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[2020] ZASCA 20
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Nature's Choice Farms (Pty) Ltd v Ekurhuleni Metropolitan Municipality (463/19) [2020] ZASCA 20; [2020] 3 All SA 57 (SCA) (25 March 2020)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
no: 463/19
In
the matter between:
NATURE’S CHOICE
FARMS (PTY)
LTD
APPELLANT
and
EKURHULENI METROPOLITAN
MUNICIPALITY
RESPONDENT
Neutral
citation:
Nature’s Choice Farms (Pty) Ltd v Ekurhuleni
Metropolitan Municipality
(Case no 463/19)
[2020] ZASCA 20
(25
March 2020)
Coram:
PETSE DP, SWAIN, NICHOLLS and DLODLO JJA and EKSTEEN AJA
Heard
:
3 March 2020
Delivered
:
25 March 2020
Summary:
Rule 33(4) of Uniform Rules of Court – separation of issues
– issues not accurately circumscribed – dispute relating
to issues to be decided – sections 74, 75, 75A and 95 of
Local
Government Municipal Systems Act 32 of 2000
– Municipal Water
Tariffs – interpretation of bylaw – prescription –
when debt falls due – rendering
invoice does not interrupt
prescription.
ORDER
On
appeal from:
Gauteng Division of the High Court, Johannesburg
(Vally J, Modiba and Unterhalter JJ concurring, sitting as a court of
appeal):
1. The appeal succeeds
and the order made by the full court is set aside.
2. The order of the trial
court in the Gauteng Division of the High Court is set aside.
3. NCF’s claim is
dismissed.
4. Each party is to pay
its own costs in respect of the proceedings before the high court,
the full court and in this Court.
JUDGMENT
Eksteen
AJA (Petse DP, Swain, Nicholls and Dlodlo JJA concurring)
[1]
The dispute in this case relates to the alleged prescription of the
claim by Ekurhuleni Metropolitan Municipality (Ekurhuleni)
in respect
of service charges raised for water usage by Nature’s Choice
Farms (Pty) Ltd (NCF). The issue of prescription
was dealt with in
the Gauteng High Court (the high court), and subsequently in an
appeal before the full court of that division
(the full court), under
rule 33(4) of the Uniform Rules. The high court upheld NCF’s
contention that the debt had prescribed
and it ordered Ekurhuleni to
reverse the charge. The full court, however, came to the contrary
conclusion and set aside the order
made by the high court. This
appeal against the order of the full court is with the special leave
granted by this Court.
[2]
On 13 March 2014 NCF instituted action proceedings against Ekurhuleni
seeking a declarator that it was not indebted to Ekurhuleni
in the
amount of R3 863 147.90 (the disputed amount) for water usage during
the period 3 September 2007 to 7 July 2010 (the relevant
period). NCF
contended that the claim had become prescribed and unenforceable by
the effluxion of time in terms of the relevant
provisions of
Ekurhuleni’s schedule of tariffs for the supply of water (the
schedule). Ekurhuleni denied the contention and
filed a claim in
reconvention in which it sought payment of the disputed amount. NCF,
in turn, raised a special plea of prescription
and Ekurhuleni
replicated to raise a number of defences to the special plea.
[3]
The issues which arise for decision before this Court are: Firstly,
the scope of the issue separated in terms of rule 33(4);
secondly,
the construction to be placed on the relevant provisions of the
schedule; and thirdly, the legal conclusions reached
by the full
court.
Background
[4]
NCF is the producer of frozen vegetable products within the area of
jurisdiction of Ekurhuleni. In the production process it
uses a
substantial quantity of water which is supplied by Ekurhuleni in the
discharge of its statutory service delivery obligation.
[5]
On 11 June 2010 Ekurhuleni caused an inspection and tests to be
conducted on the water measuring assembly (the assembly) at
the
premises of NCF. In the course thereof it was discovered that the
water meter installed at the premises was a factor 10 meter
whereas
it was recorded in the financial accounting system of Ekurhuleni as a
factor 1 meter. The factor of the meter relates to
the units in which
the water flow is measured, it has no impact on the accuracy of the
measurement. The practical effect of the
incorrect factor recorded in
the financial accounting system was that NCF had consistently been
billed for only 10 per cent of
its actual water usage prior to the
discovery of the error.
[6]
A new assembly was installed at the premises of NCF as part of
Ekurhuleni’s water meter consolidation and improvement
project.
It was duly designed and finally approved on 31 August 2010. It was
installed on 7 November 2010 and it is common cause
that the water
usage was accurately measured and recorded in Ekurhuleni’s
financial system thereafter.
