Billing system of municipalities under fire

"I am in the process of selling my house. I’ve approached the municipality for a rates clearance certificate. They’ve now informed me that I have an outstanding amount of more than R100,000 on my water account which they say has run up over the last 10 years, because I was charged on estimated amounts and not actual metered amounts. I’ve made sure to always pay my account every month, and now I have to pay this. Surely this cannot be right?”

In a long line of court cases regarding the responsibility of owners for outstanding debts and the ability of municipalities to recover such from home owners, a strong view in favour of the home owner has been upheld in the recent High Court judgement of Argent Industrial Investments v Ekurhuleni Metropolitan Municipality.

In this case Argent Industrial received an account from the municipality in March 2015 that showed an amount was in arrears for R1,152,666.98 after a water meter reading was done by the Municipality. Argent Industrial paid an estimated water account provided by the municipality every month, with the last actual water meter reading by the Municipality only done in 2009. The arrear amount reflects the difference between the actual consumption and the estimated consumption that was already paid by Argent Industrial.

Argent Industrial contested the account and argued that they were not liable to pay for any arrears of more than three years prior to March 2015, and any older amounts would have prescribed according to the Prescription Act. The Municipality argued that prescription only starts to run when the consumer is billed and that was when the Municipality became aware of the existence of the debt. They further argued that because Argent Industrial made monthly payments it constituted an acknowledgement of their debt, which also interrupted the running of prescription.

The court however held that it was not Argent Industrial’s obligation to read water meters and calculate their consumption and have everything in order for when the Municipality demands payment for the actual consumption of water. A delay of three years to read the water meters was also held to be unreasonable. The court also disagreed that prescription started running when Argent Industrial was invoiced and when the Municipality became aware of the debt. The Municipality knew that they were supplying water to Argent Industrial and that they were paying monthly estimates provided by the Municipality. The Municipality however did not know what the exact consumption of Argent Industrial was, knowledge which was within its reach, had it fulfilled its functions and the Municipality could have acquired this knowledge by exercising reasonable care. The court held further that the Municipality’s argument that Argent Industrial’s regular payments for estimated consumption amounted to an acknowledgement of their liability did not carry any weight as a consumer cannot acknowledge a debt that he was not aware of, when either the details of the debt are particularly within the knowledge of the other party, or only the other party has the ability to quantify the debt, and does not do so.

Accordingly, the court ordered the Municipality to calculate the average monthly water consumption of Argent Industrial from September 2009 until March 2015, using the meter reading on the municipal account received and then charge Argent Industrial only the average amount for water consumption for the period March 2012 to March 2015. Herewith the court effectively found in favour or Argent Industrial and determined that their debt older than three years was written off in accordance with the Prescription Act.

This finding therefore supports your view that the municipality cannot charge you for 10 years of outstanding water readings of which you were not aware. It is our advice that you consult with your attorney to investigate the matter in detail and advise you of your rights taking into account this recent decision.

April 5, 2017
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