Onelaw - Case Study

Considering debt collection mechanisms in

South Africa: An evaluation of selected

contentious issues

Funded by

OneLaw Debt Recovery Systems

Prepared by

Business Enterprises at the University of

Pretoria (Pty) Ltd

University of Pretoria Law Clinic, Faculty of

Law

May – October 2013

Summary 1

1 Mandate 1

2 Principles 3

3 Common questions 3

4 Contentious issues: Findings 7

5 Recommendations 11

Part 1 – Mandate 15

1 Introduction 15

2 Rationale for the research 16

3 Objectives of the Study 17

3.1 Substantive outcomes 17

3.2 Execution 19

3.2.1 Logistics 19

3.2.2 Method, methodology & limitations 20

3.2.3 Execution of the project: Phase 1 22


3.2.4.1 Data set A 24

3.2.4.2 Data set B 25

3.2.4.3 Data set C 28

3.2.4.4 Interviews 29


4 Terminology & Abbreviations 37

Part 2 – Framework 40

1 Industry Profile: Debt in South Africa 40

1.1 Economic position 41

1.2 Political position 49

1.3 Legal position 54

2 Debt Collection Profile: Recovery Procedures in South Africa 55

2.1 Introduction 55

2.2 Principles 55

Part 3 – Challenges 72

1 Common questions 72

2 Fundamental aspects 73

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2.1 Issue 1 73

2.1.1 Discussion 75

2.2 Issue 2 82

2.3 Issue 3 90

2.4 Issue 4 91

3 Framework for relationship between parties 92

4 Additional preliminary comments to consider 95

Jurisdiction 96

1 Introduction 96

2 Conceptualising the issue 97

2.1 Type of proceedings 97

2.2 Area of jurisdiction 98

2.3 Section 65 98

2.4 Section 45 101

2.5 Monetary value and geographical scope 102

3 Discussion 104

3.1 Perspective 1: Consent from all parties 105

3.2 Perspective 2: Section 65J(1) provides the only jurisdiction indicator for issuing

emoluments attachment orders 111

3.3 Perspective 3: Where the underlying agreement is subject to the NCA, section 90 and 91

of the NCA prevails over section 45 of the MCA 112

4 Outcomes 117

5 Summary: Jurisdiction 122

Uniformity and standardisation in courts 123

1 Introduction 123

2 Legislative framework 124

3 Practical application 127

4 Summary: Uniformity 136

Oversight 138

1 Introduction 138

2 The issues 139

3 Discussion 141

4 Comparable remedy 147

5 Discussion 159

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6 Rescission and amendment of emoluments attachment orders 160

7 Summary: Oversight, rescission and amendment 165

Interest, fees, costs & charges 166

1 Introduction 166

2 Interest 167

2.1 Introduction 167

2.2 Legal framework 170

3 Fees, costs and charges for the account of the consumer 176

3.1 Introduction 176

3.2 Section 65J(10) commission 178

3.2.1 Introduction 178

3.2.2 Determination of issues 178

3.2.3 Summary 184

3.3 Legal fees 186

3.3.1 Introduction 186

3.3.2 Legal framework 189

3.2.4 Practical application 198

3.2.5 Summary 205

Part 4 – Causes and outcomes of various mechanisms 209

Part 5 – Conclusion and recommendations 210

Part 6 – Sources 213

1 Source persons 213

2 Books 214

3 Articles & commentary 215

4 Legislation & Rules 216

5 Case law 216

6 Reports & theses 218

7 Media reports 219

8 Other 220

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Don’t ever take a fence down

until you know why it was put up

Robert Frost – 1874-1963

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Summary

This is a summary of the most important aspects of the report and is intended for

orientation purposes only. The technical nature of the report necessitates that the full

report be perused.

1 Mandate

The research commissioned was concerned with the technical issues relating to the debt

collection mechanisms. The purpose is to identify negative outcomes and the root causes

thereof through primary and secondary research methods. The outcome of this study is

to present a report to OneLaw Debt Recovery Services in which thoroughly researched

and considered legal frameworks are presented. The purpose of developing the

frameworks is to substantiate the recommended remedial actions for inter alia the pre-

identified challenges that have been recognised as obstacles in the efficiency and

credibility of the debt collection process.

The following aspects were included into the research mandate:

The interpretation of section 45 of the Magistrate’s Courts Act with regard to its

application in practices relating to the obtaining of emoluments attachment orders by

consent in South Africa;

The interpretation of section 65J of the Magistrate’s Courts Act with regard to its

application in practices relating to the obtaining of emoluments attachment orders in

South Africa;

The issue of magisterial oversight over the emoluments attachment order process;

The supporting documentation that should be required when considering a section

57/58 consent to judgment and a request for an emoluments attachment order;

The aspects relating to the rescission or amendment of emoluments attachment

orders such as lowering the instalment amount and the requirements to comply with

the procedural requirements set by law to allow for inter alia due process;

The interpretation and understanding of section 103(5) of the NCA and the common

law in duplum with regard to agreements that are subject to emoluments attachment

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orders, with specific attention given to credit agreements, the position prior to and

after the obtaining of judgment and whether legal costs are included or excluded in

the rule;

The amount and breakdown of legal costs that could reasonably be asked for by a

claimant’s attorney against a debtor in the emoluments attachment order process;

The position with regard to the 5% employer’s commission as provided for in section

65 including who is entitled to retain the percentage, by whom is it payable and

whether parties can agree contractually to have another party pay this commission;

The legal positions of the parties to the emoluments attachment order process

including a critical analysis of their rights, duties and the legal relationship between

the parties; and

The ascertainment and investigation of alternative processes in place (such as

writs/warrants of execution and section 65 procedures, such as financial enquiries),

including a study of the positive and negative effects and outcomes of these

alternatives to garnishee orders. The scope of the study did not extend to non-law or

soft law options such as call centres and payroll assignments, although reference was

made to these options where these processes had a direct impact on the formal

collection procedures.

The research was therefore primarily concerned with the reasons for the irregularities or

negative outcomes of debt collection mechanisms and not necessarily with the

identification of negative outcomes through an audit or interviews relating to garnishee

files and case studies. The purpose was to gather, analyse and evaluate the data in

order to present recommendations to address root causes such as legislative ambiguity,

based on researched legal and factual data. The research data was compiled through

desk and field research. The field research included interviews with industry stakeholders

and role-players.

The scope of the research did not extend to the impact of garnishees on a specific

income group or industry such as employers and payroll officers.

The research was undertaken over a period of six months (May to October 2013). The

geographical scope of the study insofar as interviews, discussion groups and seminars/

conferences were concerned, was limited to the following areas re Eastern Cape (East

London), Free State (Bloemfontein), Gauteng (Pretoria (Centurion), Kempton Park,



Tembisa, Johannesburg and Vanderbijlpark), Mpumalanga (eMalahleni, Nelspruit and

Witrivier) and North-West (Potchefstroom and Hartebeespoortdam (Kosmos)). The

statistics that were considered included samples from all nine provinces.

2 Principles

The research team followed a principle-based approach to evaluate contentious

issues. The following principles were identified:

Principles relating to the constitutional dispensation and common law heritage of South Africa

o Constitutional principles including procedural guarantees

o Pacta sunt servanda

Principles relating to the substantive nature of debt collection

o Debtor to honour repayment of debt

o Notice and opportunities to repay

o Fairness in dealing between parties

o Judicial oversight

o Re-imbursement for work done and disbursement

o Procedural economy

o Legality

3 Common questions

The following aspects were discussed as the outcomes of these influenced the approach

followed in respect of the contentious issues:

Issue 1

The nature and effect of consents to judgment, whether in terms of sections 57 or

58, the judgment itself and the subsequent emoluments attachment order.

Acknowledgement of liability and consent to judgment



Two alternatives presented itself:

First alternative

The acknowledgement of debt is seen as a credit agreement with all the rights and

obligations bestowed on the parties by the National Credit Act. This, if viewed as a new

agreement, may novate or attempt to novate the contractual relationship between the

parties.

Second alternative

The acknowledgement of debt and consent to judgment is merely a procedural

mechanism that entitles the creditor to obtain judgment and access procedural devices

to effect execution. In this regard, the original agreement is the point of departure and

the rights and obligations therein as regulated by the National Credit Act, if applicable.

The importance of this consideration can be summarised as follows:

The application of the NCA, including its substantive and procedural requirements

relating to entering into and enforcing the agreement as set out in the

acknowledgment of debt, on the acknowledgement of debt as well as the request

for judgment;

The effect of the judgment on the relationship between the parties and on post-

judgment rights and obligations in respect of the rate of interest (in terms of the

agreement or interest in terms of the Prescribed Rate of Interest Act 55 of 1975);

the application of section 103(5) or in duplum etc.

Issue 2

The ability of parties to regulate the relationship between them by way of

contract and in a manner that differs from the legislative provisions – the so-

called ‘contracting out of legislation’. Four indicators with examples are presented

for consideration:

First indicator

This indicator has two sections:

The legislative provision clearly states that it cannot be amended or waived by

way of agreement. Section 103(5) is an example: “Despite any provision of the



common law or a credit agreement to the contrary, the amounts contemplated in

section 101(l)(b) to (g) that accrue during the time that a consumer is in default under the

credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt

under that credit agreement as at the time that the default occurs.”

The legislation has a specific provision as well as a general provision in terms of

which parties may deviate from the specific provision. An example would be

section 65J(1), which regulates jurisdiction in terms of legislation, and section 45,

which regulates consent to the jurisdiction of a court which would ordinarily not

have jurisdiction.

Second indicator

The legislation does not make provision for the aspect that the parties wish to

regulate between themselves. An example would be date of payment of the debt.

Third indicator

There is no legislative provision which precludes the parties to contract on

different terms as set out in the legislation, but the agreement is in direct

contrast to the provisions of the legislation. An example would be section 65J

(10): “Any garnishee may, in respect of the services rendered by him in terms of an

emoluments attachment order, recover from the judgment creditor a commission of up to

5 per cent of all amounts deducted by him from the judgment debtor’s emoluments by

deducting such commission from the amount payable to the judgment creditor”. The

debtor then consents to repay all collection costs, which would include the

65J(10) commission and same is for his or her account.

Fourth indicator

The more problematic indicator is where there is no legislative provision which

precludes the parties to contract on different terms as set out in the legislation

and the agreement is not in contrast to the provisions of the legislation but

amplifies same. An example would be where the debtor consents to pay attorney

and client costs instead of party-and-party costs.

Issue 3

The regulatory scope of the NCA;



Two alternatives presented itself:

First alternative

The NCA only regulates the relationship between the parties insofar as it relates to the

rights and obligations of the parties pertaining to the credit extended. In this regard,

apart from the preliminary enforcement measures set out in the agreement and the

NCA in sections 129 and 130, the proceedings relating to the enforcement of the

agreement are regulated by the relevant legislation and rules regulating the conduct

of proceedings in court.

Second alternative

The provisions of the NCA prevail throughout the proceedings, whether judicial or

extra-judicial proceedings as the cause of action is based on a credit agreement.

Issue 4

Practical issues, not necessarily related to the legal framework, were also considered. In

this regard, the outcomes of the specific debt collection mechanism were often found to

be related to practical outcomes. Some specific examples include the following:

The section 65A procedure cannot effectively be implemented if the court does not

issue the notice prior to the court date set out on the document;

The section 65A enquiry cannot effectively be implemented if the debtor does not

appear in court or does not bring proof of income and expenditures to court;

If the sheriff cannot gain access to the premises and the debtor, notices and court

processes cannot be served on the debtor. This includes documents to initiate the

process of debt collection or remedial action such as warrants of arrest where a

debtor is in wilful default of notice to attend court.

This also pertains to the behaviour of role-players. Interviewees consistently noted that

the obstructive and ignorant behaviour of industry stakeholders, whether wilful non-

adherence to clear legislative guidelines or as a result of incompetency and lack of

knowledge, were within the top three root causes of negative outcomes of the debt

collection process. In this regard, the root cause is not necessarily founded in the

legislation and amendments to same may not remedy the position.



4 Contentious issues: Findings

Jurisdiction

1. Section 45 is not applicable to section 65J even if all the parties, including the

garnishee, consent to the jurisdiction of the specific Magistrate’s Court. Section

45 is subservient to section 28, which is in turn subject to the provisions of

section 65 of the MCA. Reliance on section 45 of the MCA is not correct and

enforceable within the context of section 65J (which contains a specific

jurisdictional provision) in a similar fashion as section 45 is correct and

enforceable within the context of section 28. Section 45 is, however, applicable to

sections 57 and 58 proceedings as the latter do not have specific jurisdictional

provisions. Section 28 regulates the choice of forum in respect of consents to

judgment and section 45 allows consent to the jurisdiction of a court other than a

court set out in section 28. However, the internal requirements regarding proper

agreement/ consent as well as the timing of the consent in respect of the

proceedings already instituted or about to be instituted, must be strictly adhered

to. Where the underlying cause of action in respect of which the consent to

judgment is given is governed by the National Credit Act, consent to jurisdiction

where this is not within the boundaries of section 90(2)(k) is disallowed.

2. Section 90 and 91 are applicable to enforcement proceedings and disallows

reliance on section 45. It is submitted that the NCA only ceases to apply when

judgment is granted. All proceedings prior to same such as section 57 and 58

consent to judgment is governed by the NCA and such a consent is akin to a

document prohibited by section 91. In this regard, section 45 may also not be

valid in respect of section 57 and 58 proceedings.

3. From a legislative point of view it is submitted that these links should be

extended to accommodate capacity constraints in the courts especially in courts

where the main payroll offices of major companies with many workers are. In this

regard, a consistent approach by all courts in necessary to avoid abuse of the

process e.g. choice of an ‘easy’ forum and be solely intended to relieve

institutional pressure (and expedite the process). A legitimate link should exist

between the court and the cause, whether this is the jurisdiction of the debtor or

that of the employer or that of the garnishee administrator where the emolument

attachment order is outsourced. As noted above, challenges to emoluments

attachment orders are initiated by either the debtor or the garnishee



administrator. There is a need for clarity on this matter in respect of a declaratory

order, test case or arguing of a stated case.

Uniformity

1. Although attorneys specialising in debt collection must adhere to the

requirements set by court within the field of their specialisation, incidences where

the requirements are obstructive and negate the purpose of the process cannot

be to the benefit of the parties. It is noted that courts have discretion and that

processes exist for review of court official’s decisions. The clerk of the court may

be taken on review to a magistrate in terms of section 13 of the MCA and

magistrates in terms of section 24 of the Supreme Court Act. Due notice is taken

of the potential of these remedies to be costly and time consuming, especially

review to the Supreme Court. However, decisions of the Supreme Court set

precedents which may clarify the matter and deter obstructive behaviour, if found

to be so.

Oversight, rescission and amendment

1. Prior to the implementation of magisterial oversight and additional requirement in

respect of rescissions and amendments, proper impact assessment studies need

to be undertaken in respect of court capacity constraints, additional costs to the

debtor and creditor and prejudice to parties though delayed or obstructed access

to justice.

2. The issue of oversight is broader than just magisterial oversight where the

purpose is to curb abuses and irregularities. Abuses and irregularities are possible

throughout the life-span of emoluments attachment orders and courts are only

involved to a limited extent.

Costs, fees, charges & commission

The following issues were specifically noted:

The emoluments attachment order does not stipulate the costs to be added to

the amount owed as the document only sets out certain judgment costs, the

amount for which judgment was granted and the interest rate. In respect of

an order for costs, the document will often state that costs are payable

(sometimes ‘to be taxed’ is added) and on which scale. In this regard, the

following information is needed on the emoluments attachment order:



o The amount for which the judgment was granted;

o The interest component where this was included into the judgment

amount;

o The rate at which interest is granted annually and the amount upon

which it is to be calculated;

o The instalments to be deducted from the debtor’s emoluments;

o The first date of payment;

o The projected costs if all deductions are made timely and accurately;

o The number of instalments;

o The date when the last payment is due.

It is important to note that non-payment or underpayment will affect both the

interest charged, costs charged in following-up on payments and the number

of instalments due (as well as the payment period). Should this realise,

additional costs could be easily motivated and verified by documentary

evidence. However, information in this regard will prevent over-charging or

over-deducting and provide a basis for the employer’s liability in terms of

section 34 of the Basic Conditions of Employment Act where the deductions

are not ceased when the instruction is received to do so. On an ancillary note,

some interviewees also noted that inclusion of the consent to judgment would

be beneficial when serving the order on the employer as this, together with

the judgment granted and emoluments attachment order. This would allow for

the employer or garnishee administrator to verify whether judgment was

entered correctly in respect of amount, interest and costs as well as

refreshing a debtors memory in respect of the document where an

emoluments attachment order is disputed.

Some attorneys have introduced a maximum allowable cost recovery on

collection costs. This relates either to all debts or categorised according to the

capital amount to be collected. The recommendation in this regard is to make

a similar approach applicable to a definite category of small debts to the

consumer (which should include tracers, debt collectors and legal

practitioners) but excluding actual expenses incurred. The cap on the

collection of these costs from the consumer should be in relation to the

capital of the outstanding debt. A specific cap e.g. debts where the capital

amount is less than R1 000 should be clearly set out. Emoluments attachment

orders would not be a viable option for debts where the legal costs, interest



and commissions (5% in terms of section 65J(10) and 10% collection

commission in terms of item 3(b)) will exceed the capital amount by a 100%.

This would impact greatly on the short-term and unsecured lending market as

seen in Part 1 above. Therefore, for outstanding capital debts below R1 000 the

repayable amount due to legal costs (just to obtain judgment, cause the order to

be implemented and monitor repayment) would in all probability equal or exceed

the capital especially where interest and other commissions are charged and

added.

o There is a need to list examples of necessary and unnecessary costs;

o There is a need for civil recourse, other than repayment of overcharged

fees, which should in essence also include an interest component.

Recourse to the Law Society in respect of unprofessional conduct may not

always have a positive pecuniary outcome as no penalties can be imposed

on the attorney. Similar penalties to schedule 2 of the BCEA may be

considered along with increased capacity of taxing masters to refer

unlawful bills of costs to a magistrate to impose the penalty.

An impact assessment report is needed if considering change to the costs taking

into account the vested interests of all the parties as well as the principles set out

above.

Section 65J(10) commission

1. A consumer can only agree to pay the commission if there is proper and informed

consent that is specifically stated in agreement. In this regard, it is submitted

that the attention of the debtor should be drawn to the provisions of section

65J(10).

2. The common questions in this regard are the impact of the judgment and whether

parties may contract out of the legislation. The impact of the judgment is

important as the applicability of the NCA is a core consideration in respect of the

rights and obligations between the parties where a credit agreement is at stake.

The provisions of the NCA are particularly restrictive when cost of credit and the

consumer’s liability towards the credit provider is concerned. This further impacts

the importance of the wording of the judgment and whether specific requests for



judgment ‘clauses’ should be inserted prior to the judgment creditor being able to

rely on same.

3. In general, the point of departure is again the relationship between the parties,

which may be contractual or legal. If the agreement, prior to judgment, is in

contrast with the contents of the judgment, it cannot be followed. However, it can

be argued that the agreement between the parties is similar to a third person

paying on behalf of another and in the absence of a specific legislative prohibition,

this may be allowable.

Legal fees

1. The uncertainty in calculating the costs pertaining to a specific matter was noted

as a cause of great concern for many interviewees. The person implementing the

emoluments attachment order is entirely reliant on the attorney to calculate and

add costs to the debtor’s account. In the premises, the legal representatives are

the only role-players who are in a position to accurately inform the debtor’s

employer when an emoluments attachment order has been complied with in full.

2. It was also noted that an emoluments attachment order is not a viable option for

very small debts as the costs often exceed the amount recovered. The one

example where the amount to be recovered was equal or less than R1 249.99

serves as a case in point. The amount recovered by the attorneys on their fee

structure for this category of debt is R947.44. The fees plus vat equals R697.57,

the disbursements R215.00 and the percentage claimed for drafting the account

R34.88. These exclude commissions and interest.

5 Recommendations

The following recommendations are made:

1. Introduce a maximum allowable cost recovery on collection costs. This can either

be extended to all debts or made applicable to a definite category of small debts

to the consumer (which should include tracers, debt collectors and legal

practitioners) but excluding actual expenses incurred. The cap on the collection of

these costs from the consumer should be in relation to the capital of the

outstanding debt.



A specific cap e.g. debts where the capital amount is less than R1 000 should be

clearly set out. Emoluments attachment orders would not be a viable option for

very small debts where the costs, interest and commission would exceed 100% of

the debt to be recovered.

2. Amend the format of the emoluments attachment order to allow for additional

information to be provided to the garnishee. This would allow for the employer to

ascertain when the debt is paid up: The amount for which the order is granted

will be the point of departure to calculate the interest and the costs.

The request for judgment, judgment and emolument attachment order format

should be amended to provide for the classification of the construction of the

judgment amount in order to indicate which part of the judgment amount is

capital and which interest. This relates to the amount for which judgment is

requested and excludes the interest requested after judgment e.g. if judgment is

requested for R 3000 of which the outstanding capital is R 2000 and R 1000 is

interest that has already accrued, this should be stipulated to avoid interest on

interest.

3. The institutional capacity constraints in courts should be addressed as a matter of

great urgency. Predictability and consistency in respect of legitimate requests for

judicial assistance is cardinal. Training alternatively practice directives in respect

of the following aspects is needed for all levels of personnel of the judiciary

dealing with debt collection:

a. The purpose of the stages of debt collection and the role of the judiciary/

different officials in each of these stages should be clarified. In this regard,

queries on reckless credit and assessment of same should be effected at

judgment stage and not at the stage where judgment was already

obtained and the request is to issue an emoluments attachment order.

b. The practicality of requesting documents/ reality of debt collection e.g. the

request for the original documentation where a credit agreement was

entered into under a legislative regime where the storage of said

agreements was not necessary or mandatory; the different forms of

reckless credit and when these assessments can be made e.g. reckless

credit does not apply to an agreement entered into prior to June 2007.



c. The scope of the discretion of the court (and guidelines to exert same) in

respect of debt collection in order to prevent the courts becoming ‘a law

upon themselves’.

4. An overall regulatory body for debt collection is needed in a similar frame as the

UK Office of Fair Trading. South Africa regulates the individual and not the

mechanism, which has resulted in a fragmented system. Attorneys are regulated

by the respective Law Societies and the regulation is limited to unprofessional or

unethical conduct. Debt Collectors are regulated by the Debt Collectors Council

whilst the National Credit Regulator regulates credit providers. The difference is

that the NCR is also responsible to regulate the credit market which allows for a

more comprehensive approach to regulation. In this regard, a body to regulate all

aspects of debt collection and with the authority to issue guidelines (see e.g. the

OFT guidelines in respect of letters of demand) is needed within the framework of

market conduct regulation. This may need attention within the development of

the twin-peaks approach to regulation to incorporate same into the developing

framework instead of developing a new body. It is submitted that additional

registration and compliance reports not form part of the regulatory body’s regime

in order to lessen the already hefty compliance burden on industry role-players

who have to be registered with either of the bodies mentioned above and comply

with various legislative requirements in any event. The body should have

investigative and subpoena powers and be a body of investigation and redress.

5. In the light of the above, judicial oversight is not recommended. Whilst some

legislative changes may assist with clarifying issues, curbing abuses and dealing

with irregularities, proper enforcement is necessary especially as many of the

irregularities are not directly related to the debt collection process. This includes a

point of reference for consumers to deal with suspected irregularities. The aspects

that concerns and a body tasked with oversight should be industry-based with

proper powers and resources.

6. The legitimate grounds for jurisdiction should be clarified i.e. whether a section

45 consent to jurisdiction is allowed as well as the correct interpretation of

concepts such as ‘place of business’ etc as lack of guidance in this regard annuls

the concept of a legislative ratio jurisdictions. However, it is submitted that these

links should be extended to accommodate capacity constraints in the courts

especially in courts where the main payroll offices of major companies with many

workers are. In this regard, a consistent approach by all courts in necessary to



avoid abuse of the process e.g. choice of an ‘easy’ forum and be solely intended

to relieve institutional pressure (and expedite the process). A legitimate link

should exist between the court and the cause, whether this is the jurisdiction of

the debtor or that of the employer or that of the garnishee administrator where

the emolument attachment order is outsourced. As noted above, challenges to

emoluments attachment orders are initiated by either the debtor or the garnishee

administrator.

7. Declaratory orders or test cases are needed to clarify matters.

8. Intervention by the Law Societies is necessary in order to provide clearer

guidelines in respect of allowable fees, especially within the contexts of being

‘reasonable’ and ‘necessary’. Furthermore, clarity is needed in respect of the

interest rate that can be ordered by the court such as 5% per month on a short-

term agreement upon which the consumer has defaulted, effectively extending

the repayment period or 15,5% in terms of the Prescribed Rate of Interest Act.



Part 1 – Mandate

1 Introduction

Research into the South African Debt Collection industry was commissioned by OneLaw

Debt Recovery Systems (OneLaw) and contracted with Business Enterprises at the

University of Pretoria (BE). The research team was sourced from the University of

Pretoria Law Clinic's Research and Short Courses Section.

OneLaw develops, provides and manages debt recovery systems. These range from and

include debt collection platforms for use by collection attorneys as well as commercial

trade in debts for profit.

Business Enterprises at the University of Pretoria is a company wholly owned by the

University of Pretoria which provides contracted research services and products to both

the public and private sector. BE acts as a facilitator between the business world and the

University of Pretoria.

The University of Pretoria Law Clinic provides gratuitous legal services to indigent

members of the community and professional training to candidate attorneys as part of

the compulsory statutory internship preceding admission as an attorney. In addition,

experiential training is provided to final-year law students through the practical law

curriculum incorporating supervised real-life client interaction. The Research and Short

Courses Section at the clinic presents short courses to members of the public on credit

and debt related matters. It further undertakes desk and empirical research on the daily

impact and effect of the law on economic, political and social aspects relating to the

South African community.



2 Rationale for the research

Debt collection is an integral part of commercial trade and as such, subject to state

regulation in a similar fashion to trade and credit extension.1 However, in South Africa,

government policies and legislative principles are becoming the norm when evaluating

any relationship between parties in a trade and industry sphere.2 As such, the conduct of

industry role players is increasingly measured against the principles embodied in e.g. the

Constitution and legislation such as the National Credit Act.

The measured conduct has, in turn, prompted reconsideration of some statutory

provisions where it was considered to be irreconcilable with the constitutional and

consumer credit framework for South Africa. Three examples relating to the Magistrates’

Courts Act deserve mention namely section 58 in African Bank v Additional Magistrate

Myambo,3 section 65 in Coetzee v Government of RSA4 and section 66 in Jaftha v

Schoeman.5

1 Louw 2013 (1) par 1.

2 See e.g. Sebola and Another v Standard Bank of South Africa Ltd and Another 2012 (5) SA 142 (CC), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2012/11.html&query=sebola%20 and%20another%20v%20standard%20bank%20of%20south%20africa%20ltd.

3 African Bank Ltd v Additional Magistrate Myambo N.O. and Others 2010 (6) SA 298 (GNP), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2010/60.html&query=african%20bank%20 ltd%20v%20 additional%20magistrate%20myambo, related to matters that the clerk of the court and magistrate need to consider in respect of consents to judgment in terms of section 58 in order to protect debtor’s rights in terms of the National Credit Act.

4 Coetzee v Government of RSA; Matiso and Others v Commanding Officer, Port Elizabeth Prison and Others 1995 (4) SA 631 (CC), found that imprisonment for civil debt infringed the delinquent debtor’s constitutional rights. The remedy available to a creditor in respect of ‘imprisonment’ now only relates to the offence of contempt of court.

5 Jaftha v Schoeman and Others; Van Rooyen v Stoltz and Others 2005 (1) BCLR 78 (CC), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2004/25.html&query=Jaftha%20v%20Schoe man%20and%20Others, found that judicial oversight is necessary in the light of the judgment debtor’s

Debt recovery has become a specialist industry in the South African financial services sector

and it has also become big business. The mass unsecured lending segment of the financial

services sector is dependent on efficient and cost effective debt recovery processes. The

creditor's interest in expeditious debt collection processes must however be balanced

against the interest of the debtor who may be exploited by efficient but soulless debt

collection practices. Debt recovery has a clear social dimension and it is therefore

unavoidable that it would attract the attention of government. The debt recovery service

industry has indeed over time become highly regulated by sometimes overlapping pieces of

legislation, such as the Magistrates' Courts Act of 1944, the Debt Collectors Act of 1998 and

the National Credit Act of 2005. ~ Louw 2013



http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2012/11.html&query=sebola%20%20and%20another%20v%20standard%20bank%20of%20south%20africa%20ltd

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2012/11.html&query=sebola%20%20and%20another%20v%20standard%20bank%20of%20south%20africa%20ltd

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2010/60.html&query=african%20bank%20%20ltd%20v%20%20additional%20magistrate%20myambo%20

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2010/60.html&query=african%20bank%20%20ltd%20v%20%20additional%20magistrate%20myambo%20

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2004/25.html&query=Jaftha%20v%20Schoe%20man%20and%20Others%20

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2004/25.html&query=Jaftha%20v%20Schoe%20man%20and%20Others%20

Within the current framework, there seems to be a move towards allocating substantive

normative considerations when applying laws and procedures to measure the conduct of

parties. An example is where parties’ conduct is viewed as unconscionable or morally

reprehensible when using the full benefit of the law in charging consumers for costs e.g.

where legal or collection costs are calculated per the allowable legislative tariff but are

disproportionate to the primary debt owed to the credit provider. Although this is lawful,

industry role-players may frown upon the practice. In the absence of clear outcomes,

these practices as embodied in legislation had, at most, broad underlying policies of

access to justice and due process or fairness, reasonableness and necessity in costing of

services rendered.

The prominent catalysts of over-indebtedness, dire economic circumstances and inability

of consumers to adequately protect themselves, duly supported by statistical evidence,

has focused the attention of many on the consumer credit extension industry. In

particular, “[t]his is as a result of financial institutions’ failure to uphold the principles of

responsible lending, a situation that was deemed the prime cause of high levels of

indebtedness”.6 The counter-reaction of industry and government is in one respect

observable in the manner in which debts are now collected, particularly in the light of the

recent investigations into irregularities and abuses pertaining to debt collection

mechanisms such as emoluments attachment orders.7

3 Objectives of the Study

3.1 Substantive outcomes

The research is concerned with the technical issues relating to the debt collection

mechanisms. The purpose is to identify negative outcomes and the root causes thereof

through primary and secondary research methods. The outcome of this study is to

present a report to OneLaw in which thoroughly researched and considered legal

frameworks are presented. The purpose of developing the frameworks is to substantiate

the recommended remedial actions for inter alia the pre-identified challenges that have

been recognised as obstacles in the efficiency and credibility of the debt collection

right to adequate housing in terms of section 26 in order to render the Magistrates’ Courts execution proceedings against immovable property constitutional.

6 Chipeta & Mbululu “The effects of the national credit act and the global financial crisis on domestic credit extension: empirical evidence from South Africa” April 2012 (5(1)) Journal of Economic and Financial Sciences 215 216.

7 See Part 2 par 1 below.



process. Although the brief allowed for the list of issues to be supplemented as the

research progresses, the additional issues were too closely related to the challenges set

out below to warrant separate consideration.

The following aspects were included into the research mandate and are

repeated hereafter:8


application in practices relating to the obtaining of emoluments attachment orders by

consent in South Africa;

The interpretation of section 65J of the Magistrate’s Courts Act with regard to its


South Africa;9

The issue of magisterial oversight over the emoluments attachment order process;


57/58 consent to judgment and a request for an emoluments attachment order;



the procedural requirements set by law to allow for inter alia due process;

The interpretation and understanding of section 103(5) of the NCA and the common

law in duplum with regard to agreements that are subject to emoluments attachment

orders, with specific attention given to credit agreements, the position prior to and

after the obtaining of judgment and whether legal costs are included or excluded in

the rule;





whether parties can agree contractually to have another party pay this commission;

8 Some minor adjustments were made to facilitate reading of the mandate and to reflect the full scope of the term of reference e.g. in duplum and section 103(5) of the National Credit Act where, previously, reference was only made to in duplum.

9 This is a very broad research question and is dealt with throughout the report.





the parties;10 and

The ascertainment and investigation of alternative processes in place (such as

writs/warrants of execution and section 65 procedures, such as financial enquiries),

including a study of the positive and negative effects and outcomes of these

alternatives11 to garnishee orders. The scope of the study did not extend to non-law

or soft law options such as call centres and payroll assignments, although reference

was made to these options where these processes had a direct impact on the formal

collection procedures.

The research was therefore primarily concerned with the reasons for the irregularities or

negative outcomes of debt collection mechanisms and not necessarily with the

identification of negative outcomes through an audit or interviews relating to garnishee

files and case studies. The purpose was to gather, analyse and evaluate the data in

order to present recommendations to address root causes such as legislative ambiguity,

based on researched legal and factual data.

The scope of the research did not extend to the impact of garnishees on a specific

income group or industry such as employers and payroll officers.

3.2 Execution

3.2.1 Logistics

The research was undertaken over a period of six months (May to October 2013). The

geographical scope of the study insofar as interviews, discussion groups and seminars/

conferences were concerned, was limited to the following areas re Eastern Cape (East

London), Free State (Bloemfontein), Gauteng (Pretoria (Centurion), Kempton Park,

Tembisa, Johannesburg and Vanderbijlpark), Mpumalanga (eMalahleni, Nelspruit and

10 This is a very broad research question and is dealt with throughout the report.

11 As indicated below, the choice of wording proved to be incorrect. Various execution mechanisms exist within a specific factual framework and to label these methods as ‘alternatives’ is short-sighted and shows a lack of understanding of the debt collection and execution process. The mechanisms are often used in conjunction with one another. Section 65E illustrates the three execution mechanisms i.e. warrant of execution in respect of movable, immovable or incorporeal property; attachment of a debt in terms of section 72 and an emoluments attachment order vis-a-vis the method of obtaining same i.e. through judgment or after a financial enquiry, the latter which can result in a ‘manner of payment’ order and be undertaken even where the execution mechanism such as an EAO was not successfully complied with. See Part 3 below.



Witrivier) and North-West (Potchefstroom and Hartebeespoortdam (Kosmos)). The

statistics that were considered included samples from all nine provinces. The research

team comprised of the following researchers, who are both duly admitted attorneys:

Jani van Wyk (Project Leader & Primary Researcher)

[email protected]/ +27 (0)12 420 4155

Heléne Davidtsz (Researcher)

[email protected]/ +27 (0)12 420 5670

3.2.2 Method, methodology & limitations

Method & methodology

Primary and secondary research methods were used through field and desk research.

The desk research included references to legislation, case law, research reports, media

reports, academic journal articles, theses and dissertations. This method allowed the

research team to gather information which preceded the current milieu (historical

development), identify obstacles and prepare for the field research. The desk research

formed the basis of the hypothesis formulated by the research team and allowed for the

preliminary findings to be tested against the current practical experiences of the

interviewees.

In particular, the team strived to consult with persons dealing with debt collection on a

daily basis in order to prevent the study from becoming a black-letter law analysis. The

interviews proved to be of exceptional value to point out the difference between the

written documents perused during the desk research and the practical implementation of

specific procedures.12 The project protocol and interview guidelines were approved by

12 A case in point which illustrates the importance of consulting with people in practice and obtaining different perspectives from role-players is discussed in detail in Part 3 hereunder, but briefly set out for purposes of this discussion. The issue related to the question of whether debtors appear in the ‘debtor’s court’ when notified as such in terms of section 65A. According to written reports (see e.g. Haupt & Van Sittert Safari into garnishment of wages 13 February 2013 7) the incidence of debtors appearing in the court when requested is low, rendering the section 65 process ineffective. Interestingly, when discussing the matter with Magistrates in three different provinces, it was consistently noted that debtors do appear. The incidence of appearance was consistently calculated at 70% or higher. In contrast, debt collection attorneys consistently noted that debtor’s do not appear. During the last interview conducted with a magistrate who had also been a practising attorney, it was noted that, as an attorney, the experience was the 1 out of 10 debtor’s appeared whilst, as a magistrate, the experience was that 7 out of 10 debtors appeared. The interviewee ascribed this discrepancy to the changing economic circumstances of South Africans. In addition, it was reported that the warrant of arrest is ‘contentious’ as it is ‘extremely traumatic for a debtor, who may be locked up in a holding cell at a police station’. During interviews, it transpired



mailto:[email protected]

mailto:[email protected]

the Ethics Committee of the Faculty of Law, University of Pretoria. Participants were not

obliged to contribute to the research and not all organisations approached to participate

did so. In this study, sample size was not so relevant as the problems were substance

driven. The core issues seemed to be ring-fenced i.e. generally speaking the challenges

that were identified during the desk research, were consistently noted/confirmed by

participants during the field research.

The interviewees for the project consisted of magistrates, civil clerks of the court,

sheriffs, attorneys, debt counsellors, debt collectors, garnishee administrators and

garnishee auditors. Some organisations approached for interviews declined to participate

or initially indicated that they were willing to participate but ultimately did not. This was

particularly relevant to the regulatory bodies/ industry organisations approached. The

composition of the interviewees was strategically chosen to present perspectives from

the creditor, debtor and third party specialists.

Limitations

Many potential interviewees were contacted but did not participate. The approach

followed by the team was to phone the offices and explain the purpose of the research to

the head of the section dealing with matters relevant to the research. The offices were

then asked whether they would be willing to participate and the scope of the

participation was explained. The team member did not request the representative to

provide an immediate answer but requested an e-mail address to forward a summary of

the project outcomes and the scope of participation. Where no response was received

within a reasonable time, the request was followed by an e-mail and phone call

whereafter no further action was taken. Where the offices had indicated their willingness

to participate, further e-mails were sent and phone calls made to set a time and date for

the interview, but after reasonable attempts, no further action was taken as this was

interpreted as reluctance to participate. Potential interviewees declined to participate for

the following reasons:

The offices were not interested in participating;

that the warrant of arrest is seldom issued and the incidence of actually arresting a debtor is very low. The sheriff will rather warn the debtor to arrive at his or her offices or at court where the person will be handed to the clerk of the court. This process was generally viewed as effective in securing the presence of the debtor at court. The interviewees consistently noted that the involvement of the South Police Service is scarce as the members of the police will generally not concern themselves with civil matters. The members are also not trained in dealing with the matter.



The information forwarded to the offices was not read and the purpose of the

interaction misunderstood even after explaining the issues;

The information was not escalated from the contact person to the person that had to

decide whether the offices would participate despite multiple requests;

No responses were received despite multiple attempts;

Workload and staff impairments resulted in the unavailability of some participants

although a willingness to participate in future research was expressed;

Delays, whether through resources or lack of attention, prevented the timely

participation of potential interviewees;

Time constraints, especially in the light of the logistical issues set out above – in this

regard, some organisations were approached as early as June and July and had either

not responded by October 2013 or not performed as indicated;

The current developments and multiple stakeholders involved in investigating the

abuses and irregularities in the debt collection sphere could also account for the

unwillingness or unavailability of potential participants. Potential participants could

have been involved in confidential research pertaining to the same topic or have

negative perspectives of the research funders which caused them to decline to

participate.

Time and budget constraints further limited the scope of the research. In this regard, the

input of interviewees and data analysed, even though consistent in many aspects,

cannot be viewed as representative of the industry and all its role-players. It is therefore

important that proper empirical research and consultation with all stakeholders precede

any implementation of the recommendations referred to herein, especially throughout

the various socio-economic and geographical strata of South Africa.

3.2.3 Execution of the project: Phase 1

The first phase of the project was executed through desk research.

The objectives of this phase were to:

Identify the relevant debt collection mechanisms to be the subject of the study. A

preliminary list of mechanisms was drafted for the study with the caveat that these



could be reduced based on criteria determined in consultation with OneLaw or its

representatives, supplemented if and where the research team deems it necessary. It

was not necessary to amend or supplement the initial list which referred to the

following debt collection mechanisms:

Section 57 and 58 acknowledgements of debt and consent to judgment;

Section 65 enquiries;

Section 65 J emoluments attachment orders;

Writs/warrants of execution for movable property;

Writs/warrants of execution for immovable property.

Identify the benefits (positive outcomes) of the identified debt collection

mechanisms;

Identify the issues, difficulties and/or irregularities pertaining to each of the

mechanisms through secondary research methods;

List the identified issues under each subject head and determine whether the root

causes of these are based in legislative failures such as ambiguity or lacunae,

interpretive differences and/or irregular implementation of legislative provisions; and

Research and argue the legal framework that underlies the negative issues identified

in order to provide clarity in respect of the rationale thereof, the correct legal position

and to substantiate the recommendations for remedial action.

The scope of the study was delineated through set parameters as it was limited to the

debt collection mechanisms set out in acts of parliament. Specifically, debt relief

remedies such as debt review, insolvency processes such as sequestration or repayment

schemes in terms of which the debtor effects payment were excluded. Although these

mechanisms, in practical terms, also effect debt collection to some extent, these were

beyond the scope of this study. As mentioned above, the study was not concerned with

non-law or soft law alternatives such as call centres/ payroll assignments, etc.

The study was further limited to secondary identification of irregularities and was not

concerned with independent identification of irregularities through an audit of garnishee

files or payroll offices. As noted above, the research was not concerned with the impact

of garnishees on persons (employees, employers and payroll officers) and entities but



specifically related to the legal framework of debt collection. However, as the impact on

the legal subjects has been a cause for concern in recent times, irregularities were duly

noted in order to provide for a thorough understanding of the issues at hand. Ancillary to

the report, basic assumptions and conclusions that refer to the impact of certain

legislative provisions and the manner of the implementation thereof had to be drawn

from the collected data. In instances where these were central to the investigation, it

was duly noted e.g. the relationship between the parties, the allowable and charged

costs and the impact on the courts and legal system.


The second phase of the project comprised of field research through primary

research methods.

The research proposal initially only involved interviews held with industry role-players,

but unexpectedly also included statistical information made available and sourced from

Flemix and Associates Incorporated dated 19 July 2013. An explanation of the three data

sets as well as an extract from the raw data is provided hereunder for purposes of

contextualisation. The statistics related to the machinery of the courts in granting section

57 and 58 judgments as well as emoluments attachment orders.

3.2.4.1 Data set A

Data set A showed the waiting periods in days for different courts as recorded for 2012

in order to obtain judgments and emoluments attachment orders. Data concerning 24

courts were provided:

Beaufort West

Christiana

Empangeni

Johannesburg

Modimolle

Temba

Bela-Bela

Durban

Ermelo

Kempton Park

Motherwell

Thabazimbi

Boksburg

East London

Hankey

Kimberley

Phuthaditjhaba

Uitenhage

Brits

Ekangala

Jansenville

Mitchells Plain

Pretoria

Winburg

Court Waiting period for judgment and EAO in 2012 (days)

Beaufort West 27.54



3.2.4.2 Data set B

Data set B showed the practices and policies of the courts to which the data related. The

data related to 524 offices of courts.13 This data set was only relevant insofar as reliance

of courts on section 45 consent to jurisdiction was measured, although the inferences

are questionable as set out in the report. The other variables were either so low (15 and

below) or high (523 and above) that no useful inferences could be drawn. In the

premises, the following variables were used with 1 indicating that the variable was

relevant to that particular court and 0 indicated that it was not relevant to the court:

The court requires that the emoluments attachment order be granted in the court of the

employer (Require Local EAO);

The court allows section 45 consents to jurisdiction for section 57 & 58 judgments

(Allow Section 45);

The court will grant a judgment where a section 57 admission of liability and consent

to judgment was signed by the debtor (Allow Section 57);

The court will grant a judgment where a consent to judgment in terms of section 58

was signed by the debtor (Allow Section 58);

The court requires that the attorney causing to issue the emoluments attachment

order for and on behalf of the creditor provide an address within the 15km radius of

the court as set out in the Magistrates' Courts Rules i.e. requiring a local

correspondent to be appointed where the instructing attorney does not have an office

within the 15km radius. In some instances, such as in urban areas, no firm is

situated within the 15km radius set by the rules of court (Require Address In

Radius);

The court allows an electronic signature on the application for the emoluments

attachment order and does not require a handwritten signature (Allow Electronic

Signature).

13 The data, when compared to the lower courts list provided by the Department of Justice at http://www.justice.gov.za/contact/lowercourts_full.html, site accessed 27 October 2013, were categorised according to the ‘office’ names and not necessarily according to ‘district’.



http://www.justice.gov.za/contact/lowercourts_full.html

Aberdeen

Acornhoek

Addo

Adelaide

Alexandra

Alexandria

Alice

Alicedale

Aliwal North

Amanzimtoti

Amersfoort

Amsterdam

Athlone

Atlantis

Atteridgeville

Babanango

Balfour [EC]

Balfour [MP]

Barberton

Barkly East

Barkly West

Batho

Beaufort West

Bedford

Bela‐Bela

Bellville

Benoni

Bergville

Bethal

Bethlehem

Bethulie

Bholothwa

Bishop Lavis

Bityi

Bizana

Bloemfontein

Bloemhof

Bluedowns

Boesmansriviermond

Ekuvukeni

Elandslaagte

Elliot

Elliotdale

eMakhazeni

eMalahleni

Emgwenya

Emlazi

Empangeni

Ermelo

Eshowe

Esikhawini

Estcourt

Evander

Excelsior

Ezakheni

Ezibeleni

Fauresmith

Ficksburg

Flagstaff

Fochville

Fort Beaufort

Fouriesburg

Frankfort

Fraserburg

Ga‐Kgapane

Galeshewe

Ga‐Nala

Ganyesa

Ga‐Rankuwa

Gariepdam

Garies

Gelvandale

George

Germiston

Gingindlovu

Giyani

Glencoe

Gluckstadt

Khutsong

Kimberley

King William’s Town

Kirkwood

Klerksdorp

Klipplaat

Kliptown

Knysna

Koffiefontein

Kokstad

Komga

Koppies

Koster

Kranskop

Kroonstad

Krugersdorp

Kuilsriver

Kuruman

Kwa Thema

KwaDukuza

KwaMashu

Kwambonambi

KwaMhlanga

KwaMsane

Kwangwanase

KwaNobuhle

Laaiplek

Ladismith

Lady Frere

Lady Grey

Ladybrand

Ladysmith

Laingsburg

Lebowakgomo

Lehurutshe

Lenasia

Lenyenye

Lephalale

Libode

Mtubatuba

Mtunzini

Muden

Murraysburg

Musina

Mutale

Namakgale

Ncotshane

Ndwedwe

Nebo

New Hanover

Newcastle

Newlands

Ngcobo

Ngqamakhwe

Ngqeleni

Ngwelezane

Niewoudtville

Nigel

Nkandla

Nkowankowa

Nongoma

Northam

Noupoort

Nqutu

Nsimbini

Nsuze

Ntuzuma

Nyanga

Oberholzer

Odendaalsrus

Ogies

Orkney

Orlando

Ottosdal

Oudtshoorn

Paarl

Palm Ridge

Parow

Seshego

Seymour

Simon’s Town

Skukuza

Smithfield

Somerset East

Somerset West

Soshanguve

Soutpan

Soweto

Springbok

Springfontein

Springs

Standerton

Stellenbosch

Sterkspruit

Sterkstroom

Steynsburg

Steytlerville

Stilfontein

Strand

Strydenburg

Stutterheim

Sutherland

Swartruggens

Swellendam

Tabankulu

Tarkastad

Taung

Temba

Tembisa

Thabazimbi

Thembalethu

Theunissen

Thohoyandou

Thulamahashe

Tiyani

Tonga

Trompsburg

Court Require

Local EAO

Allow

Section 45

Allow

Section 57

Allow

Section 58

Require

Address In

Radius

Allow

Electronic

Signature

Boksburg 1 0 1 1 0 0



Boksburg

Bonnievale

Booysens

Boshof

Bothaville

Botshabelo

Brakpan

Brandfort

Brandvlei

Bredasdorp

Breyten

Brits

Britstown

Brixton

Bronkhorstspruit

Bultfontein

Burgersdorp

Bushbuckridge

Butterworth

Cala

Caledon

Calitzdorp

Calvinia

Camperdown

Cape Town

Carnarvon

Carolina

Cathcart

Centane

Ceres

Charlestown

Chatsworth

Christiana

Clarens

Clocolan

Cofimvaba

Colenso

Colesberg

Coligny

Cornelia

Cradock

Cullinan

Dannhauser

Daveyton

De Aar

Dealesville

Goedemoed

Goodwood

Graaff‐Reinet

Grabouw

Grahamstown

Graskop

Greytown

Griquatown

Groblersdal

Groblershoop

Groot Marico

Hammanskraal

Hankey

Hanover

Harding

Harrismith

Hartswater

Hatfield

Heidelberg [GP]

Heidelberg [WC]

Heilbron

Hendrina

Hennenman

Hermanus

Hertzogville

Hillbrow

Himeville

Hlabisa

Hlanganani

Hlobane

Hluhluwe

Hobhouse

Hofmeyr

Hoopstad

Hopefield

Hopetown

Howick

Humansdorp

Ikageng

Impendle

Indwe

Ingwavuma

Inkanyezi

Inyoni

Itsoseng

Ixopo

Lichtenburg

Lindley

Loeriesfontein

Louis Trichardt

Louwsburg

Loxton

Luckhoff

Lulekani

Lusikisiki

Maclear

Madadeni

Madikwe

Magudu

Mahlabatini

Mahwelereng

Makwane

Malamulele

Malmesbury

Maluti

Mamelodi

Mankweng

Mapumulo

Marquard

Marydale

Mashishing

Matatiele

Mbazwana

Mbibana

Mbombela

Mdantsane

Mdutjana

Meadowlands

Mecklenburg

Melmoth

Memel

Meyerton

Mid Illovo

Middelburg [EC]

Middelburg[MP]

Middledrift

Midrand

Mitchells Plain

Mkhuhlu

Mkobola

Mmabatho

Modimolle

Parys

Paul Roux

Paulpietersburg

Pearston

Peddie

Perdekop

Petrus Steyn

Petrusburg

Phalaborwa

Phalala

Philippolis

Philipstown

Phoenix

Phokeng

Phungashe

Phuthaditjhaba

Piet Retief

Pietermaritzburg

Piketberg

Pinetown

Plessislaer

Pofadder

Polokwane

Pomeroy

Pongola

Port Alfred

Port Elizabeth

Port Nolloth

Port Shepstone

Port St Johns

Porterville

Postmasburg

Potchefstroom

Praktiseer

Pretoria

Pretoria North

Prieska

Prince Albert

Queenstown

Qumbu

Ramsgate

Randburg

Randfontein

Reddersburg

Reitz

Richards Bay

Tseki

Tsheseng

Tshilwavhusiku

Tshitale

Tsomo

Tulbagh

Turton

Tzaneen

Ubombo

Uitenhage

Umbumbulu

Umzimkulu

Umzinto

Uniondale

Upington

Utrecht

Van Zylsrus

Vanderbijlpark

Vanrhynsdorp

Ventersburg

Ventersdorp

Venterstad

Vereeniging

Verulam

Victoria West

Viljoenskroon

Villiers

Villiersdorp

Virginia

Volksrust

Vosburg

Vosloorus

Vrede

Vredefort

Vredenburg

Vredendal

Vryburg

Vryheid

Vuwani

Wakkerstroom

Warden

Warrenton

Wasbank

Waterval

Weenen

Welkom



Delareyville

Delmas

Devon

Dewetsdorp

Donnybrook

Douglas

Dududu

Dukuza

Dullstroom

Dundee

Dunnottar

Durban

Dutywa

Dzanani

East London

Edenburg

Edenvale

Edenville

Eerstehoek

Ekangala

Izingolweni

Jacobsdal

Jagersfontein

Jamestown

Jan Kempdorp

Jansenville

Jeppe

Johannesburg

Joubertina

Kabokweni

Kagiso

Kakamas

Kareedouw

Kathu

Keimoes

Keiskammahoek

Kempton Park

Kenhardt

Kestell

Khayelitsha

Mogwase

Mokopane

Molteno

Montagu

Mooi River

Mookgophong

Moorreesburg

Morebeng

Mossel Bay

Motherwell

Mothibistad

Mount Ayliff

Mount Fletcher

Mount Frere

Moutse

Mpumalanga

Mqanduli

Msinga

Mthatha

Mtontsasa

Richmond [KZN]

Richmond [NC]

Rietfontein

Riversdale

Robertson

Roodepoort

Rosendal

Rouxville

Rustenburg

Sabie

Sannieshof

Sasolburg

Schweizer-Reneke

Scottburgh

Sebokeng

Secunda

Sekhukhune

Selosesha

Senekal

Senwabarwana

Wellington

Wentworth

Wepener

Wesselsbron

Westonaria

White River

Whittlesea

Williston

Willowmore

Willowvale

Winburg

Winterton

Wolmaransstad

Wolseley

Worcester

Wynberg [WC]

Zastron

Zeerust

Zwelitsha

3.2.4.3 Data set C

Data set C provided the different types of documents requested by court staff and the

number/ copies of the documents so requested before emoluments attachment orders

would be granted. The data related to 396 courts and were provided in the same

document as data set B. Therefore, the courts (of which the office names were used as

point of departure) highlighted under data set B were excluded from data set C as the

information provided in respect of these courts were in terms of data set B only.

