The SCA ruled that a court cannot interdict a municipality from enforcing its credit control by-laws. The Court thus, protected the financial autonomy of municipalities in relation to the collection of revenue. 

Background

In this case, the issue before the Court related to a spacious commercial property that has been properly registered as a sectional title scheme with eight sections. Vresthena (the complainant) owned four of these sections. The management of the scheme was under the Body Corporate's trust, and the City signed a contract with the Body Corporate to supply electricity to the entire scheme. However, as of 2022, the Body Corporate has continuously failed to make payments resulting in the City implementing credit control measures, which included the disconnection of electricity in an attempt to collect the outstanding revenue. These measures were resisted by Vresthena in the High Court. The High Court granted an interim interdict in favour of Vresthena, ordering the municipality to restore the electricity and water supplies. The City, aggrieved by this decision, approached the SCA where it appealed the interim order. 

Judgment

The SCA granted the appeal against the interim order in favour of the City. It reasoned that while the order calls for the restoration of electricity, it does so "without the provision for the payment of arrears". This according to the Court, "creates an anomaly in that the City is forced to provide electricity to the property where payment is not being made" [para 13].

Moreover, the Court noted that the "effect of the order is that it compels the City to act contrary to the prevailing law and constitutional mandate: [the City] must continue to supply electricity services to users who are in arrears and have a history of non-payment for the foreseeable future, and at the same time the City is denied the power to terminate services without approaching a court".

Significantly, the court order did not impose a direct obligation on owners to pay for their consumption of electricity. The result is that the City is obliged to reconnect services to all owners without a concomitant obligation on all of them to pay for the service they will use. This court order, as correctly held by the SCA, is bound to lead to irreparable harm to the City [para 14].

Indeed, while there is a constitutional and statutory duty on municipalities to provide electricity (reference made to Mkontwana v Nelson Mandela Municipality), the Court emphasised that the non-payment of services has a negative impact on the provision of such services. Thus, to ensure the financial sustainability of municipalities, the Court emphasised that there is a reciprocal obligation on municipal customers to pay for services and a constitutional duty on municipalities to implement debt collection measures if debts are not paid, [reference made to Joseph and Others v City of Johannesburg and Others].

In this matter, the Court found that no attempt had been made to pay the debt due to the City. The Court accepted that the responsibility to pay the outstanding debts laid squarely with the Body Corporate, as it had entered into the contract with the City. It pointed out that no reasons were given as to why the Body Corporate had failed to make payment.

The Court in conclusion accepted that while the provision of electricity is a basic municipal service, the right to access electricity is not absolute. Indeed, the provision of electricity is bound and subject to the credit control measures of municipalities considering that the non-payment of electricity will negatively impact the supply thereof. The Court thus ruled that the property owners in this matter had no right to continue to receive electricity without relevant payment. The SCA ruled that the High Court wrongly interfered with the constitutional obligation of the City to ensure the collection of revenue for services that it provides and, accordingly set aside the High Court order. 

Comment

Municipal customers challenging in court the disconnection of essential services (water or electricity) by municipalities as a means of debt collection is not a new occurrence (previously explored in the Bulletin) and certainly will not be the last. The Vresthena judgment is crucial in emphasising the reciprocal obligations of consumers to pay for services acquired. Failure to pay enjoins a municipality to enforce its credit by-laws. The judgment further provides that where a Body Corporate fails to pay a municipality for services, the appropriate remedy is for owners to either compel the Body Corporate to perform its mandate (pay for services) or request for new trustees to be appointed for the Body Corporate, as allowed in the Sectional Titles Act. 

Finally, the decision emphasises that courts must be conscious of the impact of their orders on the operations and sustainability of municipalities by not interfering with their constitutional and legislative duty to collect income for the services they provide.

By Curtly Stevens, Doctoral researcher