Courts of Law Amendment Bill [B8-2016]: Department of Justice and Constitutional Development briefing

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Justice and Correctional Services

24 August 2016
Chairperson: Dr M Motshekga (ANC)
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Meeting Summary

The Department briefed the Committee on the Courts of Law Amendment Bill, while the Department of Trade and Industry (dti) briefed the Committee on what it had done, together with the Department of Justice.

The Department said the Bill was very technical. Abuses of the Magistrates’ Courts Act (MCA) had occurred, and the amendments would place mechanisms in place to protect debtors, provide for the rescission of debtors, and provide for judicial oversight before Emoluments Attachment Orders (EAOs) were granted. EAOs would be granted by the court and not the clerk of the court. Judgments would have to be obtained against debtors in areas where the debtor lived or worked, and the amendments criminalised any abuses of the system. The Stellenbosch University case would go on appeal before the Constitutional Court, and the Department was awaiting its judgment.

Members said the heart of the work of the Committee was to provide access to justice for the people. How did the majority of people access justice, because the law appeared to be a barrier to justice, with language being one of the barriers? Did this legislation include indigenous law? What abuses were occurring in indigenous courts? This Committee and Department were not serving the people as they should, because it did not address the critical issues facing people. The Department had to indicate what legislative programme it needed or wanted to transform, because the scope of work did not address the issues facing people.

Members wanted to know if a garnishee received interest from the debtor, and if garnishee orders could be implemented by the state. Members noted that the Department was suggesting a 25% cap on EAOs. Had the Department looked at the matter and considered an automatic debt review or referral? Members said that part of the solution was a clampdown on reckless lending. They said the National Credit Regulator (NCR) did nothing, and urged that the NCR be called for a briefing on why it did not do its job. The Committee, at its strategic planning meeting, had resolved to prioritise certain bills, and this was not one of them. Members called on the priorities of the Committee to be implemented. They wanted further information on the transitional provisions, and asked when the retrospective provisions would apply. It appeared that the indigent and most vulnerable had not been part of the consultation proceedings.  Amendments to the Maintenance Act had been passed the previous year. What relationship was there with regard to the garnishee orders? Members said it was important that the law provide protection from unscrupulous debt recovery agents and also that the public be educated.

Members said that the Committee would always face the prospect of dealing with amendment bills as a consequence of court judgments. They said Parliament did not exist to be a rubber stamp, and had to make laws to address challenges facing people and change their lives for the better. They asked what the Department was doing regarding education.

The Department of Trade and Industry (dti) said it had been working with the Department of Justice (DOJ) on concerns over consumer protection and over-indebtedness. Consumer protection legislation was fragmented all over government departments, and the Magistrates’ Court Act was not in line with the National Credit Act (NCA.) There was a need for coordination of all these pieces of legislation in order to ensure proper redress for consumers. The dti and the (DOJ) had established a task team to address the issue of coordination. The research had highlighted reckless lending, gaps in affordability assessment, the abuse of credit insurance, the high cost of credit, judgments and garnishees, a lack of education and awareness about credit, listing requirements, discretionary credit guidelines, and honesty and disclosure by credit providers and consumers.

The Department was aligning its legislation to the reforms that had taken place in SA. The Magistrates’ Court Amendment Bill needed to take cognisance of the automatic removal of adverse information, reckless lending, debt reviews and micro lenders, integrate the prohibition for debt collectors to collect expired debt, as well as the prohibition on selling of prescribed debt. The justice system should support all legislation that should be applied by the courts, which meant the reforms in the country should be reflected in court processes and rules.

Members had concerns over the community’s accessibility to, and awareness of, their legal rights. Loan-sharks were still targeting pensioners and charging 70 to 90% interest. What was the dti doing? There was something wrong with the implementation of the dti policy. Members said the sale of prescribed debt was still happening, but some higher learning institutions were selling that debt. Parliament had established district, provincial and national houses of traditional leaders, but it appeared these structures had not been consulted. Increasing property levies were also leaving people in debt.

The Committee received an update on the filling of vacancies at the SA Human Rights Commission. The application agreed upon the previous day would be submitted to the Office of the House and if approval could be obtained from the Office of the House by the following day, then advertisements could be in the press by the coming Monday. The Chairperson said the urgency of the matter should be impressed on the Office of the House.

 

Meeting report

Department of Justice Briefing
Ms Engela Steyn, Senior State Law Advisor: Department of Justice, said the purpose of the bill was to amend various sections of the Magistrates’ Courts Act (MCA) to address alleged abuses in the civil debt recovery system, and to provide for the rescission of judgment where the judgment debt had been settled, and the removal of an adverse credit record.