The variables listed hereafter were coded so that '1' indicated that the variable was

relevant to that particular court and 0 indicated that it was not relevant to the court. The

first three variables (i.e. the request for judgment, emoluments attachment order to be

issued by the court and the civil certified extract of judgment) also indicated the number

of copies needed. In this regard, a numerical value higher than 1 was indicated in the

column. The manner in which the data was captured in order to ease the analysis thereof

allowed the assumption that where a '1' was noted in the column (i.e. the number of

copies was not necessarily indicated), it warranted the inference that at least one copy

was needed of the specific document. In this regard, this data set provides a

conservative reflection on the documentary proof to be provided to court.



The following variables were listed with descriptions where this is not self-explanatory:

Request for judgment

Emoluments attachment order

Section 65J(2)(b) certificate

Civil certified extract of judgment

Court cover sheet (for court file)

Original contract

Copy of contract

Affidavit – Copy of contract but no original available

Affidavit – Missing contract and no copy available

Section 129 letter

Proof of postage of Section 129 letter

Letter to employer regarding of intent to issue EAO

Proof of postage of letter to employer regarding intent to issue EAO

Section 57 letter to debtor of acceptance of offer

Letter to debtor re confirmation of judgment

Proof of postage of letter to debtor re confirmation of judgment

Income & expenditure

Certificate of balance (COB received from creditor setting out outstanding balance)

Statement setting out breakdown of handover amount

Attorney's statement of account

Affidavit – Compliance with NCA

NCR certificate

Contract payslip (payslip in terms of contract of employment on date of contracting)

Payslip (payslip on date of signing of the documents provided by the tracer)

Consultant report (report by the tracer with details such as where the debtor was

encountered)

Consultant invoice (invoice for payment of the tracer)

Affidavit of service – signed by the tracer under oath to confirm that the tracer did

meet with the debtor

3.2.4.4 Interviews

In terms of the mandate, the interviewees were to include debt collectors including both

independent collectors and agents of credit providers, garnishee administrators and

garnishee auditors, attorneys, clerks of selected lower courts of South Africa,

magistrates, presiding officers of selected small claims courts, registrars of higher



courts, judges, sheriffs and entities that have instituted investigations into the

irregularities pertaining to debt collection mechanisms such as the National Credit

Regulator, Law Society of South Africa, Task Team on Garnishees and, where possible,

the Department of Justice and Constitutional Development and the National Treasury.

The participation of the above identified role-players was subject to their availability and

willingness to participate in the study, and some requests for participation were

disregarded by persons approached for interviews. In particular, the research team did

not succeed in securing the participation of the entities who had instituted investigations

into the irregularities pertaining to debt collection mechanisms, judges and registrars

and presiding officers of selected small claims courts.

Interviewees were also informed that their specific contribution to the research would

not be revealed unless a preference in this regard was expressed. Therefore, the report

is presented as anonymously as possible with due regard to the wishes of the

participants. The informed consent form is attached hereto as Annexure A.

The purpose of this phase was to obtain information on the issues set out above in

paragraph 3.1 and to:

Discuss the benefits (positive outcomes) as well as the negative outcomes of the

identified debt collection mechanisms;

Ensure that the list of outcomes is comprehensive and discuss root causes of

negative outcomes of debt collection methods;

Ascertain the perspectives of the interviewees on the negative outcomes of debt

collection methods;

Identify and discuss the reasoning behind the approach of role players to negative

outcomes of debt collection methods in the debt collection industry;

Identify and discuss the steps taken by role players to negate or support negative

outcomes of debt collection methods in the debt collection industry; and

Elicit debates on mechanisms to address negative outcomes of debt collection

methods.

Three sets of interview guidelines were drafted but only one used. Specific guidelines

were drafted for the Law Society of the Northern Provinces and the North Gauteng High



Court and these entities ultimately did not participate in the research. The following

guideline was used:

Guideline A (General)

Emolument attachment orders:

1. Do you think that section 45 of the Magistrate’s Court Act (i.e. that parties can consent to the jurisdiction

of a specific Magistrate’s Court) has an impact on practices relating to the obtaining of garnishees in the

country (i.e. on the provision that an emolument attachment order must be obtained within the

jurisdiction of the employer of the employee)?

2. What do you think about the issue of magisterial oversight over the emoluments attachment order

process?

3. What supporting documentation do you think should be required when considering sections 57/58 consent

to judgment and application for emoluments attachment orders?

4. What do you think about aspects relating to the rescission or amendment of emoluments attachment

orders such as lowering the instalment amount and the requirements to comply with the process to allow

for inter alia due process?

5. What is your interpretation and understanding of in duplum (or section 103(5) of the National Credit Act)

with regards to agreements that are subject to garnishee orders, with specific attention given to:

a. Credit agreements,

b. The position prior to the obtaining of judgment,

c. The position after the obtaining of judgment, and

d. Whether legal costs are included or excluded in the rule.

6. In your opinion, what are the amount and breakdown of legal costs that could reasonably be asked for by

a claimant’s attorney against a debtor in the emoluments attachment process?

7. What do you think is the position with regard to the 5% employer’s commission as provided for in section

65 including:

a. Who is entitled to retain the percentage,

b. By whom is it payable, and

c. Whether parties can contract to have another party pay this commission;

8. What do you think is the legal positions of the parties to the emoluments attachment process including:

a. Their rights,

b. Their duties, and

c. The legal relationship between the parties;

9. What do you think is the root causes of the problems associated with emoluments attachment orders:

a. Is it ambiguity in the legislation and how would you propose this be addressed?



b. Is it unethical or fraudulent practices by industry role players and how would you propose this be

addressed?

10. How has industry addressed the issues pertaining to emoluments attachment orders?

Alternatives

11. What are the alternative processes available, such as:

a. Section 57 and 58 acknowledgement of debt and consent to judgment;

b. Section 65 A enquiries;

c. Section 65 J emolument attachment orders;

d. Writs/warrants of execution of movable property;

e. Writs/warrants of execution of immovable property.

12. What are the benefits (positive outcomes) of the identified debt collection mechanisms?

13. What are the issues, difficulties and/or irregularities pertaining to each of the identified alternatives?

14. What are the positive and negative effects and outcomes of these alternatives to emoluments attachment

orders:

a. Does the alternative have the same effect in obtaining the objective of debt collection?

b. Is it efficient with respect to time, human resources and costs?

c. What makes the alternative better than an emolument attachment order?

d. What makes the alternative worse than an emolument attachment order?

e. Can the alternative be used in conjunction with an emolument attachment order to make the debt

enforcement more effective?

Please motivate your answers thoroughly as the researchers are just as interested in your reasoning as your

answers.

Guideline B (Law Society)

1. What are the issues relating to debt collection mechanisms that your offices have been alerted to?

2. Which of these are abusive practices and which relate to ambiguities regarding the mechanisms?

3. Which mechanisms/ protocols does your organisation have in place to deal with these issues/ references?

4. Why do you have these mechanisms/ protocols in place and have they been effective i.e. what have the

outcomes of the application of the mechanisms/ protocols been?

5. What do you think needs to be improved to create an effective debt collection industry and why?

6. What is your opinion on the relevant developments – statutory and industry related – regarding debt

collection mechanisms specifically execution of immovable property, the national credit act and

emolument attachment orders?

We are particularly interested in the regulatory role that your organisation fulfils.



Guideline C (North Gauteng High Court)

Aspects to be discussed:

1. The principles upon which debt collection and debt collection procedures are based;

2. The role of the participants in the industry, especially within the framework of contracting out of

legislation and adhering to legislative provisions;

3. The role of judicial and regulatory oversight in the debt collection industry;

4. An open discussion on challenges that your offices have experienced within the debt collection sphere and

the steps that you have taken to overcome these challenges;

5. An open discussion on the challenges that the debt collection industry (all role-players including credit

providers, debt collectors, attorneys and consumers/ debtors) experiences and that you have observed as

the judiciary.

Source persons

The following persons participated in the research through personal interviews,

group discussions and/or written submissions:

Attorneys & legal advisors

Bentley B Bentley Attorneys, Durban

Bester V Attorney, Human Resources, Goldplatz

Brandt B Potgieter & Beeken Attorneys, eMalahleni

Coetzee S S D Coetzee Incorporated Attorneys, East London

De la Guerra E S D Coetzee Incorporated Attorneys, East London

Earle S Haupt & Earle Attorneys, Mbombela

Fritz S A Deputy Head Legal, Chamber of Mines

Hebrard C Attorney, Solomon Holmes Attorneys, Johannesburg

Horn A Potgieter & Beeken Attorneys, eMalahleni

Various (4) Gerhard van der Merwe Attorneys, Mbombela

Magistrate’s Courts: Magistrate, Clerk and/or Taxing Master

Various (5) Magistrates, Johannesburg Magistrate’s Court

Du Plessis H Magistrate, Tembisa Magistrate’s Court

Joubert V Magistrate, Mbombela Magistrate’s Court



Eckley C Magistrate, Potchefstroom Magistrate’s Court

Kirsten M Magistrate, Potchefstroom Magistrate’s Court

Pieterse A Civil Clerk and Taxing Master, Mbombela

Sheriffs’ offices

Myers H Witrivier/ Nsikazi

Van Nieuwenhuizen H eMalahleni

Mosikili J Potchefstroom

Tayob A Kempton Park North, Tembisa & Midrand

Scheuer M Pretoria East

Britz L Pretoria East

Garnishee Administrators/ Auditors

Various (10) DMC (Pty) Ltd

Niclas N Garnishee Audit Services (Pty) Ltd

Van Heerden F Garnishee Audit Services (Pty) Ltd

Various (3) Summit Financial Services

Registered Debt Collection Agency

Steenkamp O HMP Financial Services

Goosen R HMP Financial Services

Van Zyl K HMP Financial Services

Molefe J HMP Financial Services

Opinions were obtained from two counsel on consents to jurisdiction as well as the

interpretation and implementation of the common law in duplum and section 103(5)

within the context of emoluments attachment orders. The two counsel were Advocate

Piet Louw SC of the Johannesburg Bar and Advocate Leon Dicker of the Pretoria Bar. The

brief for their opinions are set out hereunder in the sections discussing the topics of the

opinions.




Phase three related to the analyses of the data and the writing of the report. The report

was initially to be structured as set out below and according to the mandate. However,

during the course of preparing the report, the research team observed that the core

issues of the research became obscured by discussions and inclusion of ancillary

information purported to support the framework and argument of the issues under

investigation. It is further submitted that the client (and intended beneficiary of the

research) has a basic understanding of the debt collection mechanisms. In this respect,

reiteration of the process as set out in the relevant legislation was avoided as far as

possible. This approach further allows for a high-level and in-depth consideration of the

issues at hand within a manageable frame of information content. For a basic discussion

of debt collection mechanisms, emoluments attachment orders and the irregularities

thereto (with examples), the report titled “The incidence of and undesirable practices

relating to "garnishee orders" – a follow up report” prepared by the University of Pretoria

Law Clinic (team consisting of Ms Charlotte van Sittert as Project Leader and Researcher

and Mr Franciscus Haupt as Consultant) for GIZ can be referred to. This report is also the

primary source referred to for practical examples such as bills of costs for warrants of

execution and abuses where the basic points are illustrated as could be ascertained from

case studies. The point of departure for primary research of this report is the

experiences of practitioners in the credit industry and consistent reference is made

throughout the report to the views, perspectives and approaches of persons working in

the industry. This would prevent the report from becoming a mere black letter law

analysis. The structure of the report has therefore been amended as set out hereafter.

Initial mandate:

The report is preceded by an executive summary;

The first part of the report relates to the research mandate;

The second part of the report was initially intended to consist of the following:

A brief (handbook style) summary the current legal framework for debt collection

in South Africa for orientation purposes;

The identified issues with debt collection and the grouping thereof under

legislative failure, interpretative difficulties and irregular implementation;



The sequence of issues identified followed and divided into subchapters based on

the different debt collection mechanisms; and

A comprehensive argued discussion with a set conclusion on the legislative

failures and interpretative difficulties. As indicated above, this report is not

concerned with irregular implementation such as over-charging, etc. although this

may be noted as such if it is as a result of a legislative failure or interpretative

difficulty. A report on the irregularities pertaining to garnishees has already been

commissioned by a different stakeholder;

The chapter was further intended to compare and analyse the data obtained

during interviews in order to substantiate the arguments set forth in the

discussion;

The third part of the report was intended to consist of an analysis of the remedial

actions identified and proposed by role players including a discussion of the positive

and negative aspects of the proposed actions; and

The fourth chapter was intended to include the conclusion and final

recommendations.

Amended structure:

The report is preceded by an executive summary;

The first part of the report relates to the research mandate;

The second part of the report firstly discusses the economic, political and social

setting of South Africa as far as credit a focal point. The contents of this part were

carefully selected from various sources in order to form the foundation for the legal

discussion. It further provides a brief view of the context within which any

recommendations made to address the identified challenges should function.

Thereafter, the third part sets out the challenges as per the mandate and are dealt

with directly. Reference to the relevant sections of the regulating legislation is made

throughout the discussion. Where relevant, the alternative most suited to address

the challenge (or which would hypothetically become the mechanism of choice in the

absence of e.g. an emoluments attachment order process) is discussed in this

regard. This contextual approach includes:



The identified issues with debt collection and the grouping thereof under

legislative failure, interpretative difficulties and irregular implementation;

The comprehensive argued discussion with a set conclusion on the legislative

failures and interpretative difficulties. As indicated above, this report is not

concerned with irregular implementation such as over-charging, etc. although this

may be noted as such if it is as a result of a legislative failure or interpretative

difficulty. A report on the irregularities pertaining to garnishees has already been

commissioned by a different stakeholder;

A comparison and analysis of the data obtained during interviews in order to

substantiate the arguments set forth in the discussion; and

An analysis of the remedial actions identified and proposed by role players

including a discussion of the positive and negative aspects of the proposed

actions.

The fourth part is a reported analysis of the perspectives and experiences of the

interviewees in respect of the debt collection industry as well as a discussion of the

plausible root causes of adverse outcomes of the process.

The fifth part of the report chapter sets out the conclusion and final

recommendations and the sixth part the research sources;

Annexures B1, B2 and B3 contain the opinions of counsel and Annexure C the list of

potential interviewees contacted but who did not participate. Annexure C is intended

for the attention of the client only as it relates to the mandate of the research team.

No negative inferences were drawn from potential interviewees’ decisions not to

participate in the research.

4 Terminology & Abbreviations

The terminology used to describe the various role players and debt collection

procedures will be specially phrased in order to facilitate the reading of this

report.

Debt collector A person who collects the debt through use of a

recognised debt collection mechanism such as an

emolument attachment order. This could be an



attorney or statutory debt collector or the

creditor’s internal debt collection official.

Statutory debt collector A debt collector registered with the Debt Collectors

Council and complying with the prescriptions set out

in the Debt Collectors Act.

Attorney A person duly admitted by order of the High Court

and allowed to practice as such in any part of the

Republic in accordance with the Attorneys Act 53 of

1979. This term will also generally be used to

describe a candidate attorney, unless specific

reference is made to a candidate attorney. In this

regard, the reference is deemed to refer to the

person completing (a) his or her mandatory year(s)

of articles under contract with an admitted attorney

who has the right to be a principal to the candidate

attorney or (b) at a Law Clinic as part of a year of

community service.

Emolument attachment order An emolument attachment order is an order granted

in terms of section 65J of the Magistrates’ Courts Act

in terms of which an employer is obliged to deduct a

specified amount from the employee debtors’ wages/

salary and pay that amount to the judgment creditor

prior to paying the salary/ wages to the debtor.

Tracer A person that approaches the debtor personally to

deliver documents to the debtor and explain same

e.g. a section 129 notice provided in terms of the

National Credit Act 34 of 2005. The tracer also

negotiates payment arrangements and/or obtains

consents to judgments etc.

The following abbreviations are used interchangeably with the full reference:

Banking Association of South Africa BASA

Basic Conditions of Employment Act 95 of 1997 BCEA



Commission for Conciliation, Mediation and Arbitration CCMA

Debt Collectors Act 114 of 1998 DCA

Emoluments Attachment Order EAO

Law Society of South Africa LSSA

Law Society of the Northern Provinces LSNP

Magistrates’ Courts Act 32 of 1944 MCA

Magistrates’ Courts Rules MCR

National Credit Act 34 of 2005 NCA

National Credit Regulator NCR

NCR Consumer Credit Market Report CCMR

NCR Credit Bureau Monitor CBM

Statistics South Africa StatsSA



Part 2 – Framework

1 Industry Profile: Debt in South Africa

A macro-view of debt, debt collection and debt repayment shows many economic, social,

political and legal facets. It is intricately linked with the creditor and consumer, who are

the primary stakeholders in debt, although less intimately involved in managing and

directing the debt collection procedures. The credit-debt relationship between the

creditor and debtor is based in a legally-enforceable contractual agreement of rights and

obligations. From a pure legal perspective, the basic requirements for a recognised

contract are that parties, who are in law duly capacitated to act, reach consensus with

regard to determined rights and obligations, to enter into a lawful contract which poses

the possibility to be performed and, where prescribed, the contract complies with legal

formalities.14 The crux of a contract is that it is founded in law and that judicial remedies

are available to assist with enforcing compliance.15

However, as debt collection has a legal obligation at heart, the primary value is the

recovery of a pecuniary benefit i.e. value to which the creditor’s estate is entitled. In this

regard, the process of debt collection is often extensive prior to the actual institution of

legal enforcement proceedings. Some creditors engage with the debtor as soon as first

default occurs, arranging for rescheduling of payment where needed in order to

maximise returns. Extra-judicial steps such as referral to debt collectors who engage

with the debtor further to obtain payments may be favoured prior to judicial

enforcement and especially where the legal options are limited. In this regard, processes

that effect expeditious and continuous payments at a low cost to the creditor, is

favoured.

Recovery of debt is entirely dependent on the objective ability of the debtor to repay the

debts. Whilst an inclination or willingness to either pay or avoid creditors maliciously, the

stark reality is that recovery of debt from a debtor who has no income or assets will be a

futile and expensive exercise when considering the outcome. Uncertainty relates to

whether the debtor’s financial circumstances will improve and, if so, whether optimal

enforcement in order to attain the main objective of fiscal return will again destabilize a

potential fragile consumer. The further consideration is whether the creditor can afford

14 Hutchison (ed) The Law of Contract in South Africa 2009 6.

15 Hutchison (ed) 2009 7.



the loss of income from a business perspective and bear the costs of attempts to recover

the debt, especially where the services of external professionals such as attorneys are

employed. In this regard, notwithstanding the law of obligations, debt collection has a

very real social and economic impact on a micro (consumer) level.

In light of the above, the landscape of debt collection changes when the perspective

changes and in order to substantiate the principled approach and subsequent remedies

set out below, the following section presents a brief overview of selected perspectives.

1.1 Economic position

As at June 2013, the South African Credit Industry supported 20.21 million credit active

consumers,16 out of a human population of approximately 52 million.17 The credit

bureaus held records in excess of 43.72 million for individuals, of which 46.2% were

credit-active.18 The remaining 53.8% records were not credit-active and the information

held related to identification of the individual. The number of accounts was recorded at

71.20 million.19 An analysis of consumer credit data indicated that 52.0% of credit-active

consumers' records were in good standing (10.52 million), whilst the number of accounts

in good standing totalled 73.5% (52.33 million).20

The total outstanding gross debtor's book as at June 2013 equalled R1.47 trillion of

which R168.06 billion (11.46%) comprised of unsecured debts and R870.71 million

(0.06%) of short-term agreements.21 It must be noted that the information only reflects

that of credit providers who are required to be registered in terms of the National Credit

Act and therefore excludes lenders with less than 100 credit agreements or of which the

value of the credit agreements (excluding incidental credit agreements) is less than

R500 000.00 in debts outstanding under credit agreements.22 Furthermore, only credit

16 CBM June 2013 1, available at http://www.ncr.org.za/publications/Consumer%20Credit%20Report/cbm_ 2ndQ/CBM%20June%202013.pdf, site accessed 27 October 2013. The information contained in this publication is based on information held by registered credit bureaus as per the provisions of the NCA.

17 StatsSA October 2012 available at http://www.info.gov.za/aboutsa/people.htm and http://www.statssa. gov.za/Census2011/Products.asp, site accessed 17 July 2013. The source reported 51.8 million in 2012, hence the reference to ‘approximately’ as this may logically have changed in the interim.

18 CBM June 2013 2.

19 CBM June 2013 1.

20 CBM June 2013 2 & 3.

21 CCMR June 2013 1, available at http://www.ncr.org.za/publications/Consumer%20Credit%20Report/ ccrm_2ndQ/CCMR%20Q2-Changes,%20F.pdf, site accessed 27 October 2013.

22 CCMR June 2013 2.



http://www.ncr.org.za/publications/Consumer%20Credit%20Report/cbm_%202ndQ/CBM%20June%202013.pdf

http://www.ncr.org.za/publications/Consumer%20Credit%20Report/cbm_%202ndQ/CBM%20June%202013.pdf

http://www.info.gov.za/aboutsa/people.htm

http://www.ncr.org.za/publications/Consumer%20Credit%20Report/%20ccrm_2ndQ/CCMR%20Q2-Changes,%20F.pdf

http://www.ncr.org.za/publications/Consumer%20Credit%20Report/%20ccrm_2ndQ/CCMR%20Q2-Changes,%20F.pdf

providers with annual disbursements exceeding R15 million is expected to report on a

quarterly basis to the National Credit Regulator.23 Credit providers with annual

disbursements less than R15 million, are expected to provide annual returns.24 The

distribution of credit extended is set out in the following table, depicting the credit

granted per industry:25

CCMR June 2013 4: Credit per industry

The term 'other credit providers' refer to pension backed lenders, developmental lenders,

micro-lenders, agricultural lenders, insurers, non-bank mortgage lenders and securitised

debts.26

25.2% were unemployed as at the first quarter of 2013 when considering the 33.2

million of the population who are estimated to be between the ages of 15 and 64.27

Approximately 8 million of the 13.6 million employed persons28 were estimated to be

employed in the formal sector.29 The following data is reflected in the South African

Reserve Bank's Quarterly Bulletin for June 2013:30





27 Stats SA Quarter 1 2013 Statistical Release P0211, available at http://www.statssa.gov.za/publications/ P0211/P02111stQuarter2013.pdf, site accessed 17 July 2013: “The Quarterly Labour Force Survey (QLFS) is a household-based sample survey conducted by Statistics South Africa. It collects data on the labour market activities of individuals aged 15 years and above who live in South Africa. However, this report only covers labour market activities of persons aged 15 to 64 years.”

28 SARB Quarter 2 (June) 2013 19, available at http://www.resbank.co.za/Lists/News%20and%20Publicatio ns/Attachments/5772/01Full%20Quarterly%20Bulletin%20-%20June%202013.pdf, site accessed 27 August 2013.

29 GIZ 2013.

30 SARB June 2013 19.



http://www.statssa.gov.za/publications/%20P0211/P02111stQuarter2013.pdf

http://www.statssa.gov.za/publications/%20P0211/P02111stQuarter2013.pdf

http://www.resbank.co.za/Lists/News%20and%20Publicatio%20ns/Attachments/5772/01Full%20Quarterly%20Bulletin%20-%20June%202013.pdf

http://www.resbank.co.za/Lists/News%20and%20Publicatio%20ns/Attachments/5772/01Full%20Quarterly%20Bulletin%20-%20June%202013.pdf

Stats SA: Labour Market Statistics

9.69 million consumers reportedly had impaired records (48.0%)31 whilst the number of

impaired accounts totalled 18.87 million (26.5%).32 16.78 million enquiries received by

credit bureau on consumer records related to tracing or was made for debt collection

purposes.33 This indicated a 10.7% quarter-on-quarter increase (i.e. when compared to

the period ending March 2013) and a 26.9% increase when compared to the period

ending June 2012.34

The following table illustrates the number of applications received and rejected by

registered credit providers:35

CCMR June 2013 4: Applications received and rejected

In the light of the reported proximity between unsecured lending, emoluments

attachment orders and unscrupulous debt collection practices,36 as well as the

31 CBM June 2013 1.

32 CBM June 2013 3.

33 CBM June 2013 4.

34 CBM June 2013 4.




recommendations set out below, the following graphs serve to illustrate the span of the

unsecured and short-term lending market within the broad parameters relating to

reporting requirements set out above. The first set of tables sets out the unsecured

credit and short term credit granted respectively in relation to the gross monthly income

of individuals (number of agreements). The second set illustrates the rand value for

these types of agreements and the third set the number of agreements per size.37

Unless specifically indicated as otherwise, the discussion relates to the NCR data for the

second quarter of 2013.

The data relating to the number of agreements in relation to level of income of

consumers illustrate that approximately half of the unsecured credit extended are to

consumers with gross income equal to or less than R10 000. Whilst the year-on-year

analysis shows a decrease of 12.79%, the favoured extension to this income group has

not changed. A similar position is reflected for short-term credit extension; although the

percentage share of credit extended to persons with gross income equal or less than R10

000 is notably higher at 62.44%.

CCMR June 2013 15: Unsecured loans number of agreements when considering gross monthly income of

individuals

36 Various interviewees noted this – during many interviews, when generally asked what the major issues were which negated the success of the debt collection process, reckless credit and behaviour of stakeholders were noted. One interviewee was of the opinion that unlawful credit extension processes led to unlawful debt collection practices and adjusted the company’s debt collection policies accordingly. See also Moneyweb (author: Malcolm Rees) ‘Mines to investigate garnishees’ 3 April 2013 available at http://www.moneyweb.co.za/moneyweb-economic-trends/mines-to-investigate-garnishees, site accessed 25 July 2013 and Moneyweb (authors: Malcolm Rees, Dane Volker) ‘Garnishees ‘exploit all South Africans’ – Webber Wentzel’ 15 August 2013 available at http://www.moneyweb-financial/garnishee s-exploit-all-south-africans-webber-wentzel, 28 August 2013.

37 CCMR June 2013 15, 16 & 18.



http://www.moneyweb.co.za/moneyweb-economic-trends/mines-to-investigate-garnishees

http://www.moneyweb-financial/garnishee%20s-exploit-all-south-africans-webber-wentzel


CCMR June 2013 18: Short term agreements number of agreements when considering gross monthly income

of individuals

The following two tables reflect that the largest segment in value of unsecured credit is

extended to the income group with a gross income that exceeds R15 000 (45.61%). The

lowest income group, in respect of which the highest number of agreements was entered

into, reflects 34.24% in respect of the value distribution re share of credit granted. In

respect of short term credit agreements, the lowest income group reflects a value share

of 49.45% of the share of credit granted and the highest income group 30.82%.

CCMR June 2013 16: Unsecured loans rand value of agreements when considering gross monthly income of

individuals

CCMR June 2013 18: Short term agreements rand value of agreements when considering gross monthly

income of individuals



The next set of tables reflects the number of agreements in relation to the value of the

agreements. The data for the unsecured credit agreement category reflects that the

most credit agreements were entered into where the value of the agreement was higher

than R15 000 (31.35%). The second highest number of agreements entered into were

valued equal or less than R3 000 (24.42%). The data pertaining to short-term

agreements reflects an overwhelming 48.61% extension of credit to the value of R1 000

or less. The second lowest value category (exceeding R1 000 up to and including R2

000) provides the value of choice for the second highest number of agreements

(27.80%) entered into with consumers.

CCMR June 2013 15: Unsecured loans agreements number per agreement size

CCMR June 2013 18: Short term agreements number per agreements size

The debt-to-disposable income ratio of South African households is reported at 75.8%.38

38 Reported on 10 September 2013 by Fin 24 at http://www.fin24.com/Economy/SAs-housholds-remain-vulnerable-20130910, site accessed 12 October 2013: “The South African Reserve Bank's quarterly measure of household sector credit growth slowed further from 9.2% year-on-year in the first quarter to 7.9% in the second. Nominal disposable income growth slowed from 8.6% to 7.8% over the same two quarters. The net result was a rise in the household debt-to-disposable income ratio from a first quarter’s 75.4% to 75.8% in the second quarter.”



http://www.fin24.com/Economy/SAs-housholds-remain-vulnerable-20130910


The following tables set out a judicial perspective on civil debt:39

STASSA July 2013 2

STASSA July 2013 4

STASSA July 2013 6

39 http://www.statssa.gov.za/Publications/P0041/P0041July2013.pdf Statistics of Civil Cases for Debt July 2013 2, 4 & 6.



http://www.statssa.gov.za/Publications/P0041/P0041July2013.pdf

STASSA July 2013 3

STASSA July 2013 3

It was interesting to note that two of the magistrates’ courts of different provinces

interviewed indicated, out of their own volition i.e. without being prompted to provide an

opinion on same, that the incidence of civil litigation in respect of debt is declining.40 The

reasons provided for these opinions, however, differed from the use of ‘contingency

agreements’ to ‘economic circumstances’. In one instance, the interviewed magistrates

indicated that the prevalence of debtors in the section 65 courts was probably due to

40 Interviews dated 9 & 18 September 2013.



their changed economic circumstances. This aspect will be elaborated below, but it was

also interesting to note that two attorneys’ firms indicated that they preferred ‘soft-

collections’ i.e. call centres and debit order payments as it proved to be more resource

effective (in respect of time and human resources when considering the returns) over

the court processes to collect debt. One was an established firm and the other a firm

whose intentional expansion into the debt collection arena is relatively recent.

1.2 Political position

Credit extension has always been a core feature of any sovereign economy. In South

Africa, multiple comprehensive and high-impact consumer/ business protection/

rehabilitation statutes were introduced in the past five years – the National Credit Act,

2005; Consumer Protection Act, 2008 and Companies Act, 2011. An increased

awareness of the vulnerability of the consumer and the creditor has developed on both a

national and international scale.41

However, in the context of credit extension, the introduction of the legislation has not

been effected without the due recognition of the economic importance of both parties to

the credit agreement. This has resulted in policy trade-offs between access to credit and

state protection of vulnerable (both in terms of education, bargaining positions and

income) consumers.42

It seems as if there is a growing realisation that the phases in the life-span of a contract

are intricately linked and that the consumer credit health throughout the contract is

important in order to effect returns. This necessitates that 'credit providers [should] take

a longer-term view on their products and services'43 and engage with a struggling

consumer in a constructive manner.44 The extension of credit can be directly relevant to

the need and requirements for the enforcement of the contractual obligations, hence the

interrelation between extension of reckless credit and debt collection.45

The behavioural strategy of credit providers differs depending on a variety of factors.

Some may tolerate high-risk lending consumer profiles, i.e. enlarging the 'net' when it

41 Interviews dated 18 & 19 September 2013.

42 DTI Making Credit Markets Work 2004 paras 1.12-1.14, available at http://www.ncr.org.za/publications/ Background_NCA_ docs/Credit%20Law%20Review.pdf, site accessed 27 October 2013.

43 DTI 2004 par 4.14.

44 Interview 8 August 2013.

45 Various interviews, specifically 8 August 2013.



http://www.ncr.org.za/publications/%20Background_NCA_%20docs/Credit%20Law%20Review.pdf

http://www.ncr.org.za/publications/%20Background_NCA_%20docs/Credit%20Law%20Review.pdf

comes to credit extension to a larger number of consumers by strategizing a high-risk

appetite. The risk profile of the consumer will then be reflected in the interest rate,

which can be up to 60% per annum, excluding any further charges and costs, if the loan

is classified as a short-term credit agreement. The risk of default is ameliorated by both

the higher interest rate as well as the performance of non-defaulting portfolios and that

of the consumer who does perform in terms of the contract prior to default. In this

regard, lesser reliance is necessarily placed on debt collection strategies or fast and

guaranteed mechanisms such as emoluments attachment orders are used.

On the other hand, more conservative credit providers who have lower risk-appetites

may select clients more carefully. In this regard, access to credit is restricted to credit

users that do not fall within the scope of the profile set for a low-risk consumer. The risk

of default is lessened, but a reasonable expectation also exists that debt collection

mechanisms will be notably successful. The 2004 consumer credit policy noted that

investment risk and uncertainty is exacerbated where debt collection mechanisms are

expensive and the returns uncertain or disappointing.46 This particularly pertains to low-

income consumers.47

It is therefore arguable that compliance with legal and ethical standards during the pre-

enforcement phase (contracting phase) may directly influence the contract enforcement

phase. One interviewee indicated that the company maintains a strict professional

understanding between the debt collector, credit provider and legal representative.48 The

debt collector and legal representative are actively involved in the development and

monitoring of the contracting phase of the credit provider to ensure that proper

disclosure and affordability assessments are done. The debt collector is further the only

collector for the particular credit provider in order to be in a position to take

responsibility (especially reputational responsibility) for the debt collection practices. The

use of in-house tracers trained by the debt collector further facilitates quality assurance

and reduces the risk of abuse and irregularities.

However, even though the legislation is clear, neither compliance with legislative

provisions nor fairness in dealing between parties is guaranteed at these phases.

46 DTI 2004 par 14.3.1.

47 DTI 2004 par 14.3.1.




Within the South African context, thoughtless intervention in order to curb abuses

without a proper consideration of the role of the abused mechanism and the root causes

of the abuse can have dire consequences. Where options for effective contract

enforcement are limited, undesired lending practices may increase due to the need for

increased numbers of consumers to alleviate the burden of non-performing and non-

recoverable portfolios i.e. large numbers of 'up-front' consumers, small rates of recovery

and incidences of consumer subsidisation.

The alternative to the above is restricted credit extension as the debt collection process

is not as effective as should be. Undesirable mechanisms of debt recovery such as 'card

and pin' or reliance on unscrupulous lenders for 'easy' money may become more wide-

spread than it already is. In essence, due compliance with legislative provisions may

disadvantage the complying credit providers and debt collectors from a competitive point

of view.

The focus on debt recovery, whilst a prominent feature under consideration when the

National Credit Act was developed and drafted, was amplified in August 2012 when

investigations into the Marikana strike and the repercussions thereof shed some light on

the financial state of the participating mine workers.49 Over-indebtedness, reckless credit

extension, credit extension policies and debt collection methods became the focal point

for massive (and multiple) investigations and attempted remedial action.50 The following

49 See e.g. Moneyweb 3 April 2013. Also see the commentary on this article where it was indicated that a relation between over-indebtedness/ emoluments attachment orders and the Marikana strike cannot be sustained.

50 See e.g. Polity.org.za (author: Manie van Schalkwyk) ‘SA: Statement by Manie van Schalkwyk, Credit Ombud, on task team established to investigate garnishee orders in credit industry’ 27 February 2013

A modern credit-based economy should facilitate broad access to credit at affordable rates

through the widest possible range of credit products (secured and unsecured) inspired by a

complete, integrated and harmonized commercial law system designed to promote –

affordable, transparent and reasonably predictable mechanisms to enforce unsecured and

secured credit claims by means of individual action (e.g. enforcement and execution) or

through collective action and proceedings (e.g. insolvency). In view of the time, cost and

uncertainty of enforcement actions, there is limited reliance on the courts. It should be

noted that South Africa requires resort to the courts for any orders to repossess security,

movable or immovable, unless parties agree to determine possession between themselves.

Delays in the operation of the court system may result in depreciation of asset values.

Delays may be attributed more to the institutional aspects of the administration of justice

than to the procedural rules. An exception to the prohibition of out-of-court enforcement

refers to intangible assets and movable goods which are not in possession of the debtor, in

which case it is possible to establish contractual mechanisms for the enforcement of the

secured claim. ~ World Bank June 2012



investigations and/or industry actions were undertaken in the August to August 2012 –

2013 period:

The major retail banks, Banking Association of South Africa, National Treasury, South

African Reserve Bank and Financial Services Board met in August and October 2012.

Ultimately, the Banking Association and Minister of Finance released a joint

statement in November 2012 in which a commitment to combat over-indebtedness

was expressed as well as an undertaking not to utilize garnishee orders as a method

of debt collection.51

Treasury announced its intention to abolish garnishee orders.52

A NISC Task Team (National Industry Steering Committee) with Credit Ombud Manie

van Schalkwyk as Chair was created in order to draft Codes of Conduct for role-

players in the emoluments attachment order sphere.53

The Banking Industry (through the medium of BASA) is in the process of finalizing a

framework to inter alia provide for emoluments attachment orders to be the last

available option to collect delinquent debts.54

Other investigations by the National Credit Regulator, Department of Justice and

Constitutional Development, attorney's firm ENS and other stakeholders have been

undertaken.55

available at http://www.polity.org.za/article/sa-statement-by-manie-van-schalkwyk-credit-ombud-on-task-team-established-to-investigate-garnishee-orders-in-credit-industry-27022013-2013-02-27, site accessed on 22 July 2013.

51 http://www.treasury.gov.za/comm_media/press/2012/2012110101.pdf, site accessed 27 October 2013; Moneyweb (author: Pravin Gordhan and BASA) ‘Joint statement by the Minister of Finance and the chairperson of the Banking Association of South Africa’ 1 November 2012, available at http://www.money web.co.za/money web-financial/joint-statement-by-the-minister-of-finance-and-the, site accessed 27 October 2013; Moneyweb 3 April 2013. However, also see Mail & Guardian (author: Chantelle Benjamin) ‘Debt control: A political hot potato’ 16 August 2013 http://mg.co.za/article/2013-08-16-00-debt-control-a-political-hot-potato, site accessed 27 October 2013, reporting that ‘[t]he statement was later retracted by Basa’.

52 Polity.org.za 27 February 2013.

53 Polity.org.za 27 February 2013; Moneyweb 3 April 2013; Mail & Guardian 16 August 2013.

54 BD Live (author: Gillian Jones) ‘Abuse of garnishees to be reined in’ 26 August 2013 http://www.bdlive.co .za/business/financial/2013/08/26/abuse-of-garnishee-orders-to-be-reined-in, site accessed 27 October 2013.

55 Finweek ‘Garnishee orders: continued abuse and exploitation’ 31 October 2012 http://finweek.com/2012/ 10/31/garnishee-orders-continued-abuse-and-exploitation/, site accessed 27 October 2013; Financial Mail (author: Stafford Jones) ‘Garnishee orders set to hit debt-strapped consumers’ 31 January 2013 http:// www.financialmail.co.za/economy/local/2013/01/31/garnishee-orders-set-to-hit-debt-strapped-consu



http://www.polity.org.za/article/sa-statement-by-manie-van-schalkwyk-credit-ombud-on-task-team-established-to-investigate-garnishee-orders-in-credit-industry-27022013-2013-02-27


http://www.treasury.gov.za/comm_media/press/2012/2012110101.pdf

http://mg.co.za/article/2013-08-16-00-debt-control-a-political-hot-potato


http://finweek.com/2012/%2010/31/garnishee-orders-continued-abuse-and-exploitation/


However, although there have been extensive media coverage relating to emoluments

attachment orders, the reports have been restricted to statements relating to uncovered

irregularities, the number of garnishees and the estimated number of illegal/ irregular

emoluments attachment orders and the intended actions to be taken.

Up to now, apart from publishing the intended amendments to the Magistrates' Courts

Act, no concrete solutions or logical conclusion of the attempts of all the above-

mentioned parties have been released into the public domain for commentary. Although

it has been shown through various research reports that abuses are rife, the statistical

evidence upon which the allegations of the number of irregularities, illegal emolument

attachment orders and abuse is based, has not been released into the public domain.56

On a higher level, government policy makers are consistently concerned with the

indebtedness and social welfare of the inhabitants of this country.57 In a similar fashion,

the right and ability to recover responsible credit debts has been recognized in legislation

that has consumer protection as one of its core objectives.

The draft policy framework for consumer credit published in May 2013,58 reiterates that

“as a policy of the NCA was always to balance the respective rights and obligations of

consumers and credit providers, this approach has encouraged the consideration of the

economic interests of all stakeholders in a responsible manner. So, for example, while a

consumer may apply through the process of debt review for re-scheduling of debts, the

rights of credit providers to ensure ultimate settlement of the consumer’s obligations

have remained”.

mers, site accessed 27 October 2013; Moneyweb (author: Ryk van Niekerk, Malcolm Reese) ‘State concerned over garnishee abuse’ 27 February 2013 http://www.moneyweb.co.za/ moneyweb-2013-bud get/state-aware-of-garnishee-abuse-and-reckless-lendin, site accessed 27 October 2013.

56 The allegations of irregular garnishees have ranged from statements noting that 'garnishees ‘exploit all South Africans’ – Webber Wentzel' (Moneyweb 15 August 2013) to percentages ranging from 95% (Debtfree DIGI ‘SA’s New Apartheid – Debt Slavery for 50% of SA Workers’ 26 August 2013 available at http://debtfreedigi.co.za.sas-new-apartheid-debt-slavery-for-50-of-za-workers/, site accessed 28 August 2013) to 10-15% (Polity.org.za 27 February 2013). See also Business Report (author: Ann Crotty) ‘Garnishee orders escalate woes for cash-strapped consumers’ 26 August 2013 http://www.iol.co.za/ business/news/garnishee-orders-escalate-woes-for-debt-stressed-consumers-1.1567846#.Um02b9VAHIU, site accessed 27 October 2013, reporting 3 million garnishees of which 85% are estimated to be illegal.

57 See e.g. the policy documents in respect of the National Credit Act – prior to the implementation fo the NCA (Making Credit Markets Work, 2004) and prior to the proposed amendments to the NCA (Draft National Credit Act Policy Review Framework, 2013).

58 GG 36504 of 29 May 2013, GN 559 Draft National Credit Act Policy Review Framework, 2013 par 1.8.4.



http://www.moneyweb.co.za/%20moneyweb-2013-bud%20get/state-aware-of-garnishee-abuse-and-reckless-lendin

http://www.moneyweb.co.za/%20moneyweb-2013-bud%20get/state-aware-of-garnishee-abuse-and-reckless-lendin

http://debtfreedigi.co.za.sas-new-apartheid-debt-slavery-for-50-of-za-workers/

http://www.iol.co.za/%20business/news/garnishee-orders-escalate-woes-for-debt-stressed-consumers-1.1567846%23.Um02b9VAHIU


1.3 Legal position

Debt collection is a collective term which can be interpreted to include every step,

whether directly related to legal proceedings or not, used to collect a debt due to a

creditor.59 It can, in a broad sense, refer to both lawful and unlawful proceedings ranging

from administrative tasks to physical intimidation and illegal repossessions of assets.60

This wide term will include the participation of both legal professionals, the judiciary,

other court officials as well as registered debt collectors, ‘in-house’ collectors for

creditors or lay persons with informal training.61 However, where debt collection is

regarded in a manner restricted to judicial processes, this relates to mechanisms

founded in procedural laws,62 although it may not necessarily be reserved for the

services of qualified legal practitioners.

The legal framework for debt collection is set out in the South African common law and

various statutes. The constitutional dispensation has resulted in many traditional

principles and mechanisms conforming to a changed regime based on an open and

democratic society.63 In a similar fashion, consumer protection legislation have codified

and reinforced principles relating to fairness and reasonableness in usable formats.

The section hereafter is concerned with the current legal framework for debt collection in

South Africa and is intended to provide a broad overview of the available mechanisms for

orientation purposes. However, the basic principles underlying the regime need to be

discussed in order to provide a foundation for the discussion that follows.

59 Du Plessis & Goodey Practical Guide to Debt Collection 2003 1.

60 Du Plessis & Goodey 2003 1.



63 Preamble, Constitution. See also Campbell “The in duplum Rule: Relief for consumers of excessively priced small credit legitimised by the National Credit Act” South African Mercantile Law Journal 2010 (22) 1: “Contract provisions that are contrary to public policy, as fortified by constitutional values, may be declared unenforceable”.



2 Debt Collection Profile: Recovery Procedures in South Africa

2.1 Introduction

A principle-based approach was followed when evaluating and reporting the findings of

the research. The principles were identified through desk and field research and divided

into two categories. The first related to the principles of civil procedure and the second

to the substantive nature of debt collection.

The negative outcomes of debt collection mechanisms, as identified through the course

of the research, will be listed at a later stage and categorised under legislative failure,

interpretative difficulties and irregular implementation.

2.2 Principles

Principles relating to the constitutional dispensation and common law heritage

of South Africa

Basic principles underlie the South African civil procedural law.64 The principles are both

constitutionally entrenched or gained from the common law heritage.65 The Constitution

introduced certain procedural guarantees such as access to courts and due process (fair

trial), albeit for either civil or criminal litigation.66 It also introduced basic human rights

which is applicable to societal interaction and, in relation to contracts for purposes of this

discussion, to pacta sunt servanda and public policy. Ngcobo J in the Constitutional Case

of Barkhuizen v Napier67 set out the following guidelines:

“[29] What public policy is and whether a term in a contract is contrary to public policy must now

be determined by reference to the values that underlie our constitutional democracy as given

expression by the provisions of the Bill of Rights. Thus a term in a contract that is inimical to the

values enshrined in our Constitution is contrary to public policy and is, therefore, unenforceable.

64 Theophilopoulos et al Fundamental Principles of Civil Procedure 2012 2-3.

65 Theophilopoulos et al 2012 2-3.

66 Theophilopoulos et al 2012 2-3; De Vos “The impact of the new constitution upon civil procedural law” Stellenbosch Law Review 1995 (1) 34; De Vos “Civil procedural law and the constitution of 1996: an appraisal of procedural guarantees in civil proceedings” Journal for South African Law 1997 (3) 444.

67 2007 (5) SA 323 (CC) paras 29 & 30, available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZA CC/2007/5.html&query=barkhuizen%20v%20napier, site accessed on 27 October 2013. In footnote 12, the court refers to section 1 of the Constitution: “The Republic of South Africa is one, sovereign, democratic state founded on the following values: (a) Human dignity, the achievement of equality and the advancement of human rights and freedoms.”



http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZA%20CC/2007/5.html&query=barkhuizen%20v%20napier

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZA%20CC/2007/5.html&query=barkhuizen%20v%20napier

[30] In my view, the proper approach to the constitutional challenges to contractual terms is to

determine whether the term challenged is contrary to public policy as evidenced by the

constitutional values, in particular, those found in the Bill of Rights. This approach leaves space for

the doctrine of pacta sunt servanda to operate, but at the same time allows courts to decline to

enforce contractual terms that are in conflict with the constitutional values even though the parties

may have consented to them.”

Two notably entrenched principles of civil procedure deserve mention. The first is the

principle of audi et alteram partem which embodies the principle to inform and to be

informed of the case upon which the litigant has to answer.68 In civil procedure, the rules

of court pertaining to clarity in drafting and remedies available such as exceptions,69 etc.

serves as examples. However, various recent policy developments relating to consumer

protection begs the consideration (ranging from legality to morality) of the degree of

protection of the opposing party: To which extent, apart from considerations of fairness

and due process, do the parties need to protect the affairs of the opposing party?70 The

second principle relates to the access to impartial judicial/ tribunal oversight over a

matter which incorporates a value judgment (in respect of reasonableness) when

considering duration and costs of litigation.71

Principles relating to the substantive nature of debt collection

Debtor to honour contractual repayment of debt72

The basic principle that underlies debt collection is that the debtor should repay the debt

and that mechanisms should exist to incentivise repayment. This basic principle further

underlies various practices such as contractual agreement of payment by the debtor of

any and all costs, fees and charges incurred by the creditor in the course of collecting

the debt.

The rationale is that the non-adherence by the debtor to the contract should not

adversely impact the creditor financially when recovering the debt.73 However, in the

68 Theophilopoulos et al 2012 3.

69 In terms of the rules of court, a party must make out a proper cause of action in its pleadings in such a comprehensive manner that the opposing party knows what the case against it is and upon which it has to answer. If this is not clear, the opposing party may raise an exception (e.g. where no cause of action is made or the pleading is vague and embarassing/ bad in law) which may lead to the pleading's amendment or even the failure of the party's case in court.

70 See e.g. Business Report 26 August 2013.


72 Submissions received 19 September 2013.



context of pacta sunt servanda recent developments in consumer protection relating to

consumer contracts are of importance and considerations of fairness in contracts under

the Consumer Protection Act need to be considered. In respect of substantive fairness in

contracts, this form of fairness can either be ascertained objectively (‘generalised’) or

with reference to the debtor’s individual circumstances (‘individualised’).74 An argument

can be made out that the debtor should be treated reasonably when considering the

debt, interest accrued and costs incurred and that incidences where the debtor repays

the capital multiple times over, is unreasonable and unfair.