[7]
On 6 September 2010, prior to the installation of the new assembly
Ekurhuleni’s infrastructure department instructed Mr
Ackerman,
the area manager of the finance department (finance), to adjust the
various usage readings with the factor 10 and to
recover the amounts
due in respect of the actual usage for the period of 36 months prior
to the correction of the error in accordance
with its understanding
of para 12 of the schedule. (I shall revert to the provisions of para
12 of the schedule later.) Finance
did not respond to the instruction
until 18 September 2013 when it debited NCF with an amount R4 403
988. During February 2014,
in the face of the looming dispute,
Ekurhuleni abandoned a portion of its claim due to certain
discrepancies in the reading of
the meter at the time of the
replacement of the assembly, which its engineer ascribed to backflow
which occurred during the replacement
of the assembly. Ekurhuleni,
however, persisted in its claim for the disputed amount based on the
actual water usage for the relevant
period, as recorded by the
original meter.
[8]
NCF resisted the demand and Ekurhuleni threatened to interrupt its
water supply unless payment was made. This impasse prompted
NCF to
obtain an interim interdict to prevent the interruption of its water
supply and the institution of the action for the declarator.
The separation of issues
[9]
As alluded to earlier, the issue of the alleged prescription of
Ekurhuleni’s claim was dealt with in the high court in
terms of
rule 33(4) and an order in terms of the rule was granted at the
commencement of the trial. Before us, however, the parties
were not
in agreement as to the scope of the separation. On behalf of
Ekurhuleni it was argued that the issue relating to the prescription
of its claim in reconvention and the defences thereto as contained in
its replication were not before the court and remained to
be
adjudicated in due course. The issue of prescription of the claim for
the disputed amount as it emerges from the pleadings in
reconvention
can therefore not be decided at this stage. NCF, on the other hand,
contended that it was the intention of the parties
that all issues
relating to prescription of the disputed amount be decided. It argued
that Ekurhuleni has had the opportunity to
present any evidence which
it may have wished to in respect of the prescription raised in the
special plea in the proceedings in
reconvention. It was contended
that it was not open now to Ekurhuleni to allege that these issues
remain alive.
[10]
In order to
elucidate the issue it is necessary to consider first the pleadings.
It is the purpose of pleadings to define the issues
both for the
parties and the court and it is the duty of the court to adjudicate
upon the disputes and those disputes alone.
[1]
In its particulars of claim NCF alleged that Ekurhuleni supplied
services, including water, to it in terms of an agreement which
required it to render accurate monthly statements to NCF in respect
of charges levied. It then preceded to allege:
‘
6. In addition to
the said agreement the supply of water by the Defendant to the
Plaintiff was subject to the schedule of tariffs
for the supply of
water supply services, published as part of, alternatively, pursuant
to the said bylaws which states:-
“
12. WATER: FACTOR
AND COUPLING ERRORS:
In the event a
miscalculation was made and charged for by the Council of water
services rendered due to a factor or coupling error,
the rectified
charges applicable shall be calculated as follows, upon approval by
the Executive Director: Infrastructure Services.
The Charges applicable
shall be the levy Rand Water charges the Municipality (at that point
in time, including the WRC levy), +
15% levy, for the duration that
the incorrect charges [were] rendered, up to a maximum of 36 months
backdated, based on the average
monthly consumption registered over
three succeeding metered periods after the factor error or incorrect
coupling was rectified.”
7. In material breach of
the aforesaid agreement and in conflict with the aforesaid provisions
of the Defendant’s tariffs,
on or about 18 September 2013 the
Defendant debited the Plaintiff’s account with an amount of R3
863 147.90 and R540 848,68
(a total of R4 403 996.58). The said
amounts were debited to the Plaintiff’s account ostensibly
pursuant to the provisions
of paragraph 12 of the Defendant’s
schedule of Tariffs as referred to in 6 above and in order to rectify
as contemplated
in the said Tariff, an alleged error on the billing
system . . . .
8. The aforesaid error
would thus have entitled the Defendant to correct its error in
respect of a maximum period of 36 (thirty
six) months prior to the
date of such correction, being 18 September 2013, and thus in respect
of the period from 19 September
2010 to 18 September 2013.
9. The amount wrongfully
debited to the Plaintiffs account and claimed by the Defendant was in
respect of the period prior to 18
September 2010 and thus:
9.1
The Defendant’s claim in respect thereof had prescribed, and
9.2
The Defendant was debarred by the provisions of paragraph 12 of its
schedule of tariffs from claiming the same.’
[11]
NCF accordingly prayed for orders:
1. Declaring that NCF is
not indebted to Ekurhuleni in the amount of R3 863 147.90 as well as
the amount of R540 848,68 debited
to NCF’s account in respect
of VAT on the said amount; and
2. Directing and ordering
Ekurhuleni to reverse the amount of R3 863 147.90 as well as the
amount of R540 848,68 debited to NCF’s
account in respect of
VAT on the said amount by crediting its account in the said sum.
