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[2015] ZAGPJHC 49
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Friedshelf 837 (Pty) Ltd v City of Johannesburg and Others (2013/43575) [2015] ZAGPJHC 49 (25 March 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 2013/43575
DATE:
25 MARCH 2015
In the matter
between:
FRIEDSHELF 837
(PTY)
LTD
................................................................................................
Applicant
And
THE CITY OF
JOHANNESBURG
METROPOLITAN
MUNICIPALITY
........................................................................
First
Respondent
CITY POWER
JOHANNESBURG (PTYT)
LTD
.................................................
Second
Respondent
JOHANNESBURG
WATER (PTY)
LTD
.................................................................
Third
Respondent
EXECUTIVE
MAYOR OF JOHANESBURG,
MPHO PARKS
TAU
.................................................................................................
Fourth
Respondent
CITY MANAGER,
TREVOR
FOWLER
..................................................................
Fifth
Respondent
ACTING
MANAGING DIRECTOR, CITY POWER
SICELO
XULU
............................................................................................................
Sixth
Respondent
ACTING
MANAGING DIRECTOR, JOHANNESBURG WATER
LUNGILE
DLAMINI
............................................................................................
Seventh
Respondent
EXECUTIVE
DIRECTOR OF REVENUE AND CUSTOMER
RELATION, CITY
OF JOHANNESBURG,
LUNELWA
SONQUISHE
........................................................................................
Eighth
Respondent
JUDGMENT
SPILG,
J:
INTRODUCTION
1.
The applicant is the registered owner of
commercial property situated in Braamfontein.
2.
Although it took transfer of the property
on 19 November 2010 the applicant only received its first municipal
invoice some nine
months later, in August 2010. However electricity
was only billed during the following month and included charges of
R761 744.28
going back to February 2011.
3.
The applicant considered the charges
exorbitant since the property was hardly occupied (initially only 10%
and going up to 30%)
during the initial period to which the charges
related.
4.
A month after receipt of the September
statement a number of formal queries were logged and acknowledged by
the City. Over
the phone the City maintained that the invoices
were correct but no formal written response was forthcoming.
5.
The applicant also engaged a utilities
specialist to establish why the charges were so high. They provided a
report in February
2012 revealing that the adjoining building was
consuming electricity for which the applicant was being charged. This
appeared to
explain the high consumption and the City was promptly
advised. It then provided a direct connection for the other building.
Nonetheless
consumption continued to be much higher than expected.
6.
The applicant then obtained the assistance
of senior officials. However no one was able to explain the high
billing. It was only
in August 2012 that the applicant discovered
that it was being billed on a demand tariff. This meant that a
minimum fee of R35 000
per month was being charged irrespective
of actual consumption. The City’s responses until then
continued to centre on the
charges being estimations pending a
physical recordal. However this was not the cause. What had not been
explained, or possibly
even understood, by those who responded to the
applicant, was that the applicant was being charged on a minimum
demand tariff of
100KVA. The effect was that even if consumption was
well below 100KVA per month the applicant would still be charged a
minimum
of 70KVA or 80% of the average of the highest KVA demand
charges in the preceding 12 months.
7.
It is common cause that the applicant could
have been billed for actual consumption had it so requested. The
reason why it was billed
on a demand tariff was because the previous
registered owner had requested it and this was not altered when the
property was transferred
to the applicant.
8.
The applicant claims that as soon as it
could have reasonably become aware of the actual tariff charged and
how it was applied a
request was made to change to an ordinary
prescribed commercial tariff for actual consumption. The request was
made on 17 September
2012.
9.
However the City only responded eleven
months later on 13 August 2013 and agreed to amend the rate with
retrospective effect to
the date when the request was made; ie. 17
September 2012.
10.
In January 2014 the City issued a
pre-termination notice advising that services would be terminated
within 14 days and on 6 February
attempts were made by employees of
the City to disconnect the electricity.
THE
ISSUES
11.
The applicant contends that it never agreed
to the minimum demand tariff rates. In any event had the City billed
it immediately
and had the responsible officials actually informed it
that a demand tariff rate was being applied, then it would have
promptly
changed the tariff rate to one levied on actual consumption.