Notice and opportunities to repay

In general, the phases of debt collection including collection of unsecured or short term

debts as implemented by creditors and collectors, often allow for engagement with the

debtor and multiple opportunities to effect payment.75 Judicial debt recovery

mechanisms are, under these circumstances, methods of last resort. The creditor

implements an in-house debt recovery process, whereafter outsourcing of recovery

services, including tracing services, to debt collectors takes place. If the informal

negotiations with the debtor fail, the matter is referred for judicial collection, either via

the debt collector or from the creditor to the attorney. The necessary documentation e.g.

section 57/ 58 and consents to emoluments attachment orders are drafted and obtained

by the debt collectors, which may in a similar fashion as attorneys and after

amendments to the Debt Collectors Act, recover fees for this service. Processing of these

documents to obtain judgment and issue the emoluments attachment order is, however,

restricted to the services of attorneys. Recorded incidences have been noted where the

73 Various interviews. See also Intercontinental Exports (Pty) Ltd v Fowles 1999 (2) SA 1045 (SCA), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/1999/15.html&query=intercontinental%20 exports%20%28pty%29%20ltd%20v%20fowles. At par 27, the court notes the following with respect to costs: “By stipulating for attorney and client costs a party seeks even greater indemnity for costs incurred through having to pursue a claim in court.” See also the reference to Sapirstein and Others v Anglo African Shipping Co (SA) Ltd 1978 (4) SA (A) 14: “The purpose of an award of costs is to indemnify a party ‘for the expense to which he has been put through having been unjustly compelled either to institute or defend litigation, as the case may be’ ...and, if a contracting party wants to ensure that he is fully indemnified against such expenses, there is in my view no reason why he should not be entitled to stipulate that such costs be, if incurred, should be paid on the attorney and client scale”.

74 Stoop “The concept ‘fairness’ in the regulation of contracts under the Consumer Protection Act 68 of 2008” June 2012 212-213, available at www.academia.edu/2444498/The_concept_fairness_ in_ the_ regulation _of_contracts _under_the_Consumer_Protection_Act_68_of_2008, site last accessed 7 September 2013.

75 It seems as if creditors where a depreciating asset is involved as a form of security, is more inclined to proceed to judicial enforcement through summons, judgment and execution after preliminary -discussions with the debtor failed. Interviews 12 June, 8 August & 19 September 2013.



http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/1999/15.html&query=intercontinental%20%20exports%20%28pty%29%20ltd%20v%20fowles

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/1999/15.html&query=intercontinental%20%20exports%20%28pty%29%20ltd%20v%20fowles

duration of process to interaction with the debtor, from initial default to ultimate

judgment, has exceeded half a decade.76

The debtor further has to receive statutory notices of default, informing him or her of

default, the extent of the default, the rights of the debtor and the intention to proceed

with further legal steps.77 The rules of the court prescribe that certain information has to

be on the court documents informing the debtor of the nature of the matter and the

steps that he or she subsequently has to take.78 The sheriff is further tasked by

legislation to explain any documentation served on the debtor to the latter.79

In this regard, the option of using sections 57 and 58 consents to judgment through

personal interaction with the debtor versus directly issuing summons and taking default

judgment needs to be considered. On a basic tariff (party- and- party) basis for a debt

less than R12 000, the costs will, conservatively calculated on necessary documentation

to obtain judgment, compare as follows:80

Section 57/58 Summons (undefended action resulting in default judgment)

Taking of Instructions

Section 57(1)/ (3) or Section 58(2) letter

Admission of liability in terms of section 57 or Consent to judgment in terms of section 58

Total

R98.00

R30.00

R79.00

R109.00

Taking of Instructions

Section 56 letter of demand

Summons

Notice in terms of rule 12(2)

Judgment

Total

R98.00

R29.00

R98.00

R47.00

R98.00

R272.00

76 Investigation by University of Pretoria Law Clinic, reference to report used with permission but subject to request from copyrightholder to remain anonymous. Hereinafter referred to as ‘UPLC Investigation’.

77 See e.g. rule 4 of the Magistrates’ Courts Rules, section 56 of the Magistrates’ Courts Act and section 129 of the National Credit Act.

78 See e.g. sections 5 – 6 of the Magistrates’ Courts Rules as well as the pro forma notices in Annexure 1 to the MCR.

79 See also the informative explanation on the duties of the sheriff drafted and obtained by the Sheriff for Kempton Park North, Tembisa and Midrand included below.

80 The costs of the sheriff and ancillary costs to serve/ send the relevant documentation to the debtor-defendent is ommitted from this calculation. As will also be noted below, it was noted the it seems as if costs are primarily incurred up to the point of obtaining an emoluments attachment order, whereafter it would be reasonable to incur only collection commission in the absence of further default on the side of the garnishee or debtor.



However, in practical terms, the debt collection process necessitates that many more

steps be taken as this process is initiated where the debtor has indicated an intention

not to repay the debt. In this instance, the above documents are not sufficient to

incentivise payment without multiple communications to the debtor to encourage

repayment.81

Fairness in dealing between parties82

This aspect has two core issues for purposes of this discussion. The first is a legal

perspective and relates to procedural and substantive fairness in contracts.83 This is

discussed in more detail under the part dealing with the contractual relationship between

the parties. In short, procedural fairness relates to the establishment of the contract and

has bearing on aspects such as informed consent and disclosure in respect of the

contents of the contract.84 The use of plain and understandable language when dealing

with a debtor is core to consumer protection. The following ‘promise to pay’ serves as an

example:85

81 During the interview of 8 August 2013, the interviewees discussed the behaviour of defaulting debtors and mechanisms that work to incentivise payment. The first aspect that was highlighted for the specific firm was that the debtor is kept informed of all steps in the process. When the company receives the instruction to collect the debt, the debtor is informed of same via sms and invited to contact the company to make repayment arrangements. However, it was consistently noted that very view debtors do so. Those that contact the company usually dispute the debt and the personnel then assist the debtors to deal with the dispute with the creditor. The debtor is then telephonically contacted and a personal meeting scheduled. The company has found that debtors keep to payment arrangements where these arrangements were made face-to-face at a place and time of the debtor’s choosing when compared to telephonic arrangements (call centres). The company further employs personnel of different ages, race, culture and language to assist with dealing with diverse debtors.

82 This has manifested in various forms. See e.g. Draft National Credit Act Policy Review Framework, 2013 par 1.2.2: “The NCA has made progress in promoting its key policy aims: ‘A fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry’”; Draft National Credit Act Policy Review Framework, 2013 par 12.3.1.1: The “overlaying policy recommendation” is to “[e]ncourage fair and responsible lending and borrowing”; Stoop 2012 211: “Legislative control in the form of fairness legislation was accordingly the only option. This lead to the enactment of the Consumer Protection Act, that regulates fairness in consumer contracts, under the right to fair, just and reasonable terms and conditions”.

83 Stoop 2012 212-213.

84 Stoop 2012 213 re ‘transparency’.




The second relates to the evaluation and analysis of challenges in the debt collection

sphere and the influence of the evaluation and analysis on the recommendation of

solutions to address the root causes of the challenges. Some examples would suffice to

illustrate the point: A consumer that applies for credit whilst being over-indebted and

knowingly misleads the credit provider in this regard, is the cause of his or her own

financial situation. As such, the consumer should still not be taken advantage of or

subjected to abuses or irregularities such as overcharging or overreaching.86

Case studies87 have shown that legal practitioners and debt collectors have in certain

instances overcharged consumers. Legal assistance or intervention is also expensive

and, depending on the agreement with the consumer and the cost-level such as attorney

and client costs, can have a detrimental effect on the financial position of the consumer.

As such, this does not allow for an argument rebuffing the value of some procedures and

the remuneration due to experts for services rendered.88

86 Group discussion 3 September 2013.

87 See GIZ 2013.

88 Kotzé “Debt collection – repealing ss 57 and 58 of Magistrates’ Courts Act will be short sighted” De Rebus September 2013.



It must also be taken into account that consumer’s/ debtor’s circumstances are unique

to the individual. In this regard, a one-size fits all approach may prejudice consumers

that fall outside of the broad blue-print of the defaulting consumer. Whilst

‘reasonableness’ may be a consideration when dealing with struggling consumers, the

following aspects need to be considered:89

A consumer that borrowed money in a responsible lawful manner, i.e. compliant with

the provisions of the National Credit Act and other relevant legal principles, should

endeavour to pay back the loan and the creditor should not be prejudiced in having to

take steps to recover the loan;

The total amount repayable, inclusive of interest, costs, fees and charges should be

proportionate to the amount owed and should be structured in a manner that ensures

the financial sustainability of the consumer. This approach considers two scenarios: A

consumer who borrows R1 000 should not repay R15 000 and a consumer with a

certain monthly income should not be requested to pay an instalment that leaves him

or her without sufficient funds to meet basic living expenses.90 Furthermore, a

considered approach takes notice of a propensity to default on an unaffordable

instalment as well as the protective measures of legislation such as the NCA and

common law rules such as in duplum. In the premises, affordability guidelines should

be guidelines in order to allow for adjustment in the case of a deserving consumer.

Judicial oversight91

Judicial supervision has become a core issue where the protection of constitutional rights

is at stake during the debt collection process.92 Some of the first challenges that resulted

in amendments to the Magistrates’ Courts Act were Coetzee v Government of RSA and

89 See Part 3 ‘Interest, Costs, Fees & Charges’ below.

90 Interview 15 July 2013: The interviewees summarised the position well – the consumer should repay that which he or she owes and still be able to live with dignity. It is obvious that this approach necessitates that the unique position of each consumer be taken into account.


92 Theophilopoulos et al 2012 364 et seq.

From the institutional point of view, while South Africa benefits from a very professional

and qualified judicial system at the level of the High Court, some concerns have been noted

with respect to the operation of the judicial system in enforcement cases, especially where

regarding the Magistrates’ Court and the auxiliary staff working for the courts. The

performance of courts varies, but it is important to develop de facto specialized courts in

commercial law. The courts need more resources, especially at the level of the Magistrates’

Courts and in the auxiliary staff, and judges would benefit from more training opportunities

~ World Bank 2012



Jaftha v Schoeman and Others. Whilst the first related to the imprisonment of debtors

for civil debts, the second decision found that the process in terms of which the clerk of

the court could authorise the execution of immovable property without a magistrate

investigating whether same would infringe on the debtor’s right to adequate housing

(section 26 of the Constitution) was unconstitutional. The purpose of the oversight is to

ensure that the ‘execution will be reasonable and justifiable in the circumstances’.93

From a purely legal perspective, a similar consideration may be applied under section 25

of the Constitution, which is the right not to be arbitrarily deprived of property.94

However, although this consideration regarding ‘property’ applies to the consumer and

credit provider, a discussion of same is beyond the scope of the mandate.95 A further

aspect that should be kept in mind is that effective access to the judiciary necessitates

funds and for many consumers it is not a feasible (or viable) option to defend especially

with regard to the legal costs associated therewith. An inquisitorial approach, whereby

the court can assist a debtor with accessing the system (e.g. completion of documents

and in questioning all parties in order to ascertain true facts96), may be necessary in

order to provide for effective judicial oversight within the context of debt collection and

without adding further to the burden of the indebted consumer. However, the capacity

and independency of the courts need to be constantly kept in mind.

As will be noted below, some courts that follow the approach of Minter N.O. v Baker97

are de facto only allowing for emoluments attachment orders to be granted after a

financial enquiry has been held and where no consent was given by the debtor in respect

of an emoluments attachment order. This is under circumstances where the court would

be involved in the process, whether by way of enquiry or trial, prior to issuing an


94 An in-depth discussion of arbitrary deprivation of property will not be undertaken – authors such as Prof André van der Walt, Prof Lienne Steyn and Dr Reghard Brits have written extensively on this topic.

95 Within the context of this report, the applicability of this topic to the consumer and credit provider was duly noted by Prof van Heerden.

96 This approach was suggested by an interviewee (17 October 2013) in respect of rescissions/ amendments of emoluments attachment orders – a similar approach to maintenance/ domestic violence cases where the clerk of the court assists the claimant and the court follows an approach similar to section 65A financial enquiries.

97 Minter N.O. v Baker and Another 2001 (3) SA 132 (WLD) (see also University of Natal, Pietermaritzburg v Ziqubu 1999 (2) SA 128 (N)). The court in Minter was concerned with the information available in respect of the affordability of the instalments in the absence of participation by the debtor – see p 184: “Counsel referred us to the case of University of Natal, Pietermaritzburg v Ziqubu 1999 (2) SA 128 (NPD). Ziqubu’s case is distinguishable from the instant case in that the judgment debtor had agreed that she was in a position to liquidate the judgment debt in certain monthly instalments. This, the court found, amounted to a consent to an order. We have stressed that the instant case is not one where the judgment debtor has himself assessed his financial position and has submitted an offer which he considers he can afford".



emoluments attachment order. The court therefor indicated that the only manner in

which an emoluments attachment order could be correctly issued in the absence of

consent to the issuing of an emoluments attachment order is where the court becomes

involved e.g. a financial enquiry.98

The main criticism against legislative regulation of court oversight remains the capacity

of the courts to deal with these matters in a timely and competent manner. Integration

with other sections of the legislation such as the jurisdictional provisions that the order

should be issued in the court of the employer (with a concomitant interpretation that this

is where the main place of business/ payroll office of the employer is situated) must also

then be taken into account as a scenario may easily present itself where the employee is

resident and employed at a branch office such as Bloemfontein and the payroll office in

Cape Town. The result would be that the employee is tasked to travel to Cape Town in

order to present him- or herself to court.

Re-imbursement for work done and disbursements99

In this regard, it will be sensible to take note of the vested interests of the various

stakeholders and role-players in this industry. If due notice is not taken of role-players’

potential bias in properly considering the successes and failures of a process, the

agendas of stakeholders may intentionally or unintentionally influence the identification

of root causes. Financial motives are of primary importance. It may be assumed that

stakeholders would argue that a process in which they have a business and financial

interest is successful without considering whether it is actually a reality.

Remuneration for services rendered is core to any business economy. In the context of

legal work undertaken to collect debt, especially within the legal framework where set

procedural steps are required along with formal documentation to assist the court to

98 Minter N.O. v Baker and Another p 178: “From the papers before us, it seems that appellant, in seeking to recover the judgment debt, decided to proceed directly under the provisions of section 65J without recourse to any enquiry into the first respondent’s financial position under section 65A and without any prior offer having been submitted by the judgment debtor. Whether this procedure, in the circumstances of this case, is competent remains to be seen. The appellant does not rely on any written offer to pay the judgment debt in specified instalments and a consequent order by the clerk of the court to pay the debt in specified instalments or otherwise as contemplated by section 65 of the Act. The circumstances under which the amount of R351,76 was paid are not stated. Furthermore, as there has been no enquiry into the first respondent’s financial affairs there is no court order under section 65A(1) requiring the first respondent to make payment in instalments or otherwise.”

99 LSSA “Comments by the Law Society of South Africa (LSSA) on the working document: Magistrates’ Courts Amendment Bill relating to amendments to sections 36, 57, 58, 65, 65J and 86” 2013 par 1.7; Interview 12 June 2013.



consider the request for judgment or emoluments attachment order, it is trite that the

amount to be collected does not impact on the work that has to be done.100

In this regard, a three-way balancing act is necessary when considering the policies

underlying debt collection in respect of remuneration. Firstly, there is a need for certain

steps to be taken that ensure procedural and substantive fairness towards parties

involved in legal proceedings. Secondly, the intricacies involved necessitate the

involvement of third-party specialists such as attorneys. Thirdly, the debtor should be

treated reasonably and fairly with regard to the repayment amount, which necessitates a

further consideration of the amount owed, amount collected for the benefit of the

creditor and the costs, fees and charges incurred to collect the debt.

The fees allowed in terms of legislation have been reduced. The activation of the regional

court’s civil jurisdiction has opened the door for institution of legal proceedings in a

cheaper forum as the monetary jurisdiction of this court is R300 000.101 Furthermore,

the threshold for use of the lowest magistrate’s court scale tariff (A) has been increased

to R12 000. The Debt Collectors Act now also allows debt collectors who are not

admitted attorneys to undertake work previously reserved for attorneys and allowing the

collectors to charge for these services at tariffs according to the magistrates’ court tariff.

This has increased the competition between these two occupations. Whilst attorneys

have been trained and are required to have a degree qualification, no statutory

educational requirements pertain to debt collectors although these collectors need to be

registered with the Debt Collectors Council. The regulation of both debt collectors and

100 See Part 3 below for four examples of bills of costs.

101 Jurisdiction of Regional Courts Amendment Act 31 of 2008. Kotzé 2013: “[T]he new magistrates’ courts rules, the introduction of the regional court and changes to the scales in the fee structures have seriously affected attorneys. Not only have claims from R 100 001 to R 300 000 now been included in the regional courts’ jurisdiction, resulting in much lower fees for attorneys handling these claims on a party-and-party basis, but, due to the fact that the fee scales have changed, most debt collectors and attorneys dealing with claims for amounts that used to fall under scale B or C now have to do the same work on scale A tariff, resulting in huge losses for the firms”. Kotzé continues to illustrate that the argument offered to counter these losses has been that the difference should be collected from the creditors, but unfortunately their positions have also been overlooked in making this proposal. This was also reiterated during the interview of 8 August 2013. Many creditors are small businesses or professional sole practitioners, for example, medical practitioners. Considering that a medical practitioner has a small claim of less than R 1 000, it does not seem like much but, if he or she has 50 or a 100 debtors owing R 1 000 each it is quite a considerable amount. These professionals look for attorneys or debt collectors who are willing to collect these debts on the basis that all the legal fees should be collected from the debtor, which – in all fairness – is understandable.



attorneys, especially with regard to fees and conduct, has been attended to over the

past fifteen years.102

The success of effective debt collection from a business perspective has as its basic

principle the following: “Collections is measured by clients in terms of money collected v

money spent on attorneys”.103 In order to reduce business costs and increase business

profitability, the effectiveness of “[a]utomation and management of workflow”104 is of

cardinal importance. Therefore, it needs to be taken into account that at present most

collection costs, including the 5% commission referred to in section 65J(10), are

recovered from the debtor and that amendments to these will impact the creditor.

Furthermore, automation and reliance on systems in order to improve work-flow has its

own unique challenges such as system-errors.

Procedural Economy105

The process of debt collection should be expeditious, inexpensive and uncomplicated.106

In this regard, standardisation and certainty as to the process and its requirements are

important.107 The expectation of unproblematic debt collection relies on the assumption

that citizens will abide108 by the legislative provisions and judicial intervention i.e. that

102 Scott “Claim enforcement (debt collection)” South African Mercantile Law Journal 2002 (14) 491 494. Contra to the statement quoted in the textbox, Du Plessis & Goodey 2003 1 noted that “[d]ebt collection in the narrow sense of the word means the legal proceedings against a debtor by a creditor or the collection of the debt due to the creditor. While such legal proceedings may, in theory, be taken by anyone, including the creditor himself, the proceedings prescribed in the Magistrates’ Courts Act, 32 of 1944 and its rules are difficult for a layman to apply for reasons which will appear later”. See the related discussion in respect of rescissions and amendments to emolument attachment orders in Part 3 below.

103 Bentley Seminar: Debt Collection Bloemfontein 2013.

104 Bentley 2013.


106 Interview 12 June 2013.


108 Yssel “Alice in the debtor’s court” De Rebus February 1999.

As I have already indicated, most creditors are not geared towards debt collecting as they

actually expect their debtors to pay their debts on the agreed dates. However, experience

has shown that debtors do not pay on time or out of their own free will. They have to be

reminded and coaxed into paying their debts. This is a very time consuming, and strangely

enough, psychological activity. The type of administrative process does not fall within the

scope of the ordinary day-to-day dealings of most creditors in the commercial world. It may

also become very expensive if creditors were to employ the services of attorneys to perform

this task. Although claim enforcement is a very specialised operation, it is not of such a

difficult or legal nature that it requires the services of highly trained specialists, such as

qualified lawyers ~ Scott 2002



the rule of law will not be undermined. It is further assumed that transgressions would

and should be suitably punished.109

An effective debtor-creditor regime is dependent on an efficient enforcement system.110

In order to incentivise the promotion of access to credit for deserving candidates, credit

providers need to be adequately ensured that a workable remedy is at hand to deal with

the delinquent debtor.111 Although not all debtors are mala fide, effective enforcement

mechanisms can benefit both the defaulting consumer and the credit provider, especially

where the proper mechanisms are in place to protect the rights and interests of both

parties in a timely manner.112 A debtor can also be adversely affected, economically,

socially and psychologically113 by a slow-paced process.

From a pecuniary point of view, lengthy pre-legal procedures which delay matters whilst

interest, costs and fees run, especially where the credit provider exhausts internal

measures to the extent that it may take years for a matter to land before an attorney for

final enforcement is not conducive to proper debt collection. A slow-paced process also

affects the financial state of a creditor.114 The costs of expensive debt collection

procedures for small debts is not objectively worth it for creditors although this may

have a big impact on their financial positions e.g. a medical practitioner with 100

outstanding debts of R350 each. These would equal R35 000 but, if the costs are

properly taxed, the creditor will be held responsible for the practitioner’s full bill of costs

as drawn for each agreement. However, to avoid a culture of non-payment, many

creditors would still proceed with the debt collection process.

109 Yssel 1999.

110 The law should provide a proper ‘reliable’ framework for same – see World Bank Report of the observance of standards and codes – Insolvency and creditor rights South Africa June 2012.

111 It was noted during interviews that the lack of proper debt enforcement mechanisms may result in increased restrictive access to credit as credit providers will only extend credit to ‘safe’ consumers in order to minimise the risk of non-payment. Others indicated that the cost of credit may increase as consumers who are ‘higher risk’ consumers will only be able to access credit at high interest rates in order to balance the risk that they pose for the credit provider.

112 Interview 12 June 2013: During this interview, the attorney indicated that there is often a delay, a lengthy period of time, between the default of the debtor and the final enforcement steps taken by the attorney – this can be up to a couple of years. During this time, the credit provider would exhaust internal mechanisms, trace the debtor and obtain signed section 56 and 129 letters, section 57 and 58 documents, acknowledgements of debt and confirmation of details of the debtor. The credit provider may often even receive sporadic payment and ultimately refer the matter to the attorney.

113 Scott 2002.

114 Comment: Van Heerden 2013.



Legality

Many of the recent reports on abuses and irregularities seemingly pertain to unlawful or

unethical market conduct. However, whilst the uncovered abuses have been widely

reported and discussed, similar reports have not been released on any remedial actions

undertaken or results of actions that were purportedly undertaken.115 The following

abuses/ irregularities, founded in non-compliance with legislative provisions or legal

principles, have been reported. In particular, the follow-up report on irregularities

pertaining to emoluments attachment orders identified in 2013 (for GIZ), identified the

following issues, repeated verbatim hereafter:116

Uncertainty regarding the interpretation of jurisdiction and the in duplum rule and/or

Section 103(5) of the National Credit Act;

Lack of uniformity in the court processes followed by different Magistrates’ Courts

when granting orders which leads to forum shopping;

Shortcomings in the statutory process with no provision for affordability tests;

Service of emoluments attachments orders;117

Irregular deductions affecting the repayment period, interest as well as costs

charged;

Payroll offices stopping deductions too soon or too late with costs and interest

consequences;

Fees being charged for statements of account whilst the Act provides for free

statements of account to be delivered on reasonable request;

Debtors paying instalments with no prospect of settlement resulting in debtors being

caught in a debt spiral with no likelihood of rehabilitation;

Lack of cap on amount that can be deducted resulting in employees being left

without sufficient means for his own and his dependant’s maintenance;

Charging of excessive fees, incorrect calculation of interest and outstanding balances

and non-admissible charges being levied;

115 E.g. Law Society of the Northern Provinces, National Credit Regulator, Edward Nathan Sonnenbergs Attorneys and Summit Financial Services.

116 GIZ 2013 Executive Summary.

117 This related to service in a manner not sanctioned by the MCA and/or MCR including served effected by a person other than the messenger of the court as per section 65J(3).



Granting of reckless credit and multiple deductions from employees’ salaries;

5% commission payable to employer paid by employee instead of credit provider;

Lack of knowledge and fraud by clerks of court – currently court officials at two

magistrates’ courts are under investigation for the issuing of fraudulent orders;

Apportionments of payments not complying with Section 126 of National Credit Act.

Not all the irregularities identified in the 2013 GIZ report are relevant to this report. The

following aspects were sourced from various research reports, written sources and put

forward during the course of this research. The issues were categorised into irregularities

(this indicates wrongfulness but does not necessarily involve a form of wilfulness),

abuses (which indicates unlawfulness with an element of wilfulness) and ambiguities

(which indicates differing opinions as to the interpretation, meaning and/or scope of a

particular aspect relating to debt collection):118

Abuses

Overcharging of legal fees: ‘Overcharging’ and ‘overreaching’ are two terms used to

describe unlawful or unethical behaviour by legal professionals. Overcharging refers to

the charging of professional fees for services that were not rendered or expenses not

duly undertaken. This is unlawful behaviour as the client remunerates the professional

for a fraudulent indebtedness whilst under the impression that there is a legal basis

for the fees to be charged. Overreaching refers to the extensive costing of fees and

expenses in a manner that is unfair, unreasonable and unnecessary;

Non-adherence to the law: This includes unlawful behaviour such as granting of

reckless credit in contravention of section 81 of the NCA, non-adherence to section

103(5)/in duplum or service of the emoluments attachment order is done by a person

other than the messenger of the court;

Other costs: Interest and fees are unreasonable in proportion to the debt owed and

may be illegal;

118 See e.g. the approach of Marais “A commentary on section 103(5) of the National Credit Act” 2011 6-7: “[T]he interpretation of statutes is not a matter of personal preference, e.g. whether the interpreter is in favour of consumer protection or in favour of the rights of credit providers. The same principle would apply in respect of commentary on judgment of the Courts – an approach based in legal principles is called for. It has now become settled law that statutory interpretation should accord with that which promotes the general legislative purpose underlying a statutory provision. In ascertaining the purpose of the statutory provision, wider contextual considerations may be invoked, even where the language is unambiguous – the so-called ‘purposive construction’ of statutes. Applying a purposive construction to a statue does not, however, imply a neglect of the language used. The words used must be understood in their popular sense as used in ordinary parlance, yet balanced by the context in which they are used, i.e. a ‘context-based, purposive approach’.”



Collection of the debt: Irregular/ improper deductions by creditors;

Fraudulent behaviour such as fake signatures;

Manipulating debtor and employers’ lack of ability to discern between or lack of ability

to validate legal documents such as letters of demand and summonses.

Irregularities

Unnecessary costs imposed by courts that are recovered from the debtor;

Even though the consumer has the right to information, same is not provided unless

the consumer requests the information is given e.g. pre-agreement disclosure. The

ultimate effect is that, for a consumer to exercise his or her rights, he or she must

know about it before hand;

Lack of appreciation of basic business principles;119

Charges and costs for account of debtor;

Irregular/ improper deductions re time & amount especially where arrear and multiple

deductions are subtracted from the debtor’s emoluments at once;

Incompetency of payroll officers.

Ambiguities

Section 45 vis-à-vis jurisdiction, otherwise known as ‘forum shopping’;

The practical implementation of in duplum and section 103(5);

Standardisation/ uniformity with respect to court documents and procedures;

Information re details of emoluments attachment orders;

Repayment by debtors even though there are no settlement prospects e.g. interest

component exceeds the monthly instalment payable by the debtor;

Contracting out of legislation such as agreeing that the debtor would fund the

commission due to the garnishee in terms of section 65J(10);

Proper consent including repercussions where lack of consent is averred.

Throughout the report, the point of departure over and above the legal framework was a

business approach. There is also a realisation that there are no quick fixes120 and that

119 Datnow “Section 65: attorneys and creditors face a poor harvest” De Rebus June 1998. See also Matlala “Contract contrary to public policy: The cash loan debacle De Beer v Keyser 2002 1 SA 827 (A), 2002 1 All SA 368 (A)” Journal for South African Law 2003 (4) 797.

120 Datnow 1998.



any solution proposed should address the root cause of the challenges instead of only

dealing with the manifestation of the problem i.e. not just the ‘symptoms’ but the

‘disease’. In this regard, it is also important that consideration of the benefits of a

specific procedure is not neglected due to the abuses or irregularities in the process. The

following comment of Du Plessis J in African Bank Ltd v Additional Magistrate Myambo

N.O.121 serves as a case in point:

“The section 58-procedure is a particularly cost-effective and speedy one. The advantages of cost

effective and speedy debt collection are self evident. Provided that the provisions of section 58 and

those of the NCA are applied properly and with due regard to the parties' rights, it is in the

interests of credit providers, of consumers and of justice that the procedure be utilised. The

purposes of the NCA are set out in section 3 thereof.”

To illustrate this, the following examples of jurisdiction, costs and interest are used:

Subject Rationale Impact on consumer

Jurisdiction:

Forum-shopping

It is easier to obtain emoluments

attachment orders in some courts

whether because the officials are

bribed, the officials are incompetent

and only stamp the documents without

properly considering the request

and/or the court has limited

requirements. Alternatively the correct

choice of forum disallows an

emoluments attachment order due to

the unattainable requirements of the

court i.e. the creditor cannot comply

with requirements especially where the

court requests documentation in order

to ‘exercise’ its discretion and which

requirements are not founded in law

(e.g. requiring a reckless credit

assessment for a pre-2007 debt).

Main reason: The services rendered by

the attorney is effective and the

creditor gets results

The consumer does not enjoy the

protection of the law where there are

irregularities in the process to obtain the

order insofar as a proper execution of

duties by the court official can prevent

this – this is not necessarily related to

the forum of choice (it can be done

deliberately) but same may be relevant

where the correct jurisdiction is used –

the court official is the root cause and

not the choice of jurisdiction.

This only impacts a consumer who

wishes to challenge the order – if the

debt is owed and the order correctly

obtained, there is no rationale to

challenge the jurisdiction. The root cause

is therefore a need for a mechanism to

deal with challenges in a manner that

does not prevent the consumer from

challenging an order due to financial

constraints (which may not be the only

constraint as many consumers lack the

necessary financial and legal knowledge

and will need assistance)

121 P 9.



Costs:

High legal fees

Services rendered come at a cost and

is the income for an economically

viable business

Greed i.e. maximising profit to an

extent that it becomes unreasonable

when considering the principles set out

above

Non-adherence to basic legal

provisions and principles as adherence

(due to non-enforcement) gives an

unfair advantage to competitors122

Over-regulation and lack of

enforcement creates an environment

conducive to ‘underground’ debt

collection mechanisms in order to be

profitable

The consumer cannot be rehabilitated

and ‘start fresh’. This is relevant where

the mechanism of collection does not

have the effect that the debt is

eventually repaid. Where the debt is

owed, although it flows from the

agreement with the creditor, to the

collector of the debt it has the effect of

shifting the indebtedness from creditor to

creditor. The root cause is therefore a

lack of enforceable guidelines

rationalising costs whilst taking

economic/ business principles into

account.

Interest:

Wrong calculation

System errors, inability of system to

calculate interest correctly, outdated

systems (unwillingness to update

system as this has financial

implications) or non-adherence to

principles due to no monitoring of

interest calculated (whether this is

borne out of lack of knowledge or

unmanageable work-load or lack of

proper work ethics)

Maximising income/ return for the

creditor in a manner not supported by

law or to the detriment of the

consumer

Consumer is over-charged. The root

cause is behavioural and lack of

enforcement.

Over-deducting from

salaries

No monitoring of payments or Lack of

communication as to when debt is paid

up or payroll officer does not take note

of communication to stop payments

Lack of efforts to stop payments when

the debt is paid up

Maximising income/ return for the

creditor whether legally due or not

The consumer repays more than he or

she owes. The root cause is behavioural

and lack of enforcement of compliance.

122 See e.g. Draft National Credit Act Policy Review Framework, 2013 paras 2.2.8.2.2.2. & 2.3.10.2.1 .



Part 3 – Challenges

This part will follow the issues identified in the project mandate and will be divided into

subparts based on the different challenges. A comprehensive considered discussion is

presented with a set conclusion on the legislative failures and interpretative difficulties.

As indicated above, this report is not concerned with irregular implementation such as

over-charging, etc. although this may be noted as such if it is as a result of a legislative

failure or interpretative difficulty. A report on the irregularities pertaining to garnishees

has already been commissioned by a different stakeholder. The chapter will compare and

analyse the data obtained during interviews in order to substantiate the arguments set

forth in the discussion.

1 Common questions

Many of the research questions were linked by way of a common thread. In the

premises, the team had to research the core issues that manifested as the terms of the

research mandate. An example is the following:

Section 65J(10) provides as follows: “Any garnishee may, in respect of the services rendered

by him in terms of an emoluments attachment order, recover from the judgment creditor a

commission of up to 5 per cent of all amounts deducted by him from the judgment debtor’s

emoluments by deducting such commission from the amount payable to the judgment creditor.”

In this regard, the legislation is clear:

1. The garnishee has a right to recover a commission for the services in respect of

the implementation of the emoluments attachment order;

2. This commission is recoverable from the judgment creditor;

3. The commission is capped at 5% of the instalment deducted from the debtor’s

wages.

However, one of the research questions pertained to the following:



whether parties can agree contractually to have another party pay this commission.



The legislative provision clearly states that the garnishee (employer) is entitled to retain

the percentage and that this percentage is payable by the judgment creditor. However,

the legislation is silent as to whether parties can contractually agree that the percentage

is payable by the judgment debtor. In this regard, the core issue is whether the

legislation provides for a scenario where the parties can ‘contract out of legislation’ by

causing the debtor to fund the percentage payable to the garnishee.

2 Fundamental aspects

The following issues were central to the investigation:

2.1 Issue 1

The nature and effect of consents to judgment, whether in terms of sections 57 or

58, the judgment itself and the subsequent emoluments attachment order. Two

alternatives presented itself:

Acknowledgement of liability and consent to judgment123

First alternative

The acknowledgement of debt is seen as a credit agreement with all the rights and

obligations bestowed on the parties by the National Credit Act.124 This, if viewed as a

new agreement, may novate or attempt to novate the contractual relationship between

the parties.125

123 See e.g. Louw 2013(1) par 64 et seq; Friedman & Otto ““Section 103(5) of the National Credit Act 34 of 2005 as inspired by the common-law in duplum rule (1)” 2013 (76) THRHR 132 (May).

124 See Van Heerden “The impact of the National Credit Act 34 of 2005 on standard acknowledgements of debt” Journal for Contemporary Roman-Dutch Law 2011 (74) 644 654: “Due to the elements of deferral and charging of interest, fees and other charges in a standard acknowledgement of debt and in the absence of any express or implicit indication to the contrary, it would thus seem an inescapable conclusion that standard acknowledgements of debt entered into with natural person consumers and small juristic persons who conclude small or intermediate credit agreements fall within the category of credit transactions envisaged by section 8(4)(f) of the NCA”. See also Friend v Sendal (A973/2010, 24425/2009) [2012] ZAGPPHC 162 (3 August 2012), available at http://www.saflii.org/cgi-bin/disp.pl?file =za/cases/ZAGPPHC/2012/162.html&query=friend v sandal.

125 See Van Heerden 2011 658: “One may of course wonder whether the mere fact that a further ‘credit agreement’ is extended to a consumer who is already unable to pay his debts and is clearly either over-indebted or likely to become so in future would not constitute reckless credit. The answer to this predicament would most probably be that the acknowledgement of debt should be viewed in substitution of the previously unpaid debt in respect of which it is entered, with the effect that such debt cannot be added to the over-indebtedness calculation together with the amount owing in terms of the acknowledgement of debt”.



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Second alternative

The acknowledgement of debt and consent to judgment is merely a procedural

mechanism that entitles the creditor to obtain judgment and access procedural devices

to effect execution.126 In this regard, the original agreement is the point of departure

and the rights and obligations therein as regulated by the National Credit Act, if

applicable.

The importance of this consideration can be summarised as follows:127

The application of the NCA, including its substantive and procedural requirements

relating to entering into and enforcing the agreement as set out in the

acknowledgment of debt, on the acknowledgement of debt as well as the request

for judgment;

The effect of the judgment on the relationship between the parties and on post-

judgment rights and obligations in respect of the rate of interest (in terms of the

agreement or interest in terms of the Prescribed Rate of Interest Act 55 of 1975);

the application of section 103(5) or in duplum etc.

Under certain circumstances, a judgment may novate a debt. The following extract from

Fedsure Participation Mortgage Bond Managers (Pty) Ltd and Another v Sandlundlu (Pty)

Ltd128 summarises the position:

[26] It is common cause that Fedbond compounded interest from that day and it also varied the

interest rates in accordance with the provisions of the mortgage bond. It claimed to do so by

virtue of the provisions of Clause 5 of the mortgage bond. In seeking to justify this, Mr Pammenter

submitted that the aforesaid judgment did not novate the mortgage bond in so far as it related to

the question of interest. In support of this submission he relied on the judgment of Farlam JA in

MV Tirupati; MV Ivory Tirupati and Another v Badan Urusan Logistik (aka Bulog) 2003(3) SA104

(SCA). At paragraph 28, Farlam JA held that a judgment “does not terminate the antecedent

obligations or those things that were accessory to it, such as pledges, sureties and interest.” At

paragraph 30 he held that: ‘Although an original cause of action may continue to exist in a

reinforced and strengthened form, a judgment … may also give rise to a new and independent

cause of action enforceable between the same parties in another court’. In Trust Bank of Africa

Limited v Dhooma 1970(3) SA304 (N), Fannin J held, at 310 A-C: “It does seem to me to be a

126 Louw 2013 (1) par 67.

127 Sources: Van Heerden 2011 & Louw 2013 (2).

128 (AR409/12) [2013] ZAKZPHC 54 (18 October 2013) paras 26-28, available at http://www.saflii.org/cgi-bin/disp.pl?file= za/cases/ZAKZPHC/2013/54.html&query=attorney%20fee.



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somewhat artificial view of the position to regard a judgment as, in all circumstances, having the

effect of a novation. In some cases of course, it does have precisely that effect, where, for

example, a Plaintiff obtains a judgment for cancellation of a contract and for damages. Thus, in

this case, had the judgment been one declaring the contract between the parties to have been at

an end, with an order that the Defendant return the vehicle to the Plaintiff and pay the Defendant

a sum of money, it could quite realistically be said that the judgment wholly replaced and thus

novated the contractual rights and liabilities of the parties inter-se. But in a case like the present,

where the only purpose of the judgment is to enable the Plaintiff to enforce certain rights, by

means of execution if need be, without in any way affecting other rights arising out of the

contract, it seems more realistic to regard the judgment not as novating the former, but as

strengthening or reinforcing them. The right of action will have been replaced by a right to

execute, but the enforceable right remains the same.’

[27] This judgment was cited with approval in Swadiff (Pty) Ltd v Dyke, NO 1978(1) SA928 (AD).

At 944 F Trengrove AJA (as he then was) held: ‘I respectfully agree with the views expressed by

Fannin J, in Trust Bank of Africa Limited v Dhooma … in the passage quoted above. In a case like

the present, where the only purpose of taking judgment was to enable the judgment creditor to

enforce his right to payment of the debt under the mortgage bond by means of execution, if need

be, it seems realistic and in accordance with the views of the Roman Dutch writers to regard the

judgment not as novating the obligation under the bond, but rather as strengthening or re-

enforcing it. The right of action, as Fannin J puts it, is replaced by the right to execute, but the

enforceable right remains the same.’

[28] In both the Trust Bank and Swadiff cases, the relief sought was for specific performance of

obligations in terms of a contract. Hence the exception referred to by Fannin J did not apply. It is

however noted that in casu Fedbond expressly cancelled the loan agreement. This is precisely

what was referred to in the Trust Bank and Swadiff cases. Accordingly the judgment of 5th August

2002 novated Fedbond’s contractual rights. As a result, Fedbond had no right to vary the rate of

interest nor did it have the right to capitalize any interest in the absence of a Court order

permitting same.”

2.1.1 Discussion

The process

An emoluments attachment order is preceded by a court judgment, which in turn is

preceded by a due debt owed by the debtor to the creditor. If the debt is founded in a

credit agreement to which the NCA applies, the latter will govern the contractual

relationship between the parties insofar as the contents of the contract and conduct of

the parties are concerned.



The research is primarily concerned with non-litigious matters such as section 57 and 58

consents to judgment. The debtor who defaults in terms of the credit agreement may

admit liability and reach a repayment agreement with the creditor or its representative.

The debtor may either consent to judgment in the event where he or she defaults on the

‘new’ agreement in terms of section 57 or consent to immediate judgment in terms of

section 58 of the MCA. Both mechanisms of resolving the lis between the parties may

include repayment of the debt in instalments as well as a clause inferring liability on the

debtor for the collection costs of the creditor. The following is a brief comparison

between the section 57 and 58 procedures:129

Similarities

Section 57 forms part of chapter viii of the

Magistrates’ Court Act which deals with the

recovery of debts.

Section 58 forms part of chapter viii of the Magistrates’

Court Act which deals with the recovery of debts.

Provides for debt enforcement proceedings and

payment of debt in instalments.

Provides for debt enforcement proceedings and

payment of debt in instalments.

Differences

In the recovery procedures for the collection of

liquidated debts. Admission of liability and

undertaking to pay debt in instalments or

otherwise.

In the recovery procedures for the collection of

liquidated debts. Consent to judgment or to judgment

and an order for payment of judgment debt in

instalments.

Procedure provides for the payment of a debt in

instalments as the result of an offer received from

a debtor in response to a letter of demand or

summons.

Procedure is more streamlined. The debtor has already

consented in writing to judgment in favour of the

creditor for the amount of the debt and the costs

claimed in the letter of demand or summons.

If the debtor fails to comply with the offer,

judgment can be obtained in terms of the offer.

The debtor consents to judgment as well as the

payment of the judgment amount in instalments.

Debtor gets two chances. The first chance is to

admit liability and pay the amount of the debt and

the costs claimed in the letter of demand or

summons. The second chance is when debtor

failed to pay and is ordered by the court to pay.

The creditor can immediately obtain judgment and an

order that the judgment debt be paid in instalments if

there are a copy of the debtor’s written consent to

judgment and a copy of the letter of demand if no

summons has been issued.

First a letter of demand as a consequence of

which debtor may make an offer to repay the debt

There is an immediate consent to judgment.

129 Louw 2013 (1) paras 24-25.



in instalments i.e. a conditional consent to

judgment

Only if debtor fails to comply with the terms that

he offered to the creditor, can the creditor

approach the court for an order in terms of the

offer.

The clerk of the court enters judgment on the written

request of the creditor or his attorney accompanied by

a copy of the letter of demand, if no summons has

been issued, and the debtor’s written consent to

judgment.

The first aspect that needs to be considered is whether the judgment granted by the

court, which is considered in terms of both sections 57 and 58 to be ‘default judgments’

novate the debt or strengthens the contractual relationship between the parties.130

In respect of the effect of a judgment, Louw remarks as follows:131

“In conclusion I should say something more about my view on the nature of a judgment. As I have

pointed out above, much turns on the proper classification of a judgment – does it merely confirm

the underlying debt and provide procedural benefits or does it in fact novate that debt so that as

between debtor and creditor and any third party the legal bond is no longer one of contract but

one imposed by the judicial process? I do not think that it is an either or situation. Those who

argue that a judgment debt is nothing but an enforcement of the underlying debt place much store

in the fact that securities are not lost when a judgment debt is pronounced. This does not dictate

the nature of the judgment but constitutes a tacit term in the relevant security agreement (be that

suretyship or some other form of security). If there is, for example a suretyship then ordinarily the

accessory liability of the surety would terminate once the principal obligation is terminated and if it

is terminated by a judgment then the suretyship terminates. It would be wrong to argue that

because the suretyship survives the judgment, the judgment cannot terminate the principal debt.

From a dogmatic point of view the judgment can terminate the principal debt and all that then

happens with the accessory agreement is that a term is read into it to the effect that it does not

terminate if the principal debt terminates as a result of a judgment but that it is then accessory to

the judgment debt. I think it is wrong to argue that because the suretyship agreement lives

beyond a judgment therefore the principal debt must also survive the judgment.

Militating against the idea that the debt created by compact survives a judgment is the very clear

rule that a creditor and a debtor cannot by agreement have a judgment set aside, at will, and only

because the debtor has paid the creditor. It has repeatedly been held that to do so would amount

to a falsification of the past. If this is so then I fail to see how it can be denied that a court order is

something vastly different in nature and effect from an agreement between parties.

130 In this regard, it must also be noted that both consents include an admission of liability (acknowledgement of debt). See Van Heerden 2011 644 et seq or a discussion of whether an acknowledgement of debt is a credit agreement for purposes of the National Credit Act.

131 Louw 2013 (2) par 95-97.



Moreover, the court and not the parties is in overall control of the execution of the orders of the

court. It is true that a judgment creditor can waive the benefits of a judgment debt, but the

judgment stands. The NCA cannot prescribe how a judgment debt must be enforced or not

enforced, what a judge or a magistrate may include or disallow in a judgement debt. The NCA,

including section 103(5), does not operate post judgment.”

Naudé is of the opinion that novation is not a given result when judgment is entered as

ancillary agreements such as guarantees do not cease to exist.132 It does, however,

bring about a new cause of action.133

This is particularly relevant when considering whether reliance can be placed on contract

clauses not specifically dealt with in the judgment, such as payment of the section

65J(10) commission by the debtor for and on behalf of the creditor.134

In comparative terms, the powers and duties of the relevant court official i.e.

magistrates and clerks of the courts, also need to be considered.

In the matter of African Bank Ltd v Additional Magistrate Myambo N.O., the court

acknowledged that the NCA impacted the manner in which courts deal with requests for

judgment in terms of section 58 of the MCA. The first important aspect that the court set

was that the clerk of the court, even though the latter has the power to grant an order

that is deemed to be a default judgment/ order of court, is not the court.135 In the

premises, the duty of the clerk of the court when receiving a request for judgment is to

ascertain whether the request is formally in order and whether there are any concerns

relating to the creditor’s ‘entitlement to judgment’. Whilst the clerk of the court cannot

‘finally refuse’ an application that is apparently in order, the matter can be referred to a

132 Hutchinson (ed) 2009 377. This approach is consistent with that of Christie The Law of Contract in South Africa 5th ed 2006 454-455.

133 Hutchinson (ed) 2009 377. See also MV 'Ivory Tirupati' and Another v Badan Urusan Logistik; [2003] 1 All SA 55 (SCA) par 31, available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2002/155. html&query=mv ivory tirupati.

134 As will be discussed below, the timing of the consent becomes relevant in respect of whether a party can agree to pay a debt on behalf of another prior to the debt actually becoming due. An example is payment of section 65J(10) commission, which only becomes due once a valid emoluments attachment order is served and implemented by the garnishhee, after judgment was given by a court/ clerk of the court. Custom Credit Corporation (Pty) Ltd v Shembe [1972] 3 All SA 489 (A) 498: “Our Courts have recognized the right of a party to sue for relief on a condition to be fulfilled after issue of the Court’s order. Thus, for instance, an order for interest after date of judgment up to the time of compliance with the order is usual. SOLOMON, J.A., in Symmonds’ case, supra, recognized the right of a litigant to sue for damages not yet accrued at the date of the issue of summons. By allowing the adoption of the ‘double-barrelled’ procedure the Courts have sanctioned the institution of a claim based upon a cause of action which will only arise conditionally upon an event occurring subsequent to judgment, i.e., the defendant’s failure to comply with the Court’s first alternative order.”

135 P 24. The judgment dealt only with section 58 of the MCA and not section 57.



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magistrate for consideration, particularly as a magistrate has additional powers by virtue

of the provisions of the NCA.136 The magistrate, as a ‘court’ (section 58 requests qualify

as ‘court proceedings’) may investigate in respect of the aspects noted in Myambo.

These listed below may overlap with that which the clerk of the court must consider,

although the clerk may not investigate those aspects referred to by the NCA and

reserved for ‘court proceedings in which a credit agreement is being considered:137

Compliance with the MCA and the NCA;

o Section 58 including use of the correct forms in terms of the MCR;

o Section 129 and a true copy of the section 129(1)(a)notice;

o Letter of demand or summons as referred to in section 58 in which

compliance with the NCA is alleged;

o Alleged compliance with section 130 of the NCA including no reaction as

contemplated in section 129 on the notice so required.

The applicability of the NCA on the underlying cause of action i.e. whether the debt

arises from a credit agreement to which the NCA applies;

The incidence of reckless credit granting or not in respect of the underlying cause of

action;

o Section 83 of the NCA

Any allegation of over-indebtedness of the defendant;138

o Section 85 of the NCA

Proof of compliance with the NCA where applicable and/or requested;

o The creditor is registered as a credit provider with the NCR or allegations

why no registration is necessary or was necessary at the time of granting

the credit;

136 P 16 et seq.

137 P 30 et seq, specifically p 40 -43. See also pp 16 – 18 (selected extracts): “In my view the use of the word "shall" in section 58 limits the clerk of the court's discretion in the sense that, if the application is formally in order, the clerk of the court has no discretion finally to refuse judgment. That does not mean, however, that the clerk of the court may not refer to the court an application that is formally in order. Put differently, the word "shall" in section 58 means that clerks of the court have the discretion to do one of three things. They can refuse judgment. They can grant judgment if the papers are formally in order. If the papers are formally in order but the clerk of the court has reason to question the plaintiff's entitlement to judgment, the clerk of the court must refer the matter to the court in terms of rule 12(7). This interpretation of section 58 ensures that the court retains a measure of oversight over a procedure whereby clerks of the court grant judgments so to speak in the court's name. … The NCA calls for the careful balancing of the rights and interests of consumers against those of credit providers. Such balancing is best performed by the courts. … If a clerk of the court has any uncertainty as to whether granting judgment against a consumer might be in conflict with the NCA, and with protective measures in particular, the clerk of the court must refer the matter to the court”.

138 This presupposes an opportunity for the defendant to alledge over-indebtedness – this would be difficult in the event of a default judgment.



o The manner in which the debt/ amount claimed is calculated and whether

this is in compliance with the provisions of the NCA;

o This may be done by way of affidavit.

In terms of the Myambo-judgment, a request for judgment is founded on a cause of

action,139 which may be in respect of a credit agreement to which the NCA applies.140

The effect of a successful request, i.e. granting of judgment in the terms requested and

allowed in terms of the relevant legislation, is that the matter becomes res judicata.141

In the premises and in order to provide for proper judicial oversight, it is necessary that

the court be empowered to intervene in an appropriate manner where the consent/

request for judgment approach is taken.