[12]
Ekurhuleni denied NCF’s entitlement to the relief. It admitted
the averments set out in para 6 of the particulars of
claim and the
debit passed on 18 September 2013. It alleged that it was entitled to
correct the error ‘up to a maximum of
36 months backdated’,
however, it denied the construction placed upon para 12 of the
schedule in para 8 of NCF’s particulars
of claim. It
accordingly put NCF to the proof of the conclusions set out in para 9
of the particulars of claim.
[13]
Ekurhuleni’s claim in reconvention is similarly based on the
schedule. The claim in reconvention was met with a special
plea as
aforesaid. Ekurhuleni replicated to the special plea raising its
defence to the alleged prescription. It alleged that NCF
had operated
a consolidated account with Ekurhuleni in respect of all costs,
levies and charges incidental to electricity, refuse,
water and
sewerage services rendered by Ekurhuleni in respect of NCF’s
property as provided for in s 102 of the Local Government-Municipal
Systems Act 32 of 2000 (the Systems Act), and Ekurhuleni’s
credit control and debt collection bylaws. It pleaded that payments
made by NCF in respect of accounts and statements rendered by
Ekurhuleni in respect of municipal services rendered were allocated
to the oldest outstanding debts. Finally it asserted that the
payments effected by NCF from time to time in respect of outstanding
amounts relevant to NCF’s account constituted express,
alternatively, tacit acknowledgements of liability by NCF as provided
under s 14(1) of the Prescription Act 68 of 1969 (the
Prescription
Act), resulting
in any possible running of prescription in respect of
the disputed amount having been interrupted. It accordingly denied
that its
claim had prescribed as contended for in the special plea.
[14]
Thus the battle lines were drawn at the close of pleadings. At a
pre-trial conference held thereafter the parties agreed ‘that
[NCF’s] claim be dealt with as a separate issue’.
Pursuant to the agreement NCF caused a document headed ‘PLAINTIFF’S
NOTICE I.T.O.
RULE 33(4)
’ to be filed. The material portion of
the notice relevant to the issue under consideration was contained in
paras 1 to 3
of the notice and recorded as follows:
‘
The plaintiff
hereby gives notice that it shall make application as follows:
1. The plaintiff and the
defendant have agreed to separate the plaintiff’s claim from
the defendant’s counterclaim in
terms of
rule 33(4).
1
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2. The representatives of
the parties are of the opinion that the plaintiff’s claim may
be determinative of the whole matter.
3. The court is requested
to decide the plaintiff’s separated claim before the
defendant’s counterclaim, which are to
be set down for trial if
necessary at a later date.’
At
the commencement of the trial the transcript reflects the following
exchange:
‘
Mr Kayser: As the
court pleases M’Lord. M’Lord, I would like to refer you
to . . . a notice of intention to make application
for a separation
in terms of
rule 33(4)
, it is by agreement by the parties M’Lord.
Court: The application is
granted.’
Pursuant
to the order of separation Ekurhuleni’s claim in reconvention
was accordingly postponed sine die.
[15]
Rule 33(4)
provides:
‘
If, in any pending
action, it appears to the court
mero motu
that there is a
question of law or fact which may conveniently be decided either
before any evidence is led or separately from any
other question, the
court may make an order directing the disposal of such question in
such manner as it may deem fit and may order
that all further
proceedings be stayed until such question has been disposed of, and
the court shall on the application of any
party make such order
unless it appears that the questions cannot conveniently be decided
separately.’
[16]
This Court
has cautioned repeatedly against the inappropriate separation of
ill-defined issues which do not serve the goal of enhancing
the
convenient and expeditious disposal of litigation.
[2]
In
Denel
[3]
the court foresaw the danger of disputes arising from imprecise
articulation of orders made under
rule 33(4).
It set out guidelines
which litigants would be well advised to heed when seeking a
separation of issues under the rule and stated:
‘
Rule 33(4) of the
Uniform Rules – which entitles a Court to try issues separately
in appropriate circumstances – is
aimed at facilitating the
convenient and expeditious disposal of litigation. It should not be
assumed that the result is always
achieved by separating the issues.
In many cases, once properly considered, the issues will be found to
be inextricably linked,
even though, at first sight, they might
appear to be discreet. And even where the issues are discreet, the
expeditious disposal
of the litigation is often best served by
ventilating all the issues at one hearing particularly when there is
more than one issue
that might be readily dispositive of the matter.
It is only after careful thought has been given to the anticipated
course of litigation
as a whole that it will be possible properly to
determine whether it is convenient to try an issue separately. But,
where the trial
Court is satisfied that it is proper to make such an
order – and, in all cases, it must be so satisfied before it
does so,
it is the duty of that court to ensure that the issues to be
tried are clearly circumscribed in its order as to avoid confusion.
The ambit of terms like the “merits” and the “
quantum
”
is often thought by all the parties to be self-evident at the outset
of the trial, but, in my experience, it is only in
the simplest of
cases that the initial
consensus
survives.
Both when making rulings in terms of Rule 33(4) and when issuing its
orders, the trial Court should ensure that the issues
are
circumscribed with clarity and precision.’
[4]
[17]
In the
present instance neither the parties nor the high court appear to
have had any regard to these salutary guidelines and the
order of
separation made no attempt to circumscribe the separated issue at
all. The dispute relating to the scope of the separated
issue is
precisely what was predicted in
Denel
.
[5]
Self-evidently the special plea in reconvention, if sound, would
equally be dispositive of the matter. Moreover, much of the evidence
necessary to establish NCF’s claim would be equally material to
the special plea. This is not a matter in which a separation
of NCF’s
claim ought to have been granted.
[18]
I turn to
consider the interpretation of the order of separation. Whether a
separation occurs at the instance of the court or an
application by
the parties it must be an issue which arises from the pleadings.
[6]
As alluded to earlier an agreement was reached at a pre-trial
conference between the parties in respect of the extent of the
separated
issue. The definition of the separated issue as contained
in the notice in terms of rule 33(4) is consonant with the agreement
recorded at the pre-trial conference and it is to this formulation
that the high court had regard when issuing its order. The separation
which the high court envisaged was that articulated in paras 1 and 3
of the notice in terms of rule 33(4) which are quoted earlier.
It
provided for NCF’s claim to be decided separately and before
any evidence was heard in respect of the claim in reconvention.
It is
accordingly to the formulation of NCF’s claim in its
particulars of claim that we must look to determine the scope
of the
separated issue.
[19]
The dissent arising from the order of separation is to be found in
NCF’s allegation in para 9 of its particulars of claim
that
Ekurhuleni’s claim had become ‘prescribed’. The use
of the term in isolation is of little assistance. In
its ordinary
English usage it means no more than that the claim had become
unenforceable by the effluxion of time. Various statutes
contain
their own provisions relating to prescription. The prescription
provisions relied upon must be gleaned from the pleadings.
[20]
The essential features of NCF’s pleaded case have been quoted
earlier. It is firmly anchored in the provisions of para
12 of the
schedule. It records the terms of para 12 of the schedule and then
alleges that the debiting of the disputed amount to
NCF’s
account was ‘ostensibly pursuant to the provisions of para 12’
of the schedule in order to rectify an error
in the billing system as
envisaged in the schedule. In para 8 it asserts that the said error
would ‘thus’ (ie by virtue
of the provisions of para 12
of the schedule) have entitled Ekurhuleni to correct its error in
respect of a maximum period of 36
months prior to the date of such
correction, which it alleged occurred on 18 September 2013. This led
it to the conclusion in para
9 that the claim in respect of the
disputed amounts had ‘thus’ (ie therefore) become
prescribed.
[21]
Significantly
there is no reference to the
Prescription Act 68 of 1969
in NCF’s
particulars of claim nor is there an allegation that the disputed
amount constituted a ‘debt’ as envisaged
in the
Prescription Act. It
is not alleged when it is contended that the
debt was due or when prescription is alleged to have begun to run
[7]
.
The prescription contended for by NCF is based solely on the
construction of para 12 of the schedule and the 36 month period
referred to therein.
[22]
At the commencement of the judgment in the high court, however, the
trial judge summarised the events giving rise to the dispute
as he
perceived them. He recorded:
‘
11. When the
plaintiff received an invoice in respect of the error billing for the
amount of R4 403 996.58 dated 18 September 2013,
this led to the
action in this court for a declaratory order as set out in the
pleadings after obtaining an order from this court
interdicting the
defendant from suspending the water services pending the
determination of this dispute.
12. The plaintiff
disputed the invoice on the grounds that the amount had prescribed in
terms of the
Prescription Act 68 of 1969
.’
This
led him to identify the issue for decision as being whether or not
the water charge for the period of three years prior to
11 June 2010
and any debt arising out of the said water charges had become
prescribed and therefore extinguished by the time the
defendant
billed for the same on 23 September 2013. He accordingly decided the
matter on an application of the provisions of the
Prescription Act.
The
full court did likewise. For reasons set out earlier herein this
constituted a misdirection. NCF did not place any reliance on the
provisions of the
Prescription Act. It
relied solely on the
interpretation of the schedule for its contention that the claim had
become prescribed before Ekurhuleni billed
for the disputed amount.
