several notable obiter observations. First, it commented that while this Court has recognized in principle that there may be scope for enrichment liability outside the strict ambit of specific condictio actions (referencing McCarthy and Perry), those cases do not excuse plaintiffs from properly pleading and establishing the basis for enrichment liability. The Court noted that McCarthy and Perry recognized the need to focus on essential elements of enrichment but did not create a general cause of action based on bare assertions. The Court observed that even where a general enrichment action might be recognized, it would be necessary to plead facts explaining the circumstances and reasons for the underlying transfer sine causa. The Court noted, without deciding definitively, that the expenses incurred by CPC in paying for electricity consumed by PRASA could potentially fall within the ambit of the indemnity provided by Crowie Projects under clauses 3.4.6 and 3.4.8 of the SOB, which covered expenses directly or indirectly attributable to the Void where CPC and PRASA were unable to agree. The Court observed that nothing was known about the actual basis upon which CPC supplied electricity to PRASA, and that such conduct appeared inconsistent with clause 17 which envisaged PRASA would contract directly with eThekwini Municipality. The Court commented that agreements between CPC and PRASA were anticipated to address the situation but were not concluded despite more than a decade having elapsed since the factual necessity arose in 2013, though the reasons for this failure were unknown.

This case is significant for clarifying the requirements for establishing contractual rights through sale of business agreements and the transfer of rights under existing contracts. It emphasizes that where parties expressly agree that certain rights will be ceded through formal cession agreements to be concluded, informal or tacit cessions will not be recognized, particularly where non-variation clauses exist. The judgment reinforces that a party relying on cession must show that legally effective steps were taken to transfer the subject matter from cedent to cessionary. On enrichment law, the case reaffirms that despite recognition of a potential general enrichment action in South African law (as discussed in McCarthy Retail Ltd v Shortdistance Carriers CC and First National Bank v Perry NO), plaintiffs cannot rely on bare assertions but must properly plead and prove all essential elements of enrichment liability: enrichment of defendant, impoverishment of plaintiff, enrichment at plaintiff's expense, and lack of legal cause. The case demonstrates that where contractual indemnities or alternative remedies may exist, a plaintiff claiming impoverishment must establish that such alternative remedies are not available. It also illustrates the interrelationship between enrichment claims and contractual frameworks in complex commercial property developments involving multiple parties and phased implementation.