12.
Adv Oppenheimer
for
the applicant argued that the City has a legal duty to;
a.
ensure that accurate monthly accounts were
furnished;
b.
have properly investigated and informed the
applicant pursuant to its queries.
13.
Furthermore the applicant contends that the
enormous legal bill it was obliged to incur in requiring the City to
engage it in a
meaningful manner and its failure to comply with time
periods provided for in the rules of court justifies a punitive order
for
costs on the attorney and client scale.
14.
Aside from disputing the applicant’s
averments, the City contended that by only requesting it to write-off
interest and settle
the capital sum on terms the applicant had
admitted liability on the minimum demand tariff rate and cannot now
withdraw from that
admission.
THE
TARIFF RATE
15.
The City cannot point to any agreement with
the applicant to charge a minimum demand tariff of 100KVA. It however
contends that
the existing tariff rate simply continued to apply to
the property after the applicant took ownership.
16.
Adv
Beharie
for
the City could not produce any statute or subordinate legislation,
such as a by-law, to demonstrate that a tariff somehow adheres
to the
property. On the contrary section 3(1) (a) of the Local Government:
Municipal Systems Act (32/2000): City of Johannesburg
Metropolitan
Municipality: Credit Control and Debt Collection By-Laws
[1]
(‘the
By-Laws’
)
expressly provides that no municipal services may be provided to any
applicant unless and until an application has been made in
writing on
a form substantially similar to the one prescribed. The applicant
referred to the City’s own webpage which states
that “
you
can’t inherit an existing water and electricity account from a
previous owner or tenant of a property”
17.
It is evident that the By-law contemplates
that charges are levied pursuant to agreement and that if a special
rate is requested,
such as a demand tariff rate, then it must be
specifically applied for. It is common cause that the applicant did
not apply for
the special rate.
18.
The City contended that the applicant must
have delayed in applying for municipal services. This was in the form
of a submission
as it did not rely on any document or record in its
possession. It also claimed that accounts had in fact been sent
monthly from
the time the applicant took transfer of the property.
This clearly is not so since the first account which the applicant
claimed
to have received in August 2011 showed an opening balance of
nil.
19.
Perhaps the strongest argument presented by
the applicant against the City’s submission is that on its
website the City states
that a rates account will be opened
automatically as soon as transfer of the property into the new
owner’s name is registered
at the Deeds Office.
20.
It
appears that the inordinately long period it took the City to explain
the high charges was precisely because there was nothing
in the
account to reflect how the demand tariff came to be applied.
Presumably an official simply took the tariff rate that
had
been applied to the previous owner. It would be speculative to
conclude that the delay in opening the applicant’s account
was
because the responsible official at the time did not know how to bill
since it may equally have been inadequate data capturing
or
transferring interfaces or software programming that resulted in the
delay.
21.
However it is apparent that the City holds
out that it automatically creates an account for a new owner
immediately on transfer
of the property in the Deeds Office. The City
should therefore have systems in place to identify any special
tariffs that applied
to the previous owner and immediately engage the
new owner to determine whether the special tariff is to be
negotiated. On basic
principles, failing agreement the prescribed
standard tariff based on actual consumption must apply.
22.
Since the City automatically creates
accounts for new owners its failure to programme its systems to
provide an alert in cases where
previous owners had negotiated
special tariffs must be laid at its door. It only has itself to blame
having regard to the terms
of the By-laws which require agreement for
any rate which is not the standard applicable prescribed rate based
on actual consumption.
On the facts of this case no such agreement to
charge a special rate irrespective of actual consumption can be
inferred from the
applicant’s conduct. Each case however should
be considered on its own merits
23.
I therefore find that there was no
agreement, express or implied by conduct, if regard is had to the
applicant actually utilising
electricity from the time it took
transfer , to pay anything other than the prescribed tariff for
actual consumption. Special
tariff rates must be expressly agreed
upon and, without deciding, it appears arguable that the City has an
obligation to inform
the new owner immediately that a preferential
rate was obtained by the previous owner because of the high
electricity consumption
and that it would be necessary to agree on
such a rate if the monthly consumption will be more than 100KVA.