[23]
In the result the issue of prescription raised in the special plea in
reconvention was not before the court. Neither the trial
court nor
the full court have considered the defence raised in the replication
to meet the reliance on prescription. In the circumstances
it is
premature at this stage to rule on the issue of the prescription of
Ekurhuleni’s claim in reconvention. The effect
is that the
order of the high court cannot be sustained.
Construction of para 12
of the schedule of water tariffs
[24]
I turn to consider NCF’s case as pleaded and the interpretation
to be placed on para 12 of the schedule. The schedule
cannot be
considered in isolation. It forms part of a broader legal framework.
It has its foundation in s 74 of the Systems Act,
which enjoins
Ekurhuleni to adopt and implement a tariff policy on the levy of fees
for municipal services which complies with
the provisions of the said
Act. In this regard s 74(2) sets out various principles which must be
reflected in its tariff policy.
Three of these principles are
material to the present dispute. Firstly, s 74(2) provides that the
policy must reflect the principle
that users of municipal services
should be treated equitably in the application of tariffs. Secondly,
s 74(2)
(b)
requires that the amount which individual users are
to pay for services should generally be in proportion to their use of
that service;
and thirdly, s 74(2)
(d)
requires that tariffs
must reflect the cost reasonably associated with the rendering of the
service, including capital, operating,
maintenance, administration
and replacement costs, and interest charges.
[25]
Section 75 of the Systems Act proceeds to provide that:
‘
(1) A municipal
council must adopt by-laws to give effect to the implementation and
enforcement of its tariff policy.
(2) By-laws in terms of
subsection (1) may differentiate between different categories of
users, debtors, service providers, services,
service standards and
geographical areas as long as such differentiation does not amount to
unfair discrimination.’
[26]
On 27 May 2010 Ekurhuleni duly adopted a water and wastewater policy
for the period 1 July 2010 to 30 June 2011 pursuant to
s 74 of the
Systems Act. The policy commences by recording the provisions of s 74
of the Systems Act. It then records:
‘
Broad water
pricing goals have been established by National Government. These
goals have been directed at the pricing of raw water,
however, they
form an important context for the establishing of retail tariff
goals.
. . .
The broad principle of
use in the compilation of the tariffs to promote the attainment of
the tariff setting goals mentioned above
are:
- adequate services are
provided fairly to all consumers of Ekurhuleni;
- . . .
- payment to be in
proportion to the amount of water consumed. This will promote the
more efficient use of water, compared to tariffs
which have a large
fixed cost component; and
. . . .’
[27]
Pursuant to the principle enunciated in s 74(2)
(b)
, s 95
(d)
of the Systems Act enjoins Ekurhuleni, within its financial and
administrative capacity, where the consumption of services has to
be
measured, to take reasonable steps to ensure that the consumption by
individual users of services is measured through an accurate
and
verifiable metering system.
[28]
Section 75A of the Systems Act further empowers the municipality to
levy and recover fees, charges or tariffs in respect of
any function
or service of the municipality. Such fees, charges or tariffs are
levied by a resolution taken by a majority vote
in the city council.
The schedule is the product of such a resolution. It accordingly has
the force of a bylaw and is adopted to
give effect to the
implementation and enforcement of the water and wastewater policy.
[29]
Paragraph
12 of the schedule (as it read in 2010-2011) was set out in para 6 of
NCF’s particulars of claim and quoted earlier.
The paragraph
cannot, however, be considered in isolation as if it has an existence
of its own.
[8]
[30]
The law in
respect of the interpretation of documents was summarised in
Natal
Joint Municipal Pension Fund
[9]
as follows:
‘
Interpretation is
the process of attributing meaning to the words used in a document,
be it legislation, some other statutory instrument,
or contract,
having regard to the context provided by reading the particular
provision or provisions in the light of the document
as a whole and
the circumstances attendant upon its coming into existence. Whatever
the nature of the document, consideration must
be given to the
language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears;
the apparent
purpose to which it is directed; and the material known to those
responsible for its production. Where more than one
meaning is
possible, each possibility must be weighed in the light of all these
factors. The process is objective, not subjective.
A sensible meaning
is to be preferred to one that leads to insensible or unbusinesslike
results or undermines the apparent purpose
of the document.’
[31]
In the present case para 12 of the schedule must be read in the
context in which it appears, not only in the schedule, but
also in
the context of the legal framework which gave rise to its existence
and the principles set out in s 74 and the Ekurhuleni
water and
wastewater policy.
[32]
The purpose of para 12 is to enable Ekurhuleni to recover what is due
to it in respect of water consumed by users in circumstances
where a
bona fide error in the calculation of charges has occurred due to a
factor or coupling error. This accords with the principle
that
individual users should pay for services in proportion to their use
of that service. Paragraph 12 proceeds to set out a formula
by which
to calculate the rectified amount payable in respect of such usage
during the period for which the incorrect charge was
made. It gives
effect to the principle that tariffs should reflect the costs
reasonably associated with the rendering of the service.
