Knysna Municipality’s potential liability for June 2017 fires.

Knysna Municipality’s potential liability for June 2017 fires.

“When the bill for the fires comes due…”

The figure given most often for the total damage done by the Knysna fires last June is about R4.5 billion. That’s total damage, not damages. Damages are what a court awards a winning plaintiff in a civil claim for the damage caused them by someone’s act, or in some cases, failure to act. Until a recent Noseweek article , the question of claims for damages against Knysna municipality in connection with the June fires has attracted little attention in the press.

The Noseweek article quotes Jean du Plessis, a Pretoria attorney representing a number of Elandskraal residents who lost their homes in the fire that swept through the area early in the morning of 7 June. He says he is suing Knysna municipality for R21 million in damages for his clients. A small amount, easily covered by the reported R100 million provided by the municipality’s public liability insurance policy.

But this planned lawsuit inevitably raises a more troubling question: what is the total amount of damages being claimed against Knysna municipality in connection with the June fires? Is it more than R100 million, if that is indeed the limit of the municipality’s public liability cover? And if it is, and if the plaintiffs are awarded the amount of their claims (a big if!), what does this mean for Knysna, and Knysna’s ratepayers?

No one seems to know.

And yet, Knysna municipality should have a fairly good idea of the potential liability it is facing at this point.

Attorney du Plessis says he has served ILPOSA Section 3 notices on Knysna and Eden District municipalities, advising them that he intends to institute a R21 million damages claim against them. ILPOSA Section 3(2) requires a creditor to notify an organ of state (like Knysna municipality) of intended legal proceedings within 6 months of the date a debt becomes due. Section 3(3) provides that “a debt may not be regarded as being due until the creditor has knowledge (…) of the facts giving rise to the debt”.

The earliest the Elandskraal plaintiffs could have knowledge of the facts giving rise to their claim was 7 June 2017, the day their homes and other property burned to the ground. To be safe then, an attorney who planned to claim damages from Knysna municipality in connection with the June fires would have to serve a section 3 notice by 6 December 2017— exactly six months after 7 June.

The 6 December deadline has passed, which raises the following questions, at a minimum:

– How many Section 3 notices have been served on Knysna municipality in connection with the fires of 7 June, and what is the total amount of damages prospective plaintiffs have indicated they intend to claim?

– Will Knysna municipality’s public liability insurance policy cover all those claims, and if not, what does this mean for Knysna’s financial health going forward?

– In a worst-case scenario, is it possible that Knysna municipality could be forced into bankruptcy by these claims, and if so, what would the impact of bankruptcy be on Knysna’s residents?

– Does the wording of Knysna’s public liability insurance policy get its insurers off the hook if the municipality were shown to be grossly negligent? Merely negligent (i.e. so-called “simple negligence”)?
– Do insurers who have already paid out hundreds of millions of rand to their individual policyholders also have actionable claims against the municipality?

– If potential plaintiffs who considered instituting proceedings failed to serve a section 3 notice by 6 December as a result of the conclusions reached in the municipality’s fire report, and those conclusions ultimately fail to withstand scrutiny, will the municipality condone the late service?

– How serious is the financial risk the municipality faces, based on the merits of the cases that it already knows are going to be brought?

Knysna’s ratepayers would like to know.

The Committee

The Knysna Ratepayers Association welcomes any and all comments, answers, corrections, and any information of interest to ratepayers. Please post here or send to admin@knysnaratepayers.co.za.

This article originally appeared in the Knysna Ratepayers Association’s column, on page 10 of the 18 January 2018 edition of the Knysna-Plett Herald.

Unfortunately, the municipality’s published comment on that article was unresponsive.