The amendments to the Superior Courts Act (SCA) were because there were no substantive provisions in the SCA dealing with rescission of judgment with consent of the judgment creditor. The rescission of judgments in the High Courts under Uniform Rules 31(2) and 42 were based on the common law, where the applicant had to show good cause, which included the existence of a bona fide defence. There had been a court application to declare Uniform Rule 42 unconstitutional because of an unequal application of the law, but this challenge had been abandoned. However, it seemed prudent to amend the common law position because there had been differing high court judgments.

Clause 1 dealt with the insertion of the definition of the National Credit Act, 2005 in the MCA.

Clause 2 inserted a simple application procedure on a prescribed form, which provided for the rescission of a judgment where the judgment debt had been settled. The application may be heard in chambers, and there was no cost order unless it was opposed, in which case the court may make a cost order it deemed fit.

Clause 3 amended section 45, such that parties may consent to the jurisdiction of either a district court or a regional division court, to determine any action or proceeding otherwise beyond its jurisdiction in terms of section 29(1). Consent given in proceedings by a defendant or judgment debtor to the jurisdiction of a court  that did not have jurisdiction in terms of section 28, was of no force and effect.

In the University of Stellenbosch Legal Aid Clinic case, the Court had declared that section 45 did not permit a debtor to consent to the jurisdiction of a magistrate’s court other than that in which the debtor resides or is employed in respect of the enforcement of a credit agreement in terms of the NCA.

Clause 4 amended Section 57 such that the court, and not the clerk of the court, must enter judgments and authorise instalment orders. Documentary proof of income and expenditure of the debtor was required, and if the claim was based on the NCA, it had to be dealt with in terms of that Act. The Court may authorise an Emoluments Attachment Order (EAO) if the defendant was employed and the court was satisfied that the defendant would have sufficient means left for his or her maintenance, and that of their dependants. The court could make a cost order as it deemed fit in order to curb excessive costs charged by attorneys.

Clause 5 amended Section 58, similar to the above clause, and the court had to enter judgment and make instalment orders, not the clerk of the court.

Clause 6 amended Section 65 and the court, not the clerk of the court. had to order the judgment debtor to pay the judgment debt in instalments.

Clause 7 was a consequential amendment of section 65E.

Clause 8 dealt with Section 65J and Emolument Attachment Orders (EAOs). An EAO must be issued from the court where judgment debtor resided, carried on business or was employed. An EAO may be issued only where the court had authorised an EAO. The amount or total amount of instalments payable may not exceed 25%. A notice of intention to obtain an EAO must be served on the debtor and employer, who may file notice of opposition. If a creditor or attorney did not accept reasons for opposition, the matter may be set down in court for hearing. The clerk of the court must ensure that the court had authorised the EAO and had jurisdiction before issuing the EAO. The judgment creditor or attorney must furnish the employer and debtor with monthly statements containing particulars of payments received and the balance owing, free of charge. After the service of an EAO, if a garnishee believed or becomes aware or it is otherwise shown that the debtor would not have sufficient means left or that the amounts claimed were erroneous or not in accordance with the law, the judgment creditor or attorney must be notified without delay.

Clause 9 dealt with Section 65M and the enforcement of judgments of the High Court, and Section 65A (1) implied regional courts could not conduct financial enquiries. The amendment provided for the transfer of judgments of regional courts to district courts to conduct financial enquiries.

Clause 10 dealt with aligning the headings with the contents of the section, section 73.

Clause 11 dealt with Section 86, when a respondent may abandon judgment. If a party abandoned a judgment in his or her favour because the judgment and costs had been settled, no judgment was entered in favour of the other party.

Clause 12 dealt with section 106C criminalised offences relating to judgments, EAOs and instalment orders. The penalty would be a fine or imprisonment not exceeding three years.

Clause 13 dealt with Section 23A, and was similar to section 36 of the MCA.

Clause 14 dealt with all legal proceedings in terms of the sections to be amended by the Bill, which were instituted prior to the commencement of the Bill, which must be continued and concluded as if the Bill had not been passed: Provided that the original judgment, instalment order or EAO upon which the proceedings were based, had been obtained and granted in accordance with the law.

The operation of this subsection ceased after a period of three years from the date on which the Act or the last provisions of the Act came into operation, to avoid possible abuse of the provisions.

