Consumer Information

Author:  Maryna Botha – STBB
23 February 2017

DELAYED MUNICIPAL UTILITY BILLS    
ARGENT INDUSTRIAL INVESTMENT (PTY) LTD V EKURHULENI METROPOLITAN MUNICIPALITY (17808/2016) [2017] ZAGPJHC 14 (13 FEBRUARY 2017)

This judgment is an important acknowledgement of property owners’ rights when faced with large and delayed municipal utility bills. Here the owner received and paid water bills based on an estimated reading over a period of about 5.5 years. When thereafter the municipality took an actual reading, it became apparent that the actual consumption and the estimate differed and the owner was billed for an additional R1,1 million. Did the charges older than three years prescribe, or was the municipality correct in arguing that prescription only commenced running when the owner was billed?

SUMMARY OF JUDGMENT:

FACTS

In March 2015 the Ekurhuleni Metropolitan Municipality (the Municipality) invoiced Argent Industrial Investment (Pty) Ltd (Argent) for water consumption based on an actual reading of the water meter on its property. The meter was last read in September 2009 and ever since estimates were used in the invoices sent to Argent. After the actual reading, Argent was billed R1,152 million for the difference between its actual usage and the estimated consumption for which it had already paid, during the period September 2009 to March 2015. Argent disputed its liability for the charges for usage that had occurred more than three years before that date and claimed that the debt had become prescribed. The Municipality disagreed and argued that:

1. The obligation had not prescribed as prescription on that obligation only commenced when Argent, the debtor, was billed for the consumption, i.e. on 24 March 2015.

2. The fact that Argent had regularly paid monthly amounts for its estimated consumption, was an acknowledgment of liability which interrupted prescription. The basis for the argument was the municipal credit control and debt collection policy which stated that an amount due and payable by a consumer was a consolidated debt and that any payment into the account will be allocated to that consolidated debt as determined by the Municipality.

3. It had constitutional obligations (the Constitution read with the Municipal Systems Act and the Municipality’s Collection Policy) which created a regulatory framework which entitled it to invoice consumers whenever it was convenient for it to do so. Thus the consumer was never released from its obligation to pay if the Municipality had not issued an invoice or otherwise informed the consumer of the charges.

The Municipality conceded that it was its duty to take reasonable measures to ensure appropriate collection of its debt, but maintained that this duty only arose after the debt was invoiced.

HELD

• The Prescription Act provides that: a) a debt is extinguished by prescription after the lapse of three years (sec 10(1)). b) prescription begins to run as soon as the debt is due (sec12(1)). c) prescription does not commence to run until the creditor is aware of the existence of the debt, but only if the debtor has willfully prevented the creditor from becoming aware of the debt (sec 12(2)). d) a debt is only due when the creditor has knowledge of the identity of the debtor and the facts giving rise to the debt, but if a creditor could have acquired that knowledge by exercising reasonable care, the creditor is deemed to have that knowledge (sec 12(3)). e) the running of prescription is interrupted by an acknowledgement of debt or by the issue of process (sec 14(1)).

• The Municipality thus relied on section 12(3) of the Prescription Act for the contention that the debt only became due when the meter was read and the invoice issued, arguing that at this moment the Municipality (as creditor) became aware of the facts giving rise to the debt.

• The contention was flawed and inconsistent with the very reason why the law recognises the concept of prescription. If accepted it would entitle a Municipality to ignore its constitutional duties, which include debt collection, indefinitely. It should be kept in mind that the Municipality’s duty to take reasonable steps to collect what is due to it is for the benefit of both the Municipality and Argent.

• In any event, the Municipality had knowledge of the relevant facts: it was always aware that it was supplying water to Argent and what the latter’s identity was; it knew that Argent was billed on an estimate and that it had not read the meter on Argent’s property. These were the facts giving rise to the debt. The only “fact” of which the Municipality did not have knowledge was the exact consumption of Argent – knowledge that was within its reach, had it fulfilled its functions.

• Even if, as the Municipality contended, it did not have the necessary knowledge of the facts giving rise to the debt, it was clear in this case that the Municipality could have acquired the knowledge by exercising reasonable care – by reading the meter on the property and invoicing for consumption within a period less than that which did in fact elapse.

• It was not Argent’s duty to read meters, determine what its consumption was, and be ready to pay for that consumption whenever the Municipality raised the invoice, whenever in the future that would be. The Municipality had the duty to read the meters and invoice for consumption at reasonable intervals.

• No facts were pleaded which would support a conclusion that the delay beyond three years was reasonable. Thus the only conclusion was that the Municipality’s failure to read the meter and invoice for consumption for any period longer than three years was unreasonable, and amounted to the Municipality not having exercised reasonable care to ascertain Argent’s indebtedness.

• In these circumstances, the debt older than three years prescribed.

• The Municipality’s further contention that Argent’s regular payments for estimated consumption amounted to an acknowledgment of debt also had no merit. The Municipality could not rely on Argent’s fulfilment of its obligations to make up for its own failures.

• Had the Municipality read the meter and informed Argent of the indebtedness, Argent’s regular payments from that date without raising a dispute would have constituted acknowledgments of debt. However, 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, and does not do so.

CONCLUSION:
Argent was therefore successful in its claim that the debt beyond three years had prescribed

The Judgment can be viewed here: