Compensation for City Of Johannesburg’s Negligence/Failures

Written and contributed by Ramon Pereira, Candidate Attorney and Chantelle Gladwin, Partner

Schindlers Attorneys Tel:  (011) 448 9663 ● www.schindlers.co.za ●

Introduction 

A question commonly asked by consumers is whether the COJ will be compensating them for their difficulty in dealing with the COJ in investigating, and resolving their queries.  This is because it can take months (or even years), and cost thousands of rands in expert’s reports/assistance and/or legal fees, and cause significant disruption to the lives of the consumers (not to mention extreme psychological fatigue and stress) when a consumer is incorrectly being compelled to make payment of large amounts that should not be reflected as owing on the account.

This article explains the different types of ‘damages’ that a consumer could suffer, and which can be claimed back.

Damages

These are amounts that the consumer ends up paying as a result of the COJ’s negligence, or failure to comply with the law.  These include legal costs and the costs of using experts to resolve a dispute.

Legal costs

The easiest part of this question to answer, deals with legal costs.  If a consumer takes the matter to court and is successful, ordinarily the court will award the consumer ‘costs’, which means that the COJ must compensate the consumer for a portion of the consumer’s legal costs in bringing the matter to court.  However, the decision as to whether to award the consumer costs is always subject to the court’s discretion, and the court can take into account factors such as the behaviour of the consumer in the proceedings, when awarding costs.  In addition, the usual costs order is for costs on the ‘party and party’ tariff, which means that the consumer can recover an amount set by a court tariff for necessary attendances only, and not all amounts charged to the consumer by his/her attorney.  Occasionally costs are awarded on the ‘attorney and client’ scale, which means that the consumer can recover more from the COJ than on the party and party tariff, but even this may not result in the consumer recovering 100% of what he spends to prosecute the matter in court.

Expert’s reports and technical assistance

Where these reports are necessary in order to determine the amount owing or owed to the consumer, the costs can be included as part of the legal costs in the court proceedings.  There is no guarantee, however, that the taxing master (the person who decides in each case how much legal costs are owed by the successful party to the unsuccessful party) will allow 100%, or even any portion of, those costs.  Each case will be decided on its own merits.

“Big bill” damages

The most frequently asked question relating to damages, is whether the consumer is obliged to make payment of a massive bill, which is received after many years/months have passed, which would not have accrued over time if the COJ had billed the consumer properly, but  would rather have been split up on a month to month basis.  To distinguish these from other types of damages, let’s call them ‘big bill damages’.

COJ will argue that 100% of the big bill is payable because even though it was sent out late, the consumer used the services provided and cannot escape liability for payment merely because the bill was late.  Other articles have been written on prescription and how this can be used to reduce big bills presented after services charges have prescribed, but assuming that none of the charges that make up the big bill have prescribed, what can the consumer argue when wacked with a R 100,000 bill for 3 years of electricity?

The most common argument turns on the fact that the COJ failed to bill the consumer at all, or correctly, for an extended period of time.  If the COJ did not deliver (or make available) statements (or correct statements) for many years, and the consumer had no way of knowing what his/her actual consumption during that period was and accordingly made payment of an estimated amount for that unknown consumption, is it fair to require the consumer to now, much later, have to pay for the services that it used without knowing it was using them? There are several elements to this argument.

Turpitude

The first is that the COJ should not be entitled to benefit from its own mistake.  This is known in our common law of delict as the ex turpi causa rule, which states that no person should benefit through their own error.  The consumer could argue that the COJ erred in not sending (correct) bills and that it cannot later, to the prejudice of the consumer, claim the whole amount owed.  The COJ would inevitably argue, however, that it did not make any mistake, or that it is not benefiting because of the mistake, as it would have been entitled to benefit even if the mistake had not been made.  Alternatively it could show that it was denied or could not otherwise gain access to the meters, after having made reasonable attempts, or that some or other piece of information was not available to it, or that it was entitled to rely on certain information that later turned out to be incorrect, in order to justify its error.

Then there’s the argument that allowing consumers to escape liability because of the COJ’s error could result in a public entity that is responsible for the provision of municipal services to over R 1,2m consumers, having to write off millions, because it made a mistake when calculating or claiming (or failing to claim) the amount in question.

