Delegations from the Cape Bar Council, the Association of Debt Recovery Agents (ADRA), the Law Society of South Africa (LSSA) and the Banking Association of South Africa (BASA) presented their positions on the Courts of Law Amendment Bill. They were in agreement that the Bill sought to alleviate the plight of poor debtors disadvantaged by a debt collecting system that kept them in a state of indebtedness. However, they put forward proposals for improving it.
Notable proposals covered aspects such as the retrospectivity of the Bill, the rescission of judgments, the consent of debtors and creditors to the jurisdiction of a magistrate, proper judicial oversight over debt management and recovery, legal certainty in certain clauses of the Bill, unintended consequences of the Bill, the maximum percentage of a debtor’s earnings that may be garnished, the ambit of the ‘sufficient means’ test, and employers’ compliance with combined Emoluments Attachment Orders (EAOs).
Committee Members welcomed the presentations. Some sought clarity over the aspect of legal certainty and the retrospectivity clause, with respect to concluded and pending matters. Several felt that the retrospectivity clause would alleviate the plight of the poor and serve the interests of justice. They dismissed the ADRA’s suggestion that the Bill’s objectives did not reflect South Africa’s historical dynamics. They agreed that the key issue the Bill sought to address was careless lending and unscrupulous debt recovery practices by lenders, which touched on poverty, unemployment and inequality. A Member observed that South Africa suffered from too much credit and too little savings, which called for measures to limit access to credit and its attendant high degree of exploitation. Another queried the ADRA’s comments that the Bill would make the process of EAOs impossible. Members advised the ADRA to make written submissions to the Committee.
Members rejected the call made by the LSSA for a colloquium on the Bill, because there had been sufficient broad consultations on it already. The Department of Justice and Correctional Services agreed, saying that three versions of the Bill had been drafted so far, all of which had involved considerable consultation.
The Chairperson welcomed everyone and outlined the procedure for the public hearing on the Courts of Law Amendment Bill [Bill]. The Cape Bar Council, the Association of Debt Recovery Agents, the Law Society of South Africa and the Banking Association of South Africa, would make presentations
Briefing by Cape Bar Council
Advocate Mohamed Salie, of the Cape Bar Council, said it had made several proposals on the Bill (see attachment). The Bill’s obvious intention was to alleviate the plight of certain debtors who often find themselves at the receiving end of a debt collecting system and certain common law principles that keep debtors in a state of indebtedness, from which it is difficult to escape.’ He pointed out several developments in the law, notably arising from the Stellenbosch Judgment [University of Stellenbosch Legal Aid Clinic and Others v Minister of Justice and Correctional Services and Others 2015 (5) SA 221 (WCC)]. The principles enunciated by Desai J in this judgment aimed at protecting predominantly low income earners who may not have the means to enforce their fundamental human rights and provide for themselves and their dependents.
He said that this area of the law had, for a long time, been in need of regulation to ensure that the rights of debtors and creditors alike were protected. This was especially since the interests of creditors had been given prominence, regardless of debtors’ financial status. Given the purpose of the Bill, there was little criticism against its contents.
The Council supported the Bill and made few proposals for its improvement. These were notably amendment of section 36 of the Magistrate Courts Act on procedure for rescission of judgments, provision for consent to the jurisdiction of a magistrate, proper judicial oversight over debt management and recovery, promotion of legal certainty in clauses 14(1) and 15(3) of the Bill, emolument and attachment orders, and an appropriate cap on the percentage of a debtor’s earnings that may be garnished or attached (see attachment). He concluded that the Bill, after its passage into law, should be operative from its date of implementation, rather than the date of the Stellenbosch Judgment.
Mr S Swart (ACDP) confirmed that Adv Mohammed’s submissions were mainly in support of the Bill. He sought clarification from him on his views over possible retrospectivity of the Bill, in the light of the Stellenbosch Judgment.
Adv Mohammed explained that making the Bill retrospective could cause implementation problems.
The Chairperson called for opinions on making the Bill retrospective in application.
Adv Mohammed explained that retrospectivity could affect cases that were already pending in the courts. Making the Bill non-retrospective would clear up ambiguity and possible confusion in implementation.
Mr W Horn (DA) expressed his support for Mr Swart’s question on retrospectivity.