Louw argues two approaches.142 The first argument supports the contention that the

judgment eliminates the original cause of action i.e. the underlying debt alternatively

facilitates the creation of a parallel obligation. The second is in respect of the

reinforcement of the contract with the primary outcome of accessing procedural

remedies in enforcing the debt. The first contention is supported by Swadiff (Pty) Ltd v

Dyke NO143 and the second by E A Gani (Pty) Ltd v Francis.144 Ultimately, he comes to

the following conclusion:

“I do not believe that it is wise to deal with these issues in the abstract and it is imperative to

analyse actual and concrete relationships between creditors and debtors in order to determine

whether a judgment debt, in a concrete case, constitutes a new debt or whether it merely assists

139 The request for judgment is founded on a cause of action i.e. the credit agreement – see p 12. The consent judgment has the effect of causing the cause of action to become res judicata – see p 14.

140 See e.g. p 28.

141 Pp 13-14: “Section 58(1) created a procedure whereby a plaintiff can obtain judgment. The function of the written consent is to obviate the need for the plaintiff to prove the claim based on the underlying legal relationship. Once the clerk of the court grants judgment by consent, it has the effect of a judgment by default granted by the court in respect of the cause of action set out in thesummons or the letter of demand. The consent judgment renders that cause of action res judicata.”

142 Louw 2013 (2) par 67 [“The Appellate Division gave this approach its stamp of approval in Swadiff (Pty) Ltd v Dyke NO. In Swadiff’s case it was expressly held that a judgment does not extinguish the underlying debt, but rather confirms it, quantifies it in appropriate cases and strengthens it in a number of ways, most notably with regard to prescription and a creditor’s right to levy execution in order to satisfy the debt”]; par 73 [“In E A Gani (Pty) Ltd v Francis Goldstone and Kirk-Cohen JJ referred to the Swadiff decision but nevertheless held that the judgment against the principal debtor ‘created a new kind of indebtedness against him which include(d) the amount owing under the original contract and interest as well as costs of suit …’ “]. See also the summary in Fedsure Participation Mortgage Bond Managers (Pty) Ltd and Another v Sandlundlu (Pty) Ltd referred to above.

143 1978 (1) SA 928 (A).

144 1984 1 SA 462 (T).



in the execution of the underlying loan agreement. The terms of the contract between the parties

may shed light on this issue and so may the steps taken by the creditor. If the creditor, for

example, cancelled the agreement it would go without saying that the later judgment obtained by

the creditor would be a new legal bond between the parties with the consequence that section 2 of

the Prescribed Rate of Interest Act would apply to it without any NCA limitation. If, however,

judgment is sought on the basis that the creditor merely requires the machinery of the State to

collect the debt so that the judgment is obtained only to assist in debt collection, a different result

may emerge namely that no novation took place, no separate legal bond was created, but that the

underlying debt was merely strengthened. No mora interest would then be in issue.”145

The relevance of the above brief discussion to emoluments attachment orders and the

respective roles of the stakeholders in the process, is related to the outcomes of each

stage of the debt collection process. Sections 57 and 58 are mechanisms to obtain

judgment on a cause of action founded in a credit agreement. Section 65 J orders and

writs of execution are concerned with executing the judgment forceably where the

judgment debtor does not adhere to the court order or prefers the mechanism of

enforcing the court order through an emoluments attachment order. The discussion also

impacts the issue of magisterial oversight as it considers the role of the court in these

two stages of debt collection, namely judgment and ordering execution of the judgment.

Interviewees indicated that some courts ‘re-interrogated’ a request for an emoluments

attachment order in the same lines as for a request for judgment e.g. reckless credit

assessment, etc. This approach does not take into account that the court that issued the

judgment must have done the same and the outcome is not of consequences as any

discrepancy should have been discovered at the judgment stage.

Some interviewees, where relevant to their business, consistently perceived the lack of

standardisation in courts and the multiplicity of the documents requested by a particular

court, as obstructive in respect of costs and time.

It must also be noted that ‘consent’ to judgment does not remove the protection of the

NCA in respect of both debtor and creditor.146 The comparative process is trial where the

matter is defended and in this regard, the court would properly ‘interrogate’ the claim of

the creditor. In the light of the protective measures of the NCA of which the parties may

not be aware of, there are no grounds to argue that the court in section 57 or 58

145 Louw 2013 (2) paras 86-88.

146 African Bank Ltd v Additional Magistrate Myambo p 18 et seq.



proceedings should be any different.147 Debt collection has become a specialised and

regulated industry, not only in respect of the person who collects the debt (whether

attorney or debt collector) but also in respect of the legislative provisions protecting

debtor-consumers and balancing the interests of consumers and credit providers. In the

premises, where the process requires proper administrative compliance from role –

players, same cannot be disparaged under the frame of resource-efficiency pertaining to

time and costs. However, where the requirements are of such a nature that it effectively

bars deserving cases by delaying access to justice in terms of remedial action,

intervention is needed.

Many concerns noted by interviewees were also borne out of a distrust of other role-

players in the industry whether based in doubt in terms of integrity (belief that bribes

are taken), incompetency (no investigation is undertaken as the clerk of the court does

not have the ability to identify the signs of reckless credit or non-adherence to section

103(5)). Credit assessments may be requested at point of request for an emoluments

attachment order, in order to investigate possible reckless credit granting, where this

should have been properly investigated at the stage of granting the judgment.148 This

can be seen as an unnecessary delay with time and cost implications. A request for a

salary slip where there is doubt whether the judgment debtor can afford the instalment

which is to be deducted, would be more appropriate to the stage of proceedings i.e. the

manner of execution.

2.2 Issue 2

The ability of parties to regulate the relationship between them by way of contract

and in a manner that differs from the legislative provisions – the so-called

‘contracting out of legislation’. Four indicators with examples are presented for

consideration:

First indicator

This indicator has two sections:

The legislative provision clearly states that it cannot be amended or waived by way

of agreement. Section 103(5) is an example:149 “Despite any provision of the

147 African Bank Ltd v Additional Magistrate Myambo p 18 et seq.


149 See also Campbell 2010 6.



common law or a credit agreement to the contrary, the amounts contemplated in

section 101(l)(b) to (g) that accrue during the time that a consumer is in default under the

credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt

under that credit agreement as at the time that the default occurs.”150

The legislation has a specific provision as well as a general provision in terms of

which parties may deviate from the specific provision. An example would be section

65J(1), which regulates jurisdiction in terms of legislation, and section 45, which

regulates consent to the jurisdiction of a court which would ordinarily not have

jurisdiction.

Second indicator

The legislation does not make provision for the aspect that the parties wish to

regulate between themselves. An example would be date of payment of the debt.

Third indicator

There is no legislative provision which precludes the parties to contract on different

terms as set out in the legislation, but the agreement is in direct contrast to the

provisions of the legislation. An example would be section 65J (10): “Any garnishee

may, in respect of the services rendered by him in terms of an emoluments attachment order,

recover from the judgment creditor a commission of up to 5 per cent of all amounts deducted

by him from the judgment debtor’s emoluments by deducting such commission from the

amount payable to the judgment creditor”.151 The debtor then consents to repay all

collection costs, which would include the 65J(10) commission and same is for his or

her account.

Fourth indicator

The more problematic indicator is where there is no legislative provision which

precludes the parties to contract on different terms as set out in the legislation and

the agreement is not in contrast to the provisions of the legislation but amplifies

same. An example would be where the debtor consents to pay attorney and client

costs instead of party-and-party costs.

In this regard, proper and informed consent is of cardinal value. The literacy levels of

many consumers underscore their ability to competently participate (on equal footing) in

150 See also Friedman & Otto 2013 146. Own emphasis.

151 Own emphasis.



an agreement. Lack of knowledge regarding financial aspects as well as legal aspects

may negate the best consumer protection legislation. In many instances, the duty is on

the opposing party to ‘protect’ the interests of the other i.e. the consumer. Interviewees

also consistently noted that lack of education in financial and legal aspects is a root

cause of many of the prominent problems experienced in the debt collection sphere.

Interestingly, during interviews with sheriffs, it was notable that sheriffs are well suited

to educate persons who are confronted with the law. Some offices provide community

training on a continuous basis at schools, clinics, police offices and community

centres.152 The information that is provided is within the context of a scenario which

personally affects the person and which necessitates attention, such as serving a

summons or attaching property in lieu of a writ of execution. The repertoire that is built

up with the sheriff has also, in certain circles, assisted with eliminating some abuses

such as non-service, service by attorneys by fax instead of by sheriff or service by a

person other than a sheriff (which is a criminal offence). The following examples are

cases in point where proper instructions are provided in different languages respect of

what is expected from a person when confronted with the sheriff and/or legal

documentation:

152 During the interview on 14 October 2013, the sheriff indicated that he desired a change in the way that the sheriff is viewed, from one that ‘takes’ to one that ‘aids’.









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Magistrates indicated that there are specific important aspects that need to be put to the

debtor in order to ascertain whether there was proper consent and these are discussed

under ‘magisterial oversight’ hereafter.

2.3 Issue 3

The regulatory scope of the NCA:

First alternative

The NCA only regulates the relationship between the parties insofar as it relates to the

rights and obligations of the parties pertaining to the credit extended. In this regard,

apart from the preliminary enforcement measures set out in the agreement and the

NCA in sections 129 and 130, the proceedings relating to the enforcement of the

agreement are regulated by the relevant legislation and rules regulating the conduct

of proceedings in court.

Second alternative

The provisions of the NCA prevail throughout the proceedings, whether judicial or

extra-judicial proceedings as the cause of action is based on a credit agreement.153

In this regard, reference must be had to the purpose of the NCA. Section 3(i) of the NCA

states that “[t]he purposes of this Act are to promote and advance the social and

economic welfare of South Africans, promote a fair, transparent, competitive,

sustainable, responsible, efficient, effective and accessible credit market and industry,

and to protect consumers, by— providing for a consistent and harmonised system of

debt restructuring, enforcement and judgment, which places priority on the eventual

satisfaction of all responsible consumer obligations under credit agreements”. Chapter 6

Part C deals with ‘debt enforcement’ which indicates that the NCA does influence the

debt collection regime in South Africa. However, when a court order is granted and the

153 As will be discussed below, this does not mean that court proceedings will not have an impact. Two arguments of Friedman & Otto 2013 deserve mention. The first is that section 103(5) applies from when the debtor is in default and continues to apply notwithstanding that enforcement proceedings have been instituted. This differs from the common law position where the in duplum rule was suspended when legal proceedings were instituted. he second is that the judgment will discontinue the application of section 103(5) as the wording of this section relates to ‘default under a credit agreement’. When a creditor has successfully obtained judgment, the judgment debtor is in default in respect of the judgment and, it is argued, no longer in respect of the credit agreement.



law relating to judgments etc becomes applicable, the regulation of the NCA in this

regard is questionable.154

2.4 Issue 4

Practical issues, not necessarily related to the legal framework, were also considered. In

this regard, the outcomes of the specific debt collection mechanism were often found to

be related to practical outcomes. Some specific examples include the following:

The section 65A procedure cannot effectively be implemented if the court does not

issue the notice prior to the court date set out on the document;155

The section 65A enquiry cannot effectively be implemented if the debtor does not

appear in court or does not bring proof of income and expenditures to court;156

If the sheriff cannot gain access to the premises and the debtor, notices and court

processes cannot be served on the debtor. This includes documents to initiate the

process of debt collection or remedial action such as warrants of arrest where a

debtor is in wilful default of notice to attend court.157

This also pertains to the behaviour of role-players. Interviewees consistently noted that

the obstructive and ignorant behaviour of industry stakeholders, whether wilful non-

adherence to clear legislative guidelines or as a result of incompetency and lack of

knowledge, were within the top three root causes of negative outcomes of the debt

collection process. In this regard, the root cause is not necessarily founded in the

legislation and amendments to same may not remedy the position.158

154 Louw 2013 (2) par 97.

155 Interview 9 October 2013: The interviewees provided anecdotal evidence that section 65A’s were sent to court but only returned after the court date noted on the notice had passed.

156 Interview 19 September 2013: The interviewees indicated that this resulted in postponement with resultant time delays and cost implications. Kotzé 2013 indicates that, although the debtor is responsible for the costs in the end, the attorney has to carry costs such as the sheriff’s account in the interim.

157 Interviews 18 September & 9 October 2013: The interviewees indicated that premises such as security complexes, mines and power stations were especially difficult. Safety concerns and relevant legislation may even necessitate safety induction training, safety wear and guidance to the debtor’s workplace, which may be underground.

158 Reckless credit was consistently noted as a cause of problems in the debt collection process. This is a clear example where the legislation prohibits behaviour but stakeholders still act unlawfully. In this regard, legislative amendment may not effectively address the problem and there is a need for proper policing and enforcement to compel behavioural change.



3 Framework for relationship between parties

In the light of the discussion above, consideration of the following term of reference is

appropriate at this stage:



the parties.

The parties

The role-players in respect of debt collection are the debtor (defendant/ judgment

debtor), creditor (plaintiff/ judgment creditor), debt collector, legal representative

(attorney), magistrate and/ or clerk of the court as well as the employer (garnishee).

The initial relationship between the debtor and creditor is of a contractual nature with c

corresponding rights and obligations. Should parties not perform in terms of the

agreement, a cause of action such as breach of contract arises. However, when

judgment is granted the cause of action becomes res judicata. It is submitted that the

manner in which the court order is phrased will determine the rights and obligations of

the parties in respect of the debt. It is therefore important that the request include all

the cardinal aspects regarding repayment amount, interest and scale of costs. Sections

57 and 58 refer to the offer of the defendant when referring to the judgment and the

offer will on all probability be capable of embodiment in the request for judgment and

court order.

The emoluments attachment order is based on the judgment and it is submitted that any

agreement in contrast with the order will not be sustainable.

In this regard, it is important to note Louw’s comments on the amounts included in the

judgment amount and the interaction with section 103(5) i.e. that which is legitimately

due to the creditor and not restricted ex lege.



Role-player Obligation/s Right/s Remedy/ies available to other parties where obligations not fulfilled

Emoluments attachment order

Court Issue EAO if formally in order i.e. proper compliance with procedural and substantive legislation

Request information and/or refer to magistrate where there are discrepancies or discretion to question entitlement

Section 13 MCA: Review of decision of clerk of the court

Review to High Court

Debtor Refrain from obstructing the process such as arranging for non-payment with employer

Free statement upon reasonable request

Proper cessation of deductions once debt is paid off in accordance with EAO

Payment only of debt, interests and costs that are due

Deductions that will still leave enough emoluments for own and dependant’s maintenance

May question certain aspects of the order in accordance with section 65

Rescission or amendment of EAO where instalment amount not sustainable in light of living costs

Re-imbursement for over-charging

Creditor Monitor repayments Receive payment in accordance with court order

Refer to NCR

Civil liability

Attorney Monitor repayments

Adhere to professional and ethical standards in respect of services to client, costs, requests, etc

Receive payment from creditor for services rendered

Refer to Law Society

Civil liability

Employer Deduct monthly instalments in accordance with EAO and pay to attorney

Section 65J(10) commission

May question certain aspects of the order in accordance with section 65

Attach assets

Civil liability

Criminal liability



Louw and Dicker indicated that, where a court does not have jurisdiction, the order

granted is null and void.159 The following ratio of Southwood J is relevant:160

“A court must have jurisdiction for its judgment and/or order to be valid. If the court does not

have jurisdiction its judgment and/or order is a nullity. No pronouncement to that effect is

required. It is simply treated as such: Lewis & Marks v Middel 1904 TS 291 at 303; Suid-

Afrikaanse Sentrale Ko-operatiewe Graanmaatskappy Bpk v Shifren and Others and the Taxing

Master 1964 (1) SA 162 (O) at 164G-H; Trade Fairs and Promotions (Pty) Ltd v Thomson and

Another 1984 (4) SA 177 at 183D-E.”

Even though Louw notes that the repayment will amount to the ‘repayment of natural

debt’, the implementation of same will have repercussions for the employer as the

employer’s actions will conflict with section 34 of the Basic Conditions of Employment

Act. This matter is dealt with in more detail under the heading of ‘Jurisdiction’ hereafter.

159 Louw 2013 (1) par 47 & Dicker 2013 par 4.1. The opinions respectively set out the following risks to the parties: Louw paras 47-48: “I have already expressed the view that where a court that does not have jurisdiction issues an emoluments attachment order, the order is null and void and does not have to be complied with. But, if the order is for whatever reason complied with, then I do not think that there can be any civil consequence that can be visited upon the creditor or its legal representatives. A due debt is paid, an obligation is extinguished. There can be no enrichment action. It is the same position where a prescribed debt is paid. I have given consideration to the question whether there could be a regulatory sanction that may be visited upon the creditor if an emoluments attachment order is obtained in the wrong court. Section 133 of the National Credit Act deals with prohibited collection and enforcement practices. The section refers back to section 90(2)(l) which prohibits the use of the “card and pin” collection technique of yore. But this is the only section that I could find in the National Credit Act that directly or indirectly deals with collection techniques. I have also considered whether there could be any criminal ramifications if a creditor were to obtain a consent from a debtor conferring alternative jurisdiction on a court from that contemplated in section 65J of the Magistrates’ Court Act. I do not think a misrepresentation would be made if such a document is obtained because all that the representation would be is that such a document had been obtained. If a magistrate or a clerk of the court is impressed by such a consent, and should the court or a clerk therefore issue an emoluments attachment order, I would think that it could be argued that no misrepresentation for purposes of the criminal law has been made. What must, however, be kept in mind is that although the creditor would not receive anything by the wrong court ordering an emoluments attachment order than the judgment creditor would have obtained if the correct court made the order, the test for purposes of fraud is whether the misrepresentation gives rise to prejudice and, in this regard, it is not actual prejudice that is required but only potential prejudice. It is not even necessary that the prejudice should affect any specific person such as the judgment debtor or the employer or the court, prejudice against the State or society is adequate. See for example State v Myeza 1985 4 SA 30 (T) at 32 C.” Dicker paras 8.2-8.4: “If s 45 consents cannot validly be used, there is a substantial risk of failure in attempting to approach the wrong court to authorise such an EAO. Even if one should succeed in procuring the issue of an EAO on this basis, there is a risk of the EAO being set aside on appeal or even review. In that event, there is a risk of earning the High Court’s opprobrium; or that of the National Credit Regulator. In either of these events, there is the attached risk of adverse publicity. In the circumstances, therefore, there is a danger of the risk referred to in the brief, viz reputational risk pertaining abuse of process, being realised. If a particular process is used in a way neither contemplated nor authorised by the legislature, that is an abuse of process”.

160 Communication Workers Union and Another v Telkom SA Ltd and Another 1992 (2) SA 586 (T) 593.



4 Additional preliminary comments to consider

First and foremostly, within the context of the discussions below, it is important to note

that the arguments and perspectives reflected below where no reasoned judicial

guidance has been provided in case law are merely opinions. Ultimately, where

ambiguous provisions are a reality, the behaviour of industry role-players cannot

legitimately be reviewed in the absence of clear authority. The following two extracts

serve as cases in point:161

“ ‘In one case, a consumer had a debt of R6 000, but four months later, the debt was standing at

R11 000,’ says Van Schalkwyk. ‘It could be legal, but it’s not moral’.”

“However, because of the absence of an arm’s length relationship between the attorneys and the

debt collector entities over which they exercise control, and the fact that such debt collector

entities often take session of creditors’ claims, the tendency is for attorneys to recover the

maximum allowable collection commission from debtors and thus effectively avoiding or lessening

competition, maximising their own recovery and prejudicing consumers/debtors.”

If the legal conduct of parties is to be criticised on moral grounds, set guidelines are

needed in respect of what is acceptably moral in terms of industry perspectives. This is

particularly relevant where there are different role-players and stakeholders in the

industry with varying vested interests. It is doubtful whether parties can be criticised for

charging the maximum of a fee allowed in terms of legislation or rules.

Various principles apply when evaluating debt collection mechanisms. Due regard should

be given to the proper balancing of the respective parties’ rights and interest as well as

the purpose and outcomes of debt collection. Where behaviour or practices are deemed

to be morally reprehensible but not unlawful, fair guidelines should be set in this regard.

However, care should be taken to treat all role-players in a fair and equitable manner.

161 Polity.org.za 27 February 2013, Buchner & Hartzenberg “Cashing in on collections” De Rebus July 2013.



Jurisdiction

1 Introduction

The part of the mandate that relates to this section is the following:



South Africa.

Counsel was requested to consider the following:

Whether reliance on section 45 of the MCA is correct and enforceable within the

context of section 65J (which contains a specific jurisdictional provision);

Whether the consent has to relate specifically to the emolument attachment order

or whether consent e.g. to judgment in terms of section 58 in a specified court

will be sufficient to also include the granting of an emolument attachment order

in the same court;

Whether there are any perceived legal risks to the legal representative and its

client in utilizing section 45 consents to jurisdiction for purposes of obtaining

emolument attachment orders; and

Whether the use of section 45 of the MCA conflicts with the provisions of the

National Credit Act 34 of 2005 (“NCA”) where the underlying agreement between

debtor and creditor was a credit agreement to which the NCA applied.

The aspects that need to be considered are therefore:

The concept of jurisdiction and the three jurisdictional indicators namely monetary,

subject-matter and geographical jurisdiction;

The various relevant sections in the Magistrates’ Courts Act that set out the options in

terms of jurisdiction: Section 28, 29, 45, 46 and 65J(1);

The interaction between section 65J(1) and 45 in respect of the applicability of section

45 on section 65J(1);



The positive and negative outcomes to the provisions of section 65J(1) and section

45.

2 Conceptualising the issue

Jurisdiction refers to the authority of a court to adjudicate a matter and to enforce any

order made subsequent to the adjudication.162 The jurisdictional indicators of the

general163 South African courts can be divided into three categories namely subject-

matter (the ability to adjudicate on a specific type of action), monetary value (the ability

to hear a matter of a specific monetary value) and geographical reach (physical

boundaries of the court’s jurisdiction in respect of persons, property and causes of

action).164 The Magistrate’s Court is a creature of statute with no inherent power to

regulate its own proceedings outside the provisions of the MCA, MCR or other relevant

statutes such as the NCA.165

2.1 Type of proceedings

Ordinarily, sections 29 and 46 of the MCA determine whether the Magistrate’s Court has

jurisdiction to adjudicate on a specific cause of action. Section 29 sets out the matters

that the Magistrate’s Court is entitled to adjudicate on (with reference to the monetary

restrictions on matters) and section 46 sets out matters in terms of which the

Magistrate’s Court does not have jurisdiction. The district court’s monetary jurisdiction is

limited to R100 000 and the regional court to R300 000, except where matters relating

to the NCA are concerned as no maximum amount is set in this regard.166 The

procedures to adjudicate on these matters are also set out in the MCA i.e. the legislation

allows for the Magistrate’s Court to hear a matter relating to the recovery of debt and

the procedures to do so, including sections 57, 58 admission of liability and consent to

judgment as well as section 65J emoluments attachment orders are set out in the MCA.

Section 29 makes the provisions of the MCA subject to the NCA: “29. Jurisdiction in

respect of causes of action.—(1) Subject to the provisions of this Act and the National Credit Act,


163 Specialised courts such as labour and military courts exist, but these are not of consequence to this discussion – see Theophilopoulos et al 2012 43 for further discussion.

164 Louw 2013 (1) paras 6-7, Theophilopoulos et al 2012 52-53.

165 Louw 2013 (1) par 42, Theophilopoulos et al 2012 44.




2005, a court in respect of causes of action, shall have jurisdiction in—(e) actions on or arising out

of any credit agreement as defined in section 1 of the National Credit Act, 2005”.

2.2 Area of jurisdiction

The geographical choice of court is usually determined by section 28, which regulates

jurisdiction over the person of the defendant, respondent or litigant where certain

criteria are met. Subsections 28(1) (a) – (d) is of particular interest to this discussion

and reads as follows:

“Jurisdiction in respect of persons.—(1) Saving any other jurisdiction assigned to a court by this

Act or by any other law, the persons in respect of whom the court shall, subject to subsection

(1A), have jurisdiction shall be the following and no other:

(a) Any person who resides, carries on business or is employed within the district or regional

division;

(b) Any partnership which has business premises situated or any member whereof resides within

the district or regional division;

(c) Any person whatever, in respect of any proceedings incidental to any action or proceeding

instituted in the court by such person himself or herself;

(d) Any person, whether or not he or she resides, carries on business or is employed within the

district or regional division, if the cause of action arose wholly within the district or regional

division.”

It should also be noted that section 28(1)(f) provides that a ‘defendant’ who becomes

involved in proceedings and does not oppose the jurisdiction of the court, can tacitly

consent to the jurisdiction of the chosen Magistrate’s Court.167 The wording of section 28

needs to be carefully considered, especially where specific reference is made to e.g.

‘defendant’ vis-à-vis ‘person’.168

2.3 Section 65

Section 65J(1) allows for a procedure specific jurisdictional indicator. It specifies the

court that should be approached where an emolument attachment order is to be issued.

The relevant part of section 65J reads as follows:

167 Section 28(1)(f) reads as follows: “Saving any other jurisdiction assigned to a court by this Act or by any other law, the persons in respect of whom the court shall, subject to subsection (1A), have jurisdiction shall be the following and no other: Any defendant (whether in convention or reconvention) who appears and takes no objection to the jurisdiction of the court”.

168 See McLaren v Badenhorst and Others 2011 (1) SA 214 (ECG) par 8, available at http://www.saflii.org/cgi -bin/disp.pl?file=za/cases/ZAECGHC/2010/42.html&query=mclaren%20v%20badenhorst.



http://www.saflii.org/cgi%20-bin/disp.pl?file=za/cases/ZAECGHC/2010/42.html&query=mclaren%20v%20badenhorst

http://www.saflii.org/cgi%20-bin/disp.pl?file=za/cases/ZAECGHC/2010/42.html&query=mclaren%20v%20badenhorst

“Emoluments attachment orders.—(1) (a) Subject to the provisions of subsection (2), a judgment

creditor may cause an order (hereinafter referred to as an emoluments attachment order) to be

issued from the court of the district in which the employer of the judgment debtor resides, carries

on business or is employed, or, if the judgment debtor is employed by the State, in which the

judgment debtor is employed.”

The options allowed for are therefore the following in terms of section 65:

The district where the employer resides;

The district where the employer carries on business;

The district where the employer is employed;

If the employer is the State, the district where the debtor is employed.

The following practical interpretations are therefore relevant:

• Residence where the employer is a juristic person: Initially, it was accepted

that a juristic person could have ‘dual residency’ i.e. the main place of business and

registered address.169 Section 12 of the Companies Act 61 of 1973, which was

subsequently repealed by the Companies Act 71 of 2008, provided that the court

with jurisdiction over a company would be the court within whose jurisdiction the

principal place of business or registered address was situated. In the light of the

repeal of this section, section 23 of the 2008 Companies Act has been interpreted to

bring about a scenario where the main place of business and registered address

should be the same address, allowing for only one ‘residence’ of a company.170

However, this interpretation has not been followed by other courts where the context

169 Horn “Die ‘woonplek’ van ‘n binnelandse maatskappy” 1990 (23) De Jure 363; Van der Linde & Van der Merwe “Company residence and jurisdiction” 1994 (111) South African Law Journal 780; Van Loggerenberg Jones & Buckle The Civil Practice of the Magistrates’ Courts in South Africa Vol 1: The Act 10th ed (Revision service 3, updated to 31 March 2013) 95-96.

170 See Sibakhulu Construction (Pty) Ltd v Wedgewood Village Golf Country and Others 2013 (1) SA 191 (WCC), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAWCHC/2011/426.html&query= sibakhulu. See also Government Notice R667 in Government Gazette 35618 of 24 August 2012: Interpretation and application of section 23 of the Act and Regulation 43 of the Companies Regulations, 2011: Sibakhulu Construction (Pty) Ltd v Wedgewood Village Golf and Country Estate (Pty) Ltd: Practice Note 2 of 2012 (Government gazette No. 35618) (Department of Trade and Industry: Practice Note 2 of 2012 in terms of Regulation 4 of the Companies Regulations, 2011).



http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAWCHC/2011/426.html&query=%20sibakhulu

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAWCHC/2011/426.html&query=%20sibakhulu

of the involvement of the judiciary differed i.e. business rescue, liquidation of

companies or powers and jurisdiction of liquidators.171

• Place of business: If the employer has multiple places of business (the legislation

does not provide for ‘main place of business’), such as Woolworths, the choices of

jurisdiction is widely expanded as ‘place of business’ is not ring-fenced.172

It is submitted that where such a multitude of options exist legitimately, the consent to

jurisdiction needs to be highly motivated in terms of effectiveness and efficiency to pass

professional/ industry and judicial scrutiny. The negative outcomes experienced by role

players in practice may also shed some light on the choice to engage a specific court.

The determination of jurisdiction, especially where the party instituting the proceedings

have a choice between courts with concurrent jurisdiction, is further based on certain

underlying principles.173 Aspects such as effectiveness, common sense and convenience

are also considered when deciding upon a specific court.174 In this context,

‘effectiveness’ and ‘convenience’175 relate to the merit of the matter e.g. whether the

court will be able to give effect any order given or in which court’s jurisdiction the

majority of the witnesses are situated in respect of the cause of action.176

171 Firstrand Bank Ltd, Wesbank Division v PMG Motors Alberton (Pty) Ltd and Others [2013] 4 All SA 117 (GSJ), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPJHC/2013/203.html&query= pmg.

172 However, see Jones & Buckle 95 in respect of section 28, discusing ‘residence’, ‘registered office’ and ‘principal place of business’ in the contexts of the 1973 and 2008 Acts: “A company did not ‘reside’ at every place where it had a branch office. In Kruger NO v Boland Bank Bpk the court held that where a company’s registered office and principal place of business were outside the court’s area of jurisdiction the company was not ‘resident’ within that area of jurisdiction merely by reason of the fact that it carried on some of its business within the area”.


174 Rostami Beleggings CC v Nedbank Ltd and Others [2012] ZAGPJHC 197 paras 48-50, available at http:// www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPJHC/2012/197.html&query=rostami.

175 See e.g. Multi-links Telecommunications Ltd v Africa Prepaid Services Nigeria Ltd and Others, Telkom SA Soc Ltd and Another v Blue Label Telecoms Ltd and Others (35347/13, 30004/13) [2013] ZAGPPHC 261 (6 September 2013), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2013/261.ht ml&query=jurisdiction%20&%20effectiveness, as an example where the persons closely connected with the cause of action were resident within the jurisdiction of the chosen forum.

176 Theophilopoulos et al 2012 44-47, 77 et seq. See also Louw 2013 (1) par 6. It must, however, be reiterated that the Magistrate’s Court is a creature of statute and no principle can confer jurisdiction where the court does not have jurisdiction by virtue of the MCA or another statute. It can, at most, assist with choosing between courts with concurrent jurisdiction. Furhtermore, it is submitted, that this reference to ‘convenience’ does not include the ‘convenience’ of parties consenting to jurisdiction in terms of section 45 for the reasons (e.g. that the court is more expeditious or ‘reasonable’) as set out in the discussion hereafter.



http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPJHC/2013/203.html&query=%20pmg

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http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2013/261.ht%20ml&query=jurisdiction%20&%20effectiveness

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2013/261.ht%20ml&query=jurisdiction%20&%20effectiveness

2.4 Section 45

Consent to jurisdiction

Section 45 reads as follows:

“Jurisdiction by consent of parties.—(1) Subject to the provisions of section forty-six, the court

shall have jurisdiction to determine any action or proceeding otherwise beyond the jurisdiction, if

the parties consent in writing thereto: Provided that no court other than a court having jurisdiction

under section twenty-eight shall, except where such consent is given specifically with reference to

particular proceedings already instituted or about to be instituted in such court, have jurisdiction in

any such matter.”

Some debt collectors reason that section 45 allows for competent consent to the

jurisdiction of a Magistrate’s Court that will ordinarily not have jurisdiction. Therefore,

where the employer is resident within the jurisdiction of the Pretoria Magistrate’s Court,

the argument allows for section 45-consent to e.g. the Winburg Magistrate’s Court. This

method is used within the context of sections 57, 58 and 65 of the MCA, which

mechanisms are primarily used by legal practitioners to collect debts on behalf of clients.

The procedures related to the aforementioned sections are circumscribed in these

specific sections of the MCA and MCR. However, sections and rules of a general nature

that do not fall to be specified within the constraints of the mentioned debt collection

methods are applied within the context of debt collection to facilitate the process.

Therefore, in practice, parties consent to the jurisdiction of a particular Magistrate’s

Court, to process their applications in terms of sections 57, 58 and 65 in various

jurisdictions by virtue of their consent to the jurisdiction of these courts. Simultaneously

with this process, debtors also consent to the issuing of an EAO from the same court to

whose jurisdiction they have consented to judgment, which is not the court which has

jurisdiction in terms of section 65J.

Various opinions exist as to the nature and scope of section 45 and the following aspects

need to be clarified:

Whether section 45 is relevant where the parties desire that the proceedings be dealt

with by a court which would generally not have geographical jurisdiction as the

Magistrate’s Court does have jurisdiction to grant requests for judgment in terms of

sections 57 and 58 and emoluments attachment orders;



Whether sections 57, 58 and 65 qualify as ‘proceedings’ for purposes of invoking the

applicability of section 45;

Whether the provision of section 65J precludes any deviation from its prescriptions.

2.5 Monetary value and geographical scope

The first interpretation suggests that section 45 can only extend the jurisdiction of the

court in respect of the monetary value of the claim i.e. allowing parties to litigate in a

cheaper forum and for the full amount of the claim unrestricted by legal limitations to

jurisdiction.177 In this regard, section 28 (and by implication section 65J(1)) will in all

instances remain the jurisdictional link as section 45 cannot confer geographical

jurisdiction upon a court which does not have the authority by virtue of the legislative

provision.178

However, on a very basic interpretation of the definition of “court” and “district” as per

the MCA (and as referred to in section 45), this approach seems to be unfounded. The

definitions in the MCA read as follows: “ ‘court’ means a magistrate’s court for any

district or for any regional division” and “ ‘the district’, if used in relation to any court,

means the district, sub-district, or area for which such court is established”. The

definitions immediately invoke the concept of geographical jurisdiction. Louw

summarises the situation as follows:179

“The portion of section 45(1) that follows upon the colon does not appear to be a proviso properly

so speaking. A proviso usually qualifies what goes before it but here it seems that what follows

after the proviso does not qualify what went before it. It adds to it. As I have pointed out the first

part of section 45(1), i.e. the portion before the proviso, deals with the amount or the quantum of

the dispute. The portion after the word “provided” deals with something totally different i.e.

jurisdiction over a defendant which is indicated by the words “a court having jurisdiction under

177 Beck “Magistrates’ Courts: Consent to jurisdiction” 1980 De Rebus 409: “Jurisdiction over persons is strictly limited by s 28(1) of the Act and this makes no provision for consent to jurisdiction. It seems, therefore, that where a magistrates’ court has jurisdiction over the subject matter of the action, it is not possible at any time to found personal jurisdiction by consent unless, of course, the defendant appears and takes no objection. Such consent is therefore null and void…When it is desired to institute action in a case where the subject matter is beyond the jurisdiction of the magistrate’s court and to rely on a consent, action should be instituted in a magistrate’s court with jurisdiction in terms of s 28 and consents to the jurisdiction of a specific court should not be relied on”.

178 It is trite law that no law or agreement can provide jurisdiction in terms of subject-matter where same is specifically excluded from the jurisdiction of the Magistrate’s Courts (section 46) or specifically excluded by another law (e.g. section 12 of the 1973 Companies Act, which has technically now been repealed by section 224 of the 2008 Companies Act).

179 Louw 2013 (1) paras 17-19.



section 28”. This section, as I have pointed out above, deals with jurisdiction in respect of persons

and not quantum. The “proviso” is phrased in a highly technical manner. It consists of a long

sentence with a portion between commas in its middle. Leaving the portion in the middle between

the commas aside for the moment, the proviso reads:

“Provided that no court other than a court having jurisdiction under section 28 shall have jurisdiction

in any such matter.”

The “such matter” refers to a matter where the jurisdiction of the court in respect of quantum has

been extended i.e. the portion of section 45(1) before the proviso. This part of the proviso is

clear: Only a court that has jurisdiction in terms of section 28 can have jurisdiction where the

court’s quantum limit is lifted by agreement, by consent between the parties. The portion between

the brackets qualifies the proviso. Without the portion between brackets the proviso does not

really contribute anything. It merely says that only a court that has jurisdiction under section 28

has jurisdiction, which does not take anything any further. But, the portion between brackets

brings meaning to the proviso and extends section 28. The portion between brackets is to the

effect that where a defendant gives consent that a matter be heard by a court that would not

ordinarily have jurisdiction in terms of section 28, that court may have jurisdiction. Jurisdiction is

thus conferred on a court that does not ordinarily have jurisdiction by consent. This is clearly an

extension of the territorial jurisdiction of the magistrates’ court.

The practical effect of section 45 is thus that the parties may agree in a contract that a

magistrates’ court will have jurisdiction even if the amount in issue exceeds the magistrates’ court

jurisdiction. After a contract has been entered into and when proceedings are in the offing, the

defendant may also consent that the proceedings be instituted in a court other than the court

where he or she resides, carries on business or is employed. The fundamental distinction between

these two provisions cannot be over-emphasised: Parties may not in a contract agree that a court

that does not have territorial jurisdiction over the person of the defendant will have jurisdiction –

they may only agree that a magistrates’ court rather than a high court will have jurisdiction even if

the quantum of the claim exceeds the magistrates’ courts’ jurisdiction. It is only when legal

proceedings are about to be instituted i.e. long after the contract had been entered into, that a

defendant can consent to a court other than the court that would normally have jurisdiction in the

territorial sense. This is emphasised by section 45(2) which declares that a provision in a contract

is null and void which confers jurisdiction on a magistrates’ court other than a court contemplated

in section 28.”

Second interpretation

The second interpretation is that section 45 cannot confer jurisdiction upon the court as

the Magistrates’ Courts are creatures of statute and the emoluments attachment order



process is exclusively regulated by section 65.180 As this section makes provision for

jurisdiction, section 65J(1) is the only section that can competently provide for

jurisdiction.

3 Discussion

The interpretation of section 45 of the MCA with regard to its application in practice

relating to the obtaining of garnishees in the country has accounted for different

approaches towards the determination of a suitable court for debt collection purposes.181

This discussion concerns the legality of utilising general mechanisms such as consent to

jurisdiction in terms of section 45 to facilitate the debt collection process by conferring

jurisdiction on Magistrates’ Courts for which no provision is made in section 65J of the

MCA.

Section 45 is interpreted to allow a debtor to consent, upon request from the creditor or

his agent or legal representative, to the jurisdiction of a specific magistrate’s court to

obtain judgment and to issue an emoluments attachment order. Not all courts allow this

and not all legal representatives interpret the legislation as such. The potential abuses

that have been identified, such as consent to a jurisdiction that is far away from the

debtor or employer and subsequently costly to challenge the judgment, have also

resulted in a moral adversity to the use of consents to jurisdiction. In particular, where

consent is for the convenience of one, but not all of the parties and there is no

jurisdictional link with either of the parties, concerns arise.182

The perspectives and arguments set out below are opinions and, until an

unambiguous judgment is delivered, the only reference to same in case law are

the Balakista –case referred to below. Consents to jurisdiction in respect of

matters governed by sections 57 and 58 (parties are referred to as plaintiff and

defendant) are allowed as section 28 governs the jurisdiction of the court in

these instances although this is subject to the provisions of the National Credit

Act.

180 Louw 2013 (1) par 45. The author is of the opinion that the debtor cannot change the statutory position.

181 Haupt & Van Sittert 2013 10; Coetzee et al The incidence of and the undesirable practices relating to garnishee orders in South Africa commissioned by GTZ 2008 16.

182 Louw 2013 (1) par 3.



3.1 Perspective 1: Consent from all parties

One of the aspects that have been raised to disallow the use of consents from a legal

perspective is that the debtor cannot consent to the jurisdiction of a court for and on

behalf of the garnishee (employer):183 The latter will be bound by the court order and is

therefore the subject of the proceedings to which the jurisdiction of the court pertains.

The argument is that the employee cannot consent to the jurisdiction of a court in

respect of a matter that affects the employer where the act specifically makes provision

for the court in whose jurisdiction the employer finds itself is the court that has

jurisdiction to issue the emoluments attachment order. This approach is supported by

Louw,184 Hartzenberg J185 and Chetty J.186 This approach presupposes that section 45 is

applicable to section 65 in a similar fashion as it is applied to section 28 in order to

deviate from the latter’s provisions.

In the application of Protea Furnishers SA (Edms) Bpk h/a Barnets Meubileerders

(Applikant) en Margaret Balakista in haar hoedanigheid as Klerk van die Siviele Hof,

Pretoria (Eerste Respondent); Victor Madi (Tweede Respondent) & Magnum Shield

Security (Edms) Bpk (Derde Respondent) Hartzenberg J of the then Transvaal Provincial

Division, ordered that the First Respondent issue and sign an emoluments attachment

order in terms of section 65J. The matter was referred to the High Court as the Clerk of

the Court disputed the jurisdiction of the Magistrate’s Court of Pretoria to issue the

emoluments attachment order.187 The garnishee’s (employer’s) main place of business

was in Rosebank, Johannesburg but the debtor consented to the jurisdiction of the

Pretoria Magistrate’s Court.188 The founding affidavit of the attorneys of record indicated

that the purpose of the consent was to alleviate the administrative burden and

associated costs needed to cause an emoluments attachment order to be issued from

the relevant court in Johannesburg.189 The employer of the judgment debtor (i.e. the

garnishee) also consented to the jurisdiction of the Pretoria Magistrate’s Court upon

183 Louw 2013 (1) paras 36-37.

184 Louw 2013 (1) par 45.

185 Protea Furnishers SA (Edms) Bpk h/a Barnets Meubileerders (Applikant) en Margaret Balakista in haar hoedanigheid as Klerk van die Siviele Hof, Pretoria (Eerste Respondent); Victor Madi (Tweede Respondent) & Magnum Shield Security (Edms) Bpk (Derde Respondent).

186 McLaren v Badenhorst.

187 Par 3.5.1 of the founding affidavit.

188 Paras 2.4 & 3.3.2 of the founding affidavit.

189 Par 3.4 of the founding affidavit.



request from the attorneys of record for the judgment creditor.190 In practice, the

consent to jurisdiction is often between the debtor and creditor, via the latter’s attorneys

with no consent obtained from the employer.

In the matter of Mclaren v Badenhorst and Others191 the court emphasised the

importance of consent of all parties.192

In this regard, Louw argues that a consent to the jurisdiction of a court other than the

court set out in section 65J(1) cannot be validly effected in the absence of the

employer’s consent – he argues that the debtor (and by implication the creditor) cannot

consent for and on behalf the employer in respect of an issue that directly impacts on

the employer.193 However, ancillary to this point it needs to be considered that the debtor

190 Par 3.7.2 of the founding affidavit. Also note the Rules of the Law Society of the Northern Provinces: “68.9 Payment to other practitioners and to medical and other experts. 68.9.1 A firm shall, within a reasonable time, pay the reasonable fees and disbursements of another legal practitioner practising anywhere within or outside the Republic in respect of work entrusted to such practitioner by the firm unless – 68.9.1.1 at the time of giving initial instructions in regard to such work it advised such practitioner that it did not hold itself responsible for the payment of such fees and disbursements; or 68.9.1.2 payment is being withheld for a reason which the council deems good and sufficient.”

191 Par 12: “Furthermore the word ‘consent’ in the provisio to s 45 (1) cannot be interpreted to mean the consent of only one of the parties. Subsection (1) of s 45 specifically provides that the court shall have jurisdiction to determine any action or proceedings beyond its jurisdiction if the parties consent thereto in writing. In my judgment the words ‘such consent’ in the proviso to s 45 (1) must be interpreted to mean the consent, not of one of the parties, but all the parties to the action or proceedings. It follows logically that where only one of the parties consents to the jurisdiction of the court such consent is null and void.”

192 In the light of the dictum of the court in paras 8 & 10, it is also questionable whether there is any merit in arguing that the employer tacitly consents to the jurisdiction of the court by implementing the emoluments attachment order without objecting to the jurisdiction. In this regard, reference must also be made to section 65J(5) restricting the grounds upon which an employer may object to an emoluments attachment order. Par 8: “The difficulty I have with this submission is two-fold. Reliance on s 28 (1) (f) is clearly misplaced. Firstly, there is nothing in the wording of the section to suggest that the word defendant in s 28 (1) (f) bears anything but its ordinary grammatical meaning. In any law suit the parties are identified as either plaintiff or defendant, applicant or respondent and the submission that a consumer, on whose behalf an application is brought pursuant to the provisions of s 86 (7) (c) of the NCA, is synonymous with a defendant, as envisaged in s 28 (1) (f) of the Act, is not only charitable in the extreme but such an interpretation moreover ascribes to it a meaning that the legislature clearly never intended”. Par 10: “It can hardly be contended that by signing the consent to jurisdiction a consumer appears as contemplated by s 28 (1) (f). The interpretation contended for is strained and contrary to authority. Mr Ford, who together with Ms Beard appeared as amicus curiae at the request of the court, correctly pointed out that ‘appear’ means to enter an appearance and nothing more – William Spilhaus and Co (M.B) (Pty) Ltd v Marx”. Section 65J(5): “An emoluments attachment order may be executed against the garnishee as if it were a court judgment, subject to the right of the judgment debtor, the garnishee or any other interested party to dispute the existence or validity of the order or the correctness of the balance claimed”.

193 Louw 2013 (1) paras 36 & 37: “[s]ection 65J(1)(a) of the Magistrates’ Court Act is subject to the provisions of subsection (2). For present purposes it is merely necessary to note that section 65J(2) is to the effect that an emoluments attachment order can only be issued if the debtor consented thereto in writing or the court has so authorised. (There is also the possibility of a very complicated process as a third possibility, which is not necessary to record at this point.) All that I wish to point out is that the subsection clearly contemplates that at the time when a section 58 consent is obtained the debtor can also consent to an emoluments attachment order being issued and, as I have already pointed out, it seems that at that point the debtor can also consent to the jurisdiction of a magistrates’ court that would nto



can consent to an emoluments attachment order in the first place without any reference

to or consent by the employer. The emoluments attachment order has real human

resource and financial implications for the employer who has to implement same.194

In the light of the above comment, there is a possibility that the employer need not

implement the order if there is an objection to the jurisdiction of the court. In particular,

both Louw and Dicker indicate that a court order is ‘null and void’ where it is granted in

the absence of proper jurisdiction of the court.195 Louw indicate that payment of the debt

will therefore be akin to payment of a ‘natural debt’. However, there may be

repercussions for the employer where deductions are made that are not in line with the

provisions of section 34 of the Basic Conditions of Employment Act.

Section 34(1) and (3) reads as follows:

“Deductions and other acts concerning remuneration. – (1) An employer may not make

any deduction from an employee’s remuneration unless – (a) subject to subsection (2), the

employee in writing agrees to the deduction in respect of a debt specified in the agreement; or (b)

the deduction is required or permitted in terms of a law, collective agreement, court order

or arbitration award. (4) An employer who deducts an amount from an employee’s remuneration

in terms of subsection (1) for payment to another person must pay the amount to the person in

accordance with the time period and other requirements specified in the agreement, law, court

order or arbitration award.”

otherwise have jurisdiction. But the debtor cannot consent to jurisdiction on behalf of the employer. I cannot see that the debtor and the creditor have the right to bind the employer to a jurisdiction other than that provided for in section 65J. As I have pointed out above it is a rule of our law that the order of a court that does not have jurisdiction can be ignored with impunity – it has no effect. But that does not mean that where such an order is obtained from the wrong court and is given effect to by the employer a wrongful act is committed if monies are deducted from the debtor’s salary and paid to the creditor by the employer. I can also not see that the creditor is in any way enriched by such a deduction. If the wrong court thus issues an emoluments attachment order and the order, albeit without any actual legal effect, is honoured by the employer, the judgment debt will effectively be paid. It is akin to the payment of a natural debt”.

194 Group discussion 3 September 2013/ GIZ 2013.

195 Louw 2013 (1) par 47: “I have already expressed the view that where a court that does not have jurisdiction issues an emoluments attachment order, the order is null and void and does not have to be complied with. But, if the order is for whatever reason complied with, then I do not think that there can be any civil consequence that can be visited upon the creditor or its legal representatives. A due debt is paid, an obligation is extinguished. There can be no enrichment action. It is the same position where a prescribed debt is paid.” Dicker 2013 par 4.1: “Jurisdiction is ‘the power vested in a Court by law to adjudicate upon, determine and dispose of a matter.’ A court must have jurisdiction for its judgment and/or order to be valid. If the court does not have jurisdiction its judgment and/or order is a nullity (Communication Workers Union v Telkom SA Ltd 1999 (2) SA 586 (T) at 593G)”. Some footnotes ommitted.



If the court order is ‘null and void’ it is not a court order or imposed by law. If the

consumer in any way consented to the order, it would have to be ascertained whether

the ‘consent’ will fall under the auspices of section 34(1) in respect of agreements to

deduct. The sanctions for non-compliance with section 34 can be imposed on the

employer which may include, but not be limited to, interest in terms of section 75 of the

BCEA or chapter 10 and the schedules to the BCEA.

Thus when the order is not valid and hence no legal basis exists for the attachment of

the employer’s assets where the order is not implemented, same cannot be effected by

the attorney for the judgment debtor. If the employer deducts the funds without said

basis (i.e. after objecting to the jurisdiction), there may be legal repercussions for the

employer (although it is hard to imagine that an employee that wishes to retain a good

working relationship with his or her employer would institute recovery proceedings).196

The logistics of this provision makes sense as the employer is the subject that has to

implement the order and therefore is not only a nominal party before the court, but an

entity which has a very real interest in the matter.197 However, in reality, very few

employers are the initiators of proceedings to challenge or amend emoluments

attachment orders.198 The obligation to do so is often left to the employee or the

garnishee administrator, the latter acting under the instruction of the debtor and/or

employer. The reasons for this vary from lack of knowledge amongst employers199 to

lack of capacity to deal with issues. The further issue is that there are very few

organisations willing to assist consumers without expensive remuneration for services to

them as clients.

Another aspect to consider is that section 65J(2) allows for the consumer to consent to

the emoluments attachment order. This negates the above argument re consent that

impacts the employer as the mere consent of the employee allows a process that has

resource-draining effects on the employer from both a human resource and fiscal nature

as the non-implementation of the court order allows the legal representative of the

creditor to attach the assets of the employer. Many employers do not charge the 5%

196 It has also been submitted that if the employer does not challenge the jurisdiction, he or she has tacitly agreed to that court’s jurisdiction in terms of section 28 (1) (f) (submissions received 19 September 2013). It is clear that this section refers to ‘defendant’ and this is not relevant to section 65J proceedings as the party is the ‘judgment debtor’. See McLaren v Badenhorst and Others paras 8-10.