ADMISSION
OF LIABILITY OR ACQUIESSENCE
24.
A fundamental requirement for admission of
liability is that it is clear, unequivocal and informed. In the
present case the mere
fact that the applicant was negotiating on
interest when it was wrongly advised by the City’s personnel
about the basis on
which the charges were raised hardly qualifies.
This defence therefore fails. For the same reason the defence of
acquiescence also
fails; if the City’s personnel were unable to
fathom the basis of the tariff, then it is difficult to appreciate in
respect
of what precisely the applicant can be said to have
acquiesced.
25.
The City further argued that the applicant
had in fact regularly consumed in excess of 100KVA and therefore
accepted the minimum
demand tariff. If it had not been accorded the
minimum demand rate then the applicant would not have been able to
utilise as much
as 100KVA. However the City does not contend that the
applicant was aware or must have been aware that 100KVA is only
provided
if a consumer is on the minimum demand tariff. It
argues that 100KVA usage must be specifically requested before it is
provided.
However, without alleging that the applicant knew this fact
the City is unable to produce the factual support for its legal
contention.
THE
CITY’S BREACH OF ITS OBLIGATIONS
26.
There are a large number of cases where it
is alleged that the City’s administrative personnel shirk their
responsibilities
to provide a proper service but simply go ahead with
the threat of terminating services.
27.
Section
10 of the By-law provides that the City must endeavour to ensure
‘
accurate
metering of consumption at fixed intervals with the minimum delay
between service connection and first and subsequent rendering
of
accounts
[2]
’.
It also provides that the City endeavours to ensure ‘
accurate
monthly accounts
with
the application of the appropriate and correct prescribed fees, rates
and other related amounts due and payable
[3]
’
and
‘
the
timely despatch of accounts
[4]
’
28.
Sections 11(5) (a) and (b) require
the City to investigate a query or complaint within 14 days or as
soon as possible after it has
been received and inform the customer,
in writing, of its decision.
29.
These provisions impose a duty on the City
to at least properly investigate a query and make an informed
decision.
30.
The delay in investigating the query and
doing so in what appears to be either a haphazard or disinterested
manner, is not in conformity
with the acceptable standards expected
under the By-Laws. A duty is owed to the consumer to undertake a
conscientious investigation
and not simply go through the motions and
then threaten a termination of services.
31.
I am satisfied that the failure to perform
their duties by completing their investigations within a reasonable
time (having regard
to the nature of the enquiry and the number of
times the applicant was obliged to engage the City’s
personnel before
any action was taken) and the failure to inform the
applicant of the true basis of the charge resulted in the applicant
not being
aware that all it had to do was to request a change to the
billing tariff.
32.
However the view I take is that the
applicant by consuming electricity implicitly accepted the prescribed
tariff based on actual
consumption. If it was to be charged at any
special rate then that had to be in terms of an express agreement.
There was none.
Moreover the receipt of statements did not constitute
acceptance that the special rate was to apply. On the contrary the
applicant
continued to query why the amount was so high having regard
to the actual electricity consumption on the property.
33.
On either approach the applicant cannot be
charged the minimum demand tariff for the period where it has not
been reversed and the
ordinary prescribed tariff has been
substituted. It is common cause that the period is from 19 November
2010 to 17 September 2012.
I have already rejected the City’s
contention that the applicant must have known already by September
2011 that it was being
charged a minimum demand tariff and was
enjoying the added consumption benefits that were derived from it.
CITATION
OF FOURTH TO EIGHTH RESPONDENTS
34.
The case is made out against the
operational and administrative bodies of the City responsible for
electricity and the cutting off
of supplies in the case of
non-payment.
35.
Adv Oppenheimer was asked about the
necessity of joining the mayor and individuals who head certain
divisions within the City. It
appears that this has become a
convention in anticipation of a failure to comply with any court
order that might be made pursuant
to the application as it then would
facilitate contempt proceedings. It also appears that an application
only receives attention
if the mayor or executive director is
personally cited and served.
36.
In my view they are not parties to the
litigation and the applicant has conflated a concern for a possible
non-compliance with a
court order that might eventuate with the issue
of who is the proper representative party to be sued.
37.