Often,
however, where the error is only discovered long after the use
occurred accurate measurements may not be available. The
paragraph
therefore provides for a formula by which to determine a deemed
volume of water, same being the average monthly consumption
registered over three succeeding metered periods after the factor or
coupling error was rectified. This provision, in the context
in which
it appears, proceeds to limit the recovery of the rectified charge to
‘36 months backdated’. The provision
limits the recovery
of the rectified charge to the last 36 months, prior to the discovery
of the error, during which the incorrect
charge was levied. It
accordingly relates to the calculation of the rectified charge and
has no bearing on when an invoice is rendered
or when a claim for
payment of the rectified charge will become unenforceable. The
relevant period in this case falls within the
36 months preceding the
discovery of the error.
[33]
In this regard
s 16(1)
of the
Prescription Act provides
:
‘
[T]he provisions
of this chapter shall, save in so far as they are inconsistent with
the provisions of any Act of Parliament which
prescribes a specified
period within which a claim is to be made or an action is to be
instituted in respect of a debt or imposes
conditions on the
institution of an action for the recovery of a debt, apply to any
debt arising after the commencement of this
Act.’
The
schedule is not an Act of Parliament and finds no application to the
prescription of the claim. The issue of prescription must
accordingly
be decided on the application of the provisions of the
Prescription
Act when
the claim in reconvention is adjudicated. In the result
NCF’s assertion that Ekurhuleni’s claim became
unenforceable
by virtue of the provisions of para 12 of the schedule,
whether by ‘prescription’ or otherwise, cannot be
sustained.
Conclusions of the full
court
[34]
The full court found, in the appeal before it, correctly, that the
Prescription Act applies
to the charge raised by Ekurhuleni. For the
reasons set out earlier, however, that issue was not before it. It is
nevertheless
necessary to address two findings which the full court
made. The first issue relates to when the debt became ‘due’
as envisaged in the
Prescription Act. The
second relates to the
interruption of prescription.
[35]
In considering the issue of when prescription began to run the full
court accepted as a point of departure the date of the
replacement of
the assembly, 7 November 2010, and reasoned:
‘
13. Since the debt
comes about by virtue of the factor error tariff, it is to the tariff
that we must look to ascertain what facts
the municipality had to
prove in order to pursue its claim.
14. The factor error
tariff sets out the basis for the calculation of the rectified
charge. That calculation provides for a price
to be charged and a
mechanism to determine the quantity for which the charge may be made.
Under the factor error tariff, the price
is the levy charged by Rand
Water to the municipality (including the WRC levy) plus 15%. The
quantity is determined by ascertaining
the average monthly metered
consumption for the three month period after the error is rectified,
and then applying the average
for the period of the error, up to a
maximum backdated period of 36 months. The price multiplied by the
quantity provides the permissible
rectified charge.
15. When, then, did the
municipality acquire a complete cause of action? The joint statement
of common cause facts stipulates that
on or about 6 or 7 November
2010, a new water meter assembly was installed on the property of
NCF, following which the consumption
of water at the property was
correctly recorded on the municipality’s accounting system. As
from 6 or 7 November 2010, the
municipality, in accordance with the
factor error tariff, measured the recorded average monthly
consumption on NCF’s property
in order to ascertain the
quantity of water for which a rectified charge could be made. That
could not have been done before the
end of February 2011, it being
the earliest date by which an average of three full months of
rectified consumption could be measured
and reflected in the accounts
of the municipality.
16. . . .
17. Since the factor
error tariff did not permit the municipality to calculate the
rectified charge due by NCF before the end of
February 2011, it
follows that the charge raised by the municipality against NCF had
not prescribed by 25 September 2013 because
the three year period had
not run its course.’
[36]
I have considered the separated issue earlier. NCF’s claim for
a declarator was to resist a charge raised by Ekurhuleni
on 18
September 2010. Ekurhuleni billed NCF for a rectified charge based on
its actual water usage over the relevant period. It
did not require
the installation of any new assembly or meter to determine the volume
of the water used. To the extent that the
full court considered the
rectified charge to have been based on the average usage of the
subsequent three months it erred.
[37]
The provisions of para 12 stipulate that the rectified charges may
only be recovered upon the approval of the Executive Director:
Infrastructures Services. It is not in dispute that the Department of
Infrastructure Services requested Ackerman to rectify the
error on 6
September 2011. The letter of request set out the provisions of para
12 (in respect of water usage) and 11.1 (in respect
of wastewater
usage – which read in identical terms to para 12) and then
proceeded to request Ackerman to:
1. Reverse the amounts
previously charged for water and wastewater based on the readings of
meter no . . . for a period of three
years prior to the date the
factor error is rectified on the financial system.