197 See Theophilopoulos et al 2012 102 in respect of ‘direct and substantial’ interests of parties.

198 Interviews 22 August & 11 September 2013.

199 Coetzee et al 2008 74.



commission allowed by section 65J(10), either because of a policy decision or because

they are often not aware of it. In any event, the debtor may be responsible for the 5%

by virtue of consent to pay all costs connected with the collection of the debt.

Some authors have advocated for the repeal of the part of section 65J(2) that allows a

debtor to consent to the issuing of an emoluments attachment order. In this regard,

emoluments attachment orders would only be granted after enquiry by the court in

section 65A proceedings. As will be noted below, the success of section 65A proceedings

are questionable unless provision is made for default orders to be made against

unresponsive debtors (which would, in return, be dependent on the willingness of

presiding officers to grant orders in the absence of the debtor). If appearance is

required, the rationale for orders by consent would disappear. This approach would in all

probability result in the process of obtaining an emoluments attachment order becoming

particularly challenging.200

It is important to contextualise the benefit and adversity related to choice of forum re

the challenger of the emoluments attachment order. It was also consistently noted that

either garnishee administrators or the debtors themselves challenged orders or the

contents thereof.

“Judgments taken in terms of Section 58 and 65J of the Magistrate’s Court are sui generis in kind

in that there are no proceedings before court where the defendant can actually appear or enter an

appearance as there is no main action, the entire point of these proceedings are to accommodate

the defendant and spare him the court appearance or the cost of appointing an attorney to enter

an appearance as he acknowledges liability and makes an offer to pay the outstanding debt in

instalments. It can therefore be argued that by signing the Section 58 & 65J consent to judgment

and jurisdiction the debtor is in fact making his “appearance” before court and is not objecting to

the specific court’s jurisdiction.”201

The legitimate grounds for jurisdiction should be clarified i.e. whether a section 45

consent to jurisdiction is allowed as well as the correct interpretation of concepts such as

‘place of business’ etc as lack of guidance in this regard annuls the concept of a

legislative ratio jurisdictions. However, it is submitted that these links should be

extended to allow for options that are closer to the business and economic reality of the

debtor and creditor. As mentioned above, the challenger of the order is usually not the

employer but the debtor or garnishee administrator. In order to implement the order,

200 Various interviews.




which, if issued can be enforced throughout the Republic, the sheriff needs to be

instructed to serve the order which can be done by the instructing attorney and without

adding the additional costs of a correspondent attorney to the fees for which the debtor

may be responsible.

Multiple potential jurisdictional links are not unknown of and are usually principled-based

with set reasons.202 Effectiveness, although important, is not the only jurisdictional

aspect applicable.203 Proper and principled jurisdiction, as it is often fact-based, can

therefore be constrained by limited options due to its ‘unlimited’ potential. Multiple

options considering the two aspects of actor sequitor forum rei and cause of action are

cases in point – the option of two courts exist which may effect a higher level of

effectiveness. More options, as long as these are properly rationalised may make the

proceedings effective in practice instead of being more restrictive.

In the current judicial context, it is important to consider capacity constraints in the

courts as a reality which has a real impact on the effectiveness of the process, especially

in courts where the main payroll offices of major companies with many workers are. In

this regard, a consistent approach by all courts in necessary to avoid abuse of the

process e.g. choice of an ‘easy’ forum and be solely intended to relieve institutional

pressure (and expedite the process). A legitimate link should exist between the court

and the cause, whether this is the jurisdiction of the debtor or that of the employer or

that of the garnishee administrator where the emolument attachment order is

outsourced. As noted above, challenges to emoluments attachment orders are initiated

by either the debtor or the garnishee administrator and rarely by the employer.204

202 Sibakhulu Construction (Pty) Ltd v Wedgewood Village Golf Country and Others par 11: “...According to that principle it is residence within the territory of the court's remit that determines whether a court has jurisdiction over a person. But, as pointed out by Harms DP in Gallo Africa Ltd & others v Sting Music (Pty) Ltd & Others 2010 (6) SA 329 (SCA) [also reported at [2010] JOL 26301 (SCA) – Ed], at paragraph [10]: "For purposes of effectiveness the defendant must be or reside within the area of jurisdiction of the court (or else some form of arrest to found or (Page 7 of [2012] JOL 28484 (WCC)) confirm jurisdiction must take place). Although effectiveness 'lies at the root of jurisdiction' and is the rationale for jurisdiction, 'it is not necessarily the criterion for its existence'. What is further required is a ratio jurisdictionis. The ratio, in turn, may, for instance, be domicile, contract, delict and, relevant for present purposes, ratione rei sitae. It depends on the nature of the right or claim whether the one ground or the other provides a ground for jurisdiction. Domicile on its own, for instance, may not be enough. As Forsyth (at 164) rightly said: 'First there is the search for the appropriate ratio jurisdictionis; and then the court asks whether it can give an effective judgment . . . [and] neither of these is sufficient for jurisdiction, but both are necessary for jurisdiction.'" See Theophilopoulos et al 2012 44-46.

203 See e.g. Sibakhulu Construction (Pty) Ltd v Wedgewood Village Golf Country and Others par 11 – it cannot be viewed in isolation.

204 Interviews 21 August 2013.



3.2 Perspective 2: Section 65J(1) provides the only jurisdiction

indicator for issuing emoluments attachment orders

Louw further submits that, as the Magistrate’s Court is a creature of statute and that the

jurisdiction of emoluments attachment orders is governed solely by section 65J(1).205

This approach was supported by most interviewees.

In expanding on the argument of Louw, it is noted that section 28(1) provides that the

court set out in that section will have jurisdiction and no other: “Saving any other

jurisdiction assigned to a court by this Act or by any other law, the persons in respect of whom the

court shall, subject to subsection (1A), have jurisdiction shall be the following and no other”.

There is, however, a caveat which provides that another section in the MCA may provide

differently. It may also be argued that section 28 is applicable (logically within the

constraints of the choice of terminology in this section) only insofar as there are no other

jurisdictional provisions pertaining to specific proceedings. Section 65J is a case in point.

Furthermore, section 45 refers solely to section 28 i.e. no court other than section 28

and not to section 65J. It can therefore be argued that section 45 is not applicable to

section 65J as the latter prevails over section 28 (specific over general) and section 45 is

solely applicable to deviating from section 28.

Dicker argues in the same line, but focuses on the fact that the procedure set out in

sections 65A-M as well as that of section 65J of the MCA have jurisdictional

determinators.206 He contrasts this with the generality of section 45 and reiterates that

section 45 only refers to section 28. He further sets out why other provisions of section

28 cannot be applicable by virtue of the wording of the section: 207

“Section 28(1)(f) MCA. Within the context of this opinion, this ground of jurisdiction would appear

to have a very limited scope. The reason is the interpretation given to “appear”. It means “enters

appearance” (to defend): Muller v Möller 1965 (1) SA 872 (C) 881C. (Much of the judgment

contains a consideration of the rationes dictae of two concurring judgments, reaching the same

conclusion, for differing reasons, in William Spilhaus & CO. (M.B.) (Pty.) Ltd v Marx 1963 (4) SA

205 Louw 2013(1) par 45.

206 In this regard, it is interesting to note that section 65E, that authorises the court to grant an emolument attachment order where a hearing in terms of section 65A(1) is conducted, reiterates the wording of section 65J(1). It is clear from this section that the court may only authorise an emoluments attachment order “if the judgment debtor is employed by any person who resides, carries on business or is employed in the district, or if the judgment debtor is employed by the State in the district”. Own emphasis.

207 Dicker 2013 par 4.6 footnote 22.



994 (C)). In cases of judgments following upon the s 57 or s 58 procedures, there is, of course, no

room for an entry of appearance to defend. Section 28(1) MCA. It is important to note that the

‘persons’ referred to in s 28 are defendants and respondents, except in s 28(1)(i), which makes

provision for the court’s jurisdiction over plaintiffs or applicants in proceedings incidental to

proceedings instituted by them.”

Within the framework of this argument, consent to expand the monetary jurisdiction is

not applicable as emoluments attachment orders (as understood in the context of

section 65J) are unique to the Magistrates’ Courts.208 The same is relevant for the

jurisdictional indicators pertaining to subject-matter within the context of matters that

fall to be adjudicated by the Magistrate’s Court by virtue of sections 29 and 46 –

emolument attachment orders are competent orders to be issued by the Magistrate’s

Court as mandated by section 65J.209 Therefore, the geographical jurisdiction is solely

under consideration in this regard. It is trite that the proceedings in terms of section 57

and 58 (which is only relevant to the lis between the debtor and creditor) are subject to

the provisions of section 28 and subsequently section 45.210

This approach would mean that the Balakista-case referred to above was decided

incorrectly.

3.3 Perspective 3: Where the underlying agreement is subject

to the NCA, section 90 and 91 of the NCA prevails over

section 45 of the MCA

The sections of the NCA that are relevant to this discussion pertain to the contents of

credit agreements and amendments thereto.211

Sections 89(2)(c), 90(1), 90(2)(a) and 90(2)(b) relating to unlawful credit agreements

and unlawful provisions in credit agreements, read as follows:

89. (2)(c) Subject to subsections (3) and (4), a credit agreement is unlawful if it is a

supplementary agreement or document prohibited by section 91(a).

208 See South African Congo Oil Company v Identiguard International (Pty) Ltd 2012 (5) SA 125 (SCA), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2012/91.html &query=South%20 African%20Congo%20Oil%20Company. See also Louw 2013 (1) par 42.

209 See also Louw 2013 (1) paras 42 & 45.

210 See Louw 2013 (1) par 44.

211 See also Van Heerden 2008 Perspectives on jurisdiction in terms of the National Credit Act 34 of 2005 Absa Bank Ltd v Myburgh case no 31827/2007 (T) (unreported); Nedbank Ltd v Mateman; Nedbank Ltd v Stringer 2008 4 SA 276 (T) Journal of South African Law 840.



http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2012/91.html%20&query=South%20%20African%20Congo%20Oil%20Company

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2012/91.html%20&query=South%20%20African%20Congo%20Oil%20Company

90. (1) A credit agreement must not contain an unlawful provision. (2) A provision of a credit

agreement is unlawful if (a) its general purpose or effect is to (i) defeat the purposes or policies of

this Act; (ii) deceive the consumer; or (iii) subject the consumer to fraudulent conduct; (b) it

directly or indirectly purports to (i) waive or deprive a consumer of a right set out in this Act; (ii)

avoid a credit provider's obligation or duty in terms of this Act; (iii) set aside or override the effect

of any provision of this Act; (iv) authorise the credit provider to (aa) do anything that is unlawful

in terms of this Act; or (bb) fail to do anything that is required in terms of this Act.”

Section 90(k)(vi) of the National Credit Act disallows a contractual clause that has the

following as its core outcome: “[I]t expresses, on behalf of the consumer a consent to the

jurisdiction of the High Court, if the magistrates’ court has concurrent jurisdiction or any court

seated outside the area of jurisdiction of a court having concurrent jurisdiction and in which the

consumer resides or works or where the goods in question (if any) are ordinarily kept.”

Section 91 of the National Credit Act, headed “supplementary requirements and

documents” reads as follows: “A credit provider must not directly or indirectly require or induce

a consumer to enter into a supplementary agreement, or sign any document, that contains a

provision that would be unlawful if it were included in a credit agreement or directly, or knowingly

permit, any other person to do anything referred to in this section on behalf or for the benefit of

the credit provider.”

Section 95, headed “changes, deferrals and waivers” reads as follows: “The provision of

credit as a result of a change to an existing credit agreement, or a deferral or waiver of an amount

under an existing credit agreement, is not to be treated as creating a new credit agreement for the

purposes of this Act if the change, deferral or waiver is made in accordance with this Act or the

agreement.”

An agreement is defined as follows in section 1: “‘agreement’ includes an arrangement or

understanding between or among two or more parties, which purports to establish a relationship in

law between those parties”.

The NCA disallows clauses pertaining to the enforcement of the agreement, such as pre-

signed blank enforcement documents in the credit agreement.212 However, where the

factual situation arises that validates that enforcement steps be taken against the

defaulting debtor, the preliminary steps such as the section 129 letter of demand and

timing (section 130) of enforcement are regulated by the NCA. The procedures to collect

the debt are, however, set out in the MCA. It is therefore plausible that, as consent to

jurisdiction of a specific magistrate’s court can only be validly given in respect of

proceedings that have been instituted or are on the verge of being instituted, the

212 See sections 90 and 91 of the NCA.



consent in terms of section 45 is ancillary to the enforcement proceedings and not to the

agreement. However, in the light of the definition of ‘agreement’ in the NCA in respect of

an ‘arrangement or understanding’ ‘establish[ing] a relationship in law between those

parties’, it is conceivable that consent between parties in respect of section 45 seems to

be of consequence under this definition.

Louw argues that section 91 is not of consequence to the section 45 argument as it is

“on a completely different level and serves a completely different purpose that the

original credit agreement did. It is also entered into long after the credit agreement”.213

Unfortunately, the comment is not further developed.

Van Loggerenberg, in Jones & Buckle, argues that the interaction between section 45 of

the MCA and section 90 of the NCA is ambiguous as two possible interpretations exist

depending on which section prevails where matters are within the factual parameters for

section 45(1) i.e. the matter has been instituted or is on the verge of being instituted.214

Dicker compares the position under the NCA with its predecessor, the Usury Act and

highlights that section 90 of the NCA and section 45 of the MCA regulate the same

factual scenario.215

The impact of section 90 and 91 on section 65J proceedings (in the event that the

conclusion reached above is incorrect and section 45 is hypothetically applicable to

section 65J orders) will depend on whether the underlying cause of action ‘remains’ after

judgment was granted or whether the regulation of the NCA ceases upon the granting of

213 Louw 2013 (1) paras 30 & 31. Dicker 2013 at paras 5.4-5.7 disagrees and is of the opinion that section 45 is disallowed by sections 90/91 within the context of section 57/58. However, both counsel agree that section 45 cannot be used within the context of section 65J. See Louw 2013 (1) par 45 and Dicker 2013 par 6.11.

214 Jones & Buckle 296-297.

215 Dicker 2013 par 4.8.5.2: “In view of the unlimited monetary jurisdiction of the magistrates’ courts with regard to credit agreements as defined in s 1 of the NCA, the consents to the monetary jurisdiction formerly found in agreements under the Credit Agreements Act are no longer necessary. And as to consent to jurisdiction over the person of a consumer, s 90 deals with much the same ground as s 45. The cardinal difference in approach, however, is that s 45 allows a consent in certain limited circumstances (found in the proviso to s 45(1)); while the intent of s 90 is to restrict credit providers to the court where the consumer resides or works or where the goods in question (if any) are ordinarily kept. Otto is of the view that this has not been achieved, because of careless drafting. Nevertheless, although various commentators have correctly pointed to inconsistencies and what may loosely be called “loopholes,” what is clear is the intent that in actions based upon credit agreements, the court where the consumer resides or works or where the goods in question (if any) are ordinarily kept is the one clothed with jurisdiction." Footnotes ommitted.



judgment.216 Prior to judgment being entered, it is submitted that the NCA is applicable

for the reasons set out below.

Firstly, the discussion in African Bank Ltd v Additional Magistrate Myambo deserves

mention. The relevant parts can be summarised and interpreted as follows:217

Section 58 of the MCA and the provisions of the NCA interact. In the case of a

discrepancy, section 172(1) and schedule 1 to the NCA provide that the provisions of

the NCA will prevail over section 58. The provisions of the NCA can be applicable to

causes of action which underlie reliance on section 58 of the MCA. In this regard, the

principles and the provisions of the NCA should be applied to both the substantive and

procedural aspects of the matter before the court;

Section 58, prior to granting a request for judgment, is concerned with a cause of

action set out in the summons or letter of demand. The cause of action may be a

credit agreement to which the provisions of the NCA applies, which will result in the

provisions of the NCA becoming applicable to the section 58 proceedings prior to

entering judgment. The underlying cause of action becomes res iudicata when

judgment is entered;

A judgment by the clerk of the court, after proper adherence to the provisions of the

NCA, is deemed to be a default judgment granted by the court. The clerk of the court

can ascertain whether the NCA is applicable to the request and whether certain

procedural requirements set out in the NCA such as sections 129 and 130, have been

complied with. Other matters requiring further investigation, such as reckless credit or

adherence to section 103(5) should be referred to the court in order to interrogate the

matter if needed.

In terms of the judgment, compliance with sections 129 and 130 is necessary prior to

approaching the court/ clerk of the court for judgment in respect of section 58. These

are procedural requirements. Jurisdiction is also a procedural requirement although it

can be intricately linked with substantive aspects of the matter. It is therefore probable

that all the procedural prescriptions with respect to civil proceedings set by the NCA will

be applicable to enforcement proceedings and not just selected parts. Choice of forum is

216 See the discussion in Part 2 in respect of the effect of a judgment.

217 These were gathered from the whole of the judgment and in this regard reference is not made to specific pages of the judgment.



as important a preliminary consideration as completion of the cause of action from a

procedural point of view.218

It is submitted that the provisions of sections 90 and 91 pertain to clauses in respect of

the credit agreement and supplementary agreements. However, in the light of the

dictum in McLaren v Badenhorst that section 45 does not require an agreement and can

be validated where the Plaintiff alleges same in the pleadings,219 it would be absurd to

require that the consent be given in a manner that does not simulate an agreement. In

this regard, it is important to ascertain the scope of regulation of the NCA and the

impact that court proceedings governed by the MCA has on a credit agreement.

As set out above, section 29 is subject to the provisions of the NCA insofar the ‘cause of

action’ is a ‘credit agreement’. It is also stated that ‘action’ includes ‘action in

reconvention’ and the applicability of this section to ‘non-actions’ may be questioned.

The NCA further has, as one of its outcomes, the construction of a harmonised debt

enforcement regime and devotes sections to regulating debt enforcement as a result of

breach of contract. The contents of credit contracts is therefore not the sole governing

aim of the NCA and in this regard it does encroach on the provisions of other legislation,

notwithstanding the provisions of section 2(7): “2(7) Except as specifically set out in, or

necessarily implied by, this Act, the provisions of this Act are not to be construed as (a)

limiting, amending, repealing or otherwise altering any provision of any other Act; (b) exempting

any person from any duty or obligation imposed by any other Act; or (c) prohibiting any person

from complying with any provision of another Act.”

Sections 90(2)(k)(vi)(bb) and 45(1) are aligned in purpose insofar as a general consent

to the jurisdiction of the Magistrate’s Court is concerned. There is clearly no conflict

between these sections. However, section 90 clearly prohibits a contractual clause where

the consent to jurisdiction is to a specific magistrate’s court that fall outside the

boundaries set out in the subsection itself. It is trite law that a contractual clause

expressing consent to a specific magistrate’s court where no lis exists between the

parties is null and void within the parameters of section 45(2) in any event. In this

regard, sections 91 and 45(2) seemingly regulate a similar outcome and in this regard, it

is submitted, that section 91 does not prohibit a consent to a specific magistrate’s court

218 In respect of jurisdiction, see Theophilopoulos et al 2012 44 and in respect of completing the cause of action see African Bank Ltd v Additional Magistrate Myambo p 20.

219 Jones & Buckle 297.



as long as the court to which the parties consent fall within the parameters of section 90.

However, this will only be applicable to sections 57 and 58 in the light of the specific

jurisdictional indicators set out in section 65J as these provisions operate ex lege and no

agreement between the parties are applicable (therefore excluding the scope of section

90).220 Sections 45 and 90/91 are concerned with agreements between the parties with

regard to the jurisdiction of the court to adjudicate the lis between the parties.

The NCA also extends the jurisdiction of the MCA and Magistrates in various manners

e.g. sections 85-87 and 164. Sections 90 and 91 are applicable to enforcement

proceedings and disallow reliance on section 45. It is submitted that the NCA only ceases

to apply when judgment is granted, after which the ordinary civil rules pertaining to civil

judgments prevail. All proceedings prior to same such as section 57 and 58 consent to

judgment are governed by the NCA and such consent is akin to a document prohibited

by section 91.

4 Outcomes

Some creditors have raised concerns regarding the potential “reputational risk” involved

when conferring jurisdiction upon a court by virtue of section 45 and specifically where

there is no jurisdictional link as set out in section 65J. The “reputational risk” pertains to

allegations of abuse of process such as the following:

The consumer cannot easily query the validity or contents of the order or rescind

an emolument attachment order where the court in which the order was granted

is situated far from the jurisdiction of the employer;221

The legal representative may have to appoint a correspondent where the

emolument attachment order is issued from a court other than the local court

within whose jurisdiction the offices of the practitioner is situated. This results in

additional costs for the account of the consumer; and

There is often no discernible link with the court in which the emolument

attachment order was granted, which has resulted in rumours of bribery or lack of

220 See also Dicker par 5.6.3 in respect of consent initiated by the consumer. He argues that section 90 and 91 will only be circumvented if initated by the consumer but states that this is unlikely as even the slightest hint from the credit provider or its attorney may be construed as ‘inducement’ as contemplated by section 91.

221 Haupt & Van Sittert 2013 10.



proper attention to the validity of the orders by the court personnel i.e. forum

shopping.

Legal firms justify the utilization of section 45 from a practical perspective i.e. that

structural impediments experienced through involvement with certain Magistrates’

Courts restrict the successful and timely collection of debt. The impediments include

numerous requirements to obtain orders (economy of the process), different

requirements in different courts (lack of standardisation and uniformity) and uncertainty

as to whether the order will be issued due to an inability to predict the manner in which

the court will exercise its discretion (lack of certainty).

Data set A & C

The first graph sets out the time that it takes to obtain a judgment and emoluments

attachment order in 24 courts. The second graph illustrates that there does not seem to

be a correlation between courts that allow section 45 consents and courts that do not in

respect of expeditiousness. The courts indicated in blue do not allow section 45 consents

whilst the courts marked in red do. It must be noted that the sample is not

representative of the courts in South Africa as it is too small. It merely illustrates that

courts with both long and short waiting times may allow section 45 consents to

jurisdiction. However, whilst these maybe true of the courts at a time prior to obtaining

the information, many courts indicated that consents to jurisdiction are not allowed

anymore. Officials that deal with emoluments attachment orders in a court may also

differ from time to time – one interviewed court official indicated that consent to

jurisdiction in terms of section 45 is not tolerable within the framework of section 65.

The official’s perspective is that section 65 specifically regulates all aspects regarding

emoluments attachment orders, including the choice of forum. The data that reflect in

the graphs below, however, indicated that the court did allow section 45 consents.

The sample sizes for data set B and C were 524 and 396 respectively. Of these courts,

21 courts allowed section 45 consents to jurisdiction. If reliance is placed on the data,

allowance of consent to jurisdiction is not as wide-spread as reported. However,

anecdotal evidence suggests that compliance with section 65J(1) is not common and four

possible explanations exist, which may indicate that the issue with choice of forum is

much wider than just section 45:

Clerks of court are not attentive to the choice of forum, whether due to lack of

knowledge, competency, work overload or attitude. In the premises, EAOs may be



issued even in the absence of consent or any other ratio jurisdictionis. In this regard,

the legal representative is, in our opinion, misleading the court in creating the illusion

that the court has jurisdiction to issue the order where no jurisdictional link exists.

Courts allowed section 45 consents, but are now changing their policies. Issued EAOs

may therefore still reflect incorrect courts, but data on the number of courts

authorising acceptance of consents to jurisdiction shows declining numbers. In a

similar fashion, clients may recently be instructing attorneys to refrain from using

courts other than those authorised by section 65J(1) due to reputational risk;

The data differs in one court, depending on which court official deals with the matter

– this is plausible where no set policy is applicable to the particular court;

Anecdotal evidence suggesting reliance on section 45 has been incorrectly

interpreted. If applicable, a distinction should therefore be made on whether it

suggests that use is often made of section 45 or just whether there is non-compliance

with section 65J(1) upon perusing emoluments attachment orders. In this regard, it is

also important to note that one court may issue many emoluments attachments

orders which may lead to e.g. 1 out of 10 orders being issued in the correct court, but

only 3 or 4 courts used to obtain the EAO in a court different that the one required by

section 65J(1).

The purpose of this illustration is to indicate that clarity is needed in respect of reliance

on section 45 when it comes to section 65J orders. The legitimate grounds for

jurisdiction should be clarified i.e. whether section 45 consent to jurisdiction is allowed

as well as the correct interpretation of concepts such as ‘place of business’ etc. as lack of

guidance in this regard annuls the concept of a legislative ratio jurisdictionis.

In this regard there may be a need for a declaratory order following a stated case.

Although, if courts consistently disallow section 45 and require proper jurisdiction as set

out in section 65J(1), this would not be necessary unless the contrary is true i.e. that

section 45 is applicable to section 65J orders.

The discussion relating to uniformity in courts is intricately connected with consent to

jurisdiction. Where the judicial process is obstructed by court officials and effectively

disallows a creditor the remedy of the emoluments attachment order where it is duly

warranted in law, attention is needed as this may be construed as an abusive practice

from the side of the judiciary.



27.54

7.88

87.74

12.23 18.37

62.96

12.64 17.42

6.63 10.00

21.95

66.41

9.27 19.31

3.48

232.29

25.81 24.54 31.73

7.26 11.13 4.60

32.37

13.36

0

50

100

150

200

250

Day

s

Courts

Average times over period of a year from date of submitting to court to date of positive receipt in attorney's office



27.54

7.88

87.74

12.23 18.37

62.96

12.64 17.42

6.63 10.00

21.95

66.41

9.27 19.31

3.48

232.29

25.81 24.54 31.73

7.26 11.13 4.60

32.37

13.36

0

50

100

150

200

250

Day

s

Courts

Blue indicates that no consent to jurisdiction is allowed and Red indicates that consent to jurisdiction is allowed



5 Summary: Jurisdiction

1. Section 45 is not applicable to section 65J even if all the parties, including the

garnishee, consent to the jurisdiction of the specific Magistrate’s Court. Section 45 is

subservient to section 28, which is in turn subject to the provisions of section 65 of

the MCA. Reliance on section 45 of the MCA is not correct and enforceable within the

context of section 65J (which contains a specific jurisdictional provision) in a similar

fashion as section 45 is correct and enforceable within the context of section 28.

Section 45 is, however, applicable to sections 57 and 58 proceedings as the latter do

not have specific jurisdictional provisions. Section 28 regulates the choice of forum in

respect of consents to judgment and section 45 allows consent to the jurisdiction of a

court other than a court set out in section 28. However, the internal requirements

regarding proper agreement/ consent as well as the timing of the consent in respect

of the proceedings already instituted or about to be instituted, must be strictly

adhered to. Where the underlying cause of action in respect of which the consent to

judgment is given is governed by the National Credit Act, consent to jurisdiction

where this is not within the boundaries of section 90(2)(k) is disallowed.

2. Section 90 and 91 are applicable to enforcement proceedings and disallows reliance

on section 45. It is submitted that the NCA only ceases to apply when judgment is

granted. All proceedings prior to same such as section 57 and 58 consent to judgment

is governed by the NCA and such a consent is akin to a document prohibited by

section 91. In this regard, section 45 may also not be valid in respect of section 57

and 58 proceedings.

3. From a legislative point of view it is submitted that these links should be

extended to accommodate capacity constraints in the courts especially in courts

where the main payroll offices of major companies with many workers are. In this

regard, a consistent approach by all courts in necessary to avoid abuse of the process

e.g. choice of an ‘easy’ forum and be solely intended to relieve institutional pressure

(and expedite the process). A legitimate link should exist between the court and the

cause, whether this is the jurisdiction of the debtor or that of the employer or that of

the garnishee administrator where the emolument attachment order is outsourced. As

noted above, challenges to emoluments attachment orders are initiated by either the

debtor or the garnishee administrator. There is a need for clarity on this matter in

respect of a declaratory order, test case or arguing of a stated case.



Uniformity and standardisation in courts

1 Introduction

The term of reference that is applicable to this discussion is the following:


57/58 consent to judgment and an application for an emoluments attachment order;

This research question is discussed under the heading of ‘uniformity’ and

‘standardisation’ as this is the core issue giving rise to a need for clarity. Clarity is

needed in respect of the information that could be anticipated and put before the court

to expedite the process and reduce queries from court. Lack of uniformity and

standardisation in courts were consistently noted by legal practitioners as a cause of

frustration. Specifically, the following issues were noted:

Sections 57, 58 and 65 are intended to be fast, cost-effective and relatively

straightforward. Delays and queries increase time and cost for the parties;222

Unpredictability of the process with regard to success or not. This was also perceived

as an issue regarding competency, work over-load and attitude – clerks of court were

reportedly refusing orders without due reason or perceived as being obstructive for

reasons not attributable to the legal requirements for the issuing of orders;223

Requesting information that the plaintiff/ judgment creditor cannot supply;224

Deviance from the guidelines set out in the relevant legislation, resulting in ‘each

court having its own requirements’ – this issue is intricately linked with the ‘discretion’

of the court. Interestingly, this issue also manifests in some courts requiring specific

formats, drafted by the court itself, in which documents should be provided.

222 This includes interest that runs to the detriment of the debtor, legal costs and unpaid debts on the books of the creditor.

223 Some attorneys (interview 12 June 2013) noted that the clerk of the court, in wielding the ‘power’ of issuing orders or not, needed to be treated overly nice and polite otherwise the order would not be issued or consistent queries delayed and frustrated the process.

224 The case of African Bank Ltd v Additional Magistrate Myambo illustrates this point where a reckless credit assessment was required by the court although the agreement was entered into prior to the implementation of the NCA. Under the previous consumer credit regulation regime, reckless credit was not a recognised concept.



Requests, even though these embody all the information necessary, will not be issued

as it is not in the correct format or not ‘recognised’;225

Evaluating issues at the stage of a request for an emoluments attachment order,

where this should have been done at the stage of requesting judgment e.g. whether

credit was recklessly granted or whether the credit provider was duly registered, if

required, with the NCR at the time of granting the credit;226

Different internal court policies were also reported as a cause for forum shopping.227

2 Legislative framework The following table sets out the requirements that may be requested by the court as per

the MCA, MCR,228 NCA and case law such as Myambo in respect of the documentation

that the plaintiff/ judgment creditor must provide to the court.229 The full section or rule

is not restated and all references are to the contents of the complete section or rules.

The graphs and table under subheading 3 further compare the requirements of data set

C with the legislative requirements to isolate those documents requested by courts in

addition to those prescribed by legislation. The table also provides motivation for

225 This issue is discussed in detail below, but at this stage it is important to note that this is not unique to debt collection. The same was noted in debt review matters – see NCR An assessment of debt counselling 2012, summary available at http://www.ncr.org.za/index.php?option=com_content&view=article&id=152, site accessed 27 October 2013. The full report was not released in to the public domain and in the premises, the suggestions for reform in that report is referred to herein with permission of the NCR.

226 This approach may indicate a lack of trust between courts. One specific example, not given in relation to this topic specifically, but potentially relevant was that some courts would not grant emoluments attachment orders if the judgment which is the subject matter of this form of execution was not granted by the same court. Practical discrepancies arise where the court that should issue the order in terms of section 65J(1) refuses to do so in the absence of a local judgment and other courts decline to issue the order due to lack of jurisdiction.

227 GIZ 2013. During various discussions, incidently or to ascertain why certain courts would be preferrable to others, attorneys noted that some courts were ‘closed’ (i.e. it was almost impossible to obtain an order) whilst others ‘stamped anything’ (i.e. the documents were not perused properly). Others noted that in some courts, especially where the court was situated in an area where there were no large businesses e.g. Johannesburg or Cape Town, the clerks of the court were not overloaded and had more time to spend on emoluments attachment orders. In another instances, specifically pertaining to section 65 fianncial enquiry, the attorneys noted that prior to the appointment of more clerks, the turnaround time for court docuemtns were so long that the court only returned the document after the court date set out on the document had been passed. This necessitated re-issuing of the document and resubmission to court with a new date. Other attorneys preferred to use the court where their offices were located in order to direct the whole process from their offices without having to appoint a correspondent (see also the founding affidavit in the Balakista –case referred to above).

228 Specifically Rules 4(1)(a),(2),(4),12(5), 12(6), 12(6A), (7).

229 See also Theophilopoulos et al 2012 pp 33, 34, 40-41, 247-248 & 394-395.



http://www.ncr.org.za/index.php?option=com_content&view=article&id=152

documents that interviewees noted should be included for purposes of assisting the court

to evaluate the request.230

Section 57 Section 58 Section 65J


Section 57(2) & Form 5A


Section 58(1) & Form 5B

Notice of judgment by registered

post

Section 57(3) & Section 58(2)

Copy of demand or summons

setting out cause of action (nature

and amount of claim) and alleging

compliance with NCA (specifically

section 129 & 130)

Section 129 and a true copy of

the section 129(1)(a)notice

Alleged compliance with section

130 of the NCA including no

reaction as contemplated in

section 129 on the notice so

required

Affidavit iro compliance with law

where no summons

Original agreement or affidavit

where no original

Confirmation of compliance with

legislation (rules – whether

summons or not)

Section 57(2)(1)(a), Rule 4(1)(a)

& 4(2) & 4(4) & 12(6) & 12(6A)

Copy of demand or summons

setting out cause of action (nature

and amount of claim) compliance

with NCA (specifically section 129

& 130)

Section 129 and a true copy of

the section 129(1)(a)notice

Alleged compliance with section

130 of the NCA including no

reaction as contemplated in

section 129 on the notice so

required.

Affidavit iro compliance with

law where no summons

Original agreement or affidavit

where no original

Confirmation of compliance

with legislation (rules –

whether summons or not)

Section 58(1)(a), Rule 4(1)(a) &

(b) & 4(2) & 4(4) & 12(6) &

12(6A) & Myambo

Consent to EAO by debtor

Section 65J(2)(a)

Admission of liability by defendant

Section 57(2)(1)(b)

Consent to judgment by defendant

signed by debtor and two witness

Section 58(1)(b) & Rule 4(3)

Judgment or extract

Section 65J & Rule 45(1)

230 Ultimately, the court is responsible for ascertaining whether there is proper entitlement prior to wielding its judicial power – see e.g. Campbell 2010 10: “There are various ways in which the in duplum rule can be enforced in order to ensure its application in practice – by the courts, consumers and their legal representatives. The courts have a duty mero motu to raise the illegality of interest claimed in contravention of the in duplum rule, if this is clear from the facts, even if the in duplum rule was not pleaded. It is not clear whether the courts are aware of this. This approach has been given added impetus by the proscriptive nature of s 103(5). The court is, however, not required to speculate or piece together a defence on behalf of the defendant from mere fragments of evidence”.



Copy of acceptance of offer by

plaintiff or plaintiff’s attorney

Section 57(2)(1)(b)

In terms of Myambo, the court

may require (even by way of

affidavit):

Information regarding the

applicability of the NCA on the

underlying cause of action i.e.

whether the debt arises from a

credit agreement to which the

NCA applies;

The incidence of reckless credit

granting or not in respect of

the underlying cause of action

(section 83 of the NCA)

Proof of compliance with the

NCA where applicable and/or

requested:

o The creditor is registered as

a credit provider with the

NCR or allegations why no

registration is necessary or

was necessary at the time

of granting the credit;

o The manner in which the

debt/ amount claimed is

calculated and whether this

is in compliance with the

provisions of the NCA.

Myambo pertained to section 58,

but may be relevant for section 57

as well

EAO

Section 65J(3) & Rule 46(2) Form

38

Affidavit or affirmation of non-

compliance with accepted offer

with calculation of balance claimed

where payments were made since

the offer

Section 57(2)(c)

Registered letter with contents

specified in section 65J(2)(b)(i)

Affidavit or affirmation with

contents as specified in section

65J(2)(b)(ii)



3 Practical application

Data set C

The following graphs illustrate the variance in number and contents of documents

required and allowed in the sampled courts (out of the 396 courts listed) to obtain an

emoluments attachment order.

The first graph illustrates the number of documents that should be provided to the court

prior to the issuing of an emoluments attachment order. The maximum number of

documents that need to be attached is 18 and the lowest 6. For some courts, no

standardised information was available. The second and third graphs illustrate the

requirements of the courts and indicate which documents seem to be important for

courts to peruse prior to issuing an emoluments attachment order. The following are the

documentation/requirements of the courts and the top ten documents (376 courts or

more) are noted in bold below:

Document Source231

Request for judgment Sections 57(2) & 58(1)

Emoluments attachment order Section 65J(3)

Section 65J(2)(b) certificate Section 65J(2)(b)(ii)

Civil certified extract of judgment Rule 46(1)

Court cover sheet (for court file) Unknown

Original contract Rule 12(6)

Copy of contract Allowance based on Rule 12(6)

Affidavit – Copy of contract but no original available Rule 12(6)

Section 129 letter Technically compliance need only be

alleged but where this is done by

way of affidavit, it is practice to

attach proof. A copy of the letter

would easily show compliance

231 Sources: MCA, MCR, NCA, African Bank Ltd v Additional Magistrate Myambo, Theophilopoulos et al 2012.



Proof of postage of Section 129 letter Proof of compliance with section 129

Letter to employer regarding of intent to issue EAO Unknown

Proof of postage of letter to employer regarding intent to

issue EAO

Unknown

Section 57 letter to debtor of acceptance of offer Section 57(2)(b)

Letter to debtor re confirmation of judgment Sections 57(3) & 58(2) & 65J(2)(b)

Proof of postage of letter to debtor re confirmation of

judgment

Section 65J(2)(b)(ii); Confirmation of

compliance with sections 57(3) &

58(2)

Income & expenditure Unknown

Certificate of balance (COB) Section 57(2)(c)(i) & 65J(2)(b)(ii);

Myambo and evaluating entitlement

of plaintiff to amount

Statement setting out breakdown of handover amount Section 57(2)(c)(i) & 65J(2)(b)(ii);

Myambo and evaluating entitlement

of plaintiff to amount

Attorney's statement of account Unknown

Affidavit – Compliance with NCA Rule 12(6A)

NCR certificate Rule 12(6A) [compliance with

legislation]

Contract payslip Unknown

Original contract Rule 12(6)

Payslip Unknown

Consultant report (TP cover sheet) Unknown

Consultant invoice Unknown

Affidavit of service Unknown

It is important to note that the court has a discretion to grant judgment and the clerk of

the court should refer any potential order to a magistrate should there be cause for



concern.232 In respect of documents that could reasonably be requested by the court,

the court could in theory request any document related to the request before it in order

to clarify any questions as to the entitlement of the creditor to judgment in the terms set

out in the request. This relates to substantive and procedural compliance with legislation

relating to the cause of action such as:233

Compliance with provisions of the NCA where the NCA mandates a court to deal with

these incidences such as reckless credit and over-indebtedness;

Validation of the cause of action before the court such as

o Compliance with the legislation when the credit agreement was entered

into; and

o Incidences where non-compliance is a ground for an order nullifying or

voiding an agreement or contract clause;234

Legislative restrictions on recovery of amounts such as section 103(5) where the

creditor has no legal entitlement to amounts that exceed the prescribed threshold set

in section 103(5) or amounts not set out on section 101(1);

Procedural requirements such as the provisions of section 129 and 130 of the NCA

and proof thereof.

It is trite that there should be proper compliance with the procedural requirements of the

MCA, MCR and Forms.

Furthermore, courts query discrepancies that may be noted from the documentation

such as differing signatures on the original credit agreement and the consent to

judgment or where the witnesses sign at different addresses as the debtor.

Requesting payslips or informing employers of emoluments attachment orders may be

pro-active behaviour (i.e. facilitating an affordable instalment or proper implementation

of the order) but these are not founded in law and may delay the process. The creditor

or his attorney is not obliged by law to verify whether the debtor can afford the

instalment consented to although it could be argued that the debtor should be assisted

to offer a sustainable instalment. Otherwise, this will delay the process after the first

instalment is deducted and where the debtor does not have enough funds available after

232 African Bank Ltd v Additional Magistrate Myambo e.g. p 18.

233 These are aspects that the attorney need to verify in any event prior to requesting judgment.

234 See sections 89, 90, 91 and 164 of the NCA iro unlawful contracts and contract clauses.



deduction of the instalment to maintain him or herself and any dependants. Creditors

should be aware that each debtor’s circumstances and ability to pay differs.

If the procedure in terms of section 57 and 58 is properly applied within the parameters

of the MCA and NCA, problems with the EAO such as rescission or amendment and

unrelated requests such as reckless credit assessments at EAO stage, can be avoided.

The first graph hereunder illustrates the different requirements and the number of courts

that require the specific document. The sample size was too large to include the specific

names of the courts in relation to the number of documents required. In this regard, the

courts are represented by numbers on the horizontal axis.

This graph illustrates that the majority of courts have ten requirements for obtaining

judgment and an emoluments attachment order. The specific documents required are set

out thereafter and this pertains to 70% of the sampled court offices.

Number of requirements of different documents by courts

The second graph set out below illustrates the number of courts requiring a specific

document. 279 out of the sample size of 396 (70.45%) have similar requirements which

are set out after the following two graphs. The third graph illustrates those documents

that are either required or not required by all of the courts in the sample size.

0

2

4

6

8

10

12

14

16

18

20

0 50 100 150 200 250 300 350 400

Num

ber o

f doc

umen

ts re

quire

d

Courts



Number of courts requiring a specific document

396 396 396 396 377

18

376 379 379

1 12 12 8 8

392

18 2

49

396

10 0 1 0

63

7 0 27

0

50

100

150

200

250

300

350

400

450

Num

ber o

f cou

rts

Documents required



Different documents required by 100% of the sampled courts

70% of courts required only the documents stated hereafter. In this regard, there does

seem to be some uniformity although this may exclude queries on the matter after

request:

Two copies of Request for Judgment

Four copies of the Emoluments Attachment Order

Section 65J(2)(B) Certificate

Three copies of the Certified Extract of Judgment

Court Cover Sheet

Original Contract

Copy of Contract

Affidavit – Copy of Contract

Section 129 Letter

NCR Certificate

The next graph illustrates the documents in respect of which there is deviation from the

standard and the frequency thereof. It should be noted at this stage, that it is uncertain

whether these ‘deviations’ occurred as queries on files or as a set requirement on all

files.

396 396 396 396 396

0 0 0 0

50

100

150

200

250

300

350

400

450

Nu

mb

er o

f co

urt

s

Document required/ not required



Documents in respect of which there is a deviation from the standard and the number of courts deviating

The following graph illustrates the documents not necessarily required by the ‘standard’

courts, but requested by other courts nevertheless. It also indicates the incidences of

courts requiring these documents.

Deviations from the standard

18

1

12 12 8 8

18

2

49

10

1

63

7

27

3 4

0

10

20

30

40

50

60

70

Num

ber o

f cou

rts t

hat

requ

ire th

e do

cum

ent

Document required

19

20

17 17

15.5

16

16.5

17

17.5

18

18.5

19

19.5

20

20.5

Court Cover Sheets Original Contract Certified Copy ofContract

Affidavit Copy ofContract

Num

ber o

f cou

rts

Documents required



The following graph illustrates the number of courts that deviate from the standard as

compared to the total number of courts in the sample size when categorised according to

province.

Deviations per province

The following illustrate the different requests from courts:235


76

55

28

59

35 36

29 29

49

22

7

16 16

6 8 3

6

33

0

10

20

30

40

50

60

70

80

Number of Courts in Sample Number of Deviating Courts





4 Summary: Uniformity

Although attorneys specialising in debt collection must adhere to the requirements set by

court within the field of their specialisation, incidences where the requirements are

obstructive and negate the purpose of the process cannot be to the benefit of the

parties. It is noted that courts have discretion and that processes exist for review of

court official’s decisions. The clerk of the court may be taken on review to a magistrate

in terms of section 13 of the MCA and magistrates in terms of section 24 of the Supreme

Court Act. Due notice is taken of the potential of these remedies to be costly and time

consuming, especially review to the Supreme Court. However, decisions of the Supreme

Court set precedents which may clarify the matter and deter obstructive behaviour, if

found to be so.



Training for role players:236

• Interaction between the Department of Justice, the National Credit Regulator and

Law Society of South Africa should be encouraged to draft uniform requirements

for role players as well as proper courses and workshops. This can also be

effected through presentations at magistrates’ meetings;

• Magistrates and clerks of the court should also be provided with circulars on

important developments in the industry;

• Court officials should be allowed to have input into the uniform requirements in

order to limit the current situation where a clerk or magistrate still requires

additional information or documents in his or her court;

• The value of training by persons in the field e.g. senior clerks and magistrates

and on-going day to day office training cannot be underestimated, provided that

persons are trained on the correct legal positions. In this regard, communication

between role-players is also important to reduce friction and frustration;

• Attitude adjustment and stricter regulation where parties are acting mala fides

e.g. strict enforcement of correct legal position e.g. documents required;

• Logistical assistance with regard to human and capital resources is of extreme

importance to clerks and magistrates in order to relieve the strain that the

current economic situation has brought about;

• Refusal of costs on attorney and client scale should be considered where parties

unnecessarily delay the process.

236 Sourced and adapted marginally from NCR 2012 298-299.



Oversight

1 Introduction

The part of the mandate that relates directly to this section is the following:

The issue of magisterial oversight over the emoluments attachment order process.

This particular suggestion was forwarded by the Department of Justice in proposed

amendments to the Magistrates’ Court Act to remove the possibility of consenting to an

emoluments attachment order without a form of financial enquiry as envisaged in section

65.237 The remaining mechanism, upon removal of consent and mere application for an

order in terms of section 65J(2)(b), will solely be authorisation by the court as set out in

the second part of section 65J or in e.g. sections 65A, 65E and 74 of the MCA.

Therefore, distinctions need to be drawn in respect of the purpose of the court and the

stage of the proceedings. Execution is only plausible after a judgment has been granted.

Section 65J is a form of execution, as are warrants of execution against movable,

immovable and incorporeal property and section 72 garnishee orders. In the premises,

the court’s intervention would be akin to the position in respect of section 66 of the MCA,

however, the basis for this intervention is section 26 of the Constitution.

The enquiry as envisaged in section 65 generally either precedes the granting of an

emoluments attachment order or is in lieu of non-satisfaction of an emoluments

attachment order. It is not a manner of court-assisted execution and it is submitted, not

comparable to the granting of an emoluments attachment order.

However, the term of reference relating to rescission and amendment of the emolument

attachment order is also discussed under this heading as the context is related to the

discussion relating to oversight:



the process to allow for inter alia due process.

237 The most important consideration in this regard is elaborated on below, but concerns the capacity of courts to deal with the additional proposed burden without becoming an obstruction to obtain justice and relief. See also The Times (authors: Aarti Narsee & Jan Bornman) “Justice delayed by shortage of magistrates” 29 October 2013, available at http://www.timeslive.co.za/thetimes/2013/10/29/justice-delayed-by-shortage-of-magistrates, site accessed 29 October 2013.



http://www.timeslive.co.za/thetimes/2013/10/29/justice-delayed-by-shortage-of-magistrates


2 The issues

The rationale for the suggestion re magisterial oversight is threefold. However, all three

cardinal issues pertain to behavioural and educational aspects: Non-adherence to

legislative provisions and lack of literacy. It must also be noted that interviewees

indicated that they interacted with parties that did follow the process correctly whilst

others did not. In the premises, specific behaviour or conduct cannot be interpreted as

relevant to all role-players within a specific part of the industry e.g. attorneys.238

Firstly, abuses in the process necessitate a form of oversight as investigations into

irregularities have consistently noted that some role-players do not adhere to the

relevant legislative provisions and prejudice industry stakeholders in the process. These

range throughout the life-cycle of the debt collection process and range from wilful non-

adherence to ignorance about the law. An example is non-adherence to the provisions of

the NCA such as non-adherence to the provisions of section 103(5).

Secondly, the lack of proper informed consent by a debtor, who may or may not be

literate, financially literate or ‘legal-wise’, has prompted a need for judicial or impartial

governance as a protective measure. An example is where the debtor is under the

impression that the emoluments attachment order is a ‘court debit order’ and is unaware

that the employer will be involved, the order will be served by the sheriff which may

attach the assets of the employer where the latter fails to adhere to the court order and

that the instalment will be deducted by the employer from his or her salary.

Thirdly, the inability of parties to deliver certain outcomes envisaged by the legislation

due to practical considerations or discrepancies in the legislation is an issue. An example

in this regard is the following subsections of section 65 in respect of when it is

determined whether the judgment debtor will have sufficient funds available for his or

238 During some interviews, parties were requested to comment briefly on the working relationship between themselves in respect of the following groupings e.g. administrators and attorneys, sheriffs and attorneys, magistrates and clerks of the court. It was noted that some attorneys ‘get it right’/ ‘work with us’ whilst others were described as obstructive in the sense of ‘talking down’ to the other party (especially with regard to costs) or not providing the requested information or not providing information as detailed as requested. Some magistrates and clerks were described as ‘not getting along’ whilst most indicated that a good relationship existed between the clerks and the magistrates. In these courts, the parties were described as working together, training each other and assisting in each other with queries – this was a two-way line of communication with clerks assisting magistrates with queries on aspects that the clerk dealt with on a daily basis and the magistrate assisting clerks.



her own maintenance and that of his or her dependants (this is also dependant on the

measures used in respect of obtaining the emoluments attachment order): 239

Section 65J(6) reads as follows: “If, after the service of such an emoluments attachment

order on the garnishee, it is shown that the judgment debtor, after satisfaction of the

emoluments attachment order, will not have sufficient means for his own and his dependant’s

maintenance, the court shall rescind the emoluments attachment order or amend it in such a

way that it will affect only the balance of the emoluments of the judgment debtor over and

above such means”.

Section 65J(2)(b)(ii) reads as follows: “An emoluments attachment order shall not be

issued unless the judgment creditor or his or her attorney has first filed with the clerk of the

court an affidavit or an affirmation by the judgment creditor or a certificate by his or her

attorney setting forth the amount of the judgment debt at the date of the order laying down

the specific instalments, the costs, if any, which have accumulated since that date, the

payments received since that date and the balance owing and declaring that the provisions of

subparagraph (i) have been complied with on the date specified therein”.

The three issues are also intricately linked as can be ascertained from the following

example provided by an interviewee: The debtor consents to an instalment which he or

she cannot afford (or which would be extremely difficult to maintain) due to pressure

from the attorney who has a minimum acceptable instalment as instruction from the

judgment creditor. The debtor does not realise, understand or know that he or she is

free to object to an unreasonable instalment and the intimidating behaviour of the legal

representative due to professional pressure to perform in a satisfactory manner can

amount to abuse of the process. Alternatively, as section 58 consents to judgment are

often (this was noted by more than one interviewee) enforced as if these were section

57 consents (i.e. the debtor is first given the chance to keep to the consent as a

payment arrangement and upon default judgment is taken) or blank enforcement papers

are signed unlawfully at the time of granting of the credit, consumer/ debtor’s

circumstances may have changed adversely since agreeing to a specific instalment.

