The Nature’s Choice Case: Prescription of Municipal Charges for Electricity and Water

2022, Articles, High Court, Municipal Law, News

Article by Chantelle Gladwin-Wood (Partner) and Maike Gohl (Partner)
15 December 2022

ARGENT INDUSTRIAL CASE

Judgment in the matter of Argent Industrial Investments (Pty) Ltd v Ekurhuleni Metropolitan Municipality 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. In this case it was famously held that a municipality cannot claim electricity and/or water charges from a consumer when they have prescribed, and that ordinarily, if the municipality was in the position to have determined how much they ought to have been and issued an invoice for those charges, that prescription on those charges would have started running when the municipality ought to have come to the knowledge of the claim (i.e. when the municipality ought to have issued the invoice based on the correct amount).

IMPORTANCE OF THE ARGENT INDUSTRIAL CASE

Electricity/water charges prescribe after 3 years

  • The prescription period starts running not when the municipality issues an invoice, but when it ought to have reasonably have been in a position to issue the invoice – i.e. when it could have figured out or determined how much the customer owed
  • In this case the customer received a very large bill after five years or so, and it argued that it was not liable for all periods of consumption older than three years at the time of receipt of the bill – and the court upheld this argument
  • This means that a municipality has a relatively limited period of three years to issue an invoice for and claim payment of electricity and water charges from a customer – if it misses its chance due to its own negligence/incompetence, it cannot hold the customer liable years later

NATURE’S CHOICE CASE

Facts

This was a Supreme Court of Appeal judgment, handed down in 2019. It is thus a stronger legal precedent than Argent Industrial, which was decided by the South Gauteng (Johannesburg) High Court, and the Nature’s Choice judgment applies not only in Gauteng but all across South Africa. The facts of the case are difficult to follow because this is one case that forms part of a series of disputes between the parties, but in short the parties were arguing over whether or not certain water charges claimed by a municipality had prescribed or not. The municipality had charged the customer for several million rands of water charges, some three years or so after discovering that the water meter at the property was faulty and had only been billing the customer for around 10% of the water actually used. It rendered the customer a large bill for the water that it had discovered it had not already charged for, and the customer argued that by the time the invoice was issued, the liability for the debt had prescribed.

LEGAL ARGUMENT – WHEN DOES PRESCRIPTION START TO RUN?

The Supreme Court of Appeal considered the provisions of the relevant laws and held that in that case the prescription period of three years (or 36 months) started running when the error was detected (namely, that this was when the debt fell due in law), and the date when the invoice was issued for the charges was of no import (paragraphs 32 and 41). It was accordingly not open to the municipality to argue that although it had discovered the error in 2010, prescription only started running three years later after it had actually issued the invoice (the invoice was only actually issued later in 2013).

DOES THE ISSUING OF AN INVOICE INTERRUPT PRESCRIPTION?

In short, no. The date of the invoice is unimportant – the date when the debt fell due (as explained above) is when prescription starts to run (paragraph 44).

CONCLUSION

This is a victory for property owners against errant municipalities, as the judgment sets a precedent on the abovementioned important principles of law and confirms the contents of Argent Industrial. Anyone with queries as to the above can contact Maike Gohl or Chantelle Gladwin-Wood for more information or assistance with cases relating to prescription of municipal electricity/water charges.