2. Adjust the various
consumption readings with a factor 10, calculate and levy the correct
charges for water, wastewater in terms
of para 12 and 11.1 as quoted
above plus VAT for the period as stated in 1.’
[38]
The instruction to finance was therefore to adjust the various
consumption readings actually recorded with a factor 10 in order
to
calculate the rectified charges for water. Furthermore, Ackerman
testified in respect of the manner of calculation of the rectified
charge which was billed as follows: ‘And how was the corrected,
the incorrect billing that took place, how was that corrected?
. . . With the journal
that was, or the adjustment that was made, we took the readings of
the period and we multiply that by 10
to give us the correct levy.’
And
later:
‘
In determining and
levying the amounts . . . on behalf of the defendant I used the best
known and the only method or the most practical
and available method
in exercising my powers and functions in my aforesaid capacity on
behalf of the defendant.
And what was that method
that you used? . . . The method that we used is, we took the
incorrect period, levies and we just multiply
that by 10 in order to
get the correct consumption per month and, did the adjustment on,
based on that.’
[39]
What
emerges from this, on my understanding, is that Ekurhuleni had
consistently used actual water meter readings where available,
rather
than the average of the consumption registered over the three
succeeding metered periods, in order to calculate a rectified
charge.
That was in fact the method adopted in calculating the disputed
amount. It accords with the principles which the Systems
Act
prescribe, with the broad principles established by National
Government for the fixing of water prices and with the water and
wastewater policy adopted by Ekurhuleni. It is the Systems Act and
the water and wastewater policy which empowers Ekurhuleni to
adopt
the schedule which, in turn, is required to give effect to the
policy.
[10]
On the
consideration of all these factors the correct interpretation to be
placed on para 12, as it read at the time, is that the
price formula
should be applied to the actual water usage measured during the
period that incorrect charges were levied where such
figures are
available. Where accurate measurements of the actual usage for the
period over which the miscalculation occurred are
not available the
average of the next three metered periods may be adopted to reflect
the deemed usage. This interpretation would
accord with the
authorising provisions in terms of which the schedule came into
existence and with the actual conduct of Ekurhuleni.
[40]
It is significant that the schedule of water tariffs adopted by
Ekurhuleni in respect of the subsequent year (July 2011 to
2012) and
every year thereafter, recognised this. The subsequent schedules of
water tariffs adopted annually read:
‘
The charges
applicable shall be the levy Rand Water charges the municipality (at
that point in time, including the WRC levy), plus
15% levy, for the
duration that the incorrect charges were rendered, up to a maximum of
36 months backdated. Should accurate readings
not be available the
charges would be based on the average monthly consumption registered
over three succeeding metered periods
after the factor error or
incorrect coupling was rectified.’
[41]
The inquiry
as to when a debt is ‘due’ as envisaged in
s 12(1)
of the
Prescription Act has
been frequently considered. The approach was
restated by this Court in
Farocean
Marine (Pty) Ltd
[11]
as follows:
‘
Prescription
commences to run “as soon as the debt is due”
(s 12(1)).
Although the “date on which a debt arises usually coincides
with the date on which it becomes due” this need not always
be
the case. The question is thus when the debt the respondent seeks to
recover arose and when it became due. A money debt is “due”
when there is a “liquidated monetary obligation presently
claimable by the creditor for which an action could presently be
brought against the debtor. Stated differently, the debt must be one
in respect of which the debtor is under an obligation to pay
immediately”.’
[12]
(Footnotes omitted.)
In
the application of these principles and in the light of the
interpretation which I have placed on para 12 the debt in respect
of
a rectified charge, in this instance the disputed amount, arises and
is due, at least in instances where accurate water measurements
for
the relevant period are available, upon discovery of the factor
error. At that stage all the facts from which the rectified
charge
arose were known, the amount of the claim was liquidated and the debt
was immediately payable. Ekurhuleni would immediately
have been
entitled to demand payment based on the actual water measurements in
respect of water usage that had already occurred.
On this basis
prescription began to run on 11 June 2010. In the circumstances the
conclusion of the full court on this issue cannot
be sustained.
[42]
The second issue arising from the judgment of the full court which
requires consideration relates to the interruption of prescription.
In this regard the full court held:
‘
The parties
accepted that for purposes of this appeal prescription was
interrupted on 25 September 2013 when NCF received a consolidated
invoice from the municipality reflecting the rectified charge for the
period 3 September 2007 to 1 February 2010. It was also conceded
before us, correctly, that if prescription began to run from February
2011 or thereafter, the rectified charge by the municipality
against
NCF was a debt that had not been extinguished before it was claimed.’
