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Corub Property v. Gancalves: Tenant’s Utilities Liability

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Corub Property v. Gancalves: Tenant’s Utilities Liability

Corub Property v. Gancalves: Tenant's Utilities Liability

Corub Property (Pty) Ltd v Paul Gancalves Barbuzano: A Commercial Tenant’s Liability to Pay Municipal Electricity and Water Charges

Case name: Corub Property (Pty) Ltd v Paul Gancalves Barbuzano

Citation: (427/2022 [2023] ZASCA 89

Court: Supreme Court of Appeal

Date of judgment: 8th June 2023

Overview of the Matter

This case concerned – a contractual dispute between a property owner and a tenant, over municipal water and electricity charges of a supermarket situated in a shopping centre.

The central question was whether or not the property owner had proven the amount in municipal charges that the tenant was liable to pay.

Legal Issues Raised in the Case

The legal issue in this case related to the interpretation of certain provision of a lease agreement between the two parties.

Relevance to Contractual Disputes under Lease Agreements

This case is important because it considers the common scenario where one party does not pay their due under a lease agreement because they are aggrieved by an unrelated matter.  

Applicable Law

The Greater Johannesburg Metropolitan Electricity By-laws. The by-laws govern the supply and payment of electricity in the greater Johannesburg region.

Summary of the Relevant By-laws

According to section 17 of the municipal by-laws, electricity supplied by the municipality may be resold. In this case, electricity for each sub-purchaser must be metred through a sub-meter.

Summary of the Disputed Lease Agreement Provisions

The relevant provisions of the lease agreement between the parties provided the following:

  • The tenant will pay the cost of electricity, water and gas consumed on the leased premises.
  • The amount owed by the tenant will be calculated by the property owner in accordance with the municipal by-laws and may include a service charge of the sub-meter.

Explanation of How the Law Applies to the Case 

Corub Property purchased electricity from the municipality and resold this electricity to its tenants. As required by the municipal by-laws, every tenant, including Mr Barbuzano, had a sub-meter installed in their shop.

The water and electricity payment arrangement in the lease agreement between Mr Barbuzano and Corub Property was in accordance with the municipal by-laws.

Detailed Description of the Facts Leading up to the Case 

Mr Barbuzano operated a supermarket at a shopping centre in Johannesburg. He leased his shop from Corub Property (Pty) Ltd, who owned the shopping centre.

Corub Property appointed a company called Collective Utility Management (CUM) as its agent to manage the centre’s utilities. CUM was responsible for doing monthly meter readings and providing each tenant with a monthly invoice of how much water and electricity it owed.

The electricity meter at Mr Barbuzano’s supermarket had a kilovolt (KVa) register and a kilowatt hour (KWh) register. The monthly readings were captured by CUM on both registers.

The circuit breaker installed at the supermarket was a 200 Ampere circuit breaker. This circuit breaker was considered suitable for a supermarket which is a large electricity consumer.

Chronological Order of Events 

The shopping centre was previously owned by the Van Der Linde Family Trust (VLFT).

In 2008 Mr Barbuzano and VLFT entered into a five-year written lease agreement in respect of the shop where Mr Barbuzano ran his supermarket.

Corub Property bought the shopping centre from VLFT in 2012 and became its new owner.

In 2013 Corub Property renewed the lease agreement with Mr Barbuzano on the same terms as his previous lease agreement with VLFT.

Mr Barbuzano defaulted on his electricity payments and Corub Property approached the regional court to claim the arrears. The regional court ordered Mr Barbuzano to pay the arrears.

However, he was unhappy with the decision of the regional court and appealed to the High Court. The high court upheld his appeal.

Corub Property appealed the decision of the High Court at the Supreme Court of Appeal and won.

Relationship between the parties involved 

Mr Barbuzano and Corub Property are parties to a lease agreement.

Issues to be Determined 

The court had to determine if Mr Barbuzano was, in terms of the lease agreement, liable to pay for both the kilovolt amp (KVa) component and kilowatt amp (KWa) component of the monthly readings of the electricity meter installed at his supermarket.

Summary of the Arguments Made by Both Parties 

Mr Barbuzano argued that the supermarket only needed an 80 AMP circuit breaker instead of the 200 AMP circuit breaker that was currently installed.

He said that he had requested Corub Property to replace the 200 AMP circuit breaker, but that Corub Property refused to do so.

He contended that the reason for the 200 AMP circuit breaker was because there was previously a bakery at the supermarket, which consumed more electricity, but which had been closed for years.

Corub Property called four witnesses who were all employees of CUM. The witnesses testified that the monthly meter readings for the supermarket were undertaken properly and recorded accurately.

Their evidence showed that Mr Barbuzano was charged the correct tariffs for the KVa and KWh readings.

Evaluation of the Strengths and Weaknesses of Each Argument 

The court found the evidence presented by the CUM witnesses to be credible.

The court pointed out that Mr Barbuzano neither denied this evidence nor presented any opposing evidence.

The court said that Mr Barbuzano only disputed the correctness of the meter readings in his pleadings.

He did not raise the issue of the 200 AMP circuit breaker in his pleadings.

He also did not raise this issue at the trial in the regional court.

This issue only surfaced at the high court. Furthermore, Mr Barbuzano did not lead any evidence to support this argument.

Discussion of the Relevant Law 

The court reiterated the following principles relevant to the contractual dispute at hand:

  • When interpreting a contract, the court will consider the language, context and purpose of the contract.
  • A court will generally not decide on issues that were not raised in the pleadings. 

The exception to this principle is that a court has the discretion to allow a party to raise issues at the trial that were not raised in the pleadings only if: 

The other party will not be prejudiced.

All the facts are placed before the court at the trial.

Court’s Decision and Order

The court was satisfied that Corub Property proved Mr Barbuzano’s liability and ordered that Mr Barbuzano pay the arrears in municipal water and electricity charges.

Explanation of the Reasoning Behind the Decision

The court considered the language, context and purpose of the disputed provisions of the relevant provisions of the lease agreement.

Language – The court said that it is clear from the language of the lease agreement that Mr Barbuzano is obligated to pay the electricity charges.

Context – The court took the view that there is nothing in the context of the agreement or the broader factual context that justifies a different interpretation.

Purpose – According to the court, the purpose of the relevant provisions is self-evident. It is to place on the tenant the obligation to pay for the cost of electricity consumed on the premises.

The court further said Corub Property would be prejudiced if Mr Barbuzano was allowed to raise the issue of the 200 AMP circuit breaker on appeal because it was not raised in the pleadings or at the regional court.

Implications for Lease Agreement Disputes

 This case confirmed that there is no reason why a court will not give effect to a legitimate lease agreement.

Lessons to be Learned from the Case for Potential Clients

Potential clients should be aware that non-payment is not an option where there is a legitimate liability to pay under a lease agreement. It is also important to note that in preparation for a court case, all relevant facts and arguments must be raised in the pleadings.

Recommendations for Individuals Facing Similar Situations

 Individuals facing concerns over their lease agreements are advised to seek advice from legal professionals.

 Judges and Legal Teams

Judges: Coram: DAMBUZA ADP and NICHOLLS, GORVEN, MEYER and GOOSEN JJA

For the appellant: S McTurk

Instructed by: Otto Krause Inc, Roodepoort; Honey Attorneys, Bloemfontein

For respondent: R Erasmus

Instructed by: Riekie Erasmus Attorneys, Roodepoort; Symington & De Kok Attorneys, Bloemfontein

Read More:

Corub Property (Pty) Ltd v Paul Gancalves Barbuzano

Commerical Law – Evictions

Expropriation of Land – What Are Your Rights?

 

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