Nature's Choice Farms (Pty) Ltd v Ekurhuleni Metropolitan Municipality

Nature's Choice Farms (NCF), a producer of frozen vegetable products, used substantial quantities of water supplied by Ekurhuleni Metropolitan Municipality. On 11 June 2010, during an inspection, Ekurhuleni discovered that NCF's water meter was recorded incorrectly in its financial system as a factor 1 meter when it was actually a factor 10 meter. This error meant NCF had been billed for only 10% of its actual water usage. On 18 September 2013, Ekurhuleni debited NCF's account with R3,863,147.90 for the rectified charges covering water usage from 3 September 2007 to 7 July 2010. NCF disputed this debt, arguing it had prescribed under paragraph 12 of Ekurhuleni's schedule of water tariffs, which limited recovery of rectified charges to 36 months. NCF instituted action proceedings seeking a declarator that it was not indebted to Ekurhuleni. Ekurhuleni filed a counterclaim for payment. The parties agreed to separate NCF's claim from the counterclaim under Rule 33(4) of the Uniform Rules.

• Whether the separation of issues under Rule 33(4) of the Uniform Rules was appropriate and what was the scope of the separated issue
• The correct interpretation of paragraph 12 of Ekurhuleni's schedule of water tariffs regarding the 36-month limitation period
• Whether NCF's claim for declaratory relief based on prescription was properly founded on the schedule of tariffs or the Prescription Act 68 of 1969
• When did the debt for rectified water charges become 'due' for purposes of prescription under the Prescription Act
• Whether the rendering of an invoice interrupts prescription

The appeal succeeded. The order of the full court was set aside. The order of the trial court was set aside. NCF's claim was dismissed. Each party was ordered to pay its own costs in respect of the proceedings before the high court, the full court and the Supreme Court of Appeal.

The ratio decidendi includes: (1) When issues are separated under Rule 33(4), they must be clearly circumscribed to avoid confusion, and the scope is determined by reference to the pleadings and any agreement between the parties; (2) Paragraph 12 of the municipal water tariff schedule, interpreted in the context of sections 74, 75, 75A and 95 of the Local Government Municipal Systems Act 32 of 2000, relates only to the calculation of rectified charges for water usage where factor or coupling errors have occurred, and the 36-month limitation refers to the period for which charges may be recovered, not to when a claim becomes prescribed or unenforceable; (3) The schedule is not an Act of Parliament within the meaning of section 16(1) of the Prescription Act 68 of 1969 and therefore does not displace the application of the Prescription Act to debts arising from municipal service charges; (4) Where actual water meter readings are available for the period of incorrect billing, paragraph 12 should be interpreted to permit calculation based on actual usage rather than deemed average usage; (5) For prescription purposes, a debt for rectified water charges becomes 'due' when the error is discovered, where accurate measurements are available, as at that point all facts are known, the amount is liquidated, and payment is immediately demandable; (6) Rendering an invoice does not interrupt prescription under the Prescription Act - only acknowledgement of liability under section 14 or service of legal process under section 15 can interrupt prescription.

The Court made several obiter observations: (1) Courts have repeatedly cautioned against inappropriate separation of ill-defined issues under Rule 33(4) that do not serve the goal of enhancing convenient and expeditious disposal of litigation; (2) In many cases, issues that appear discrete at first sight are actually inextricably linked when properly considered; (3) Even where issues are discrete, expeditious disposal is often best served by ventilating all issues at one hearing, particularly where there is more than one potentially dispositive issue; (4) An incorrect concession by counsel regarding a matter of law prescribed by statute (such as what interrupts prescription) cannot bind the parties; (5) The present case was not appropriate for separation of issues as the special plea in reconvention would equally be dispositive of the matter and much of the evidence for NCF's claim would be equally material to the special plea; (6) The separation in this case did not advance the resolution of the dispute at all and considerable costs were incurred in consequence, with the parties being equally culpable. The Court also observed that paragraph 12 has a purpose of enabling municipalities to recover what is due for water consumed where bona fide calculation errors occur, consistent with the principle that users should pay in proportion to their use of services.

This case provides important guidance on: (1) The proper application of Rule 33(4) of the Uniform Rules regarding separation of issues, emphasizing that issues must be clearly circumscribed to avoid confusion and that separation should only occur when it truly advances the expeditious disposal of litigation; (2) The interpretation of municipal bylaws and tariff schedules in the context of enabling legislation, particularly the Local Government Municipal Systems Act 32 of 2000; (3) The principle that municipal tariffs must be interpreted consistently with the statutory framework requiring equitable treatment of users and charges proportional to actual usage; (4) Clarification that for prescription purposes, a debt becomes 'due' when it is liquidated and immediately payable, which in cases of meter errors occurs when the error is discovered (where actual readings are available); (5) The principle that rendering an invoice does not interrupt prescription - only acknowledgement of liability or service of legal process achieves interruption under the Prescription Act. The case also illustrates the dangers of imprecise pleadings regarding prescription and the importance of clearly identifying the legal basis for claims.