[43]
These comments by the full court should be considered in the context
of the particular facts of the present case. It was NCF’s
claim
which served before the full court. I have recorded earlier that it
was NCF’s case that Ekurhuleni’s claim had
prescribed
prior to the rendering of an invoice. It is in this context that
these comments should be viewed.
[44]
To the
extent that it may have been the intention to declare that the
rendering of a consolidated invoice interrupted prescription
the
finding cannot be sustained. Prescription is interrupted by an
acknowledgement of liability or by the service on the debtor
of any
process whereby the creditor claims payment of the debt.
[13]
Rendering of an invoice has no effect on the running of prescription.
As the interruption of prescription is a matter of law prescribed
by
the
Prescription Act an
incorrect concession by counsel cannot bind
the parties. In the circumstances, irrespective of the attitude of
the parties before
the full court, the rendering of an invoice on 18
September 2013 did not affect the running of prescription. Before us
counsel
for Ekurhuleni did not contend otherwise.
Costs
[45]
The dispute between the parties has had an unfortunate history. The
separation of issues agreed upon between the parties was
clearly
inappropriate. The evidence which has been tendered on behalf of
Ekurhuleni would in all likelihood have to be duplicated
in the event
that Ekurhuleni should resolve to proceed with the claim in
reconvention notwithstanding the findings set out earlier
herein. The
separation has accordingly not advanced the resolution of the dispute
between the parties at all. Considerable costs
have been incurred in
consequence thereof and, irrespective of the result, the parties are
equally culpable in respect thereof.
In the circumstances it would be
appropriate that each party bare its own costs in respect of the
trial before the high court and
in respect of the appeals before the
full court and in this Court.
[46]
In the result:
1. The appeal succeeds
and the order made by the full court is set aside.
2. The order of the trial
court in the Gauteng Division of the High Court is set aside.
3. NCF’s claim is
dismissed.
4. Each party is to pay
its own costs in respect of the proceedings before the high court,
the full court and in this Court.
___________________
J
W EKSTEEN
ACTING
JUDGE OF APPEAL
Appearances
For
appellant: A Bester SC (with him J Kayser)
Instructed
by: David C Feldman Attorneys, Johannesburg
Lovius
Block, Bloemfontein
For
respondent: J C Uys SC
Instructed
by: Klopper Jonker Inc, Alberton
McIntyre
Van Der Post, Bloemfontein
[1]
Molusi and Others v Voges NO and Others
[2016] ZACC 6
;
2016 (3) SA
370
(CC) para 28; Fischer and Another v Ramahlele and Others
[2014]
ZASCA 88
;
2014 (4) SA 614
(SCA) para 13.
[2]
Private Employee Solutions (Pty) Ltd v Vital Distribution Solutions
(Pty) Ltd
2005 (5) SA 276
(SCA) para 26 and 27; Consolidated News
Agencies (Pty) Ltd (In Liquidation) v Mobile Telephone Networks
(Pty) Ltd and Another
[2009] ZASCA 130
;
2010 (3) SA 382
(SCA) para
89-90; Absa Bank Ltd v Bernert
2011 (3) SA 74
(SCA) para 21; and
Adlem and Another v Arlow
2013 (3) SA 1
(SCA) para 5.
[3]
Denel (Edms) Bpk v Vorster 2004 (4) SA 481 (SCA).
[4]
Id at 484I-485E.
[5]
See also Absa Bank Ltd v Bernert 2011 (3) SA 74 (SCA).
[6]
First Rand Bank Ltd v Clear Creek Trading 12 (Pty) Ltd and Another
[2015] ZASCA 6; 2018 (5) SA 300 (SCA).
[7]
Cf Gericke v Sack
1978 (1) SA 821
(A); Lancelot Stellenbosch
Mountain Retreat (Pty) Ltd v Gore NO and Others
[2015] ZASCA 37
; and
Amler’s Precedents of Pleadings 9 ed (2019) at 306.
[8]
See Swart en ‘n Ander v Cape Fabrix (Pty) Ltd
1979 (1) SA 195
(A) at 202C.
[9]
Natal Joint Municipal Pension Fund v Endumeni Municipality
2012 (4)
SA 593
(SCA) at 603F-604B.
[10]
Section 75 of the Systems Act.
[11]
Farocean Marine (Pty) Ltd v Minister of Trade and Industry
[2006]
ZASCA 137
; 2007 (2) SA (SCA) 334para 12.
[12]
See also Singh v Commissioner, South African Revenue Service
2003
(4) SA 520
(SCA) at 533C-E.
[13]
Section 14
and
15
of the
Prescription Act.