Contributory Negligence

The sentiment that a party that contributes to the incurrence of damages, should not be entitled to recover 100% of those damages, is acknowledged by our courts in the exercise of the principles of contributory negligence. The theory goes that the amount of claim should be reduced by the proportion in which the claimant was at fault and contributed to causing the damages.  To give an example of how this might work in COJ cases, the court would assess how much of the mistake was caused by the COJ (say 30% in any particular case because it failed to read the meters for 2 years) and then reduce the amount claimed by the COJ, by that 30%.  As mentioned above, it can be argued by the COJ in response that the COJ’s claim for a big bill payment, is not a claim for damages, and so this principle should not apply.

Another expected response by the COJ would be that it is under-resourced and through some system or process failure this one account (out of over a million) slipped through the cracks, and therefore that it was unfortunate, but not negligent, in handling the matter.  Coupled with a plea for lenience because it is a public entity, this could potentially defeat any damages claim lodged by a consumer.

 ‘What if’ damages reduction argument

Another common response by consumers to a large bill, is that had they received their bills regularly showing accurate monthly charges, they would have realised that they were incurring much higher charges, and would have taken measures to reduce their consumption.  This is most typically brought up in situations where the COJ under-estimates for extended periods of time and the consumer does not realise that the charges are based on estimated, as opposed to actual, readings; or where a water leak/theft of electricity is occurring without the consumer’s knowledge.

To my mind, this is the most interesting of the damages arguments, because the scope for reduction of the claim is staggering.  Consider these examples of cases currently being handled by writer:

1. Client is presented with a R 360,000 bill, backdated for 10 years, because the service provider mistakenly forgot to include the meter factor in its consumption calculations.  During the ten year period the consumer received bills based on actual readings each and every month, and duly paid them.  His bills were similar to those of his neighbours (because their bills were also wrong) and so he had no reason to suspect that anything was amiss in terms of the billing.  Client’s actual monthly consumption is about R 9,000 worth, but he was being charged about R 1,000 worth.  As there are only two elderly people in his house, he understood the R 1,000 per month charge to be reasonable.  He alleges that had he known he was incurring R 9,000 per month in charges, he would have installed more energy efficient heat pumps, lights, a gas stove, a geyser timer and blanket, and other technologies aimed at reducing consumption.  He also would have applied to reduce his supply from 100KVA to 50KVA, which would have caused his bill to halve.  This client is an advocate and seasoned property developer with 20 years experience.
2. Client is a commercial property owner who rents out a building.  He receives accounts and sends them to the tenants for payment.  The tenants pay him and he pays the municipality, for 4 years.  He then receives a bill for R 400,000 for arrears, because the COJ under-billed him on estimates, and he did not realize this.  He cannot recover from his tenants because they have left and he cannot trace them, and one he does manage to trace, defends the matter in court on the basis that the client’s claim against him has prescribed.  Client is an educated businessman with more than 20 years experience in commercial rental property.
3. Client is a residential property owner who buys a building in CBD, and after a year, gets his first account for over R 3m.  This account shows minimum demand (KVA) charges of R 30,000 per month, which are charged on a particular tariff even if no electricity is consumed.  Client logs countless queries, sets up meetings with several officials at COJ and City Power (including the mayor) and everyone tells him that his bill is correct, because it is based on actual readings.  No one bothers to check or explain that he is being billed on a certain tariff that includes minimum demand charges, when he could (simply and easily) apply to be put onto a different tariff where he doesn’t pay those minimum demand charges.  Client’s argument is that if he had received his bills earlier, and if anyone at COJ or City Power had bothered to apply their minds to his query, they would have realized that the problem was the tariff and switched him to the lower tariff.  Client is one of the biggest property developers in CBD and a well known architect.
4. Client is a residential property owner in Byranston, who doesn’t receive his bills for 4 months.  As this is nothing strange, he continues to pay the average of the prior three months bills.  When his bills eventually start to arrive again, there is R 60,000 in arrears for water.  Client logs a query for the arrears to be investigated because his consumption patterns have not changed and there is no reason, to his mind, for the massive bills.  The next bill arrives and the arrears are not reversed, and the client has heard nothing from the COJ, so he pays a water leak detector, who finds a massive underground leak that is running into the field next door, and that client would never otherwise have even noticed.  By this time client’s bill is R 80,000 and he immediately repairs the leak.  Client argues that had he received bills every month and had the City responded to his query to say that there was no problem on the billing side, he would have engaged a leak detector and discovered the leak earlier, and not have incurred charges of R 80,000.   Client is a partner at a law firm in Joburg, and a conveyancer, with extensive experience in property law and management.

