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Prescription of Municipal Utility Accounts (estimate and actual readings)

In a recent matter before the Gauteng Local Division, ARGENT INDUSTRIAL INVESTMENT (PTY) LTD (the applicant) sought certain relief against EKURHULENI METROPOLITAN MUNICIPALITY (the respondent) under case number 17808/2016, that it inter alia did not have to pay for consumption of water that occurred more than 3 years before March 2015, on the basis that the obligation to pay for that consumption has prescribed, and had it already prescribed by the time the invoice was presented. The application was argued before the Honourable Acting Justice Yacoob.

The relevant facts in this matter were that between September 2009 and March 2015, the applicant was charged, and paid, for estimated water consumption. The meter installed at the applicant's premises was not read by the respondent between 21 September 2009 and 13 March 2015. After the meter was read on 13 March 2015, the applicant was billed for the difference between its actual usage and the estimated consumption for which it had already paid, during the period September 2009 and March 2015, almost six years. The applicant then raised a dispute regarding the charges for usage that had ocurred more than 3 years before that date.

The applicant did not dispute that it had consumed the water reflected by the meter reading in March 2015. Its only contention is that its obligation to pay for any consumption more than three years before that date had prescribed by the time the respondent presented the applicant with its invoice. The respondent furnished no reason why no meter reading was taken between September 2009 and March 2015.

The respondent argument in its defence was that the obligation had not prescribed, because prescription on that obligation did not start running until the applicant was billed for that consumption, on 24 March 2015. It submits also that the fact that the applicant regularly paid monthly amounts for its estimated consumption amounts to an acknowledgment of liability which interrupts prescription.

The respondent rested its argument on Chapter 7 of the Constitution of the Republic of South Africa, 1996, in particular sections 151-156 thereof, read with schedules 4 and 5, read with the Local Government: Municipal Systems Act. 32 of 2000 ("the Systems Act") and the Ekurhuleni Metropolitan Municipality Credit Control and Debt Collection Policy 2015/16 ("the Policy"). It argued that the basis that the regulatory framework created by these instruments entitles the respondent to invoice consumers whenever it is convenient to the respondent, and the consumer is never released from its obligation to pay when the respondent has not issued an invoice or otherwise informed the consumer of the charges which it has incurred.

Furthermore, it was argued that monthly payments constitute an acknowledgment of debt is Clause 5.1(d) of the Policy, which states that an amount due and payable by a consumer is a consolidated debt, and that any payment into the account will be allocated to that consolidated debt as determined by the respondent.

It was conceded by the respondent’s Counsel that, if the respondent's behaviour was unreasonable, it would be open to the Court to intervene, but he stopped short of conceding that the respondent's behaviour in this case was unreasonable. The respondent, he submitted, behaved exactly as it is entitled to do. Counsel for the Respondent acknowledged that it is the respondent's duty to take reasonable steps to "ensure appropriate collection of its debt” and cited various authority in support thereof. However, he contended that the obligation only arose after the debt was invoiced.

The Prescription Act, 68 of 1969 ("the Prescription Act") provides that: a debt is extinguished after the lapse of three years; prescription starts to run as soon as the debt is due; prescription does not commence to run until the creditor is aware of the existence of the debt, but only if the debtor has wilfully prevented the creditor from becoming aware of the debt; 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, and the running of prescription is interrupted by an acknowledgement of debt or by the issue of process.

The respondent 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, contending that it is only when the meter was read and the invoice issued that the respondent, the creditor, became aware of the facts giving rise to the debt.

The Court disagreed that the prescription could not start running until respondent had taken these steps as this would be inconsistent with the very reason why the law recognises the concept of prescription. It would also entitle the respondent to ignore its constitutional duties, which include debt collection, indefinitely. It is worth noting that the respondent's duty to take reasonable steps to collect what is due to it are for the benefit of both the respondent and the applicant.

At all times, the respondent had knowledge of the relevant facts and was aware: that it was supplying water to the applicant; of the applicant's identity; the applicant was paying an estimate each month, if from nothing else, that the respondent had not read the meter on the applicant's property. These are the facts giving rise to the debt. The only "fact" of which the respondent did not have knowledge was the exact consumption of the applicant, and this was knowledge within the respondent's reach, had it simply fulfilled its functions.

It was the Court’s view that the respondent could have acquired the necessary knowledge by exercising reasonable care, by reading the meter or meters on the property and issuing an invoice for consumption within a period less than that which did in fact elapse.

The Court held further that it is not the applicant's duty to read meters, determine what its consumption is, and be ready to pay for that consumption whenever the respondent gets around to asking for payment, whenever in the future that may be. The respondent has a duty to read the meters and invoice for consumption, at its convenience, but at reasonable intervals.

All that was necessary for the Court to find in the applicant's favour, is a conclusion that a delay beyond three years is unreasonable. Since there were no facts which to support a conclusion that the delay beyond three years was reasonable, the Court concluded with no doubt that the respondent's failure to read the meter or meters and invoice the applicant for consumption for any period longer than three years was unreasonable, and amounts to the respondent not having exercised reasonable care to ascertain the applicant's indebtedness.

In these circumstances, to the extent that the respondent did not have the required knowledge of the applicant's indebtedness for the period more than three years before the date of the invoice, it is deemed to have had that knowledge.

The Court dismissed the respondent's contention that the applicant's regular payments for estimated consumption amount to an acknowledgment of debt goes, and furthermore, the respondent cannot rely on the applicant's fulfilment of its obligations to make up for its own failures. Had the respondent read the meter and informed the applicant of the indebtedness, the applicant'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.

The respondent was thus order to reverse all charges for water consumption added to the applicant's account as a result of the reading of the meter on 13 March 2015; reverse all interest and legal fees charged to the applicant's account in respect of the charges for water consumption; calculate the applicant's average monthly consumption over the period 21 September 2009 and 13 March 2015, using the meter reading reflected on the invoice of the applicant's account dated 24 March 2015, and charge the applicant an amount based on that average for the period 13 March 2012 to 13 March 2015, and send the applicant a full statement of account reflecting the reversals, calculations and charges dealt with in this order, and an invoice reflecting the amount that is due and payable, within 14 days of this order.

Furthermore, the respondent is not entitled to claim any payment from the applicant in respect of the applicant's account for any period before 13 March 2012; may not terminate, restrict, or threaten to terminate or restrict services on the basis of the applicant not having paid the amounts added to the applicant's account in the invoice of 24 March 2015; and to pay the applicant’s legal costs of the application.

Consumers who have thus been receiving estimate readings for periods exceeding 3 years, must take all necessary legal steps, once a proper reading has been undertaken, to have the amounts it has paid reversed and any average monthly amounts for any period exceeding 3 years, declared prescribed.

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