Weekend Post (South Africa)



Argent Industrial Investment (Pty) Ltd v Ekurhuleni Metropolit­an Municipali­ty (17808/2016) [2017] ZAGPJHC 14 (13 February 2017) This judgment is an important acknowledg­ment 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? The Judgment can be viewed here: http://www.saflii.org.za/za/cases/ZAGPJHC/2017/14.pdf. 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 Prescripti­onAct 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 andArgent. 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 onArgent'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 ascertainA­rgent'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 onArgent'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. Argent was therefore successful in its claim that the debt beyond three years had prescribed. Katie Morris

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