By Chantelle Gladwin-Wood, Partner and Maike Gohl, Partner
Judgment in the matter of Argent Industrial Investments (Pty) Ltd v Ekurhuleni Metropolitan Municipality( 17808/2016)  ZAGPJHC 14; 2017 (3) SA 146 (GJ)was handed down on 13 February 2017 in the Gauteng Local Division of the High Court by Judge S Yacoob. This matter was handled by Christopher Tucker (Partner) and Maike Gohl (Senior Associate) at Schindlers, and argued by Adv. Mark Oppenheimer of the Bridge Group.
In this case the Ekurhuleni municipality failed for approximately 5 and a half years to take actual readings of the water meter. It billed in the interim based on estimated readings. Argent argued that it was not liable for charges for water that were older than three years at the date that the big bill finally arrived in 2015 on the basis that these charges had already prescribed by the time that the bill was presented to it.
The municipality argued, in response, that:
- Firstly, because the consumer made payments each month during the period in question for the estimated charges, that this constituted an acknowledgement of its debt for the large bill presented years later based on actual readings (it lost on this point); and
- Secondly, that the water charges older than three years included in the big bill in 2015 had not prescribed because prescription can only start running when the municipality actually bills the client, and not before that.
We quote/paraphrase from the judgment:
- A consumer who receives a bill for municipal charges for electricity or water for any period older than three years cannot be held liable for the amounts older than three years, because they have prescribed. This is taken from the judgment read as a whole.
- Prescription of charges more than three years old cannot be interrupted (stopped) by payments made by a consumer of estimated charges during the period that the municipality was billing on estimates. A debtor cannot be considered to have acknowledged a debt of which it knows nothing, when either the details of the debt are particularly within the knowledge of the creditor, or only the creditor has the ability to quantify the debt (paras 18 and 19).
- Prescription starts running not when the invoice is presented to the consumer, but rather when the municipality should have become aware of all of the facts that gave rise to its claim – one of those facts being the actual charge (as opposed to the estimated charge). The municipality could have taken actual readings at any time. It simply failed to. It thus could have become aware of the actual charge at any time. This means that prescription starts running when a municipality should have taken actual readings and billed the consumer on actual readings. Note that this judgment did not, unfortunately, say when a municipality should be taking actual readings – the judge specifically did not decide this issue and this has been left open for consideration in future (para 11).
- However, the court did say that it is not the consumer’s duty to read meters and determine what its consumption is. The municipality is under a duty to take reasonable steps to collect what is due to it – this duty exists for the benefit of both the consumer and the municipality. The municipality has a duty to read the meters and invoice for consumption at its convenience but at reasonable intervals (paras 12 and 15).
- Where there are no records of regular actual readings to assist in determining how much of a bill for several years has prescribed, it is appropriate to apply the industry standard – which is to average the consumption for the entire period out over all of the months in that period, and then use the average arrived at to calculate the consumer’s liability for the whole period by multiplying that average by 36 months (para 20).
This is a victory for property owners against errant municipalities, as the judgment sets a precedent on the abovementioned important principles of law. Anyone with queries as to the above can contact Maike Gohl, Christopher Tucker or Chantelle Gladwin-Wood for more information or assistance with cases relating to prescription of municipal electricity/water charges.