239 This relates to the court’s approach in Minter N.O. v Baker and Another on p 183 in the context of section 65J(6): “We consider that the intention of that subsection is plain. It is readily conceivable that the financial position of a judgment debtor may change for the worse after he has consented to an order for payment in instalments or the court has made such an order after enquiry, or after an emoluments attachment order has been served. Subsection 65J(6) allows the court to come to the assistance of a judgment debtor if that happens. It is understandable that the onus would be on the judgment debtor to demonstrate that he will not have sufficient means for the maintenance of himself and his dependants; for, the order would not have been made in the first place had it not been for his earlier consent or a decision by a court after an enquiry has been held. Furthermore, the relevant information would be peculiarly within the knowledge of the judgment debtor.”



3 Discussion

It is therefore of cardinal importance to ascertain exactly what the function of the

magistrate should be and which irregularities the suggested oversight should curb. It is

also important to be realistic in evaluating whether magisterial oversight would indeed

be able to meet the expected outcomes and whether it would be effective.

Most interviewees, with the exception of debt collectors and attorneys, were in favour of

magisterial oversight. The two main concerns sustaining this presupposition were the

following:

Behaviour

Stakeholders were not honest and truthful:

o Debtors would not fully disclose their income and expenses and either

overextend themselves or promise a lower amount whilst being able to

afford a higher amount;

o Role-players such as tracers did not accurately explain what an

emoluments attachment order is and what the implications thereof were.

Role-players did not adhere to the legislative requirements such as proper compliance

with the NCA.

Lack of knowledge

Many debtors are financially illiterate or do not know their rights and obligations. They

are also easily manipulated to over-extend themselves or prejudice themselves by

consenting to debts and costs. All debtors also do not monitor and manage their

debts;

Attorneys do not have all the information necessary to assess the debtor’s financial

position when deciding on an affordable instalment to propose – there is also no

provision which allows the attorney to obtain the information apart from a co-

operating debtor. Reliance is placed on the debtor (who is not under oath), the tracer

(who must obtain this from a co-operating and truthful debtor) and/ or the credit

provider (which may have the information, but which may be outdated).



The two main concerns of debt collectors and attorneys were:

Debtor’s ‘procedural’ default: Experience with section 65 financial enquiries has shown

that debtors do not attend court when requested to do so. Without the debtor

present, the process can be delayed indefinitely. This may be exacerbated where

personal service of a notice to appear at court is required. Debtors do not bring the

requested proof of e.g. income and expenses with them to court, necessitating

postponement – the challenges in this regard are discussed below;

Courts may not have the capacity to deal with every application for an emoluments

attachment order as expected.240 This also included a concern that presiding officers

may be overly cautious when it comes to debtors to the detriment of creditors.

Expectation Assessment of expectation

The courts will have the capacity for the

transfer of this duty from the clerk of the

court to the magistrate

Empirical research pertaining to constraints in courts is needed.

Many studies have found that there are severe capacity

constraints in the courts, both in respect of resources and

competency, which undermines the ability to properly execute

the allocated functions.241

Deal with irregularities pertaining to

underlying cause of action e.g. reckless

credit or prescribed debt

Refuse EAO

A judgment has already been granted at the stage of an

application for an emoluments attachment order

Refusing the EAO will not address the core issue as other debt

collection mechanisms may be used such as requesting a writ of

execution to attach movable property

The court will have to be able to also rescind the order

Evaluate adequacy of ‘consent’

Question debtor under oath

This would be akin to the section 65 debtor’s court procedure

which magistrates use

The challenges with this process is set out below

Evaluate affordability of ‘instalment’ The court will have to rely on the debtor and creditor to provide

the information, necessitating postponement and warning to

240 Empirical research is needed in this regard otherwise the lack of capacity will bar access to justice for deserving judgment creditors where no other mechanism for collecting the debt is viable.

241 WorldBank 2012, NCR 2012, etc.



Question debtor under oath and look at

income and expenses

appear at court where the debtor does not adhere to this

Evaluate legality of ‘costs’ The process may become time consuming with costs raised for

the account of the debtor especially where the matter is

postponed and where various parties are called242

Raising and recovering costs is a post-judgment and post-EAO

action and the court does not have any control over this when

the parties leave the court

Curb post- judgments and post- EAO

abuses such as overcharging the

consumer

The court will not be able to oversee the process and conduct of

parties at this stage

Curb fraud and unlawful behaviour such

as faked signatures or signing of blank

pre-enforcement documentation or at

stage of applying for credit

It was extremely informative to ascertain from interviewees what

the value of certain documents was, especially in the light of

some interviewees’ perception that the request for these

documents was unreasonable.243 The required documentation is

discussed below. For purposes of this discussion it is important to

note that the court will then not only be requested to interrogate

the debtor, but also peruse and verify the documentation. This

may have time and cost implications which will be for the

account of the debtor if an order for costs is made in favour of

the creditor.

In the light of the abuses and irregularities surrounding emoluments attachment orders,

there seems to be a renewed move towards oversight of emoluments attachment

242 In terms of 169 of the NCA, a credit provider may be requested to appear in court to answer questions about the credit agreement: “169 (1) In any proceedings in any court for the recovery of debt in terms of a credit agreement, if the consumer (a) alleges that the cost of credit claimed by, or made to, the credit provider exceeds the maximum permitted by the Act; and (b) requests that the credit provider be called as a witness to prove the amount of debt claimed to be owing, the court must not give judgment until it has afforded an opportunity for the consumer to examine the credit provider in relation to the debt claimed to be owing, unless it appears to the court that the consumer’s allegation is prima facie without foundation, or that examination of the credit provider is impracticable”.

243 The term ‘unreasonable’ must, however, be qualified to a specific context and the example of the request for an original contract is a case in point: Where the credit agreement was entered into prior to the implementation of the NCA, credit providers did not necessarily keep the original agreement. In some instances, contracts become misplaced. Where no copy exist or a copy is not acceptable to the court, the creditor is effectively barred from accessing this particular remedy. The MCA and rules of court have moved towards oversight in requests for judgments, section 65 proceedings and execution against immovable property but the mechanism for obtaining an emoluments attachment order other than after a section 65 enquiry, does not provide for magisterial oversight..



orders.244 Initially, the submissions related to magisterial oversight and same can be

observed from the proposed amendments to the Magistrates’ Courts Act. However, when

the scope of the oversight is considered, and in particular, the timing of the incidences of

the irregularities reported the type of oversight and the scope thereof would need to be

expanded. This means that, if the irregularities reported are rooted in the pre-order or

post-order phase, the functionality of judicial intervention should be reconsidered.

The point of departure for protective measures should be considered at this stage. If the

rationale for judicial oversight (i.e. in the form of magisterial intervention in a financial

enquiry setting) is founded in the constitutionality of the process (such as section 25),

the developments in respect of section 26 of the constitution should be considered.

However, in the light of the consent of the debtor, this may be problematic and solely

applicable where the debtor has not consented to an attachment of earnings. The second

consideration should be whether it is to curb abuses and in this regard it should be

considered whether the court is the correct forum (and properly empowered) to effect

same.

Two aspects deserve mentioning here. The first is that many challenges to emolument

attachment orders necessitate the involvement of a third party specialist such as an

attorney. The debtor may not have the funds to procure the services if the employer is

not willing to assist as well. Unless the issue falls under the jurisdiction of the regulatory

bodies (discussed below), there is no mechanism for the debtor to effectively address

the issue.

Many of the gross irregularities such as overcharging or duplicate emolument attachment

orders only realise or can be addressed after the emolument attachment order has been

implemented.

Aspects such as the capital-interest component etc can be ascertained by the court or

the official tasked with issuing the order. Courts do not have the capacity to deal with

irregularities pertaining to emolument attachment orders outside the scope of legal

intervention set out in the relevant legislation. For irregularities outside the scope of the

court, even if there is judicial oversight over all matters, an alternative needs to be

developed. The second issue is again related to the jurisdiction of the court and the

powers to grant remedial orders. Consumer protection legislation such as the Consumer

Protection Act and the National Credit Act regulate the contractual relationship between

the parties if these statutes are applicable. The practical effect of judicial intervention is

244 See e.g. the proposed amendments/ working document in respect of the Magistrates’ Courts Act.



that the protection afforded is removed due to the court order. The discussion of the

impact of a court order on the workings of section 103(5) hereunder serves as a case in

point. It is doubtful whether the court has the knowledge or authority to include fairness

principles e.g. relating to costs, into the court order. The court can only make orders as

to legitimate claims (e.g. where the NCA prevents the recovery of costs from the debtor,

the order can only be made in respect of the monies that may be recovered, such as the

mora interest. Cost orders after judgment cannot be reduced through reliance on the

terms of the NCA as it is submitted that the NCA does not apply to regulate the post-

judgment relationship between the parties. The NCA mandates the court to make certain

orders (see e.g. sections 130 and 164 of the NCA).245

This does not only relate to magisterial oversight – particularly as the capacity

constraints of the courts are well-known.246 It seems clear that, if the irregularities of

emoluments attachment orders are as wide-spread as reported, oversight in some or

other form is necessary. However, a word of caution as to costs, especially where

additional role-players are introduced into the market, as improper regulation could lead

to additional financial burden to the consumer.

The majority of the issues seemingly relate to market conduct and the inability of

regulatory bodies to intervene with appropriate investigation and sanctioning.247 The

jurisdiction of regulatory bodies differs e.g. the National Credit Regulator is tasked with

the regulation of the credit industry and can only deal with matters to which the National

Credit Act applies. On the other hand, the Law Societies are tasked with governing the

conduct of attorneys and firms, but only in respect of unprofessional conduct. The

governance is therefore ‘person’ specific and no regulatory body exists that can assess

emoluments attachment orders in a holistic manner. Furthermore, the person will often

need professional assistance where the NCR refuses jurisdiction (e.g. attorney’s costs) as

245 See the discussion on the impact of the judgment in Part 3 par 1 above. The manner of oversight is framed within the context of a section 65 enquiry, however this is to be contrasted with the form of oversight required when considering an application to declare immovable property specially executable. This is often done by way of affidavit, but with reference to EAOs, in the absence of documentary evidence, the information required may fall exclusively within the personal knowledge of the debtor. See e.g. the requirements set in Firstrand Bank Ltd v Folscher and Another and Similar Matters 2011 4 SA 314 (GNP), available at http://www.saflii.org/za/cases/ZAGPPHC/2011/79.pdf.

246 Delays may be attributed more to the institutional aspects of the administration of justice that to the procedural rules.

247 Kotzé 2013.



http://www.saflii.org/za/cases/ZAGPPHC/2011/79.pdf

well as the Law Society (e.g. whether attorney’s costs are included in section 103(5)) as

it is not unprofessional conduct such as overcharging.248

Haupt and Van Sittert249 indicate that “the exclusion of the discretion and supervision of

presiding officers in the granting of and determination of the deductions to be made

comes at a heavy price. In many instances, clerks of the court lack the necessary

knowledge and skill or information to effectively and efficiently administer these orders.

This is particularly true where reliance is made on section 65J(2)”. Unfortunately, the

aforementioned statement does not take into account that many of the irregularities do

not manifest or are not rooted in the process of obtaining emolument attachment orders.

Furthermore, neither the clerk of the court nor the magistrate will be able to pick up on

irregularities solely on the papers required by legislation before the court. The example

of a fraudulent signature is used although courts have developed procedures to limit

abuse insofar as is possible. An example of such procedures is the request for original

documentation or limiting the clerks of the court who may grant emolument attachment

orders in order to ensure familiarity with signatures between officers of the court. In this

regard, fraudulent court signatures are lessened as deviations are duly noted when the

papers are received by the relevant court official.

However, in some instances a thorough investigation necessitating documents reflecting

the original signature of the debtor and, potentially the services of a hand-writing expert

is needed. Requiring same will increase the time and costs of the process. Simply

referring the matter to a magistrate will not increase the ability to ascertain fraudulent

behaviour without also increasing the procedural burden of the process.

An interviewee indicated that the issue is not necessarily who executes the duty, but

that the person or official who does it is competent to do so.250 It must, however, be

noted that clerks of the court and magistrates have different powers. The competencies

granted in terms of the NCA to ‘the court’ i.e. the magistrate serve as an example.251

Anecdotal evidence suggests that some clerks of court are not competent, do not

understand the process or have the skills to establish whether or not there are

248 Example provided during interview 15 July 2013.

249 Haupt & Van Sittert 2013 11.

250 Interview dated 10 September 2013.

251 The court in African Bank Ltd v Additional Magistrate Myambo took due notice of this difference.



irregularities present.252 Reports on other clerks, notably where the clerks are also the

taxing masters, indicate that the magistrates were confident in the ability of the clerks.

The magistrates often relied on them for guidance on matters specifically within the

scope of the clerks’ everyday duties.

4 Comparable remedy

The further alternative submitted is to allow for the court to issue an emoluments

attachment order only after a financial enquiry has been held.253 This would in essence

require a section 65A enquiry254 prior to issuing an emoluments attachment order. The

concept of a debtor’s court, conforming to the audi alteram et partem principle and

allowing for the court to interrogate the debtor in order to, theoretically, impose an order

that is structured to fit the circumstances of the debtor is sound. Section 65A makes

provision for the debtor to appear in front of a magistrate in the so-called 'debtor's court'

for a financial enquiry. The purpose of the appearance and enquiry is to allow the

judgment creditor, in the presence of the magistrate, to question the judgment debtor

on his or her financial circumstances in order to ascertain whether there are funds

available to repay the debt towards the judgment creditor. The MCA governs the

procedure to notify the relevant parties as well as the respective rights and obligations of

the debtor.

In terms of a section 65A(1) notice a judgment debtor may be summoned to appear

before the Magistrates’ Court in chambers on a specified date to enable the court to

252 In the minority judgment of African Bank Ltd v Additional Magistrate Myambo [2010] ZAGPPHC 105 (delivered in September 2010 and available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPP HC/2010/105.html&query=myambo), the court noted at paras 8 & 9 that “I am concerned that a number of clerks of the court may not refer matters to the magistrate simply because they are overwhelmed by the process, or too busy to give it the attention it requires or, as unfortunately sometimes happens, are not mindful of how significant a part they play in ensuring that the provisions of the Act, especially with regard to the element of fairness and protection of the consumer/debtor, are complied with by the creditors. In the circumstances, I would qualify the sentence in the majority judgment: ‘they can grant judgment if the papers are formally in order’ (emphasis added), by adding the phrase, after ‘in order’; ‘and the clerks of the court have no reason to question the plaintiff's entitlement to the judgment’. The addition of this phrase would, in my view, highlight, in the mind of the clerk of the court, that formal qualification of the application for consent judgment is no deterrent to the clerk of the court's referral to the magistrate.” This procedure is an option in terms of sections 65A and 65E but is not mandatory prior to obtaining and emoluments attachment order. A financial enquiry can even be held where a debtor fails to make payment even though an emoluments attachment order was issued.

253 Summary of submissions: Department of Justice. Also see Coetzee et al 2008.

254 Sources: Written submissions provided by Haupt & Van Sittert as received for purposes of report titled Safari into Garnishment of Wages 13 February 2013 commissioned by Corporate Rebels; interviews dated 1 August 2013, 9, 18 & 19 September 2013; Bentley Seminar: Debt Collection 2013; Bentley De Rebus 2013; Van Sittert & Haupt 2013, Kotzé 2013.



http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPP%20HC/2010/105.html&query=myambo

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPP%20HC/2010/105.html&query=myambo

enquire into the financial position of the judgment debtor and to make such an order

as the court may deem just and equitable. The purpose of the procedure is therefore

to hold a financial enquiry in order to obtain an order for payment of the judgment

debt in instalments. The notice is drawn up and signed by the judgment creditor and

his/her attorney, issued by the clerk of the court and served by the sheriff.

The court which has jurisdiction is the court where the debtor resides or carries on

business or is employed. Where the judgment debtor is a juristic person, the court

that has jurisdiction is the court of the district where the registered office or main

place of business of the juristic person is situated.

The clerk of the court may not issue a section 65A(1) notice where the minutes of the

original court proceedings do not show that the judgment debtor was personally

present or represented by an attorney when the original judgment was awarded or no

warrant of execution was personally served on the judgment debtor. In these

circumstances the judgment creditor’s attorney must first deliver a section 65A(2)

letter by registered post to the judgment debtor. The judgment creditor’s attorney

must furnish proof to the court of postage of the letter to the judgment debtor. Where

the judgment debtor is in permanent employment, the section 65A(2) letter may also

include a reference to section 65J which makes provision for an emoluments

attachment order. The inclusion of such a reference will amount to a notice for the

purposes of obtaining an emoluments attachment order as set out in section

65J(2)(b).

Failure to appear when commissioned to do so is a criminal offence and the judgment

debtor can be arrested for contempt of court. Even so, the practical implementation of

the process is unfortunately circumvented by human behaviour.

In terms of section 65A of the MCA, a debtor can on notice from a creditor be requested

to appear before a magistrate in order for the latter to conduct a financial enquiry into

the affairs of the debtor. This procedure allows for the court to investigate the

circumstances of the debtor in order to ascertain whether there are funds available to

repay a debt owed to a creditor and order that this be done, where possible, by way of

reasonable instalments affordable to the consumer. However, this procedure is

dependent on the following:

1. The enquiry must be requested by the creditor;



2. The enquiry must come to the notice of the debtor and the debtor must

understand what is expected of him or her (e.g. when and where to attend and

which documents to bring along) as well as the repercussions of non-compliance

with the notice (e.g. contempt of court resulting in arrest and penalty);

3. The debtor must attend the enquiry, which includes that the debtor should be

available at the date of the enquiry i.e. be able to take leave from work and

travel to court;

4. The debtor must provide the information needed to conduct the enquiry in a

feasible manner i.e. true proof of income and expenses, etc.;

5. The creditor or its attorney must be present at the enquiry, which involves legal

costs.

The following procedures are available where the above procedure is lacking or the

circumstances do not present itself as needed to be effective:

1. Most magistrates require personal service of the section 65A notice (notice of the

enquiry) or positive proof that the notice and the contents of the notice came to

the attention of the debtor e.g. service on someone resident in the same

household;

2. The creditor’s legal representative has the option of requesting that a warrant of

arrest be issued for the delinquent debtor. In this regard, the option exists for the

debtor to contact the attorney to make payment arrangements or to arrange for

the enquiry to be postponed to a date when the debtor will be able to attend;

3. If the debtor fails to appear at the court the legal representative for the creditor

may request that a warrant be issued for the arrest of the debtor. The debtor will

then be arrested by the sheriff or warned to present him- or herself at court to

explain his or her contempt of court.

The following potential problems have been reported and affect the effectiveness of the

procedure:

1. The capacity of the courts to deal with financial enquiries in a timely manner;

2. The ability and willingness of the debtor to understand and react to the notice to

attend the financial enquiry – this includes lack of knowledge, cognitive function



to understand the notice and the repercussions thereof, ignorance, financial

inability to attend the enquiry, physical inability to attend the query, family and

employment responsibilities;

3. The financial and legal literacy of the consumer to understand the options

available to him or her in respect of payment arrangements (especially where

options regarding amount, repayment period with resultant cost-implications are

available to the debtor);255

4. The ability of the sheriff to effect personal service on the debtor (especially the

‘professional debtor’) where this is a non-negotiable requirement of the court

based on the magistrate’s discretion.256 This may also apply in a similar fashion to

service of the warrant of arrest. Difficulties, which have cost implications as

payment is either further delayed or multiple attempts to serve the notice is

necessary, include:

a. Additional effort by the sheriff to attempt service at different times of the

day and multiple efforts may be needed (the debtor is ultimately

responsible to settle the expenses, but the attorney needs to carry the

costs in the interim);

b. Service (where the debtor is employed) by large companies, mines and

employers where access cannot be gained onto the premises makes

personal service extremely difficult or impossible.257 The sheriff has the

statutory mandate to demand access but may be subject to cumbersome

(in respect of time) safety precautions whereafter the debtor has to be

located (such as a miner that is employed underground). This necessitates

assistance from the employer especially where same employs a large

majority of debtors and the scenario repeats itself on a recurring basis;

c. It may be a point of embarrassment for the debtor to be served with a

notice to attend a financial enquiry into his or her affairs as a result of

255 Some debt collectors present the debtor with repayment options based on a variation of instalments and repayment periods. The debtor then has the option of choosing an option which he or she finds acceptable and implementable within the framework of his or her lifestyle and financial abilities.

256 Written submissions on a random sample of 46 files examined. See, however, the perspectives of magistrates and sheriffs on effecting ‘personal knowledge’ below.

257 Regarding service in general, it was interesting to note that one attorney’s firm indicated that they do not do collections where the employer is a mine as a result of the perceived impenetrable difficulties associated with the process.



non-payment of debt at his or her place of employment and in front of his

or her co-workers, peers, superiors and employer;

d. Legal representatives seldom ‘serve’ the notice as it has time and cost

implications.

5. The presence of the debtor at the enquiry with all the necessary documentation –

it was interesting to note that the magistrates interviewed in two different

provinces consistently noted that the percentage of debtors who do not appear

for the financial enquiry is low (this ranged from one court stating that the

percentage of non-complying debtors was in the single digits, to another

estimating non-appearance at 10 to 20%). In direct contrast to the

aforementioned, attorneys and sheriffs noted that the percentage of non-

complying debtors is very high (70/80 to 90%). When the discrepancy was put to

interviewees in subsequent interviews, it could not be explained – one

interviewee who had been an attorney prior to becoming a magistrate indicated

that, as an attorney, the appearance of debtors was estimated at 1 out of 10,

whilst as a magistrate, the incidences of appearance were 7 out of 10.258 The

interviewee attributed this to the current economic circumstances of debtor.

During this interview it was also noted, when asked about the ‘use’ of the section

65 ‘debtor’s court’, that this court was often used and ‘full’. The question was

asked in response to allegations that the section 65 court was not effective. The

following reasons are purely speculative as, indicated above, the interviewees

were unable to provide a reason for the discrepancy when it was put to them:

258 A case in point which illustrates the importance of consulting with people in practice and obtaining different perspectives from role-players is discussed in detail in Part 3 hereunder, but briefly set out for purposes of this discussion. The issue related to the question of whether debtors appear in the ‘debtor’s court’ when notified as such in terms of section 65A. According to written reports the incidence of debtors appearing in the court when requested is low, rendering the section 65 process ineffective. Interestingly, when discussing the matter with Magistrates in three different provinces, it was consistently noted that debtors do appear. The incidence of appearance was consistently calculated at 70% of higher. In contrast, debt collection attorneys consistently noted that debtor’s do not appear. During the last interview conducted with a magistrate who had also been a practising attorney, it was noted that, as an attorney, the experience was the 1 out of 10 debtor’s appeared whilst, as a magistrate, the experience was that 7 out of 10 debtors appeared. The interviewee prescribed this discrepancy to the changing economic circumstances of South Africans. In addition, it was reported that the warrant of arrest is ‘contentious’ as it is ‘extremely traumatic for a debtor, who may be locked up in a holding cell at a police station’. During interviews, it transpired that the warrant of arrest is seldom issued and the incidence of actually arresting a debtor is very low. The sheriff will rather warn the debtor to arrive at his or her offices or at court where the person will be handed to the clerk of the court. This process was generally viewed as effective in securing the presence of the debtor at court. The interviewees consistently noted that the involvement of the South Police Service is scarce as the members of the police will generally not concern themselves with civil matters. The members are also not trained in dealing with the matter.



a. ‘Non-appearance’ could be interpreted differently, with interviewees

potentially interpreting a ‘non-appearance’ with a reason e.g. inability to

obtain leave from employment as an ‘appearance’ as it was not wilful

neglect;

b. Magistrates deal with various firm’s enquiries whilst the attorney’s firms

only have a select few debtors to deal with on a daily basis;

c. Parties have vested interests and account for these in their answers or

equate the effort to obtain payment (e.g. the effort of issuing warrants,

postponing enquiries v requesting judgment in terms of section 58 and the

issuing of an emolument attachment order on consent obtained from the

debtor) with the success of the process;

d. The above represent perspectives and no empirical research is available on

the attendance of debtors of the debtor’s court to provide a scientific

foundation for either of the perspectives.

e. Empirical research (necessitating assistance from courts and attorneys) on

the following aspects will be the only way of objectively ascertaining

whether the concerns of the industry is valid:

1. Notices issued

2. Debtors who appear at the first court date as stipulated in the

notice;

3. Debtors with whom arrangements are made or who make

arrangements and in respect of which attendance is not

necessary;

4. Debtors in respect of whom writs of arrest are issued;

5. Debtors who appear as a result of a warning or writ;

6. Subsequent non-attendance by debtors who had already

appeared in court before.



Two further aspects relating to section 65 enquiries are of importance:

Service on specific persons including personal service on the debtor

Many of the challenges set out in this section also relate to service of documents by

sheriffs in general i.e. summons, notices, etc. The practices of sheriffs to effect service

are also applicable to documents other than emoluments attachment orders.

Access to premises

Sheriffs consistently noted that service at premises which have strict security are

problematic. In light of legislative change, the sheriff also does not have the power to

enter the premises without a person present on the premises anymore. These include:

Security complexes and apartment buildings, which either have security personnel

who are under strict orders not to let uninvited persons onto the premises, gates with

no manner of contacting someone inside, unidentifiable or unreachable body

corporate representatives;

Large working premises with inherent dangers such as mines and power stations. In

these circumstances, legislation and safety guidelines may necessitate that safety

gear be worn or safety/ induction training be undertaken prior to granting admission

to sections of the complex. When the sheriff is then allowed to enter, the person has

to be found – and the challenges in locating the person may differ from working

underground, hiding from the sheriff or working shifts.259 Sheriffs have then indicated

that they have to wait for the person outside the premises, which is time-consuming

and may not fall within their ordinary working hours;

In rural areas, finding a specific address where stands are allocated is problematic

and may necessitate assistance by local inhabitants.

Information

In terms of section 65J(3) “an emoluments attachment order shall be prepared by the

judgment creditor or his attorney, shall be signed by the judgment creditor or his attorney and the

clerk of the court, and shall be served on the garnishee by the messenger of the court in the

manner prescribed by the rules for the service of process”.

259 An interviewee indicated that debt collection matters where the debtor was employed at a mine was, as a matter of policy, not undertaken by the business as it was extremely difficult to locate the person.



Companies where the document, such as the emoluments attachment order, must be

served on a specific department may also require repeated attempts as the document

may contain the address of the company, but not specify the specific department or that

department’s address. Similarly, the instructions from the attorney would not specify the

department or person upon which service is to be effected, necessitating the sheriff to

ascertain this. Incomplete information such as personnel numbers or correct spelling of

the name and surname of the judgment debtor on an emoluments attachment order

caused employers/ garnishees to refuse to accept service. Incorrect information, such as

addresses, etc further delay the process.

Sheriffs seemingly also provide information to assist parties in making informed

decisions on whether to proceed with execution, etc. One sheriff provided an estimation

to attorneys of removal and storage costs as well as the amount for which the attached

assets would ordinarily sell at an auction. The legal representative could then decide

whether to proceed with a sale in execution and the sheriff requested a deposit where

there was an expected loss after sale. It was noted that the success of sales in execution

depended on the economic circumstances and geographical location of the debtor. Some

debtors are also in the position to settle the debt and the attachment therefore serves

the purpose of motivating the debtor to settle the debt.

The following is an example of a general notice by a sheriff to attorneys where the

debtor resides in the Tembisa area:

Personal knowledge instead of personal service

Interviewees noted that courts required personal service and that this delayed the

process where the debtor could not be located. However, when consulting with

magistrates and sheriffs, it seemed as if a practical discretionary approach was taken by

some. In this regard, the focus was on obtaining evidence that the debtor obtained

knowledge of the document. In many instances the assistance of the community was

given.

Firstly, the so-called ‘same-roof’ service was an option. An interview indicated that the

sheriff’s offices working hours were from 8.00 to 16.30. Debtors residing in rural areas

were not at home during these hours. Therefore, the document was left at the correct



address at e.g. a relative (grandparent/ spouse). The sheriff also obtained the relative’s

cell phone number, possibly the cell phone number of the debtor and/or a work address

from the relative. The relative was then tasked with giving the document to the debtor.

The sheriff would phone the relative the next day to ascertain whether the document

reached the intended person. When interviewing the magistrate’s court for the area in

which the sheriff worked, the magistrate indicated that this form of service, as long as

there was proof/ confirmation that the document reached the debtor i.e. personal

knowledge, was acceptable (although not necessarily strictly in accordance with the

legislative provisions governing service).

Another sheriff had set up a point within a township where members of the township

would collect post and notices. This was further managed by a person who knew the

inhabitants of the township and would call the person to come and collect the document.

Some magistrates indicated that service, which utilises technology, should be an option

available when serving documents – the focus was on the personal knowledge of the

debtor about the proceedings rather than the method of service.

Process to compel attendance

Some interviewees (sheriff’s offices) indicated that they seldom arrested persons where

they failed to attend court. Magistrates noted that debtors made arrangements with the

attorneys as they could e.g. now obtain leave from work. Others noted that debtors did

not appear in court as they could not risk losing their employment and that it was costly

to attend court for some who had to travel. In this regard, attorneys did not always

request warrants to be issued.260

One interviewee noted that magistrate’s would at most warn the debtor (e.g. section

65A(8)) and that actual imprisonment only happened after repeated contempts. Reliance

on the assistance of the South African Police Service is apparently rare as the members

of the police are not concerned with civil matters and lack the knowledge to understand

their roles in respect of section 65 warrants of arrest. Another interviewee indicated that

the court ordinance was rarely available or wanted to ‘take’ the person – in this regard

the person was often requested to meet the sheriff at the court on an agreed time and

260 One magistrate had, however, chanced upon a practice where attorneys would obtain warrants of arrest after the debtor had made an arrangement and would then refer the debtor to the warrant when the debtor did not make payment. This matter was personally taken up with the attorneys and measures tightened in respect of these warrants.



date (often before the court began) whereafter the person was handed to the clerk of

the court.

Some sheriffs indicated that a meeting was scheduled with the debtor at the sheriff’s

office whereafter the attorney was also informed. Attempts were then made to resolve

the matter without having to go to court.261

One of the problems is that the debtor is brought to court by the sheriff but the attorney

is not present and cannot address the debtor to resolve the matter.262 Most interviewed

sheriffs indicated that they did inform the attorney that the debtor had been warned to

meet the sheriff at court or at his or her office, but one other indicated that he did not

work for the plaintiff but for the court. In this regard, the sheriff only informed the

attorney that the debtor had been located by way of a sheriff’s return which was

stamped by the clerk of the court upon handing the person to the clerk. The return was

thereafter submitted to the attorney.

One sheriff’s office also indicated that they made extensive use of technology such as

faxes and emails to inform attorneys of developments in a timely and expeditious

manner.

Sheriffs therefore confirmed that they did serve section 65 A notices, section 65

warnings/ warrants of arrest and that there were problems with serving the documents.

They also confirmed that debtors did not attend court which necessitated the warnings.

However, practical steps (of which some are noted above) are taken to overcome these

problems, expedite the process, minimise the trauma of arrest for the debtor and ‘to get

the job done’.

In respect of knowledge of proceedings, two sheriffs in different provinces and without

any prompting by the interviewer used the example of Labour (CCMA) matters. In

respect of these matters, the first document in the proceedings need not be served by

the sheriff. The order, which is the last document, or writ of execution is served by the

sheriff and the following observations were made:

261 An interviewee of a sheriff’s office consistently noted that the people in the area of his jurisdiction did not ‘like’ the court. He further noted that this was one of the reasons why interpleader proceedings had a very low success rate – where the person was informed that he or she had to go to court to show his or her title with regard to the property, it seldom happened.

262 Bentley “Separating the baby and the bath water – Garnishee and emoluments attachment orders” De Rebus March 2013.



At this stage, it is often the first time that the respondent/ defendant is confronted

with the matter and becomes aware of it;

Many problems appear at this stage such as wrong identity – one example that the

sheriff used was that the order to attach assets had been granted against a person

who had not employed the applicant/plaintiff but was only the manager/ foreman of

the business that employed the claimant.

This point serves to illustrate the necessity of the sheriff in serving documents.

Anecdotal evidence suggests that persons who are not sheriffs attempt to serve

emoluments attachment orders (or orders framed as such but which is in reality notices

or other documents) or attorneys simply faxed these orders to the sheriff. Many sheriffs

have, however, built up a repertoire with the community in order to train them on who

the sheriff is (many sheriffs are well known and identifiable in small communities) and

what the sheriff’s powers etc are. Many lay persons including employers are not properly

informed about sheriffs which facilitate abuses of the process.

It is logical that the language proficiency (and language barrier where knowledge of the

English language is not adequate) be taken into account. This example is phrased in

legal terms and can even be simplified further. There is also no indication of where the

court is:





5 Discussion

There are further time and cost implications to execute the process effectively especially

in the light of the efforts to incentivise persons to adhere to the legal prescriptions.

An overall regulatory body for debt collection may be needed in a similar frame as the

UK Office of Fair Trading which governs debt collection as well as licensees in this

respect.263 Alternatively, improved co-ordination between regulatory bodies is needed,

which may further necessitate expanded mandates.264 South Africa regulates the

individual and not the mechanism, which has resulted in a fragmented system.265

Attorneys are regulated by the respective Law Societies and the regulation is limited to

unprofessional or unethical conduct. Debt Collectors are regulated by the Debt Collectors

Council whilst the National Credit Regulator regulates credit providers. The difference is

that the NCR is also responsible to regulate the credit market which allows for a more

comprehensive approach to regulation. In this regard, a body to regulate all aspects of

debt collection and with the authority to issue guidelines (see e.g. the OFT guidelines in

respect of letters of demand) is needed within the framework of market conduct

regulation. This may need attention within the development of the twin-peaks approach

to regulation to incorporate same into the developing framework instead of developing a

new body. The World Bank recommended, in respect of the debtor-creditor regime that

in “South Africa, it appears appropriate to focus on the safeguarding of the legislative

263 The OFT has the authority to issue guidance notes and guidelines. These notices embody the OFT’s interpretation and explanation of legislation and list practices that the OFT regards as undesirable and other practices the OFT wishes to see adopted. The notices do not have legal force but provides guidance as to the OFT’s view of legislation and in respect of unfair or improper conduct. It is therefore a threshold against which an entity can measure its conduct, especially with regard to that which is acceptable for a credit institution with a consumer credit license from the OFT. The OFT has issued the following credit sector specific guidance notes to date: debt collection, debt management (and credit repair services), second charge lending, irresponsible lending, mental capacity guidance for creditors, credit brokers and intermediaries. The OFT has regulatory duty in respect of the credit industry, including the authority to curb practices which, though not necessarily rendered unlawful legislation or prone to sanction but which may adversely affect consumers and/or the industry – see Goode RM (full reference to considered parts set out in bibliography).

264 In this regard, a list of set behavioural patterns could be isued by the Law Societies, in consultation with the NCR. These may be in respect of aspects relating to debt collection where, if attorneys are involved, would validate investigation by the Society e.g. section 103(5) or in duplum especially as the Law Societies’ committees should have intricate knowledge of attorney’s costs.

265 At present, established organisations structured like the Credit Ombud or National Debt Mediation Association are probably best suited to fulfill such a need although proper funding, human and other resources and proper support will be needed.



gains made in implementation, and to improve the systems on the basis of the elements

that are already in place.”266

It is submitted that additional registration and compliance reports do not form part of

the regulatory body’s regime in order to lessen the already hefty compliance burden on

industry role-players who have to be registered with either of the bodies mentioned

above and comply with various legislative requirements in any event. The body should

have investigative and subpoena powers and be a body of investigation and redress.

In the light of the above, judicial oversight in all instances is not recommended although

the issue of consent was more often than not met with disapproval by interviewees of

the judiciary and administration. Whilst some legislative changes may assist with

clarifying issues, curbing abuses and dealing with irregularities, proper enforcement is

necessary especially as many of the irregularities are not directly related to the debt

collection process. This includes a point of reference for consumers to deal with

suspected irregularities. The aspects that concerns and a body tasked with oversight

should be industry-based with proper powers and resources.

6 Rescission and amendment of emoluments attachment

orders

Subsections 65J(5), 65J(6), 65J(7) and 65J(8)(b) provide as follows:

“(5) An emoluments attachment order may be executed against the garnishee as if it were a court

judgment, subject to the right of the judgment debtor, the garnishee or any other interested party

to dispute the existence or validity of the order or the correctness of the balance claimed.”

“(6) If, after the service of such an emoluments attachment order on the garnishee, it is shown

that the judgment debtor, after satisfaction of the emoluments attachment order, will not have

sufficient means for his own or his dependant’s maintenance, the court shall rescind the

emoluments attachment order or amend it in such a way that it will affect only the balance of the

emoluments of the judgment debtor over and above such sufficient means.”

“(7) Any emoluments attachment order may at any time on good cause shown be suspended,

amended or rescinded by the court, and when suspending any such order the court may impose

such conditions as it may deem just and reasonable.”

266 World Bank 2012 23.



“(8)(b) An employer on whom a certified copy referred to in paragraph (a) has been so served,

shall thereupon be bound thereby and shall then be deemed to have been substituted for the

original garnishee, subject to the right of the judgment debtor, the garnishee or any other

interested party to dispute the existence or validity of the order and the correctness of the balance

claimed.”

In terms of the current position, various legal and non-legal checks and balances exist to

address problems with emoluments attachment orders. Should all parties execute their

duties in a competent manner, the following considerations apply:

The clerk of the court receives the request for judgment and emoluments attachment

order with supporting documentation. The clerk should peruse the documents and,

even where the requests seem formally in order, may refer it to the court.267 The

court may, in terms of Myambo, as and when applicable, investigate aspects relating

to the cause of action in respect of consents to judgment;

The garnishee and/or garnishee administrator may, if competent and knowledgeable,

peruse the emoluments attachment order and query the existence, validity or

correctness of the balance claimed. The debtor or any other interested party may also

question the existence, validity or correctness of the balance claimed;

Over and above all, the attorney for the creditor is bound to act in an ethical and

lawful manner and may be removed from the roll of practicing attorneys, held civilly

and criminally liable if found to have acted unethically and/or unlawfully.

During interviews, with the exception of one, interviewees stated that incidences where

the debtor could not afford the instalment deducted in terms of the court order and

which, in theory necessitated amendments to the order through a court process, were

low. Magistrates, attorneys and garnishee administrators indicated that the parties would

agree internally on a reduced instalment supported by recent payslips and proof of

income and expenditure. Where garnishee administrators were involved, the

negotiations were channelled through their officers.268 Consumers/ Debtors were not

267 Where the cause of action is a credit agreement which is subject to the provisions of the National Credit Act, the rules of the Magistrate’s Court provide that the matter should be referred to the Magistrate in terms of rule 4 incorporating subrules 12(6), (6A) and (7). Some interviewees are of the opinion that these rules are ultra vires.

268 It was also noted that referral of cases where the intervention of a specialised organisation such as the Credit Ombud was necessary, had to be done (or at least the application completed) by the debtor. This posed its own challenges although the garnishee administrator assisted the debtor and sent the completed form to the organisation.



interviewed and submissions cannot be made in respect of their perspectives and

experiences. At most, reliance is placed on assumptions/ observations by interviewees.

It also transcribed from interviews with garnishee administrators that challenges to the

order were seldom initiated by the employer, but mostly by the debtor or administrator

handling that specific employer group and channelled to the attorney for the judgment

creditor. Although the interviewed personnel of administrators were competent in their

knowledge of the law, the interviewees did indicate that the co-operation received from

attorneys differed. In respect of aspects entirely in the domain of the law, such as legal

costs and requests for detailed statements, some attorneys were perceived as being

obstructive. However, the interviewees indicated that most attorneys, when supplied

with proper proof of income and expenses, were inclined to negotiate reduced

instalments. In this regard, the matter was not necessarily channelled through court as

there were costs involved. However, as this is in contrast with a due court order,

adherence is solely based on parties’ goodwill. Magistrates also reported low incidences

of applications for amendments where the emoluments attachment order was not in

connection with a section 74 administration order. In these instances, some applications

for amendments were observed.

During one of the last interviews, two magistrates proposed a possible solution to

address rescissions and amendments.269 The proposal was based on the process to

obtain orders such as domestic violence interdicts or maintenance orders where the

process is extremely simple and no legal representation is needed. The clerk of the court

assists persons in this regard. The magistrates indicated at this stage that many debtors

appearing in court in terms of section 65 were not represented in any event, sworn in

and questioned by the magistrate. Where the creditor’s attorney questioned the debtor,

the court would supervise the questioning.

Two aspects need to be considered.

The first is whether the court/ clerk of the court will have the capacity to assist debtors

in a manner that is fair and equitable to both the debtor and creditor. It must be noted

that similar abuses pertaining to bribery, incompetency, etc currently ascribed to clerks

of the court may very well manifest within this context as well. The powers of the clerk

of the court must also be considered within the scope of the nature of the emoluments

269 This proposal was not researched further and aspects such as competency of clerks to assist debtors without prejudicing either the rights of the debtor or that of the creditor as well as capacity constraints will need to be properly attended to prior to implementing any process in the suggested lines.



attachment order. In this regard, as section 65 specifically refers to ‘court’, it is

submitted that the clerk will only be in a position to assist the person to complete the

necessary forms and attach the required supporting documentation, but that the actual

rescission or amendment be effected by a magistrate after due consideration of

prejudice to the debtor and/or creditor. This remedy would necessitate standard

documentation.

The second aspect pertains, again, to a consideration of the aspects that should be

considered at a specific point of the process. It is submitted that section 65J(6) is

counter-productive when considering the progress of the process to obtain an

emoluments attachment order as the affordability of the instalment is challengeable after

the emoluments attachment order has been served on the garnishee. An interviewee

indicated that a recent income and expenditure sheet should be provided to the court

prior to authorising payment in specific instalments. In this regard, affordability of

instalments can be dealt with prior to actual prejudice to the debtor.270 If this approach

is taken, with due consideration that it will involve additional costs for the account of the

debtor (which is due and payable upon rendering of the service to obtain the necessary

information) and may delay the process in initially obtaining an emoluments attachment

order, only a change of circumstances or irregular orders will be plausible reasons for

amendments/ rescissions.

Provision is made for judicial oversight in consent judgments in respect of agreements to

which the NCA applies/ requests for judgment in terms of sections 57 and 58. In terms

of Rules 12(5) & 12(7)271 of the MCR:272

“(5) The registrar or clerk of the court shall refer to the court any request for judgment on a claim

founded on any cause of action arising out of or based on an agreement governed by the National

270 It must be noted that there are foreseeable challenges to this, such as: Obtaining documentation from debtors, especially where these are not readily available such as proof of monthly expenses and necessitate intensive co-operation from the debtor or requiring debtors to be truthfull (whether adding expenses or forgetting about certain expenses). Other problems pertain to costs – if tracers are employer, their services are recovered from the debtor as an expense. The importance of using properly trained tracers cannot be overstated as information can be obtained from the debtor in this regard. However, the time from when a debtor consults with a tracer up to actual enforcement of the agreement may be lenghty as many attorneys enforce a section 58 consent like a section 57 – the debtor is again given the opportunity to comply with the agreement and upon default, judgment is taken. This may result in information not being up to date anymore.

271 Rule 12(7) is made applicable to section 57 and 58 proceedings by rule 4(4).

272 See also African Bank Ltd v Additional Magistrate Myambo. An interviewee noted that this rule may be ultra vires but that it is necessary. Sections 57 and 58 empower the clerk of the court to grant judgment but it may be referred to court (in respect of section 58 see Myambo).



Credit Act, or the Credit Agreements Act, 1980 (Act No. 75 of 1980), and the court shall thereupon

make such order or give such judgment as it may deem fit.”

“(7) The registrar or clerk of the court may refer to the court any request for judgment and the

court may thereupon—

(a) if a default judgment be sought, call upon the plaintiff to produce such evidence either in

writing or oral in support of his or her claim as it may deem necessary;

(b) if a judgment by consent be sought, call upon the plaintiff to produce evidence to satisfy

the court that the consent has been signed by the defendant and is a consent to the

judgment sought;

(c) give judgment in terms of plaintiff’s request or for so much of the claim as has been

established to its satisfaction;

(d) give judgment in terms of defendant’s consent;

(e) refuse judgment; or

( f ) make such other order as it may deem fit.”

A court deciding on whether to grant judgment may therefore request information in

accordance with authority granted to it by the NCA.273

The magistrate also indicated that there are incidences of consumers signing of blank

enforcement documentation at the time of credit-granting. In this regard, consumers’

circumstances would have changed i.e. the consumer defaulted on the agreement, and

the original instalment agreed to (if inserted at all) would not necessarily be affordable.

Magistrates also indicated that they perused the original credit agreement, not only for

purposes of comparing signatures, but also to obtain an idea of the original instalment in

terms of the credit agreement for purposes of instalments now payable after default of

the consumer. However, current circumstances preceded by over-indebtedness, loss of

employment, divorce or death of a spouse cannot be ascertained without additional

information.

273 See Myambo in respect of the powers of the clerk of the court and that of the court itself. In respect of financial information, see the approach of the court in Minter N.O. v Baker and Another quoted extensively above.



7 Summary: Oversight, rescission and amendment

Prior to the implementation of magisterial oversight and additional requirement in

respect of rescissions and amendments, proper impact assessment studies need to be

undertaken in respect of court capacity constraints, additional costs to the debtor and

creditor and prejudice to parties though delayed or obstructed access to justice.

The issue of oversight is broader than just magisterial oversight where the purpose is to

curb abuses and irregularities. Abuses and irregularities are possible throughout the life-

span of emoluments attachment orders and courts are only involved to a limited extent.

The ordinary civil procedural principles relating to due process would apply in respect of

rescission and amendment, however, use of these options is often not viable for the

consumer when considering the time, difficulty and cost implications.



Interest, fees, costs & charges

1 Introduction

The terms of reference in the mandate that relate to this section are the following:

The interpretation and understanding of in duplum with regard to agreements that are

subject to emoluments attachment orders, with specific attention given to credit

agreements, the position prior to and after the obtaining of judgment and whether

legal costs are included or excluded in the rule;





whether parties can contract internally to have another party pay this commission;

The following scheme illustrates the parties to the debt collection process who may have

a claim to the funds of the debtor, whether as a capital or interest debt, fee, cost,

commission or charge.



2 Interest

2.1 Introduction274

In terms of public policy and legislation, defaulting consumers are protected from credit

costs that may accumulate indefinitely in the absence of the ability of the consumer to

cure his or her default.275 In terms of the common law, the in duplum-rule prohibits a

creditor in any agreement where interest is charged on a capital amount from recovering

arrear interest where the sum of the interest that has become due and payable equals

that of the capital sum.276 The amount that may be recovered at the time that the

maximum amount allowable in terms of the in duplum-rule is reached i.e. the arrear and

unpaid interest equal to the outstanding capital amount, is calculated with reference to

the capital amount at the time when the interest equals that amount. The common law

in duplum only applies to unpaid and arrear interest and is applicable to any agreement

where a capital sum and interest is applicable. Furthermore, once the debtor has made

payment, however small, which reduces the total unpaid interest to below the allowed

cap, interest can accumulate again until the maximum is reached again.277

The same principle applies to section 103(5) of the NCA. Section 103(5) of the NCA is

applicable to credit agreements to which the NCA applies. In terms of this section, all

costs of credit mentioned in section 101 that accrues (i.e. paid or unpaid) is included to

calculate the maximum allowable amount payable by the debtor after he or she has

defaulted on a credit agreement. The outstanding principal amount is calculated at the

date of the default of the consumer. The amount for which the consumer is liable after

he or she has defaulted on a credit agreement (this section overrides the contractual

terms between the parties) may not exceed twice the outstanding principal amount i.e.

the outstanding principal amount when the debtor defaults and accumulated costs of

credit equal to the outstanding principal amount. However,

274 The in duplum rule has been discussed by many authors and various sources were researched in respect of this part of the report, including Louw 2013 (2); Dicker 2013; Campbell 2010; Friedman & Otto 2013 91); Friedman & Otto “Section 103(5) of the National Credit Act 34 of 2005 as inspired by the common-law in duplum rule (2)” (2013) 76 THRHR 361 (August); Kelly-Louw “The statutory in duplum rule as an indirect debt relief mechanism” South African Mercantile Law Journal 2011 (23) 352; Vessio “A short discussion on the effects of the in duplum rule upon commencement of litigation and after judgment: a view both ‘inside’ and ‘outside’ the National Credit Act” Obiter 2010 725; Nedbank Ltd and Others v National Credit Regulator and Another 2011 3 SA 581 (SCA), available at http://www.saflii.org/cgi-bin/ disp.pl?file=za/ cases/ZASCA/2011/35.html&query=Nedbank%20v%20National%20Credit%20Regulator; Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1998 (1) SA 811 (SCA) 834 B-E, available at http://www. saflii.org/cgi-bin/disp.pl?file=za/cases/ ZASCA/1997/94.html&query=oneanate.

275 See e.g. Nedbank Ltd and Others v National Credit Regulator and Another par 37.

276 Nedbank Ltd and Others v National Credit Regulator and Another paras 36 & 37.

277 Nedbank Ltd and Others v National Credit Regulator and Another paras 36 & 37.



http://www.saflii.org/cgi-bin/%20disp.pl?file=za/%20cases/ZASCA/2011/35.html&query=Nedbank%20v%20National%20Credit%20Regulator

http://www.saflii.org/cgi-bin/%20disp.pl?file=za/%20cases/ZASCA/2011/35.html&query=Nedbank%20v%20National%20Credit%20Regulator

“Section 103(5) is not a code and embodies no more than a specific rule applicable to specific

circumstances, that is, to credit agreements subject to the NCA. It is thus a statutory provision

with limited operation.”278

The following is a very basic visual comparison of the effect of section 103(5) vis-à-vis

the common law in duplum rule. A more detailed comparison is set out thereafter.

Section 103(5) of the National Credit Act 34 of 2005 introduced a statutory limit on

amounts that may be recovered by virtue of a credit agreement which is subject to the

provisions of the Act. In Nedbank Ltd v National Credit Regulator,279 the court held that

“once the amounts referred to in section 101(1)(b)-(g) that accrue during the period of

default, whether they are paid or not, equal in aggregate the unpaid balance of the

principal debt at the time the default occurs, no further charges may be levied”.