Mr B Bongo (ANC) welcomed the Stellenbosch judgment for its intervention to alleviate the plight of the poor. He remarked that the retrospectivity clause had been well crafted. Though the legislature makes law, the courts also make law through their interpretations, because they technically amend the law. The retrospectivity clause would alleviate the plight of the poor, and serve the interests of justice.
The Chairperson supported Mr Bongo’s comments that a well-crafted retrospectivity clause would serve the interests of justice.
Mrs G Breytenbach (DA) sought clarity over legal certainty concerning concluded and pending matters, and the ambit of the retrospectivity clause. She was concerned that legal uncertainty could result in unfairness.
Adv Mohammed affirmed that legal certainty was required in the Bill, and retrospectivity could complicate this certainty.
The Chairperson stated that concluded matters may not be reopened with the retrospectivity clause. Only pending matters may fall under the clause, and such matters would not offend legal certainty.
Mr Swart remarked that the Chairperson’s comments captured the problem with transitional provisions. Section 14 of the Bill stated that ‘all legal proceedings which were instituted prior to the commencement of this Act, and which were not concluded before the commencement of this Act, must be continued and concluded in all respects as if this Act had not been passed.’ Thus, if there were proceedings that had been instituted, they must be continued and concluded, so long as the original judgment, instalment order or emoluments attachment order on which the instituted proceedings had been based, were obtained and granted in accordance with the law. He affirmed the sentiment that the Stellenbosch judgment had been very progressive. He said that the retrospectivity problem was not insurmountable, and expressed the hope that the Department would motivate its inclusion in order to ensure legal certainty.
Briefing by Association of Debt Recovery Agents (ADRA)
Mr Marius Jonker, Chief Executive Officer: ADRA, said that the Association generally supported the Bill. However, it objected to three aspects of the Bill. The first was affordability. The second was legal certainty. The third was unintended consequences.
Section 65J (1A) of the Bill introduced a cap of 25% of a consumer’s salary which may be attached, as well as a comprehensive ‘sufficient means’ test to be evaluated in a financial enquiry. The ADRA submitted that the 25% cap was based on a misconception of foreign law, notably the wage attachment regime of the USA. It had evaluated the regimes of the USA, Germany, England and Australia, and had concluded that the provision of a cap in the Bill merely protected the wealthy and created legal uncertainty. If it was introduced, it should comply with the following:
- Be thoroughly researched;
- Provide protection of minimum wages;
- Guard against undue preference for higher income earners
- Be structured in a manner that achieved its intended objective, namely to alleviate pressure on an already over-extended court capacity;
- Reduce legal costs which were for the account of the consumer; and
- Complement, rather than frustrate, other consumer protection legislation.
Other than the 25% cap, sections 57, 58, and 65 provided for a very comprehensive ‘sufficient means’ test. The ADRA submitted that only the following information could be reasonably be obtained by the creditor, and was sufficient for purposes of the test:
- Full particulars of the debtor’s income and recent proof thereof;
- Particulars of all court orders in terms of which the debtor was ordered to pay a judgment debt or other obligation in specified instalments, or otherwise;
- Particulars of agreements with other creditors for debt repayment;
- A credit bureau report which was not less than three months old, and which reflected the debtor’s reported credit exposure.
The Chairperson noted that the ADRA’s objections suggested that there were still many court battles lying ahead, and that Parliament may find itself being part of those battles.
Mr Bongo expressed concern over the ADRA’s presentation, because it suggested that the Bill’s objectives did not reflect South Africa’s historical dynamics. He said that in the past, garnishee orders could be done in a ‘shenanigan way’ by the clerk of the court, who could simply authorise deductions from a poor person’s salary without consultation with him/her. The ADRA’s concerns over garnishee orders seemed to be based on desktop research. These concerns should be backed with empirical data that reflected poor people’s realities. In some cases, debts had been repaid and yet deductions continued.
Mr Bongo said that International law was recognised as law in the RSA, meaning that nothing was wrong if the Bill emulated a trend in foreign jurisdictions. He concluded that the ADRA’s presentation was ‘aloof’ from the current realities in rural communities concerning garnishee orders. The Stellenbosch judgment had been a well-researched judgment that sought to alleviate the plight of the poor, and he disagreed that the Bill sought to protect the rich. The ADRA’s opinions were a ‘helicopter view.’
