The City of Cape Town owned the Wemmershoek Dam and connected pipeline, which supplied drinking water to the Cape metropole. In 1952, the City entered into an agreement with riparian farmers (whose land bordered the Wemmershoek River) to compensate them for the loss of their riparian water rights when the dam was built. The agreement allocated specific quantities of water to each farm from the pipeline: a free allocation and further allocations at discounted rates. In the case of farm Môrelig, the allocation was a maximum of 151,536 kilolitres per annum (90,920 kilolitres free, and 60,616 kilolitres at discounted rates). This agreement was registered as a servitude of aqueduct against the property title deeds in 1964. The Bourbon-Leftley family trust acquired Môrelig in 1992 and converted it from vineyards to fruit farming, placing 40 hectares under irrigation. In 1993, the trust installed a new 150mm metered outlet. Between 1999-2001, the trust consumed water far exceeding its maximum allocation (309,840 kilolitres in 1999, 348,629 kilolitres in 2000, and 265,852 kilolitres in 2001). The excess consumption was not detected earlier because the City's meter readers consistently misread the meter by failing to multiply readings by a factor of 10 as instructed on the meter face. During 1994-1998, the first respondent regularly contacted the City's accounts department and received incorrect low readings showing consumption well below the free allocation. In 2001, the City discovered the error and demanded payment of approximately R1.7 million for excess water consumed at the 'miscellaneous tariff plus 25%'. The trust immediately obtained alternative water sources and ceased exceeding its allocation.
Appeal dismissed with costs. The City of Cape Town's claim for approximately R1.7 million for excess water consumption was rejected on both contractual and delictual grounds.
A tacit term can only be imported into a contract if the court is satisfied that the parties would necessarily have agreed upon such term if it had been suggested to them at the time of contracting. It is insufficient that the term would be reasonable, convenient, or that it might have been agreed to - the test is one of necessity based on the inference that both parties must or would necessarily have agreed. The courts cannot make contracts for parties or supplement agreements merely because it appears reasonable to do so. In determining whether a tacit term exists, courts must consider primarily the express terms of the contract and surrounding circumstances. A proposed tacit term that contradicts express contractual acknowledgements cannot be inferred. For delictual claims based on misappropriation of resources, the plaintiff must prove not only unlawful conduct and fault, but also actual damages sustained as a result of the misappropriation.
The Court noted, without finally deciding, that an action for damages resulting from unlawful and intentional or negligent misappropriation of water may be available in South African law (referring to Hefer v Van Greuning 1979 (4) SA 952 (A)). The Court observed that there was considerable merit in the argument that an experienced farmer who knew that 40 hectares of fruit trees required approximately 160,000 kilolitres annually should have been suspicious of meter readings showing only 33,000-52,000 kilolitres per annum, suggesting potential negligence even if not intentional misappropriation. The Court suggested that cutting off water supply to enforce allocation limits might constitute spoliation (referring to Bon Quelle v Munisipaliteit van Otavi and Telkom SA Ltd v Xsinet), though other remedies such as cancellation, damages, or prohibitory interdicts would be available to enforce allocation limits. The Court indicated that if parties had been asked what would happen if allocations were exceeded, the most likely response would have been that the owner was not entitled to exceed the allocation and the City would have whatever legal remedies were available, perhaps with a rider that additional water could be provided subject to availability at a rate to be negotiated.
This case is significant in South African law for its comprehensive treatment of tacit terms in contracts, particularly in the context of servitudes. It reinforces the strict test for inferring tacit terms, requiring that parties would necessarily (not just reasonably or conveniently) have agreed to the proposed term. The judgment clarifies that courts cannot supplement contracts merely because it appears reasonable to do so, and that subsequent conduct of parties, while relevant, cannot on its own establish a tacit term without understanding the context of that conduct. The case also provides guidance on the elements required for delictual liability based on misappropriation of water resources, particularly the need to prove actual damages and not merely unlawful conduct. It demonstrates the courts' reluctance to impose contractual obligations beyond express terms, especially where such obligations would contradict the express acknowledgements in the agreement.