The consequence of this judgment appears to be that two of the sub-rules of the

common law in duplum rule do not apply to debts owing under credit agreements that

are regulated by the Act.

The first aspect of the common law rule that does not apply is that interest may not

exceed the outstanding capital amount of a loan (debt) as at date of default. This is

278 Nedbank Ltd and Others v National Credit Regulator and Another par 38.

279 Paras 38 & 49.

0

1

2

3

4

5

6

Principal amount at time of default for purposes of 103(5)/ Outstanding capital amountat time that double is reached for purposes of in duplum

Common law in duplum

Section 103(5)



because it is now not only interest but interest together with the other items noted in

section 101(1)(b)-(g) that may not exceed the unpaid capital amount at date of default.

The second aspect of the common law rule that does not apply is that interest paid

during the period of default may run again up to the limit set by the outstanding debt.

This is so because the rule now is that the aggregate of all amounts debited may not

exceed the maximum allowable threshold. The consequence of the use of the term

“aggregate” is that the amounts paid cannot be deducted in that only the amounts

debited may be added up, only non-paid amounts make up the “aggregate”.

The common law in duplum rule has yet another two sub-rules. The first is that the rule

is suspended when legal proceedings are instituted against the debtor.280

The second is that once judgment has been granted, interest may run again until it

reaches the capital amount outstanding in terms of the judgment.281 Counsels’ briefs

280 Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 834 B-E. See also Nedbank Ltd and Others v National Credit Regulator and Another par 37. In particular, see Campbell 2010 6: “Thus, eg, when unpaid interest reaches the equal of the unpaid capital during the course of litigation, it has been held that the in duplum rule is not applicable, and a debtor is not protected ‘pendente lite against interest in excess of the double’.The rationale for this finding is that a debtor is not being exploited when a creditor is being kept out of pocket with the assistance of delays inherent in legal proceedings. Upon judgment being given, interest on the full amount of the judgment debt (including any interest for which judgment has been granted) commences to run afresh”.

The operation of the common-law in duplum rule is suspended pendente lite, where the lis

is said to begin upon service of the initiating process. This has the effect that interest which

has stopped running because it has reached the amount of the unpaid capital will start to

run again from the time the credit provider institutes legal proceedings. It is therefore

possible that the arrear and unpaid interest may exceed the outstanding capital, because of

the suspension of the in duplum rule pendente lite. The basis for the in duplum rule, namely

that it is in the public interest that borrowers should be protected from exploitation of

lenders who permit interest to accumulate, falls away when a lender institutes proceedings

in a court to enforce the agreement. The lender under these circumstances is taking steps

to prevent interest from accumulating further. Although this aspect is not explicitly dealt

with in Nedbank v National Credit Regulator or the court a quo, it seems that the common-

law position does not apply to section 103(5). The Supreme Court of Appeal only referred to

Nedbank’s views and remarked: “Nedbank appears to have conceded that the suspension of

the rule pendente lite was done away with by s 103(5)… Section 103(5) stipulates that

despite any provisions of common law the charges that accrue during the time that a

consumer is in default under the credit agreement may not exceed the unpaid balance of

the principal debt. Although a matter might be pending before a court, the consumer will

still be in default under a credit agreement as required by section 103(5) and the credit

agreement will, it is submitted, not be able to rely on the common law position with the

effect that the limitation continued in section 103(5) will apply pendente lite” ~ Friedman &

Otto 2013



were therefore concerned with the application of section 103(5) with regard to the

following aspects:282

Whether the common law principles relating to in duplum have been outlawed in

instances where the causa is a credit transaction governed by the NCA;

If not, have the abovementioned two common law rules have been outlawed by

the rule in section 103(5);

The impact of regulation 47: Whether, if the Act does not apply to post-judgment

interest, the regulations can make the provisions of section 103(5) applicable;

Whether a sanction, if any, may be visited upon a credit provider for a breach of

section 103(5) and which sanction would be applicable; and

Whether section 103(5) includes collection costs due to a debt collector or an

attorney.

2.2 Legal framework The agreement between the debtor and the creditor will govern the rights and the

obligations of the parties.283 This is supplemented by any applicable legislation which

may prescribe rights and obligations that cannot be waived.284 In terms of section

103(5), the liability of the consumer to the credit provider is limited and no legal right to

recover revenue that exceeds the maximum allowable limit set by section 103(5) when

applicable, exists.

“However, one of the policy considerations underlying section 103(5) and the common law in

duplum rule is that creditors should be deterred from being sluggish to enforce agreements while a

debtor is in an unbearable position where his debt got out of hand. Forcing consumers who are

hopelessly over-indebted to reconsider their financial position through initiating the enforcement

proceedings may well be the most responsible course of action.”285

281 Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 834 E.

282 The briefs differed to some extent from the terms of reference and the opinions are therefore attached to this report as the research team did not express an opinion apart from that which was directly relevant to this report.

283 Scott 2002 491.

284 An example is section 90(2) of the National Credit Act.

285 Friedman & Otto 2013 (2) 366.



The problem with the granting of judgment is, even though the interest rate is often

lowered to 15,5%, that it negates the protection of the National Credit Act in respect of

the capping of interest and costs through the provisions of section 103(5).

Differences and similarities between section 103(5) and the common law in duplum

rule:286

Differences

In duplum Section 103(5)

Based in common law Based in legislation, diverges from the common

law

Applicable to interest only Applicable to all prescribed costs of credit

Outstanding capital Unpaid balance of the principal debt

Time of reaching double – then calculate

outstanding capital

At time of default

Unpaid and arrear interest Paid and unpaid and arrear costs of credit that

accrue during time of default

Allocation of payments can be agreed upon by

parties

Section 126 regulates allocation of payments

Suspended pendentee lite when enforcement

proceedings are instituted

No suspension

Similarities

Judgment affects the implementation

Restrict freedom to contract

Interest does not lose its character

Debtor protection is at the core of the rule

286 Friedman & Otto (1) 141-144.



In the discussion below, based on the terms of reference, the process of debt

collection is segmented as follows:

Terms of reference: “The interpretation and understanding of in duplum with

regard to agreements that are subject to emoluments attachment orders, with

specific attention given to credit agreements, the position prior to and after the

obtaining of judgment and whether legal costs are included or excluded in the

rule”

The following table therefore illustrates the breakdown:

Process Section 103(5) In duplum Remarks

Phase A

Default –

institution of legal

proceedings

Applicable Applicable

Phase B Institution of legal

proceedings –

judgment

Continuously applied

from Phase A

Suspended pendente

lite

Interest may

accumulate

Phase C Judgment –

execution

Terminated

In duplum applicable to

judgment amount

Applicable on

judgment amount

Phase A and B

costs/ interest

included in

judgment

Default - Institution of Legal Proceedings Judgment - Execution

Soft Collections

Hard Collections

Pre-agreement

Default

Agreement

Judgment & Execution

Agreement - Default



Default

Section 103(5) becomes applicable when the consumer is in default under a credit

agreement to which the NCA applies. The section remains applicable until one of the

following factual scenarios realises:

1. The consumer’s ‘default’ is cured. This is interpreted to mean that the consumer

manages to reach a point in time where he or she would have been had the

default not occurred and the pecuniary situation is as if no default occurred. In

this regard, all arrear costs of credit must have been satisfied;

2. The credit agreement is no longer at stake i.e. where a judgment is given, the

point of reference of the consumer’s default is no longer the credit agreement.

In the premises, the institution of legal proceedings does not negate any of the

requirements of section 103(5). This is in stark contrast to the position under the

common law, where the institution of legal proceedings ‘suspended’ the operation of the

in duplum rule.287 As the NCA governs contracts between parties, section 103(5) is

applicable to the pre-judgment period and will influence the amount for which judgment

may be obtained: “As was pointed out above, the SCA held that in the light of the

provisions of the NCA, there is no longer a contractual entitlement to interest, or to the

other charges, except as allowed for by s 103. The latter section now expressly forms

part of the credit agreement and defines the obligations of the parties as to interest and

the other charges.”288

Judgment

“Therefore as soon as judgment is given to enforce the debt, which has the effect that

the contract comes to an end, the consumer is no longer under default under a credit

agreement and any default thereafter will, it is submitted, be default in respect of a

judgment debt and interest will commence to accrue afresh in terms of the common-law

in duplum rule. The operation of section 103(5) will therefore, under these

circumstances, be brought to a halt as soon as there is a judgment in legal proceedings

287 Kelly-Louw 2011 357-358, Friedman & Otto (1), Margo and Another v Gardner, Gardner and Another v Margo and Another 2010 (6) SA 385 (SCA), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/ cases/ZASCA/ 2010/110.html&query=margo%20v%20gardner.

288 Dicker 2013 par 13.2.



http://www.saflii.org/cgi-bin/disp.pl?file=za/%20cases/ZASCA/%202010/110.html&query=margo%20v%20gardner

http://www.saflii.org/cgi-bin/disp.pl?file=za/%20cases/ZASCA/%202010/110.html&query=margo%20v%20gardner

for the recovery of the debt. It will be default in respect of the judgment debt and not

default under a credit agreement as required by section 103(5).”289

The common law in duplum is applicable to judgments. Two perspectives exist on the

effect of a judgment on the contractual terms of the agreement i.e. to which extent

reliance can be placed post-judgment on pre-judgment agreed terms, but for purposes

of 103(5) and in duplum it is submitted that the application is the same. The judgment is

not a credit agreement even where it strengthens the contractual terms between the

parties and grants access to the procedural remedies pertaining to execution. It does,

however, impact the requirements set for the application of section 103(5). In this

regard, the discussion pertaining to the nature and scope of the judgment is not

applicable to this discussion.

What is of relevance is the following noted by Kelly-Louw:290

“Courts agree that the common-law in duplum rule affects the running of interest on a judgment

debt. However, there is often disagreement on which amount the interest on a judgment debt

should be calculated – the capital amount originally lent (i.e, principal debt) and costs awarded in

terms of the judgment or on the full amount the judgment was granted for (i.e, capital amount

originally lent plus the accrued interest before judgment). Schulze has expressed the view that

interest begins to run from the date of judgment on the judgment debt as a whole, irrespective of

the size of its interest component. The in duplum rule then applies again to the judgment debt as a

whole, the policy consideration being that after the judgment is obtained, the credit provider must

execute and bring to a close the accumulation of interest. This is also in line with the view of the

Supreme Court of Appeal in Standard Bank v Oneanate Investments. So, once judgment is

granted, the interest starts running on the judgment debt again and the common-law in duplum

rule affects the running of that interest and prevents unpaid interest from reaching the level of the

unpaid judgment debt.”

Legal costs

Louw is of the opinion that legal costs are not included in section 103(5). His reasoning

is as follows: 291

“To my mind the NCA, by sections 101(1)(g) and 103(5), does not apply in terms or by necessary

implication to the institution of legal action against the consumer in order to legally collect a debt.

“Collection costs” as used in section 101(1)(g) refers exclusively to collections that are subject to

289 Friedman & Otto (1) 145-146.

290 Kelly-Louw 2011 7. Louw 2013 (2) also deals with this theme extensively.

291 Louw 2013 (2) par 136 -140. Footnotes inserted in brackets.



the NCA i.e. in the period before legal representatives are appointed. It seems to me that this

must be the logical conclusion of section 101(1) dealing with items that may legitimately be

included in a credit agreement. This item concerns collection costs. A credit provider can thus

require a consumer to pay collection costs that are incurred whilst the contract is still subject to

the regime of the NCA.

What is important in this regard is to note what the NCA does not authorise to be included in a

credit agreement and thus excludes from a credit agreement. The NCA does not authorise an

agreement that the debtor must pay the creditor’s attorney and client costs or attorney and own

client costs that are incurred after a matter has been handed to attorneys. This is of fundamental

importance because it shows that the legislature turned its face against the inclusion in credit

agreements of clauses that can only ever apply after a matter has been handed to attorneys. The

significance of this is, I think, that the legislature clearly intended that the default position insofar

as the scale of costs that may be granted at the judgment phase must be ordinary party and party

costs and that a court may only grant costs on the attorney and client and attorney and own client

scales where the particular case warrants such an unusual order. In other words, there must now

be reason for a court to grant attorney and own client costs. In short, the parties may not by their

agreement fix the scale of costs that a court may order.

I can find nothing in the NCA to suggest that courts no longer have the function to order that costs

must be paid by the losing debtor. I can find nothing in the NCA that shows that courts no longer

have the power to order judgment and execution costs. In fact, as I read regulation 47 the

existing position is entrenched. The regulation merely says that legal judgment and execution

costs may not exceed the actual costs incurred by a credit provider. In other words, a credit

provider cannot claim costs purely on the back of an agreement or by convention but the costs

must actually be incurred. Secondly, the regulation does no more than to say that the costs that

are recovered may not exceed the costs that may be fixed in terms of any of the pieces of

legislation listed in this regulation which, to my mind, is nothing but a simple reference to the

concept of taxation. In other words, the regulation says no more than costs can only be recovered

if actually expended and costs recovered may not exceed duly taxed costs. [I do not wish to be

understood that all costs must always be taxed, but they may not exceed what would otherwise be

the “taxed limit”.] Regulation 47 does, indeed, make reference to “collection costs” as concept but,

I repeat, the Minister cannot define concepts that are not defined in the NCA and, in any event, it

is clear that the context of regulation 47 refers to “legal judgment and execution costs” and not to

“soft collection costs”. In my view section 103(5) has not brought an end to the judgment

creditor’s right to obtain an order of costs and such an order does not form part of the collection

costs meant in section 101(1)(g).”

This term of reference is, strictly speaking, not relevant to post-judgment costs as there

is a judgment. It is applicable to pre-judgment costs as it refers to the costs incurred by

the credit provider in collecting on the debt. It is submitted that the contents of the



judgment will be of importance – the costs not specifically mentioned in the judgment, if

it was pre-judgment costs, will be included for purposes of section 103(5).

3 Fees, costs and charges for the account of the consumer

3.1 Introduction

Creditors have the option of outsourcing debt collection or claim enforcement activities

for a variety of reasons.292 These can range from internal lack of resources293 to

considerations of client relations.294

Within the framework of the National Credit Act, the fees, costs and charges that may be

recovered from the debtor are limited through specification (section 101) and amount

(section 103(5)). This applies to pre-judgment debts, or those debts incurred prior to

judgment and which do not relate to the costs recoverable in terms of the cost order

granted by the court.

Within the broader framework of legal costs, costs are limited by legislation, rules of law

societies and to costs actually incurred. The basic consideration that an account must be

fair, reasonable and necessary also finds application. In particular:

The tariff set out in the Magistrates’ Courts Rules is the point of departure. It was

noted that, where the recovery of attorney and client costs are authorised by the

order, the bill of costs is usually 30% more than the tariff.

The guidelines set out by each Law Society determine what is chargeable by an

attorney. The Law Society may also have specific views on undercharging. Many

attorneys realise that clients do not find it viable to instruct an attorney to recover

debt. It may be in their business interests to charge a set or reduced amount per case

and rely on volumes in order to be profitable. Although some writers have argued that

292 Scott 2002 491 et seq.

293 Scott 2002 491 & 493 notes that “these institutions offer specialised services towards which creditors are not geared… These entities are organised administratively in such a way that it is financially and in terms of the allocation of time far more expeditious for them to enforce claims than for the creditors who are basically not geared towards performing these services”.

294 Scott 2002 494 states that “[f]or psychological reasons most creditors prefer not to deal with their debtors personally at this stage and most debtors find it embarrassing to continue their business relationship with their creditors after they have had to deal with them personally in order to ensure payment of their debts”. During the interview conducted on 8 August 2013, the interviewee noted that the manner in which the debt collector set about to collect the debt was of paramount importance where preservation of the relationship between the debtor and creditor was of consequence to both parties.



e.g. charging the maximum commission is exploitative and anti-competitive,295

‘undercharging’/ ‘undercutting’ may be “frowned upon as touting”.296

A limitation on legal fees may assist a debtor who will not be able to fully satisfy the

debt as per the emoluments attachment order;

The legal costs recovered must be expenses actually incurred and for services actually

rendered. In this regard, personal attention to each case is necessary otherwise the

conduct of the attorney will amount to overcharging;

It is further noted that the charges should be necessary in advancing the case. A case

in point is where the debtor is phoned to thank him or her for payment and then

subsequently charged for the call;

It is further submitted that the expenses should be reasonable.

Legal costs are a source of contention for many and accounts have been labelled legal,

but immoral.297 This view was shared by many interviewees as the debtor is responsible

for the costs. It is doubtful whether the same perspective would apply where the creditor

was responsible for the costs. On the other hand, the default of the debtor is the reason

for the costs. If this view is shared by the Law Societies, consideration should be given

to drafting new guidelines after conducting a proper impact assessment study as the

outcome will affect the remuneration due where the services of third party specialists are

solicited.

In this regard, an interviewee noted that there should be a minimum amount which

limits the option of emoluments attachment orders to debts that exceed this minimum

amount.298 The rationale for this proposal is based on the costs to the debtor where an

emoluments attachment order is obtained. If the minimum costs that may be charged in

terms of the lowest tariff set out in the Magistrates’ Courts Rules, where costs are

calculated on an extremely conservative scale is exceeded by the outstanding debt,

obtaining an emoluments attachment order should not be an option. Some attorneys

have indicated that they limit their costs so that it never exceeds the capital amount of

the debt. As set out above, undercharging may be seen as a form of touting and the

perspective of the Law Societies should be obtained in this regard.

295 See e.g. Buchner & Hartzenberg 2013.


297 Polity.org.za 27 February 2013.




However, this will effectively mean that the short term agreements less than R 1000,

which comprise the highest percentage of these agreements, will probably be excluded.

In terms of the MCA, specifically section 65J(10), provision is made for a special form of

commission payable to a garnishee (employer). This is over and above the costs allowed

in terms of the tariff to the MCR and in relation to section 65J proceedings.

3.2 Section 65J(10) commission

3.2.1 Introduction

The terms of reference that pertains to this section is the following:



whether parties can contract internally to have another party pay this commission;

3.2.2 Determination of issues

Section 65J(10) provides for a commission of 5% payable to the employer (garnishee)

by the judgment creditor for the implementation of the emoluments attachment order.

The legislation specifically provides that the employer can recover this amount from the

judgment creditor.

“Any garnishee may, in respect of the services rendered by him in terms of an emoluments

attachment order, recover from the judgment creditor a commission of up to 5 per cent of all

amounts deducted by him from the judgment debtor’s emoluments by deducting such commission

from the amount payable to the judgment creditor.”

The legislation is clear that the employer has a legislative right to recover the 5%

commission and the judgment-creditor has an obligation to remunerate the garnishee-

employer for his or her services. The judgment-creditor therefore funds the 5%. In the

absence of an agreement to the contrary, the legislative provision will be the default

position and the debtor cannot be held liable or fund the 5%.

The first question is whether the judgment creditor and judgment debtor may

contractually agree that the judgment debtor will remunerate the garnishee-employer

out of his or her own funds.

The second question is whether the agreement and its terms are governed by the NCA

and whether the section 65J(10) commission will qualify as ‘commission’ referred to in



section 101(1)(g) as ‘collection costs’ and by necessary inference in section 103(5). Note

that ‘collection costs’ in this regard is with reference to a credit agreement and not with

respect to the costs for which the creditor is liable.299

The third question is whether the reference to ‘collection fees’ in section 57(1) includes

the commission referred to in section 65J(10).

In practice, the following two occurrences with variations are found:

1. In terms of the relevant labour legislation, the employer may only make certain

deductions from the remuneration due and payable to the employee.300 Where

the section 65J(10) commission is actually recovered by the employer (there are

recorded cases where the employer did not deduct the commission)301 the

following can happen: The employer deducts the 5% from the instalment and

pays the remaining amount over to the judgment creditor or the latter’s attorney.

The judgment creditor’s attorney credits the account of the debtor for either the

full amount of the instalment deducted from the employee’s salary as per the

court order or credits the account of the debtor for the actual amount received

i.e. the instalment less the 5% commission so deducted.

In terms of the first version where the debtor is credited for the full amount although the

instalment received is less, underscores the practice as intended by the legislator: The

judgment creditor is responsible for the actual payment of the commission. However,

two further complications arise from this practice. The Law Society of the Northern

299 Marais 2011 27.

300 Basic Conditions of Employment Act 75 of 1997 – Section 34 reads as follows: “Deductions and other acts concerning remuneration. – (1) An employer may not make any deduction from an employee’s remuneration unless – (a) subject to subsection (2), the employee in writing agrees to the deduction in respect of a debt specified in the agreement; or (b) the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award. (2) A deduction in terms of subsection (1) (a) may be made to reimburse an employer for loss or damage only if – (a) the loss or damage occurred in the course of employment and was due to the fault of the employee; (b) the employer has followed a fair procedure and has given the employee a reasonable opportunity to show why the deductions should not be made; (c) the total amount of the debt does not exceed the actual amount of the loss or damage; and (d) the total deductions from the employee’s remuneration in terms of this subsection do not exceed one quarter of the employee’s remuneration in money. (3) A deduction in terms of subsection (1) (a) in respect of any goods purchased by the employee must specify the nature and quantity of the goods. (4) An employer who deducts an amount from an employee’s remuneration in terms of subsection (1) for payment to another person must pay the amount to the person in accordance with the time period and other requirements specified in the agreement, law, court order or arbitration award. (5) An employer may not require or permit an employee to – (a) repay any remuneration except for overpayments previously made by the employer resulting from an error in calculating the employee’s remuneration; or (b) acknowledge receipt of an amount greater than the remuneration actually received.”

301 GIZ 2013.



Provinces’ Rules302 require that proper accounting records are kept with a corresponding

duty to accurate recount to the client. Specifically, Rules 68.1.2 and 68.1.3 stipulate

respectively that the records should reflect ‘entries from day to day of all moneys

received and paid by it on its own account’ and ‘particulars and information of all moneys

received, held and paid by it for and on account of any person’. Rule 68.3 states that

there should be a clear differentiation on the accounting records between the operations

relating to the trust and business account of the attorney’s firm respectively. The

following is further of particular importance:303

“Accounting to clients

Every firm shall within a reasonable time after the performance or earlier termination of any

mandate account to its client in writing. Each account shall contain – details of all amounts received

by it in connection with the matter concerned, appropriately explained.

A firm shall ensure that the total amount of money in its trust banking account, trust investment

account and trust cash at any date shall not be less than the total amount of the credit balances of

its trust creditors; ensure that no account of any trust creditor is in debit.”

In practical terms, this would necessitate that dual accounting systems be operated –

one to reflect the actual amounts received in the trust account and dispensed to the

client and another to calculate the payments due by the debtor, the repayment period

and the interest, costs, etc. chargeable on the debtor’s account. This is an aspect that

should be taken up with the relevant Law Societies in order to ensure that this is

allowable. The alternative option would be for the creditor to reimburse the commission

to the employer independently and after payment was received. However, it is submitted

that this will be an additional administrative burden on all parties involved.

2. In terms of the second version, the judgment creditor is not responsible for the

payment of the commission as the debtor in reality funds the 5%. This may be by

way of a contractual clause in which the debtor undertakes to pay all collection

costs which is interpreted to include the section 65J(10) commission. The

employer recovers the commission directly from the debtor and the debtor is not

credited for the full amount deducted from his or her salary, but for the

instalment less the commission deducted. In this regard, it cannot be argued that

the creditor remunerates the employer and recovers same from the debtor as the

302 Rules 68-69, available at http://www.northernlaw.co.za/Documents/rules_of_law_society/rules_of_ law_society_20121129.pdf, site accessed on 1 October 2013.

303 Rules 68.7 & 68.7.1, 69.3.1 & 69.3.2. Own emphasis.



http://www.northernlaw.co.za/Documents/rules_of_law_society/rules_of_%20law_society_20121129.pdf

http://www.northernlaw.co.za/Documents/rules_of_law_society/rules_of_%20law_society_20121129.pdf

instalment received is treated as a full payment. The result is that the

accumulative commission allowable in terms of section 65J and the tariff to the

Magistrate’s Courts Act and Rules is 15% - 5% recoverable by the employer in

terms of section 65J(10) and 10% recoverable by the collector, whether in terms

of Table B Part 1 Item 3(b)304 if it is an attorney or Annexure B to the Regulations

of the Debt Collector’s Act305 if it is a registered debt collector. The Magistrates’

Courts Act and the Debt Collector’s Act allow for a similar collection commission,

although the maximum amount recoverable is significantly higher in the case of

debt collectors (R407.00) than that of the attorney (R300.00). Both statutes also

provide that recovery of the commission limits additional charges to be levied or

will be in substitution for certain charges that may be debited to the debtor’s

account.

Some writers have questioned the method of section 65J(10) as a form of

reimbursement due to the employer for the implementation of a duty imposed by third

parties.306 The two proposed alternatives noted by Van Loggerenberg are to either

charge the account of the judgment debtor for the ‘additional administrative expenses’ of

the employer or consider the emoluments attachment order in a similar fashion as

deductions that the employer is tasked with ex gratia such as taxes, contractual

obligations in terms of the employment contract, etc.307 The primary concerns for the

creditor is that the legislation makes provision for the commission to be payable by the

judgment creditor and not the debtor.308 The point of departure for these concerns is

centred on the default of the debtor: The behaviour of the debtor of non-payment is the

cause for the emoluments attachment order and the resultant costs.309 The costs and

304 “3. The following shall be allowed in addition to the fees laid down in the Tariff to this Part: A fee of 10% on each instalment collected in redemption of the capital and costs of the action, subject to a maximum amount of R300,00 on every instalment. Where the amount is payable in instalments the collection fees shall be recoverable only on payment of every instalment. Such fees shall be in substitution for and not in addition to the collection fees prescribed in paragraph 13 of Part 1 of Table A”.

305 “On receipt of an instalment (one or more) in redemption of the debt inclusive of instalments made directly to the client: A fee of 10% of the instalment received, subject to a maximum amount of R407,00. No additional fee shall be charged for any attendance in connection with the receipt or payment of any instalment”.







charges levied in the debt collection process are not for the pecuniary benefit of the

creditor, but for third parties tasked with collecting the debt.310

There does not seem to be a prohibition against consenting to pay the obligations of a

third party (an example in this regard would be a suretyship, although the latter applies

where the primary debtor (if the agreement does not make the surety a co-principal

debtor as well) fails to meet its contractual obligations). In this regard, where the debtor

consents to pay the 5% (and is aware of the fact that he or she is not under any

obligation to do so as the legislation stipulates that this is to be recovered from the

creditor), it cannot be faulted from a legislative perspective of contractual freedom.

However, aspects such as reasonableness and fairness are applicable where the 5%

contributes to escalate the indebtedness of the debtor to an indefensible

disproportionality to the original debt due. It may also be argued that a provision as

such is now, in the light of recent developments and consumer protection contra bonos

mores.

However, the impact of the NCA deserves mention in respect of costs that the consumer

becomes liable for. In terms of section 100(1),

“[a] credit provider must not charge an amount to, or impose a monetary liability on, the

consumer in respect of – (a) a credit fee or charge prohibited by this Act; (b) an amount of a fee

or charge exceeding the amount that may be charged consistent with this Act; (c) an interest

charge under a credit agreement exceeding the amount that may be charged consistent with this

Act; or (d) any fee, charge, commission, expense or other amount payable by the credit provider

to any third party in respect of a credit agreement, except as contemplated in section 102 or

elsewhere in this Act”.311

The critical question is therefore whether the NCA is applicable to the agreement in

terms of which the debtor consents (usually included in the acknowledgement of

debt/admission of liability together with the consent to judgment) to pay the 5%

commission for and on behalf of the credit provider to the employer. In terms of section

101(1), “[a] credit agreement must not require payment by the consumer of any money

or other consideration, except – (g) collection costs, which may not exceed the

prescribed maximum for the category of credit agreement concerned and may be

imposed only to the extent permitted by Part C of Chapter 6”.312


311 Own emphasis.

312 Part C of Chapter 6 is concerned with ‘debt enforcement by repossession or judgment’.



The NCA does not authorise consent to pay the section 65J(10) commission apart from

the general reference to the MCA in Rule 47.

This means that the liability to pay the 5% needs to be founded in legislation (which it is

not) or as per the court judgment (which ordinarily only reflects the exact wording of the

section). It is therefore submitted that, where the credit provider does not credit the

consumer with the full amount of the instalment deducted in terms of the emoluments

attachment order, the credit provider is in default under the court order in the absence

of a clear agreement to the contrary. In practice, the employer recovers the amount

from the debtor by deducting the 5% and transferring the further amount to the

attorney of the credit provider. In this regard, the right of the employer to recover the

5% from the credit provider is extinguished, but the debtor has a right of recovery

against the creditor for the 5% as there is no legal debt in respect of the 5%. It does

not seem plausible that parties can contract out of judgment terms and it seems

fraudulent to do so due to the ignorance of the debtor.

In light of the above, the following considerations are relevant to conclude this issue:

It is submitted that, in the light of the scope of the National Credit Act which pertains

to credit agreements and not post-judgment wage execution orders,313 sections 101,

101 and 103(5) is not applicable to section 65J emoluments attachment orders;

The commission only becomes payable after judgment and after issuing of an order in

terms of section 65J when the garnishee executes its duties as per the emoluments

attachment order;

Although a party may waive the benefits to a judgment, parties cannot agree that a

judgment ceases to exist;314

After judgment and upon issuing a section 65J order, section 65J(10), which is often

copied as such onto the emoluments attachment order, becomes applicable;

It is submitted that section 65J(10) regulates the position post-judgment unless the

debtor agrees to fund the 5% explicitly and after judgment – this is particularly

relevant as the obligation and corresponding entitlement to payment of the

313 The National Credit Act does have application to sale of property (e.g. sections 127,131, etc) which is not relevant for purposes of this discussion.

314 Louw 2013 (2) par 96-97. With reference to the NCA, Louw notes at par 97 “The NCA cannot prescribe how a judgment debt must be enforced or not enforced, what a judge or a magistrate may include or disallow in a judgement debt. The NCA, including section 103(5), does not operate post judgment.”



commission as set out in section 65J(10) only becomes due and payable after an

emoluments attachment order was lawfully issued, served and implemented;

It will then amount to an agreement to pay the ‘debt’ of a third party but the debtor is

not obliged to do so. In the premises, all the requirements for voluntary consent to

pay the 5% for and on behalf of the judgment creditor is necessary where the

garnishee recovers the commission;

Mere deduction of the 5% without the informed consent of the debtor may amount to

unfair enrichment or more serious allegations such as fraudulent behaviour;

In the case of a judgment conforming to the wording of section 57 in respect of which

‘collection’ fees are payable by the debtor, it would have to be ascertained whether

the commission in terms of section 65J(10) can be construed as collection fees. In the

light of comparable sections such as the inclusion of ‘commission’ into collection costs

in section 101(1)(g) of the NCA or into the tariff for legal fees in terms of the MCR, it

is plausible that this commission may be included.315 However, as this commission

only ‘accrues’ (to use the words in Nedbank Ltd and Others v National Credit

Regulator and Another) after judgment, it may not be an issue if section 103(5) is not

applicable post-judgment even though payment of the commission is required by the

credit provider in terms of the agreement between the parties.

It is questionable whether the clerk of the court has the legislative authority to order the

debtor, in lieu of the agreement, to include an amended version of section 65J(10) into

the emoluments attachment order. A further agreement may be necessary. The rationale

for this is to ensure that the debtor understands that this is a liability of the credit

provider which, in terms of legislation, is payable to the garnishee-employer. The debtor

also needs to understand that there is no legislative provision forcing him or her to

consent to payment of the section 65J(10) commission.

3.2.3 Summary

1. A consumer can only agree to pay the commission if there is proper and informed

consent that is specifically stated in agreement. In this regard, it is submitted

that the attention of the debtor should be drawn to the provisions of section

65J(10).

315



2. The common questions in this regard are the impact of the judgment and whether

parties may contract out of the legislation. The impact of the judgment is

important as the applicability of the NCA is a core consideration in respect of the

rights and obligations between the parties where a credit agreement is at stake.

The provisions of the NCA are particularly restrictive when cost of credit and the

consumer’s liability towards the credit provider is concerned. This further impacts

the importance of the wording of the judgment and whether specific requests for

judgment ‘clauses’ should be inserted prior to the judgment creditor being able to

rely on same.

3. In general, the point of departure is again the relationship between the parties,

which may be contractual or legal. If the agreement, prior to judgment, is in

contrast with the contents of the judgment, it cannot be followed. However, it can

be argued that the agreement between the parties is similar to a third person

paying on behalf of another and in the absence of a specific legislative

prohibition, this may be allowable.



3.3 Legal fees

3.3.1 Introduction

The purpose of debt collection is to collect outstanding debts from a delinquent debt

through various judicial and extra-judicial methods.316 The success of the process is

mostly evaluated by the amounts collected in the form of settlement of the debt, as this

is the primary outcome of debt collection. However, the following principles are of

importance when legal costs are considered:317

316 Du Plessis 2003 1.

317 In this respect, only costs recovered by legal representatives for their own account is discussed. He following is an example from an Admission of liability and Consent in terms of Section 57 and 65J of the Magistrate's Court Act 32 of 1944 which authorises a pre-judgment collection commission for which the legislation does not make an allowance (only section 65J(10) allows for a commisisn in this regard after judgment and after an emoluments attachment order was granted): “I hereby authorize my employer to deduct and transmit on a monthly basis, the amount set out in paragraph 3 above and to pay same to the judgment creditor c/o the attorney acting on behalf of the Plaintiff in this matter, and also to deduct the 5% commission allowed in Law that is payable by me to my employer, until the full outstanding amount has been settled.”

It is thus clear that interpretation of the National Credit Act obliges a purposive approach as

required by section 2(1). That it was the legislature's intention to keep the cost of credit as

low as possible for the consumer is apparent in various provisions of the act, such as the

regulation of interest and limitation of initiation fees. The legislature did not intend to limit

only the direct cost of credit but also ancillary costs occasioned by related matters. It is

submitted that it is for this reason that the act devotes part A of chapter 7 to alternative

dispute resolution as a means of achieving settlement of disputes other than by means of

debt enforcement in a court, which is an adversarial and often significantly more costly

procedure. It is also for this reason that section 129(1)(a) requires that a credit provider

must, as a required procedure before debt enforcement in a court, first propose to a

consumer that the consumer approach a debt counsellor, alternative dispute resolution

agent, consumer court or the ombud with jurisdiction with the intent that the parties

resolve any dispute under the agreement or develop and agree on a plan to bring the

payments under the agreement up to date. That the legislature was not ignorant of the

costs occasioned by litigation, also appears from provisions such as section 90(2)(k)(iv),

which prohibits a clause in a credit agreement embodying consent to a pre-determined

value of costs relating to enforcement of the agreement except to the extent that is

consistent with chapter 6. The statutory limitation of the in duplum rule contained in

section 103(5) of the act may also have a limiting effect on legal costs. It is submitted that

when interpreting the act these contextual considerations should be borne in mind ~ Van

Heerden 2008



Efficiency in respect of time: The time within which the debt is collected. An extended

period of collection of debt increases the interest payable (and ultimately the

outstanding balance) by the debtor, which is to the detriment of the consumer

especially where the instalment is not sufficient to cover the interest component. The

result is that, although this is to the pecuniary benefit of the creditor as well as the

attorney collecting commission on each instalment, the debt will either be

extinguished over an extensive period of time or not at all.

Effectiveness in respect of the purpose and intended outcome of debt collection: Full

repayment of the debt owed. Therefore, the process of debt collection will only be

successful if the debtor can repay the debt within a reasonable period of time. The

process of debt collection was not intended to continue indefinitely (no expectation of

comprehensive settlement through repayment) and a process which does so, is in

essence unsuccessful;318

Efficiency in respect of input and output: The costs, charges and fees should not

exceed the amount owed to the creditor. The purpose of debt collection has as an

outcome recovery of the debt owed to the creditor and is contra-indicative if the cost

of the process exceeds the amount in respect of which the proceedings were

instituted in the first place. This is an example of an adverse outcome even where the

costs are not for the account of the creditor but that of the debtor if the latter has

consented to pay same. The core issue is that the outcome does not make economic/

business sense where the process itself is of more pecuniary value than the outcome.

As will be illustrated below, the above principles are embedded in various safe-guards

within the process. However, bridging the space between principle and practice has

proven to be challenging. It will be shown that some attorneys draft an account for each

individual case following tariff and/or attorney and client scales. Others have developed

either a set bill of costs in respect of each case whilst other attorneys have scaled costs

in accordance to the capital recoverable through the process.

Adherence to the guidelines set out in the legislation and rules of the Law Societies (and

indirectly the basic principles) is to a large extent wholly dependent on the integrity of

the persons controlling the process and the costs. This is particularly challenging when

considering the potential capacity and competency constraints in courts in respect of

taxation if necessitated for all debt collection matters. Furthermore, bodies established in

respect of overseeing a particular industry, such as attorneys, can only review bills of

318 The rationale behind the common law in duplum rule serves as a case in point.



costs where same is referred to the organisation. This necessitates knowledge on the

part of the debtor or another interested party to recognise discrepancies or potential

abuse. Apart from behavioural obstacles to consistent cost allocation, potential variables

such as the following influence the costs in respect of individual cases, complicating set

rules:

The meaning of ‘necessary’ within the context of costs. Linking ‘necessary’ steps to

whether the outcome of the process is reached, can be ambiguous. No list of

unnecessary or necessary actions exist to facilitate ascertainment or for purposes of

guiding professional behaviour. An example is various attempts at phoning a potential

garnishee prior to reaching the garnishee in order to verify employment. Whilst only

the last call has a positive outcome in taking the process a step further to reach

payment, the question is whether the other four attempts were necessary and can be

billed against the account of the debtor. In this regard, a positive outcome cost

approach may be necessary within the context of debt collection i.e. only where the

action has been successful in taking the matter further such as actually reaching the

employer and obtaining some information.

The incidences of timely and accurate payment. Late payments or underpayments by

a debtor and subsequent garnishee influence the length of the repayment period as it

influences both the interest that accumulates as well as the period of which these

become repayable. As will be noted below, an administrative burden in implementing

the emoluments attachment order is the lack of certainty in respect of the repayment

period. This is largely attributed to the lack of information relating to the costs that

will be charged during the lifetime of the order. However, interviewees did note that

some attorneys were providing repayment plans together with the order which

facilitated implementation and monitoring of the order. This will allow for calculation

of interest and the repayment period in order to effect timely ceasing of deductions

when the order has been complied with.

The inability to monitor a debtor’s account where parties are not obliged to act in

good faith in providing information upon and in accordance with requests. Section

65J(4)(b) allows for “[t]he judgment creditor or his attorney, at the reasonable request of the

garnishee or the judgment debtor, [to] furnish him or her free of charge with a statement

containing particulars of the payments received up to the date concerned and the balance

owing”. Reportedly, this does not discourage costs to be charged in respect of the

statement as the provision is interpreted as only prohibiting charges for the statement

itself. The parties are also not obliged to provide a detailed statement, necessary to



examine for unlawful costs. Furthermore, no indication is given of what the term

‘reasonable’ refers to, which is open for different interpretations.

Changes to the tariffs will be effective from 15 November 2013.319

Any drastic changes to costs, including capping of fees will necessitate an impact

assessment prior to implementation as this may impact both creditor and debtor.

3.3.2 Legal framework

In terms of the wording of Regulation 47 it seems as if this regulation further limits the

amounts that the creditor can recover in respect of a credit agreement, to the applicable

legislation.320 However, as mentioned above, section 103(5) is not applicable to post-

judgment costs which are governed by the tariffs in the Rules of Court as well as the

guidelines set by the Law Societies.321 At most, pre-judgment costs will be subject to

section 103(5).

It is common practice for parties to agree that the creditor may recover legal costs on

attorney and client scale from the debtor. As indicated by Smalberger JA in

Intercontinental Exports (Pty) Ltd v Fowles322 courts retain a discretion to provide an

319 GG Number 36913 of 1 October 2013, GN 760, RG 10032. This includes changes to the threshold amounts e.g. changes in respect of the threshold amount for Table A Part I for scale A from R12 000 to R7 000.

320 Dicker 2013 par 15. Van Loggerenberg in Jones & Buckle refer to Item 13 of Part 1 of Table A of Annexure 2 to the Rules and Rules 33(5)(a)(i) and (5)(c) in respect of ‘collection fees where a judgment debt is payable by instalments’. The author also notes in respect of subrule 33(5)(b) ‘between attorney and client’ “[i]n relation to proceedings other than those under ss 74 and 74A-74W the question of attorney and client costs is governed by s 80(2)” – Jones & Buckle Rule 33-8 [Service 2, 2012].

321 Many interviewees were of the opinion that costs can only be recovered as governed by legislation post-judgment. However, clerks issue orders stipulating attorney and client costs and these bills of costs are duly taxed by taxing masters in a similar fashion as a bill of cost in a trial. (or not taxed but changed)

322 Paras 25 -27: “The basic rule is that, statutory limitations apart, all costs awards are in the discretion of the court. The court’s discretion is a wide, unfettered and equitable one. It is a facet of the court’s control over the proceedings before it. It is to be exercised judicially with due regard to all the relevant considerations. These would include the nature of the litigation being conducted before it adn the conduct of the parties (or their representatives). A court may wish, in certain circumstances, to deprive a party of costs, or a portion thereof, or order lesser costs that it might otherwise hace doen as a mark of its displeasure at such party’s conduct in relation to the litigation. Is it to be precluded by agreement from doing so? A court should not be obliged to give its imprimatur to an order of costs which, in the circumstances, it considers entirely inappropriate or undeserved. In my view, as a matter of policy and principle, a court should not, an must not, permit the ouster of its discretion because of agreement between the parties with regard to costs. Because a court exercises its discretion judicially, not capriciously, it would normally be bound to recognise the parties’ freedom to contract and to give effect to any agreement reached in relation to costs. But good grounds may exist, depending upon the particular circumstances, for following a different course. This might result, on a proper exercise of discretion, in a party being deprived of agreed costs, or beign awarded something less in the way of costs than that agreed upon. As pointed out in Sapirstein’s case supra at 14C, the purpose of an award of costs is to indemnify a party. By stipulating for attorney and client costs a party seeks even greater indemnity for costs incurred through having to pursue a claim in court.”



order as to costs in line with the agreement between the parties. If a proper rationale

exists for the agreement,323 the proceedings before the court and the conduct of the

parties do not necessitate a departure from the contractual agreement between the

parties, the court would ordinarily give effect to the understanding between the parties

in respect of costs.324 The default of the debtor necessitates that the creditor approach

the court to enforce the debtor’s obligations. In the premises, the creditor ‘indemnifies’

itself by way of an agreement against costs incurred by the delinquent behaviour of the

other party to the contract.325

The terms in which the judgment is therefore drafted, pertaining to costs, is important. A

distinction needs to be drawn between pre-litigation and post-judgment costs. In terms

of section 19 of the Debt Collector’s Act, a debt collector (which excludes an attorney)

may only recover costs in terms of the DCA – not provision is made for an equivalent to

attorney and client costs. Marais notes that pre-litigation costs (i.e. collection costs other

than post-judgment costs) cannot, in the absence of an agreement, be recovered from

the debtor.326 In the premises, these costs, as recovery thereof is governed by a

contractual relationship between the parties, will be subject to the restrictions imposed

by section 103(5).327 This position is in contrast with an ex lege obligation for recovery

of costs, which is the default position in the absence of an agreement between the

parties.328

Ordinarily, each party is responsible towards his or her own legal representative to pay

the representative’s remuneration and expenses incurred in rendering legal services

whether the matter was successfully resolved or not. 329 Payment is usually governed by

an attorney and client agreement which may also incorporate the client’s mandate to the

attorney. The agreement will specify which scale of fees will be due and payable by the

client to his or her attorney. It can either be per action/ services rendered such as

consultation or drafting court documents or on an hourly basis. In respect of specific

actions, the default position is the tariff (party-and-party scale) set out in the Rules of

the Magistrates’ Courts.330 The agreed position is attorney and client scale, which allows

323 Intercontinental Exports (Pty) Ltd v Fowles paras 26 & 27.

324 Intercontinental Exports (Pty) Ltd v Fowles par 26.

325 Intercontinental Exports (Pty) Ltd v Fowles par 27.

326 Marais 2011 32.

327 Marais 2011 40.

328 Marais 2011 40.

329 See Cilliers Law of Costs September 2013 par 4.02.

330 Rule 80(1) of the MCR.



for actions not set out in the tariff but nevertheless necessary in order to bring the

proceedings to its logical conclusion. Attorney and own client costs are per agreement

for each hour of work or part thereof undertaken on the client’s matter by the

attorney.331

A further general rule of costs is that a successful party may recover costs from the

unsuccessful party if the court grants an order to this effect.332 The order will either not

specify the scale (the default position is party-and-party) or may specifically state that

costs of the successful party is payable on a party-and-party scale. Granting an order for

attorney and client costs,333 may be done by the court where the parties have agreed

that costs will be payable on the higher scale.334

The following principles are therefore applicable:

• The Magistrates’ Courts Act and Rules of Court are the primary sources for the

regulation of the costs that may be charged and recovered in respect of section

65J proceedings.335 The Act also regulates the persons that may recover fees in

terms of section 80;336

• The MCR contain the actual actions and costs on a party-and-party scale that are

recoverable in respect of specific proceedings, which is the default position in

respect of costs that may be recovered by one party from another upon the

granting of an order to pay the opposite parties’ costs;337

• The Rules set by the four provincial Law Societies in respect of professional fees

supplements the tariff in the MCR in respect of attorney and client costs. These

are the costs that may be recovered by the attorney from the client and includes


332 See Cilliers Law of Costs September 2013 paras 2.03 & 2.08 .

333 Rule 80(2): “(2) As between attorney and client, the clerk of the court may in his discretion (subject to the review hereinafter mentioned) allow costs and charges for services reasonably performed by the attorney at the request of the client for which no remuneration is recoverable as between party and party and for which no provision is made in the rules”. A magistrate’s court does not have the capacity to grant an order for attorney and own client costs – see Theophilopoulos et al 2012 404 and Cilliers 2013 par 15.02.

334 See Intercontinental Exports (Pty) Ltd v Fowles paras 22, 24, 26-27. See also Cilliers 2013 par 4.06 for examples of attorney and own client costs.

335 Rule 80(1) provides as follows: “Costs to be in accordance with scales and to be taxed—(1) The stamps, fees, costs and charges in connection with any civil proceedings in magistrates’ courts shall, as between party and party, be payable in accordance with the scales prescribed by the rules.”

336 Van Loggerenberg in Jones & Buckle 566 submit that the subsection referring to ‘any civil proceedings’ only apply to litigious matters and not to non-litigious matters.

337 Theophilopoulos et al 2012 403 -404.



charges not provided for in the tariff.338 However, debtors often consent to pay

attorney and client costs and where the judgment confirms same, the creditor

recovers these costs from the debtor as well. Apparently, an estimate of 30%

above tariff is a general indication of the amount recoverable in terms of the

attorney and client scale;

• Legal costs need to have been actually incurred (services actually rendered) if

recoverable on an action/ service basis.339 The alternative is a contingency fee

agreement upon a specified success reached in the proceedings but various

formal requirements such as registration of the contingency fee agreement at the

relevant Law Society and caps on the total amount recoverable, exist;340

• Costs in respect of legal proceedings may only be recovered (i.e. executed upon

by way of a judicial remedy to enforce payment on the grounds of a judgment)

from another party in terms of a judgment term to this effect.341 If the judgment

or order stipulates costs on a party and party scale or does not specify the scale

such as attorney and client costs, the default position will be taken and the

attorney can only recover costs from the debtor on a party-and-party scale. The

remaining amount due will have to be recovered from the creditor in terms of the

agreement between the creditor and his or her or its attorney;

• Any bill of costs must be fair, reasonable and necessary;342

• Costs, charges, fees, services rendered and disbursements/ expenses incurred

may only be recovered once from the debtor i.e. where the garnishee is

338 See Cilliers Law of Costs September 2013 par 4.02: “In the narrow and more technical sense, the term is applied to those costs, charges and expenses as between attorney and client that ordinarily the client cannot recover from the other party”.

339 See e.g. Rule 33(6).

340 See the Contingency Fees Act 66 of 1997, De la Guerre v Ronald Bobroff & Partners Incorporated and others [2013] JOL 30002 (GNP) and Rules of the various Law Societies.

341 The court has a discretion to award costs. It is submitted that, where the debtor agreed to pay the creditor’s costs and fails to do so, the creditor will have to institute action to recover same if this matter was not dealt with in a judgment.

342 See also the guidelines in respect of attorney and clients costs set by Law Societies e.g. Rule 81 of the Rules of the Law Society of the Northern Provinces. It is notable that reference to “necessary” is continuously found in both the MCR and Society’s Rules which prompts the consideration that a legal representative must take an economic approach to finalising a matter. This consideration should cause practitioners from maximising income throuhg unnecessary costs. In this regard, a list of necessary and unnecessary costs should be drafted by the industry/ Society as a general guideline. Taxing masters play an important role in curbing abuses but, unfortunately, not all bills of costs are taxed (only one bill is often allowed by taxing masters). The capacity of courts is a concern as is the high level of competency necessary to adequately supervise legal costs from a judicial perspective. See also Christie 2006 354-355 in respect of excessive attorney’s fees.



remunerated for its services through an administrative fee, the attorney for legal

services rendered and collection commission, the creditor may not also recover

costs from the debtor for same;

• Projected costs are subject to variables such as accurate timing and consistent

payments as well as what is allowed by the taxing master of each court.343

Various costs are set out below to illustrate the different items that can be charged.

Some attorneys have taken the initiative to either cap their fees or calculate same in

accordance with the capital amount recoverable. However, it is submitted that the

debtor, having agreed to pay all liabilities of the creditor in respect of collection costs, is

only liable insofar as the creditor is liable. In the premises, the capped fees should

indirectly benefit the debtor as well.344

The following rules are applicable to section 65 proceedings:

33. Costs.— (1) The court in giving judgment or in making any order, including any adjournment

or amendment, may award such costs as it deems fit.

(5) (a) In district court civil matters, the scale of fees to be taken by attorneys as between party

and party shall—

(i) be that set out in Table A of Annexure 2 in addition to the necessary expenses;

(ii) in relation to proceedings under section 65, 65A to 65M, inclusive, and 72 of the Act and all

matters ancillary thereto be that set out in Parts I and II respectively of Table B of the said

Annexure; and

(iii) in relation to proceedings under section 74 and 74A to 74W, inclusive, of the Act and all

matters ancillary thereto be that set out in Part III of Table B of the said Annexure.

(b) The scale of fees referred to in paragraph (a) (iii) of this subrule shall also be the scale of fees

to be taken between attorney and client in relation to proceedings under section 74 and 74A to

74W, inclusive, of the Act.