The applicant could not show any
legislation which requires service of such an application on the
fourth to eighth respondents.
That being so there has been an
impermissible mis-joinder
38.
Should the City fail to comply with any
court order then a rule can be issued calling upon the responsible
and accountable officials
to show cause why they should not be held
in contempt of court. But until there is a failure to respect a court
order there is
no
lis
between the applicant and them.
TERMS
OF PAYMENT
39.
It is evident that a significant sum might
become due and payable. The applicants have sought an order which
includes directing
that the parties enter into reasonable payment
terms which take into account the applicant’s circumstances.
40.
At this stage the court should not
prescribe anything beyond a date by when the applicant is to make its
representations so as to
ensure that the litigation does not
prejudice the applicant which otherwise might be subject to the
sanctions provided for in section
13(2)(c) of the By-law.
41.
Moreover sections 21 (4) to (6) of the
By-law make adequate provision for the exercise by the City of the
discretion it has to allow
a period of payment whether under or in
excess of 24 months and the factors it is obliged to consider when
exercising its discretion.
42.
These are administrative powers and the
court cannot indirectly interfere with or further circumscribe how
the discretion is to
be exercised. It would amount to an
impermissible interference with a discretionary power, the exercise
of which is similarly regulated
by the provisions of subordinate
legislation contained in sections 21(4) to (6) of the By-Law.
COSTS
43.
I agree that the City had not complied with
its duties to properly investigate the queries and that the applicant
was obliged to
incur significant costs both in respect of engaging a
utilities billing expert and their attorneys.
The
threat of termination of services also required the applicant to take
steps to protect itself.
44.
Nonetheless I am not persuaded that the
applicant did not also take advantage of delays and may have lead the
City to believe, unwittingly,
that only interest was in issue.
45.
Perhaps most importantly, the City has
raised a genuine issue for consideration, which impacts on the way it
deals with new owners
on transfer of property into their name and
cannot be critisised for seeking to argue the position they contended
for. A final
factor is that the joining of the fourth to eighth
respondents was unnecessary.
46.
Overall I believe that the usual order for
costs should not be departed from, save that the actual costs of
engaging MOTLA,
being the utility audit service utilised as an
expert is also to be borne by the City. To the extent necessary, they
are declared
to have provided expert testimony.
ORDER
47.
I accordingly order that;
a.
The first and second respondents are
to reconcile the applicant’s account, number 550 498 238
in respect of
electricity charges and consumption by reversing the
minimum demand charge tariff of 100KVA for the period commencing 19
November
2010 to 17 September 2012 inclusive and substitute such
tariff with the standard prescribed tariff for actual consumption by
a
commercial consumer;
b.
Within 14 days of the reconciliation of the
applicant’s aforesaid account the applicant is to make
representations to the
relevant respondent to allow for payment of
arrears over a period either as contemplated under section 21 (4) or
(5) of the Local
Government: Municipal Systems Act (32/2000): City of
Johannesburg Metropolitan Municipality: Credit Control and Debt
Collection
By-Laws (the ‘
By-Law’
)
and which will be considered by such respondent in accordance with
the provisions of the applicable section as read with section
21(6)
of the By-Law;
c.
The relevant respondents are interdicted
from terminating the applicant’s services to the property in
respect of the amounts
that stand to be reversed;
d.
The first to third respondents are to pay
the applicant’s party and party costs which costs are to
include the actual costs
of engaging MOTLA and obtaining their report
, being the utility audit service engaged by the applicant, as an
expert. To the extent
necessary, MOTLA are qualified as an expert and
are declared to have provided necessary expert evidence in the form
of the report
contained in the founding affidavit.
SPILG,
J
DATE
OF HEARING: 20 May 2014
DATE
OF JUDGMENT: 25March 2015
LEGAL
REPRESENTATIVES:
FOR
THE APPLICANT: Adv M Oppenheimer
Schindler
Attorneys
FOR
THE RESPONDENTS: Adv N Beharie
Denga
Inc.
[1]
Notice
1857 of 2005; Provincial Gazette no 213 of 23 May 2005
[2]
Section
10(a)
[3]
Section
10(c)
[4]
Section
10(d)