Clause 15 dealt with the date the amendments would come into effect. A concern was raised that the transitional provisions in clause 14 might not benefit debtors who were currently over-indebted due to irregular judgments and orders. It was submitted that many debtors would be assisted if provisions of retrospectivity were introduced. Provision was made that some of the clauses would apply with effect from 8 July 2014, the date of the judgment in the Stellenbosch case.

Mr Lawrence Basset, Chief Director: Legislative Development, Department of Justice, said the bill was very technical. Abuses of the MCA had occurred and the amendments would place mechanisms in place to protect debtors, provide for the rescission of debtors and provide for judicial oversight before EAOs were granted. EAOs would be granted by the court and not the clerk of the court. Judgments would have to be obtained against debtors in areas where the debtor lived or worked and the amendments criminalised any abuses of the system. He said the Stellenbosch University case would go on appeal before the Constitutional Court, and the Department was awaiting its judgment.

Discussion
The Chairperson said the heart of the work of the Committee was to provide access to justice to the people. How did the majority of people access justice, because the law appeared to be a barrier to justice, with language being one of the barriers? Did this legislation include indigenous law? What abuses were occurring in indigenous courts? This Committee and the Department were not serving the people as they should, because they did not address the critical issues facing people. The Department had to indicate what legislative programme it needed or wanted to transform, because the scope of work did not address the issues facing people.

Mr Basset said he would be reporting back. He said the issues raised were being attended to, and a report for the Committee was being drawn up.

The Chairperson said he wanted to know the date when the report would be available.

Mr L Mpumlwana (ANC) said the report was long overdue. He wanted to know if the garnishee received interest from the debtor and if garnishee orders could be implemented by the state.

The Chairperson said he had received a call from SAFM on the garnishee order issue, and it was not correct that he had not been briefed on the matter beforehand.

Mr W Horn (DA) congratulated the Department, saying it had successfully addressed the issues raised by the court judgment. He noted that the Department was suggesting a 25% cap on Emolument Attachment Orders (EAOs). He said this would create a vacuum where there would be more debtors who had no realistic possibility of getting out of debt. Had the Department looked at the matter and considered an automatic debt review or referral? Part of the solution was a clampdown on reckless lending.

Adv G Breytenbach (DA) said she had raised matters with the National Credit Regulator (NCR) on more than one occasion. The NCR had done nothing, and she urged that the NCR be called to the Committee for a briefing on why it had not done its job.

Mr B Bongo (ANC) said that the concerns seemed to be to protect business. The bills should be to address the plight of the poor.

The Chairperson said the Committee was there to serve the people, not to promote business. The Committee wanted bills that would change the lives of people.

Ms M Mothapo (ANC) said the Committee, at its strategic planning meeting, had resolved to prioritise certain bills, and this was not one of those bills. She called on the priorities of the Committee to be implemented. She wanted further information on the transitional provisions, and asked when the retrospective provisions would apply. Would it be from 8 July 2014? It appeared that the indigent and most vulnerable had not been part of the consultation proceedings. Amendments to the Maintenance Act had been passed the previous year. What relationship was there with regard to the garnishee orders?

Ms M Pilane-Majake (ANC) said it was important that the law provide protection from unscrupulous debt recovery agents, and also that the public be educated.

Mr Horn said that the Committee would always face the prospect of dealing with amendment bills as a consequence of court judgments.

The Chairperson said the Committee workload was mainly briefings, and it was in danger of becoming a rubber stamp. Parliament did not exist to be a rubber stamp, and had to make laws to address challenges facing people and change their lives for the better.

Regarding concerns over whether the amendments made provision for interest to be paid to an employer, Ms Steyn said that was not the case. The interest was when an employer did not deduct the EAO amount timeously from the debtor’s salary, then interest and other costs were added to the outstanding debt and the amendment was an attempt to avoid this. There was no interest paid to the employer, but the employer was entitled to a commission of five per cent for making the deduction.

She said she would have to check whether civil servants could have EAOs against their state salaries.

Regarding the caution expressed on the capping of EAOs, Mr Basset said that even the Desai judgment placed more emphasis on judicial oversight.

On the issue of automatic debt review or debt counselling, he said the bill made the National Credit Act (NCA) applicable.

The Chairperson asked who took the decision to educate people on the law and with what resources. What was the Department doing regarding education?

Mr Basset said he was not in a position to provide an answer, but would get the information to the Committee.

Regarding the issue of capping and judicial oversight, Mr Siphamandla Kumkani, Director: Credit Law and Policy, Department of Trade and Industry (dti), said that the proposed 25% or less as a cap, was for cases where there was more than one creditor, and involved the question of who got paid first. With a cap, all creditors would get an equal share from the capped amount.