(6) Save as to appearance in open court without counsel, the fees in subrule (5) shall be allowable

whether the work has been done by an attorney or by his or her clerk, but shall, except in the case

of the fee referred to in paragraph 13 of the general provisions under Table A of Annexure 2, be

343 Interviews/ informal discussions.

344 Although this may be perceived as altruistic, many clients (creditors) are reportedly not keen to ‘throw good money after bad debt’. Capping fees to creditors may be a smart business move, creating competition between practitioners but may also not be tolerated by Law Societies under their touting provisions. However, some creditors have agreements that legal practitioners may recover all fees recoverable in terms of law from the debtor although the fees for which the creditor is liable, is capped. It is submitted that the liability of the debtor for costs is directly related to the liability of the creditor towards the legal practitioner. The purpose of an agreement to pay the other party’s costs is in essence to indemnify the deserving party against any punitive outcome of having to resort to legal intervention to recover debts duly owed to the creditor (see Intercontinental Exports (Pty) Ltd v Fowles par 27).



allowable only in so far as the work to which such fees have been allocated has in fact and

necessarily been done.

(14) (a) The costs of issuing any warrant of execution or arrest shall, where they are payable by

the party against whom the warrant is issued, be assessed by the registrar or clerk of the court

without notice and inserted in the warrant.

(b) The costs payable by the judgment debtor in respect of any proceedings under section 65 or

65A to 65M inclusive, or 72 of the Act shall be inserted by the judgment creditor or his or her

attorney on the face or reverse side of any process issued under either of those sections and

assessed by the registrar or clerk of the court before issue.

(c) The registrar or clerk of the court may refuse to issue any process under section 65 or 65A to

65M, inclusive, or 72 of the Act in which the costs are not inserted or inserted but not according to

tariff.

(21) If a party consents to pay the costs of another party, the registrar or clerk of the court shall,

in the absence of an order of the court, tax such costs, as if they had been awarded by the court.

(22) Value added tax may be added to all costs, fees, disbursements and tariffs in respect of which

value added tax is chargeable.

The following extracts set out the tariff applicable to section 65J

proceedings:345

345 Interviewees (e.g. 9 September 2013) noted that post-judgment/ EAO the costs were regulated by the tariff to the MCR. Others (e.g. 28 October 2013) noted that a consumer can agree to pay attorney and client costs as long as he or she were properly informed as to what this entails. The interviewee also indicated that the collection commission provided for in item 3(b) was only allowable in terms of the amount collected for capital and costs and does not pertain to interest. As indicated below, the wording of e.g. Rule 81 of the Law Society of the Northern Provinces seems to disallow fees (attorney and client) where a tariff in respect of the actions pertaining to debt collection is set in ‘law’. Debt collection is specifically regulated by the MCR, which allows for some discrepancy when considering the reference to ‘tariff’ and ‘law’ in Rule 81.



Annexure 2 Table B Part I

Annexure 2 Table A Part IV (only items 1 – 5 applicable)



Annexure 2 Table B Part I

Rules of the Law Society of the Northern Provinces (as an example)

Rule 81 (own emphasis)

81. ATTORNEY AND CLIENT CHARGES

81.1.1 Subject to the provisions of rule 81.5 a member to whom any claim of whatever nature is handed

for collection may in addition to any professional fees (e.g. the charges for any proceedings in a court

of law) charge reasonable attorney and client charges: For the guidance of members the following attorney

and client charges have been prescribed by the council as being reasonable attorney and client charges

for purposes of this rule, but this shall not be construed as prohibiting a member from departing from the

prescribed charges, either upwards or downwards, in appropriate circumstances.

81.1.1.1 (a) In the case of the member originally instructed before the granting of a judgment and also in

the case of every member who receives instructions thereafter, but before the granting of a judgment,

instruction charges of—

(i) R100 for claims of R1 up to R1 500;

(ii) R200 for claims over R1 500 up to R5 000;



(iii) R300 for claims over R5 000 up to R10 000;

(iv) R400 for claims over R10 000.

[Para. (a) amended by GG 32905 of 27 January 2010.]

(b) In the case of every successive member who receives instructions after the granting of judgment,

instruction charges of—

(i) R100 for claims of R1 up to R1 500;

(ii) R300 for claims over R1 500.

[Para. (b) Amended by GG 32905 of 27 January 2010.]

(c) R50 for every necessary letter or telegram written or received and for each necessary attendance.

[Para. (c) amended by GG 32905 of 27 January 20i0.]

(d) R90 for every 10 minutes or part thereof every necessary consultation with a debtor.

(Para. (d) amended by GG 32905)

81.1.1.2 Collection commission at the rate of 10 per cent on the amount collected, subject to a

recommended maximum amount of R1 000 for each payment or instalment, provided that where the

member recovers commission from the debtor, either in terms of any law or in terms of a contractual

obligation, he/she shall credit his/her client therewith to the extent of, but not exceeding the collection

commission debited to his/her client. Collection commission covers all attendances and work done in

connection with the receipt of a payment and accounting to a client in respect of a payment. [R.

81.1.1.2 amended by GG 32905 of 27January 2010.]

81.1.2 The charges set out in rule 81.1.1.1 and 81.1.1.2 shall be made only in respect of professional

services rendered in cases where no tariff is prescribed by any other law.

81.2.1 In the case of final recovery or repossession of movables in terms of a hire purchase agreement, a

suspensive sale agreement, a lease or any other contract of a like nature, a member shall, subject to the

provisions of rule 81.2.3 in addition to any professional fees, charge collection commission, calculated in

accordance with the provisions of rule 81.1.1.2 on the value of the movables so recovered or repossessed.

81.2.2 The value referred to in rule 81.2.1 shall be the value fixed on the movables by a court of law at a

final judgment or the value fixed on the movables by an appraiser.

81.2.3 Where the total unpaid amounts owing under the agreement are less than the value of the movables

recovered or repossessed or no value has been fixed on such movables by the court or by an appraiser the

collection commission shall be calculated on the total unpaid amounts and not on the value of the movables.

81.3 The council may make general rulings regarding the application of this rule and the circumstances under

which and the extent to which members may deviate- from the provisions of this rule.

81.4 Rules 81.1 to 81.3 are applicable to claims in respect of which a magistrate’s court has jurisdiction.

In terms of the provisions of rule 81.1.2, it seems as if the provisions of Rule 81.1.1.2

cannot be applicable where the tariff prescribed in the MCR allows for a comparable

commission to be charged. In this instance, the provisions of Annexure 2 Table B Part I

Item 3(b) are relevant. It is submitted that the cap on collection commission set in this



item cannot be exceeded. The rules of other Law Societies may differ. However, Item

3(b) does not contain a similar prohibition to Rule 81: “Collection commission covers all

attendances and work done in connection with the receipt of a payment and accounting

to a client in respect of a payment”. This prohibition specifically relates to charges to

debtors for various “attendances” which escalate costs. Strict supervision and

enforcement is needed to prevent abuse of this discrepancy between the tariff and rules.

It is submitted that the tariff should contain a similar provision to clarify the matter.

Collection commission is charged in respect of collecting the instalment and additional

charges directly related to this action would in reality amount to double charging.

Collection commission cannot justifiably be charged for only receiving payment (often

electronically) into the attorney’s trust account as tariff/ attorney and client scale are

both action/ item based. It must therefore include some positive action intricately linked

to the collection by the attorney, such as acknowledging receipt of payment, accounting/

reporting to client and updating records. The action of recovering costs should

consistently be motivated by necessity with a specific and tangible outcome.

3.2.4 Practical application

The following are examples provided re bills of costs in debt collection matters of various

attorneys. The first is a full bill of costs and the second sets out the items and expenses

recovered by the particular attorneys depending on the amount recoverable. This is an

initiative which provides an example of proportionality. The graphs thereafter illustrate

the scale of the individual costs proportionate to the category of debt as well as those

costs which escalate in accordance with an escalated debt and those (e.g. drafting an

emoluments attachment order) that stay the same notwithstanding an increased debt.

Details Fees Expenses

Taking instruction to obtain judgment (Rule 81 fee) R 150.00

Taking instruction to obtain EAO (Fee as per tariff) R 100.00

Request ITC report and Perusal thereof R 7.00 R 19.00

Instruction to service provider –Debtor Tracing & Confirmation of Employment

(Rule 81 fee)

R 50.00

Debtor Tracing & Confirmation of Employment R 280.00

Perusal of Tracing & Confirmation of Employment Report R 50.00



Drafting, Perusal and signature of Notice ito S 129 of the NCA R 50.00

Attendance to posting of Notice ito S129 of the NCA R 12.00 R 18.56

Drafting, Perusal and Posting of Letter of Demand (S 56) R 29.00

Printing and Posting of Trace Pack for Consultation with debtor (14 pages x R3) R 42.00

Receipt and perusal of Trace Pack for Consultation with debtor (14 pages x R7.00) R 98.00

Consultation with debtor for payment arrangements – Act 114 of 1998 (R37 +

VAT)

R 8.14

Necessary telephone call by consultant – Act 114 of 1998 (3 x R15 k+ VAT) R 46.14

Signature of AOD, etc at debtor’s place of work – Act 114 of 1998 (R150 + VAT) R 171.00

Other necessary expenses not specifically provided for by Consultant- Act R 15.00

Consent to Judgment R 79.00

Attendance of delivering Request for Judgment to Clerk of Court R 12.00 R 54.00

Section 57/58 Judgment per tariff R 98.00

Attendance on collecting Judgment from Clerk of Court R 12.00

Perusal for confirmation that judgment is granted R 7.00

Drawing, perusal & signature of Notice to Defendant in terms of Section 57(3) R 56.00

Attendance on posting of Notice in terms of Section 57(3) per registered post R 30.00 R 18.56

EAO Fee as per tariff R 131.00

Attendance on making of copies to file and keep (5p x R3) R 15.00

Attend to payment of invoice of Courier/Correspondent R 12.00 R 116.70

Correspondent/Courier attendance R 12.00

Instruction to Sheriff R 19.00

Correspondence to employer (Rule 81 fee) R 50.00

Correspondent/Employer attendance R 12.00

Attendance on payment of Sheriff’s return of Service R 12.00 R 149.90



Perusal of Sheriff document confirmation of service R 14.00

Telephone costs R 60.00

SUB TOTAL R1 117.00 R1 083.00

Vat @ 14% R 156.38

Sub Total R1 273.38

Plus Expenses R1 083.00

TOTAL AMOUNT DUE R2 356.38

In other examples, the following items were due and payable, depending on the

capital amount recoverable:346

< 1 249.99

category 1

1 250.99 <

1 499.99

category 2

1 500<

1 999.99

category 3

2 000<

2 499.99

category 4

2 500+

categories

5 – 8

Taking instructions X X

Tracer's fee X X X X X

Attendance: to draw cheque for tracer X X X X

Letter of demand X X X X X

Draft consent to judgment X X X X X

Tel call to debtor: confirm employment X X X X X

Perusal letter of demand/ consent to

judgment (8ff)

X X X X

Letter to client: reporting X X X X X

Draft judgment ito section 58 X X X X X

Draft NCA compliance affidavit (2ff) X X

346 The attorneys in this regard took the view that the legal costs should not exceed the capital amount recoverable. The categories of capital amounts are set out hereafter, and therefore in each category some items’ charges were increased, although similar items recovered, on a scale as between party-and-party and attorney-and-client.



Draft Rule 4(4) compliance affidavit

(2ff)

X X

Attendance: to issue judgment X X X

Attendance: to uplift from court &

perusal judgment

X X X X X

Letter to client: reporting X X X X

Tel call to debtor's employer: confirm

paypoint

X X X X

Draft emoluments attachment order X X X X X

Draft balance assessment X X X X

Letter to sheriff: emoluments

attachment order

X X X X X

Attendance: receive return from sheriff X X

Perusal: sheriff's return & account (2ff) X X X X X

Diverse expenses X X X X X

Attendance: to draw cheque for sheriff X X X X X

Letter to client: reporting X X X

Tel call employer: confirm service and

date of 1st payment

X

X

X

X

X

Attendance: tel call from employer –

request balance

X X X

Draft final balance assessment X X X

Letter to cancel emoluments

attachment order

X X X X X

Tel call to debtor: outstanding balance

settled

X X X X

Letter to client: final reporting X X X X X

5% on total for drafting account X X X X X



Items charged for (drafting of

account excluded)

16 21 27 26 29

The graphs below illustrate a scenario where costs are directly related to the capital

recoverable. Some costs and disbursements remain the same whilst others are

escalated. The items are necessary to obtain the outcome of debt collection in a

expeditious manner and in order to prevent unnecessary delays. One example deserves

mentioning. Many interviewees complained that the information relating to where the

emoluments attachment order should be served was often incorrect or incomplete,

leading to additional costs and actions necessary to obtain the necessary information and

re-serve the order. It is notable that telephone calls are charged for in order to obtain

this information and to expedite the payments.



R 0.00R 100.00R 200.00R 300.00R 400.00R 500.00R 600.00R 700.00R 800.00R 900.00

R 1 000.00R 1 100.00R 1 200.00R 1 300.00R 1 400.00R 1 500.00R 1 600.00R 1 700.00R 1 800.00R 1 900.00R 2 000.00R 2 100.00R 2 200.00R 2 300.00R 2 400.00R 2 500.00R 2 600.00R 2 700.00R 2 800.00R 2 900.00R 3 000.00R 3 100.00

Fees

& V

at

Disb

urse

men

ts

Fees

& V

at

Disb

urse

men

ts

Fees

& V

at

Disb

urse

men

ts

Fees

& V

at

Disb

urse

men

ts

Fees

& V

at

Disb

urse

men

ts

Fees

& V

at

Disb

urse

men

ts

Fees

& V

at

Disb

urse

men

ts

Fees

& V

at

Disb

urse

men

ts

1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8

5% on total for drafting account

Letter to client - final reporting

Tel call to debtor - outstanding balance settled

Letter to cancel emoluments attachment order

Draft final balance assessment

Attendance - tel call from employer - request balance

Tel call employer - confirm service and date of 1st payment

Letter to client - reporting

Attendance - to draw cheque for sheriff

Diverse expenses

Perusal - sheriff's return & account (2ff)

Attendance - receive return from sheriff

Letter to sheriff - emoluments attachment order

Draft balance assessment

Draft emoluments attachment order

Tel call to debtor's employer - confirm paypoint


Attendance - to uplift from court & perusal judgment

Attendance - to issue judgment

Draft Rule 4(4) compliance affidavit (2ff)

Draft NCA compliance affidavit (2ff)

Draft judgement ito section 58


Perusal letter of demand/ consent to judgment (8ff)

Tel call to debtor - confirm employment

Draft consent to judgment

Letter of demand

Attendance - to draw cheque for tracer

Tracer's fee

Taking instructions



R 0.00

R 50.00

R 100.00

R 150.00

R 200.00

R 250.00

R 300.00

R 350.00

R 400.00

R 450.00

R 500.00

R 550.00

R 600.00

R 650.00

R 700.00

R 750.00

R 800.00

R 850.00

R 900.00

R 950.00

R 1 000.00

R 1 050.00

1 2 3 4 5 6 7 8



The categories into which the debts were divided for the above two graphs, are as

follows:

Category 1 2 3 4 5 6 7 8

Max 1 249.99 1 499.99 1 999.99 2 499.99 2 999.99 4 999.99 9 999.99 10 000

Min N/A 1 250.00 1 500.00 2 000.00 2 500.00 3 000.00 5 000.00 N/A

The following are examples of extracts from attorney’s accounts in respect of

‘unnecessary’ costs, costs that should be included in the collection commission of the

attorney (item 3(b) or include in section 65J(4)(b)):

Correspondence in respect of furnishing the statement;

Charging for the telephone call requesting the statement;

Attendance for drawing file;

Attendance to making copies for file to keep;

Attendance to printing documents;

Forwarding document to sheriff.

The above fees, as well as the items allowed in terms of attorney and client scale, is

subject to the discretion of the taxing master of the court, in respect of which there may

also not be uniformity in different courts.

3.2.5 Summary The uncertainty in calculating the costs pertaining to a specific matter was noted as a

cause of great concern for many interviewees. The person implementing the emoluments

attachment order is entirely reliant on the attorney to calculate and add costs to the

debtor’s account. In the premises, the legal representatives are the only role-players

who are in a position to accurately inform the debtor’s employer when an emoluments

attachment order has been complied with in full.

It was also noted that an emoluments attachment order is not a viable option for very

small debts as the costs often exceed the amount recovered. The one example where

the amount to be recovered was equal or less than R1 249.99 serves as a case in point.

The amount recovered by the attorneys on their fee structure for this category of debt is

R947.44. The fees plus vat equals R697.57, the disbursements R215.00 and the

percentage claimed for drafting the account R34.88. These exclude commissions and

interest.

The following issues were specifically noted:



The emoluments attachment order does not stipulate the costs to be added to the

amount owed as the document only sets out certain judgment costs, the amount for

which judgment was granted and the interest rate. In respect of an order for costs,

the document will often state that costs are payable (sometimes ‘to be taxed’ is

added) and on which scale. In this regard, the following information is needed on

the emoluments attachment order:347



amount;348








It is important to note that non-payment or underpayment will affect both the

interest charged, costs charged in following-up on payments and the number of

instalments due (as well as the payment period). Should this realise, additional costs

could be easily motivated and verified by documentary evidence. However,

information in this regard will prevent over-charging or over-deducting and provide

a basis for the employer’s liability in terms of section 34 of the Basic Conditions of

Employment Act where the deductions are not ceased when the instruction is

received to do so.349 On an ancillary note, some interviewees also noted that

inclusion of the consent to judgment would be beneficial when serving the order on

the employer as this, together with the judgment granted and emoluments

attachment order. This would allow for the employer or garnishee administrator to

verify whether judgment was entered correctly in respect of amount, interest and

347 Various interviewees, Haupt & Van Sittert 2013 40/ MCR Form 38.

348 Stroebel v Stroebel 1973 2 SA 137 (T); Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd [1995] 4 All SA 128 (C); Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1998 1 SA 811 (SCA); Louw 2013 (1) paras 77 – 85, specifically par 98: “For all these reasons I am of the view that in the absence of an agreement regulating post judgment interest, the Prescribed Rate of Interest Act 55 of 1975 applies and this means that the common law in duplum rule applies to the new judgment debt, that everything in section 101 with the exception of interest goes into the “capital account” and that the interest that had run up up to that point is kept to one side and that mora interest runs on all the amounts in the capital account until the mora interest reaches that balance”. See also Vessio 2010 733-734.

349 Interviews 12 June 2013/ 19 September 2013. It was noted that Government Departments were slow to cease payments even after multiple letters and phone calls.



costs as well as refreshing a debtors memory in respect of the document where an

emoluments attachment order is disputed.

Introduce a maximum allowable cost recovery on collection costs. This can either be

extended to all debts or made applicable to a definite category of small debts to the

consumer (which should include tracers, debt collectors and legal practitioners) but

excluding actual expenses incurred. The cap on the collection of these costs from the

consumer should be in relation to the capital of the outstanding debt. A specific cap

e.g. debts where the capital amount is less than R1 000 should be clearly set out.

Emoluments attachment orders would not be a viable option for debts where the

legal costs, interest and commissions (5% in terms of section 65J(10) and 10%

collection commission in terms of item 3(b)) will exceed the capital amount by a

100%.

This would impact greatly on the short-term and unsecured lending market as seen

in Part 1 above. Therefore, for outstanding capital debts below R1 000 the repayable

amount due to legal costs (just to obtain judgment, cause the order to be implemented

and monitor repayment) would in all probability equal or exceed the capital especially

where interest and other commissions are charged and added.

There is a need to list examples of necessary and unnecessary costs;350

There is a need for civil recourse, other than repayment of overcharged fees,

which should in essence also include an interest component. Recourse to the Law

Society in respect of unprofessional conduct may not always have a positive

pecuniary outcome as no penalties can be imposed on the attorney. Similar

penalties to schedule 2 of the BCEA may be considered along with increased

capacity of taxing masters to refer unlawful bills of costs to a magistrate to

impose the penalty.

An impact assessment report is needed if considering change to the costs taking

into account the vested interests of all the parties as well as the principles set out

above.

Excessive interest was not dealt with in this discussion. However, Bentley aptly

summarises the approach that the root cause of extensive interest collection should be

addressed:

350 Such as the ‘black’ and ‘grey’ lists set out in the Regulations to the Consumer Protection Act.



“The complaint here relates to excessive interest collected on debts by means of EAOs. Again, the

real issue is the NCA and the policing of the Act. If the issue is that (-) the interest charged is

illegal in terms of the NCA, then appropriate action must be taken by the NCR and other relevant

parties to stop such practices; the permitted interest rates are too high, then the provisions of reg

42 of the regulations in terms of the NCA need to be amended; the total interest charged over a

period of time is too high, then the problem is the vagueness of the provisions relating to the

capping of interest in terms of ss 101 to 105 of the NCA, the interpretation of which, despite the

efforts of the Supreme Court of Appeal to give guidance in Nedbank Ltd and Others v The National

Credit Regulator and Another 2011 (3) SA 581 (SCA), remains a bone of contention. I submit that

the solution lies in either amending the NCA to clarify the position or seeking another declaratory

order on the interpretation of these provisions and taking action against those who exceed the

limit.”

In this regard, clarity is needed in respect of the interest rate that can be ordered

by the court such as 5% per month on a short-term agreement upon which the

consumer has defaulted, effectively extending the repayment period or 15,5% in

terms of the Prescribed Rate of Interest Act.351

351 In this regard, Bentley March 2013 proposes the following: “Creditors wanting the benefit of an EAO must accept simple interest at the maximum rate permissible in terms of the Prescribed Rate of Interest Act 55 of 1975 from the date of the EAO. This is because they are achieving a greater degree of security with the EAO and the debtors will most likely pay the debt over an extended period – something the NCA drafters did not envisage when prescribing some of the higher maximum interest rates. This will also discourage those credit providers charging high interest rates from granting reckless credit premised on the probability that they can secure their debt and high interest return by aggressive use of EAOs”.



Part 4 – Causes and outcomes of various mechanisms



Part 5 – Conclusion and recommendations

The following recommendations are made:

1. Introduce a maximum allowable cost recovery on collection costs. This can either

be extended to all debts or made applicable to a definite category of small debts

to the consumer (which should include tracers, debt collectors and legal

practitioners) but excluding actual expenses incurred. The cap on the collection of

these costs from the consumer should be in relation to the capital of the

outstanding debt.

A specific cap e.g. debts where the capital amount is less than R1 000 should be

clearly set out. Emoluments attachment orders would not be a viable option for

very small debts where the costs, interest and commission would exceed 100% of

the debt to be recovered.

2. Amend the format of the emoluments attachment order to allow for additional

information to be provided to the garnishee. This would allow for the employer to

ascertain when the debt is paid up: The amount for which the order is granted

will be the point of departure to calculate the interest and the costs.

In this regard, the following information is needed on the emoluments

attachment order:



amount;








3. The request for judgment, judgment and emolument attachment order format

should be amended to provide for the classification of the construction of the

judgment amount in order to indicate which part of the judgment amount is

capital and which interest. This relates to the amount for which judgment is

requested and excludes the interest requested after judgment e.g. if judgment is



requested for R 3000 of which the outstanding capital is R 2000 and R 1000 is

interest that has already accrued, this should be stipulated to avoid interest on

interest.

4. The institutional capacity constraints in courts should be addressed as a matter of

great urgency. Predictability and consistency in respect of legitimate requests for

judicial assistance is cardinal. Training alternatively practice directives in respect

of the following aspects is needed for all levels of personnel of the judiciary

dealing with debt collection:

a. The purpose of the stages of debt collection and the role of the judiciary/

different officials in each of these stages should be clarified. In this regard,

queries on reckless credit and assessment of same should be effected at

judgment stage and not at the stage where judgment was already

obtained and the request is to issue an emoluments attachment order.

b. The practicality of requesting documents/ reality of debt collection e.g. the

request for the original documentation where a credit agreement was

entered into under a legislative regime where the storage of said

agreements was not necessary or mandatory; the different forms of

reckless credit and when these assessments can be made e.g. reckless

credit does not apply to an agreement entered into prior to June 2007.

c. The scope of the discretion of the court (and guidelines to exert same) in

respect of debt collection in order to prevent the courts becoming ‘a law

upon themselves’.

5. An overall regulatory body for debt collection is needed in a similar frame as the

UK Office of Fair Trading. South Africa regulates the individual and not the

mechanism, which has resulted in a fragmented system. Attorneys are regulated

by the respective Law Societies and the regulation is limited to unprofessional or

unethical conduct. Debt Collectors are regulated by the Debt Collectors Council

whilst the National Credit Regulator regulates credit providers. The difference is

that the NCR is also responsible to regulate the credit market which allows for a

more comprehensive approach to regulation. In this regard, a body to regulate all

aspects of debt collection and with the authority to issue guidelines (see e.g. the

OFT guidelines in respect of letters of demand) is needed within the framework of

market conduct regulation. This may need attention within the development of

the twin-peaks approach to regulation to incorporate same into the developing

framework instead of developing a new body. It is submitted that additional



registration and compliance reports not form part of the regulatory body’s regime

in order to lessen the already hefty compliance burden on industry role-players

who have to be registered with either of the bodies mentioned above and comply

with various legislative requirements in any event. The body should have

investigative and subpoena powers and be a body of investigation and redress.

6. In the light of the above, judicial oversight is not recommended. Whilst some

legislative changes may assist with clarifying issues, curbing abuses and dealing

with irregularities, proper enforcement is necessary especially as many of the

irregularities are not directly related to the debt collection process. This includes a

point of reference for consumers to deal with suspected irregularities. The aspects

that concerns and a body tasked with oversight should be industry-based with

proper powers and resources.

7. The legitimate grounds for jurisdiction should be clarified i.e. whether a section

45 consent to jurisdiction is allowed as well as the correct interpretation of

concepts such as ‘place of business’ etc as lack of guidance in this regard annuls

the concept of a legislative ratio jurisdictions. However, it is submitted that these

links should be extended to accommodate capacity constraints in the courts

especially in courts where the main payroll offices of major companies with many

workers are. In this regard, a consistent approach by all courts in necessary to

avoid abuse of the process e.g. choice of an ‘easy’ forum and be solely intended

to relieve institutional pressure (and expedite the process). A legitimate link

should exist between the court and the cause, whether this is the jurisdiction of

the debtor or that of the employer or that of the garnishee administrator where

the emolument attachment order is outsourced. As noted above, challenges to

emoluments attachment orders are initiated by either the debtor or the garnishee

administrator.

8. Declaratory orders or test cases are needed to clarify matters.

9. Intervention by the Law Societies is necessary in order to provide clearer

guidelines in respect of allowable fees, especially within the contexts of being

‘reasonable’ and ‘necessary’. Furthermore, clarity is needed in respect of the

interest rate that can be ordered by the court such as 5% per month on a short-

term agreement upon which the consumer has defaulted, effectively extending

the repayment period or 15,5% in terms of the Prescribed Rate of Interest Act.



Part 6 – Sources

1 Source persons

The members of the research team would like to extend their sincere thanks to all the participants

to this research project, as well as the persons and organisations who facilitated access to the

participants, relevant reports and other information. The facilitators included Hennie Ferreira

(MicroFinance South Africa), Laetitia van Jaarsveld (MicroFinance South Africa), Leonie van Pletzen

(MicroFinance South Africa), Ockert Steenkamp (M&H Financial Services), Raleen Jooste (DCM

(Pty) Ltd), Anton Viljoen (DCM (Pty) Ltd), Charlotte van Sittert (University of Pretoria Law Clinic).

Source persons

The following persons participated in the research through personal interviews, group

discussions and/or written submissions:

Attorneys & legal advisors

Bentley B Bentley Attorneys, Durban

Bester V Attorney, Human Resources, Goldplatz

Brandt B Potgieter & Beeken Attorneys, eMalahleni

Coetzee S S D Coetzee Incorporated Attorneys, East London

De la Guerra E S D Coetzee Incorporated Attorneys, East London

Earle S Haupt & Earle Attorneys, Mbombela

Fritz S A Deputy Head Legal, Chamber of Mines

Hebrard C Attorney, Solomon Holmes Attorneys, Johannesburg

Horn A Potgieter & Beeken Attorneys, eMalahleni

Various (4) Gerhard van der Merwe Attorneys, Mbombela

Magistrate’s Courts: Magistrate, Clerk and/or Taxing Master

Various (5) Magistrates, Johannesburg Magistrate’s Court

Du Plessis H Magistrate, Tembisa Magistrate’s Court

Joubert V Magistrate, Mbombela Magistrate’s Court

Eckley C Magistrate, Potchefstroom Magistrate’s Court

Kirsten M Magistrate, Potchefstroom Magistrate’s Court

Pieterse A Civil Clerk and Taxing Master, Mbombela

Sheriffs’ offices

Myers H Witrivier/ Nsikazi



Van Nieuwenhuizen H eMalahleni

Mosikili J Potchefstroom

Tayob A Kempton Park North, Tembisa & Midrand

Scheuer M Pretoria East

Britz L Pretoria East

Garnishee Administrators/ Auditors

Various (10) DMC (Pty) Ltd

Niclas N Garnishee Audit Services (Pty) Ltd

Van Heerden F Garnishee Audit Services (Pty) Ltd

Various (3) Summit Financial Services

Registered Debt Collection Agency

Steenkamp O HMP Financial Services

Goosen R HMP Financial Services

Van Zyl K HMP Financial Services

Molefe J HMP Financial Services

Opinions were obtained from two counsel on consents to jurisdiction as well as the interpretation

and implementation of the common law in duplum and section 103(5) within the context of

emoluments attachment orders. The two counsel were Advocate Piet Louw SC of the Johannesburg

Bar and Advocate Leon Dicker of the Pretoria Bar.

Prof Corlia van Heerden of the Department of Mercantile Law, Faculty of Law, University of Pretoria

and Mr Franciscus Haupt of the University of Pretoria Law Clinic, Department of Procedural Law,

Faculty of Law were consultants for the report.

2 Books

Christie The Law of Contract in South Africa 5th ed 2006 LexisNexis Butterworths: Durban

Du Plessis & Goodey 2003 Practical Guide to Debt Collection 2003 LexisNexis Butterworths:

Durban

Hutchison (ed) The Law of Contract in South Africa 2009 Oxford University Press Southern Africa

(Pty) Ltd: Goodwood

Theophilopoulos et al 2012 Fundamental Principles of Civil Procedure 2nd ed LexisNexis: South

Africa

Van Loggerenberg Jones & Buckle The Civil Practice of the Magistrates’ Courts in South Africa Vol

1: The Act 10th ed (Revision service 3, updated to 31 March 2013) & Vol 2: The Rules (Revision

service 5, updated to 30 April 2013)



3 Articles & commentary

Beck “Magistrates’ Courts: Consent to jurisdiction” 1980 De Rebus 409

Bentley “Separating the baby and the bath water – Garnishee and emoluments attachment orders”

De Rebus March 2013

Buchner & Hartzenberg “Cashing in on collections” De Rebus July 2013

Campbell “The in duplum Rule: Relief for consumers of excessively priced small credit legitimised

by the National Credit Act” South African Mercantile Law Journal 2010 (22) 1

Chipeta & Mbululu “The effects of the national credit act and the global financial crisis on domestic

credit extension: empirical evidence from South Africa” April 2012 (5(1)) Journal of Economic and

Financial Sciences 215

De Vos “The impact of the new constitution upon civil procedural law” Stellenbosch Law Review

1995 (1) 34

De Vos “Civil procedural law and the constitution of 1996: an appraisal of procedural guarantees in

civil proceedings” Journal for South African Law 1997 (3) 444

Datnow “Section 65: attorneys and creditors face a poor harvest” De Rebus June 1998

Friedman & Otto “Section 103(5) of the National Credit Act 34 of 2005 as inspired by the common-

law in duplum rule (1)” 2013 (76) THRHR 132 (May)

Friedman & Otto “Section 103(5) of the National Credit Act 34 of 2005 as inspired by the common-

law in duplum rule (2)” (2013) 76 THRHR 361 (August)

Horn “Die ‘woonplek’ van ‘n binnelandse maatskappy” 1990 (23) De Jure 363

Kotzé “Debt collection – repealing ss 57 and 58 of Magistrates’ Courts Act will be short sighted” De

Rebus September 2013

Marais “A commentary on section 103(5) of the National Credit Act” 2011

Matlala “Contract contrary to public policy: The cash loan debacle De Beer v Keyser 2002 1 SA 827

(A), 2002 1 All SA 368 (A)” Journal for South African Law 2003 (4) 797

Scott “Claim enforcement (debt collection)” South African Mercantile Law Journal 2002 (14) 491

Van der Linde & Van der Merwe “Company residence and jurisdiction” 1994 (111) South African

Law Journal 780

Van Heerden “The impact of the National Credit Act 34 of 2005 on standard acknowledgements of

debt” Journal for Contemporary Roman-Dutch Law 2011 (74) 644

Van Heerden 2008 Perspectives on jurisdiction in terms of the National Credit Act 34 of 2005 Absa

Bank Ltd v Myburgh case no 31827/2007 (T) (unreported); Nedbank Ltd v Mateman; Nedbank Ltd

v Stringer 2008 4 SA 276 (T) Journal of South African Law 840

Vessio “A short discussion on the effects of the in duplum rule upon commencement of litigation

and after judgment: a view both ‘inside’ and ‘outside’ the National Credit Act” Obiter 2010 725



Yssel “Alice in the debtor’s court” De Rebus February 1999

4 Legislation & Rules

Attorneys Act 53 of 1979

Basic Conditions of Employment Act 75 of 1997

Companies Act 61 of 1973

Companies Act 71 of 2008.

Constitution of the Republic of South Africa, 1996

Consumer Protection Act 68 of 2008

Debt Collectors Act 114 of 1998

Jurisdiction of Regional Courts Amendment Act 31 of 2008

Magistrates’ Courts Act 32 of 1944

National Credit Act 34 of 2005

Prescribed Rate of Interest Act 55 of 1975

Rules Regulating the Conduct of Proceedings in the Magistrates’ Courts of South Africa

The Law Society of the Northern Provinces (Incorporated as the Law Society of the Transvaal)

Rules The Rules made under the authority of section 74 of the Attorneys Act 53 of 1979, and

promulgated in Government Gazette 7164 of 1 August 1980 as amended by Government gazette

16511 of 7 July 1995, by Government Gazette 17190 of 17 May 1996, by government Gazette

17617 of 22 November 1996, by Government Gazette 17932 of 18 April 1997, by government

Gazette 18152 of 12 July 1997, by Government Gazette 18313 of 3 October 1997, by Government

Gazette 19446 of 13 November 1998, by Government Gazette 21175 of 19 May 2000, by

Government Gazette 22160 of 23 March 2001, by Government Gazette 26477 of 25 June 2004, by

Government Gazette 26981 of 19 November 2004, by Government Gazette 32905 of 27 January

2010 and by Government Gazette 33050 of 25 March 2010, available at http://www.

northernlaw.co.za/Documents/rules_of_law_society/rules_of_law society_20121129.pdf

5 Case law

African Bank Ltd v Additional Magistrate Myambo [2010] ZAGPPHC 105 (delivered in September

2010) available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/20 10/105.html&

query=myambo

African Bank Ltd v Additional Magistrate Myambo N.O. and Others 2010 (6) SA 298 (GNP),

available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2010/60.html&query=

african%20bank%20ltd%20v%20additional%20magistrate%20myambo



http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/20%2010/105.html&%20query=myambo

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/20%2010/105.html&%20query=myambo

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2010/60.html&query=%20african%20bank%20ltd%20v%20additional%20magistrate%20myambo

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2010/60.html&query=%20african%20bank%20ltd%20v%20additional%20magistrate%20myambo

Barkhuizen v Napier 2007 (5) SA 323 (CC) available at http://www.saflii.org/cgi-bin/disp.pl?file=

za/cases/ZACC/2007/5.html&query=barkhuizen%20v%20napier

Coetzee v Government of RSA; Matiso and Others v Commanding Officer, Port Elizabeth Prison and

Others 1995 (4) SA 631 (CC)

Communication Workers Union and Another v Telkom SA Ltd and Another 1992 (2) SA 586 (T)

Custom Credit Corporation (Pty) Ltd v Shembe [1972] 3 All SA 489 (A) 498

De la Guerre v Ronald Bobroff & Partners Incorporated and others [2013] JOL 30002 (GNP)

E A Gani (Pty) Ltd v Francis 1984 1 SA 462 (T)

Fedsure Participation Mortgage Bond Managers (Pty) Ltd and Another v Sandlundlu (Pty) Ltd

(AR409/12) [2013] ZAKZPHC 54 (18 October 2013), available at http://www.saflii.org /cgi-

bin/disp.pl?file=za/cases/ZAKZPHC/2013/54.html&query=attorney%20fee

Firstrand Bank Ltd v Folscher and Another and Similar Matters 2011 4 SA 314 (GNP), available at


Firstrand Bank Ltd, Wesbank Division v PMG Motors Alberton (Pty) Ltd and Others (2012/13077)

[2013] ZAGPJHC 203 (12 August 2013), available at http://www.saflii.org.za/za/cases/ZAGPJHC/

2013/203.html

Friend v Sendal (A973/2010, 24425/2009) [2012] ZAGPPHC 162 (3 August 2012), available at

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2012/162.html&query=friendvsandal

Intercontinental Exports (Pty) Ltd v Fowles 1999 (2) SA 1045 (SCA), available at http://

www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/1999/15.html&query=intercontinental%20ex

ports% 20%28pty%29%20ltd%20v%20fowles

Jaftha v Schoeman and Others; Van Rooyen v Stoltz and Others 2005 (1) BCLR 78 (CC), available

at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2004/25.html&query=Jaftha%20v%20

Schoeman%20and%20Others

Margo and Another v Gardner, Gardner and Another v Margo and Another 2010 (6) SA 385 (SCA),

available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2010/110.html&query=mar

go%20v%20gardner

Mclaren v Badenhorst and Others 2011 (1) SA 214 (ECG) available at http://www.saflii.org/cgi-bin

/disp.pl?file=za/cases/ZAECGHC/2010/42.html&query=mclaren

Minter N.O. v Baker and Another 2001 (3) SA 132 (WLD)

Multi-links Telecommunications Ltd v Africa Prepaid Services Nigeria Ltd and Others, Telkom SA

Soc Ltd and Another v Blue Label Telecoms Ltd and Others (35347/13, 30004/13) [2013]

ZAGPPHC 261 (6 September 2013), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/ case

s/ZAGPPHC/2013/261.html&query=jurisdiction%20&%20effectiveness

MV 'Ivory Tirupati' and Another v Badan Urusan Logistik; [2003] 1 All SA 55 (SCA) par 31,

available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2002/155.html&query=mvi

vorytirupati



http://www.saflii.org/cgi-bin/disp.pl?file=%20za/cases/ZACC/2007/5.html&query=barkhuizen%20v%20napier

http://www.saflii.org/cgi-bin/disp.pl?file=%20za/cases/ZACC/2007/5.html&query=barkhuizen%20v%20napier


http://www.saflii.org.za/za/cases/ZAGPJHC/%202013/203.html

http://www.saflii.org.za/za/cases/ZAGPJHC/%202013/203.html

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2012/162.html&query=friendvsandal

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2004/25.html&query=Jaftha%20v%20%20Schoeman%20and%20Others

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2004/25.html&query=Jaftha%20v%20%20Schoeman%20and%20Others

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2010/110.html&query=mar%20go%20v%20gardner

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2010/110.html&query=mar%20go%20v%20gardner

http://www.saflii.org/cgi-bin%20/disp.pl?file=za/cases/ZAECGHC/2010/42.html&query=mclaren

http://www.saflii.org/cgi-bin%20/disp.pl?file=za/cases/ZAECGHC/2010/42.html&query=mclaren

http://www.saflii.org/cgi-bin/disp.pl?file=za/%20case%20s/ZAGPPHC/2013/261.html&query=jurisdiction%20&%20effectiveness

http://www.saflii.org/cgi-bin/disp.pl?file=za/%20case%20s/ZAGPPHC/2013/261.html&query=jurisdiction%20&%20effectiveness

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2002/155.html&query=mvi%20vorytirupati

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2002/155.html&query=mvi%20vorytirupati

Nedbank Ltd v National Credit Regulator 2011 3 SA 581 (SCA), available at http://www.saflii.org/

cgi-bin/disp.pl?file=za/cases/ZASCA/2011/35.html&query=Nedbank%20v%20National%20Credit

%20Regulator

Protea Furnishers SA (Edms) Bpk h/a Barnets Meubileerders (Applikant) en Margaret Balakista in

haar hoedanigheid as Klerk van die Siviele Hof, Pretoria (Eerste Respondent); Victor Madi (Tweede

Respondent) & Magnum Shield Security (Edms) Bpk (Derde Respondent) case number 1419/2003

Transvaal Provincial Division delivered on 25 February 2003 by Hartzenberg J

Rostami Beleggings CC v Nedbank Ltd and Others (20459/2008 SGJHC) (19 October 2012)

available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPJHC/2012/197.html&query=r

ostami%20beleggings

Sapirstein and Others v Anglo African Shipping Co (SA) Ltd 1978 (4) SA (A)

Sebola and Another v Standard Bank of South Africa Ltd and Another 2012 (5) SA 142 (CC),

available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2012/11.html&query =sebola

%20and%20another%20v%20standard%20bank%20of%20south%20africa%20ltd

Sibakhulu Construction (Pty) Ltd v Wedgewood Village Golf Country and Others 2013 (1) SA 191

(WCC), available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAWCHC/2011/426.html&

query=sibakhulu

South African Congo Oil Company v Identiguard International (Pty) Ltd 2012 (5) SA 125 (SCA),

available at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2012/91.html&query=

South%20African%20Congo%20Oil%20Company

Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd [1995] 4 All SA 128 (C)

Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1998 (1) SA 811 (SCA), available at

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/1997/94.html&query=oneanate

Stroebel v Stroebel 1973 2 SA 137 (T)

Swadiff (Pty) Ltd v Dyke NO 1978 (1) SA 928 (A)

University of Natal, Pietermaritzburg v Ziqubu 1999 (2) SA 128 (N)

6 Reports & theses

Coetzee et al The incidence of and the undesirable practices relating to garnishee orders in South

Africa commissioned by GTZ 2008

Consumer Credit Market Report June 2013, available at http://www.ncr.org.za/publications/

Consumer%20Credit%20Report/ccrm_2ndQ/CCMR%20Q2-Changes,%20F.pdf, site accessed 27

October 2013

DTI Making Credit Markets Work 2004, available at http://www.ncr.org.za/publications/

Background_NCA_docs/Credit%20Law%20Review.pdf, site accessed 27 October 2013

Haupt & Van Sittert Safari into garnishment of wages 13 February 2013



http://www.saflii.org/%20cgi-bin/disp.pl?file=za/cases/ZASCA/2011/35.html&query=Nedbank%20v%20National%20Credit%20%20Regulator



http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPJHC/2012/197.html&query=r%20ostami%20beleggings

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPJHC/2012/197.html&query=r%20ostami%20beleggings

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2012/11.html&query%20=sebola%20%20and%20another%20v%20standard%20bank%20of%20south%20africa%20ltd

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZACC/2012/11.html&query%20=sebola%20%20and%20another%20v%20standard%20bank%20of%20south%20africa%20ltd

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAWCHC/2011/426.html&%20query=sibakhulu

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAWCHC/2011/426.html&%20query=sibakhulu

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2012/91.html&query=%20South%20African%20Congo%20Oil%20Company

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/2012/91.html&query=%20South%20African%20Congo%20Oil%20Company

http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZASCA/1997/94.html&query=oneanate

http://www.ncr.org.za/publications/%20Consumer%20Credit%20Report/ccrm_2ndQ/CCMR%20Q2-Changes,%20F.pdf

http://www.ncr.org.za/publications/%20Consumer%20Credit%20Report/ccrm_2ndQ/CCMR%20Q2-Changes,%20F.pdf

http://www.ncr.org.za/publications/%20Background_NCA_docs/Credit%20Law%20Review.pdf

http://www.ncr.org.za/publications/%20Background_NCA_docs/Credit%20Law%20Review.pdf

http://www.statssa.gov.za/Publications/P0041/P0041July2013.pdf Statistics of Civil Cases for Debt

July 2013

Investigation by University of Pretoria Law Clinic, reference to report used with permission but

subject to request from copyright holder to remain anonymous

NCR An assessment of debt counselling 2012, summary available at http://www.ncr.org.za/index.

php?option=com_content&view=article&id=152, site accessed 27 October 2013

NCR Credit Bureau Monitor June 2013, available at http://www.ncr.org.za/publications/Consumer

%20Credit%20Report/cbm_2ndQ/CBM%20June%202013.pdf, site accessed 27 October 2013

South African Reserve Bank Quarter 2 June 2013, available at http://www.resbank.co.za/Lists/

News%20and%20Publications/Attachments/5772/01Full%20Quarterly%20Bulletin%20-%20June

%202013.pdf, site accessed 27 August 2013

Stats SA Quarter 1 2013 Statistical Release P0211, available at http://www.statssa.gov.za/

publications/P0211/P02111stQuarter2013.pdf, site accessed 17 July 2013

StatsSA October 2012 available at http://www.info.gov.za/aboutsa/people.htm and http://www.

statssa.gov.za/Census2011/Products.asp, site accessed 17 July 2013

Stoop “The concept ‘fairness’ in the regulation of contracts under the Consumer Protection Act 68

of 2008” June 2012 212-213, available at www.academia.edu/2444498/The_concept_fairness_ in_

the_regulation_of_contracts_under_the_Consumer_Protection_Act_68_of_2008, site last accessed

7 September 2013

World Bank Report of the observance of standards and codes – Insolvency and creditor rights

South Africa June 2012

7 Media reports

BD Live (author: Gillian Jones) ‘Abuse of garnishees to be reined in’ 26 August 2013

http://www.bdlive.co.za/business/financial/2013/08/26/abuse-of-garnishee-orders-to-be-reined-

in, site accessed 27 October 2013

Business Report (author: Ann Crotty) ‘Garnishee orders escalate woes for cash-strapped

consumers’ 26 August 2013 http://www.iol.co.za/ business/news/garnishee-orders-escalate-woes-

for-debt-stressed-consumers-1.1567846#.Um02b9VAHIU, site accessed 27 October 2013

Debtfree DIGI ‘SA’s New Apartheid – Debt Slavery for 50% of SA Workers’ 26 August 2013

available at http://debtfreedigi.co.za.sas-new-apartheid-debt-slavery-for-50-of-za-workers/, site

accessed 28 August 2013

Fin 24 (10 September 2013) at http://www.fin24.com/Economy/SAs-housholds-remain-

vulnerable-20130910, site accessed 12 October 2013

Financial Mail (author: Stafford Jones) ‘Garnishee orders set to hit debt-strapped consumers’ 31

January 2013 http:// www.financialmail.co.za/economy/local/2013/01/31/garnishee-orders-set-to-

hit-debt-strapped-consu mers, site accessed 27 October 2013



http://www.statssa.gov.za/Publications/P0041/P0041July2013.pdf

http://www.ncr.org.za/index.%20php?option=com_content&view=article&id=152

http://www.ncr.org.za/index.%20php?option=com_content&view=article&id=152

http://www.ncr.org.za/publications/Consumer%20%20Credit%20Report/cbm_2ndQ/CBM%20June%202013.pdf

http://www.ncr.org.za/publications/Consumer%20%20Credit%20Report/cbm_2ndQ/CBM%20June%202013.pdf

http://www.resbank.co.za/Lists/%20News%20and%20Publications/Attachments/5772/01Full%20Quarterly%20Bulletin%20-%20June%20%202013.pdf



http://www.statssa.gov.za/%20publications/P0211/P02111stQuarter2013.pdf

http://www.statssa.gov.za/%20publications/P0211/P02111stQuarter2013.pdf

http://www.info.gov.za/aboutsa/people.htm

http://www.academia.edu/2444498/The_concept_fairness_%20in_%20the_regulation_of_contracts_under_the_Consumer_Protection_Act_68_of_2008

http://www.academia.edu/2444498/The_concept_fairness_%20in_%20the_regulation_of_contracts_under_the_Consumer_Protection_Act_68_of_2008

http://www.bdlive.co.za/business/financial/2013/08/26/abuse-of-garnishee-orders-to-be-reined-in

http://www.bdlive.co.za/business/financial/2013/08/26/abuse-of-garnishee-orders-to-be-reined-in



http://debtfreedigi.co.za.sas-new-apartheid-debt-slavery-for-50-of-za-workers/



Moneyweb (author: Ryk van Niekerk, Malcolm Reese) ‘State concerned over garnishee abuse’ 27

February 2013 http://www.moneyweb.co.za/moneyweb-2013-budget/state-aware-of-garnishee-

abuse-and-reckless-lendin, site accessed 27 October 2013

Finweek ‘Garnishee orders: continued abuse and exploitation’ 31 October 2012

http://finweek.com/2012/ 10/31/garnishee-orders-continued-abuse-and-exploitation/, site

accessed 27 October 2013

Mail & Guardian (author: Chantelle Benjamin) ‘Debt control: A political hot potato’ 16 August 2013

http://mg.co.za/article/2013-08-16-00-debt-control-a-political-hot-potato, site accessed 27

October 2013

Moneyweb (author: Malcolm Rees) ‘Mines to investigate garnishees’ 3 April 2013 available at

http://www.moneyweb.co.za/moneyweb-economic-trends/mines-to-investigate-garnishees, site

accessed 25 July 2013

Moneyweb (author: Pravin Gordhan and BASA) ‘Joint statement by the Minister of Finance and the

chairperson of the Banking Association of South Africa’ 1 November 2012, available at

http://www.money web.co.za/money web-financial/joint-statement-by-the-minister-of-finance-

and-the, site accessed 27 October 2013

Moneyweb (authors: Malcolm Rees, Dane Volker) ‘Garnishees ‘exploit all South Africans’ – Webber

Wentzel’ 15 August 2013 available at http://www.moneyweb-financial/garnishee s-exploit-all-

south-africans-webber-wentzel, 28 August 2013

Polity.org.za (author: Manie van Schalkwyk) ‘SA: Statement by Manie van Schalkwyk, Credit

Ombud, on task team established to investigate garnishee orders in credit industry’ 27 February

2013 available at http://www.polity.org.za/article/sa-statement-by-manie-van-schalkwyk-credit-

ombud-on-task-team-established-to-investigate-garnishee-orders-in-credit-industry-27022013-

2013-02-27, site accessed 22 July 2013

The Times (authors: Aarti Narsee & Jan Bornman) “Justice delayed by shortage of magistrates” 29

October 2013, available at http://www.timeslive.co.za/thetimes/2013/10/29/justice-delayed-by-

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8 Other

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