Reasonable consumer

These examples highlight that even very experienced property developers, attorneys and architects do not understand how COJ bills work.  It is submitted that the ordinary lay person cannot possibly be expected to understand the intracacies of tariffs, meter readings, consumption and other charges.  Seen in this context, it is submitted that the consumer has no duty to engage experts to detect problems with his account, where he has no reason to suspect that there is a problem.

Another aspect to consider of the reasonable consumer, is to what lengths he is expected to go, in trying to resolve the dispute with the COJ.  Is logging one query enough, or should he log 50?  Is it enough to log queries and follow up, or is a visit to the walk in centre essential?  Should the consumer exhaust all other remedies, like going to the Consumer Commissioner, or lodging an appeal with the Municipal Manager, before coming to court?  If the consumer just gives up after months of attempting to resolve the query, does this constitute acceptance of the COJ’s version?

Lastly, when will a reasonable consumer be entitled to damages (or a reduction in the amount claimed by the COJ) as a result of the inconvenience and mental fatigue caused by the process?  General damages can be claimed in terms of common law, which include amounts for pain and suffering and other intangible harms, but which are notoriously difficult to quantify precisely because they are intangible and so subjective.

Reasonable COJ official

This must be compared to the ‘reasonable COJ official’ who investigates queries logged.  Firstly, they must be investigated in a reasonable time, otherwise the COJ should be held responsible for damages incurred by the consumer as a result of the COJ’s failure or unreasonable delay in investigating the query.  Secondly, the level of investigation must be appropriate to the query logged and the investigator must be sufficiently experienced or qualified to undertake the query.  What is required in each case will differ on a case by case basis, but ultimately each query must be treated with care and diligence, because only the COJ is in a position to investigate and resolve these types of queries (without having to engage experts). Thirdly, where the COJ fails to investigate or resolve a query, as it is required to do so by law, and the consumer has suffered damage as a result, the courts should not condone this failure merely because the COJ pleads poverty.  To do so would empower the COJ to continue acting with a disregard for the rights of the consumers, and will only delay the ultimate resolution of the billing crisis.

Negligence assumed in NERSA regulations

The Electricity Regulation Act creates a rebuttable presumption that where an electricity provider fails to act, its conduct is negligent.  This is a useful legal weapon in the hands of consumers wanting to claim compensation for their damages.

Balancing act

Ultimately the courts are thus required to strike a balancing act between the rights of consumers, and the rights of the COJ.  Both have obligations to each other (for example, consumers have obligations to check that their accounts are correct and log queries if they are not, whereas COJ has obligations to investigate and resolve queries).  But there is no precedent telling us how far the COJ or the consumer is expected to go when a dispute arises, or how to handle the situation where one or both have been negligent in complying with their obligations, or even what to do when a consumer is unable to make payment of massive bill precisely because he is unable to recover the amounts claimed from the persons who incurred those charges, as a result of the delay in the COJ’s issuing of the big bill.

At some level fairness to the consumer, and accountability on the part of the COJ, must be brought into it by the courts.  Whilst one can appreciate that the COJ needs to collect its debts in order to continue providing services, consumers should not be unduly prejudiced by the COJ’s failure to comply with its obligations within a reasonable time.  It is submitted that prescription should not be the only weapon a consumer has to a big bill – the principles of turpitude and contributory negligence, as well as general damages for pain and suffering, should be brought into account by the court, when deciding whether a claim under the circumstances discussed above is valid, or if it is found to be valid, to what extent that claim should be reduced in fairness to the consumer.

City’s own policies

The City’s own Credit Control and Debt Collection Policy recognises that the COJ is empowered to write off debt that it is unlikely to recover, because (among other reasons) there was negligence or fault on the part of the COJ or any of its officials.

Conclusion

To date there are no answers to the above in our law.   We hope to make some, and be the catalyst for change in COJ’s attitude towards its obligations to its consumers.