He said loan sharks were a huge problem. The dti had published a draft notice on the threshold level for everyone to be registered as credit providers. The Minister had done away with the threshold level. In May the final notice had been issued and everyone was now required to register with the National Credit Regulator. Currently, educations programs were being run and small, medium, formal and informal lenders were being encouraged to register.

Regarding the Maintenance Act, Mr Basset said a maintenance bill had been passed that dealt with maintenance defaulters. Their details were sent to the credit bureaux.  This was different from the judgment debts being considered before the Committee, so there was no correlation.

He noted the Committee’s comments on the prioritisation and desirability of the bill.

On greater consultation, he said the Department could have done better. The bill had been placed on the Department's website. The SA Human Rights Commission had made a comprehensive contribution following on grass-roots interaction with the public.

Dti Presentation
Mr Kumkani said the dti had been working with the Department of Justice (DOJ) on concerns over consumer protection and over-indebtedness. Consumer protection legislation was fragmented all over government departments, and the Magistrates Court Act was not in line with the NCA. There was a need for coordination of all these pieces of legislation in order to ensure proper redress for consumers. The dti and DOJ had established a task team to address the issue of coordination.

Research that had been conducted had highlighted reckless lending, gaps in affordability assessment, the abuse of credit insurance, the high cost of credit, judgments and garnishees, a lack of education and awareness about credit, listing requirements, discretionary credit guidelines and honesty and disclosure by credit providers and consumers.

The Department was aligning its legislation to the reforms that had taken place in SA. The dti had put into legal force the Credit Amendment Act, National Credit Regulations, including affordability assessment regulations, published final regulations on the limitation of interest rates and fees, and published a final notice determining a new threshold for registration for all credit providers (including loan sharks) in May 2016.

The Magistrate Courts Amendment Bill needed to take cognisance of the automatic removal of adverse information, reckless lending, debt reviews and micro lenders, integrate the prohibition for debt collectors to collect expired debt, as well as the prohibition on the selling of prescribed debt. Debt collection had to be regulated strictly, and all role players, including lawyers, had to be subject to the Debt Collectors Act. The Act should be amended to deal with processes and notices for prescription, or interruption of prescription. Prescribed debt should not be capable of being collected. He said people should be prosecuted for collecting on a prescribed debt.

He said the MCA had to be amended as per the Desai judgment. The justice system should support all legislation that should be applied by the courts, which meant the reforms in the country should be reflected in court processes and rules. The justice system had to apply and transmit the information required for judgment garnishee orders. This would also help with the accuracy of information held by credit bureaux.

Discussion
Ms Mothapo said she had concerns over the community’s accessibility to, and awareness of, their legal rights. The government had a good policy on social assistance. While final notices had been issued by the dti, loan-sharks were still targeting pensioners and charging 70 to 90% interest. What was the dti doing? There was something wrong with the implementation of the dti policy. The sale of prescribed debt was still happening, but some higher learning institutions were selling that debt.

The Chairperson said Parliament had established district, provincial and national houses of traditional leaders, but it appeared these structures had not been approached.

Ms Pilane-Majake said the issue of increasing property levies were also leaving people in debt.

Mr Kumkani acknowledged that a lot of policy was being put in place. The challenges were more on the implementation of the policies, and the implementation agents suffered from a lack of staff capacity. The Department was looking at reinforcing the NCR to ensure that legislation was effectively implemented.

Regarding the selling of prescribed debt, which was carrying on, and on awareness building, he said these were still a work in progress. The NCR had done some investigations into a number of areas in the various provinces, and could be called before the Committee.

Regarding the role of traditional leaders, he said the dti had agreements with CONTRALESA as part of education and awareness and had appointed 50 fieldworkers in nine provinces to give information in rural areas on various rights. After the establishment of the Department of Small Business, that department took over these functions.

The Chairperson said that while the Congress of Traditional Leaders of South Africa (CONTRALESA) was progressive, it was not representative of all traditional leaders, so the houses of traditional leaders should be utilised.

Update: Filling of Vacancies at SA Human Rights Commission
Mr Vhonani Ramaano, Committee secretary, said he would be submitting the application agreed upon the previous day, to the Office of the House and if he could get approval from the Office of the House by the following day, then advertisements could be in the press by the coming Monday.

The Chairperson said the urgency of the matter should be impressed on the Office of the House, and the Chief Whip should also contact the Office of the House.

The meeting was adjourned

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