Ms C Pilane-Majake (ANC) agreed with Mr Bongo’s comments. She drew attention to the intention of the Bill, and South Africa’s challenges as a democracy. The key issue was addressing careless lending and unscrupulous practices by lenders. These practices touched on poverty, unemployment and inequalities. The purpose of the Bill was to deal with these problems. Regarding the 25% minimum cap, the issue was to examine how it was crafted in the Bill in order to avoid unintended consequences. This was pertinent in maintenance orders. Ultimately, the intention of the Bill was important: to protect against careless lending and unscrupulous debt recovery processes.
Mr Swart noted that the ADRA has been involved in debt recovery collaborations with government since 2012. It had a code of conduct, and its main concern seemed to be unscrupulous lending and debt recovery practices without due court process, as well as emoluments and attachment orders. This was what the Stellenbosch judgment had tried to address. He asked the ADRA to suggest (in writing, if it wished) appropriate wording in the Bill regarding unscrupulous and reckless lending practices to which the Department could respond. He observed that South Africa was a society that suffered from too much credit and too little savings. Thus, government, the Finance Department and the National Treasury were all trying to limit access to credit because of the degree of exploitation that resulted from excess credit in South African society. He requested the ADRA to articulate appropriate phrasing for realising the principles in the Bill.
The Chairperson remarked that Mr Swart’s suggestion of a written response was practical, given the Committee’s limited deliberation time.
Ms M Mothapo (ANC) supported Mr Swart’s comments, remarking that the ADRA seemed to be unhappy with the Stellenbosch case, even though it had been an amicus curia in the case. She sought clarity on the ADRA’s position regarding the Stellenbosch judgment, given that the amendments in the Bill had resulted directly from that judgment. She said that she did not have the written submissions of 12 August 2016.
Mr Horn sought an explanation for Mr Jonker’s comments that the Bill would make the process of emolument attachment orders impossible. He said that in the vast majority of cases, the question of unpaid debts involved reckless lending. Why, then, should the lender be protected for failing to properly apply the ‘sufficient means’ test? It was settled that the debtor must be left with sufficient means to take care of himself/herself after debt repayment. The Bill or Act did not need to set out the procedure for the 25% cap, since this could be done though subsidiary legislation, such as regulations.
Ms Breytenbach sought an explanation of the aims of the ADRA, its membership, and whether any of the respondents in the Stellenbosch judgment had been a member of the ADRA. If they were ADRA members, what had been the consequences of their actions?
The Chairperson noted that Committee Members had done their homework. He asked the ADRA to respond in writing, if it so wished.
Mr Jonker said that respondents in the Stellenbosch judgment had not been ADRA members. One of them had applied for membership, but had been denied. They had then threatened the ADRA with a high court application to compel their admission. They were not members and would never be members, because what had happened to the consumers (applicants) had been horrible and ridiculous. He said that the letter of the law, the purpose of the law, and compliance with the law were different things.
The magistrate had to satisfy him/herself that there was no reckless lending before granting judgment. The rest was a law enforcement issue. What was happening to unregistered loan sharks? If the Bill was passed as law but was not enforced, nothing would change.
On the empirical aspect of the ADRA’s submissions, Mr Jonker said that he was abreast of current realities because he dealt with them on a daily basis. Although the Bill’s aim was to protect consumers, who paid for their legal fees? He challenged Committee Members to provide documentary evidence on the consumer costs of litigation. This was why the Bill was impossible to implement in its current state. He promised to draft further representations, consult further, and furnish them to the Committee.
The Chairperson expressed appreciation for the ADRA’s research and presentation.
Briefing by Law Society of South Africa
Advocate Graham Bellairs, member of the Rules Board and attorney with the Law Society of South Africa (LSSA), presented the LSSA’s opinions on the Bill. He sid that the Bill’s intentions were noble, and noted the limitations identified by Judge Desai in the Stellenbosch judgment as:
- No limit on the amount that may be deducted from the earnings of a debtor in terms of the Emoluments Attachment Order (EAO);
- No limit on the number of EAOs that may be granted against a particular debtor;
- No evaluation of the affordability of debts on the part of debtors;
- No judicial oversight for the process of obtaining EAOs;
- Forum shopping for courts to entertain applications for judgment and issuing of EAOs;
- Obstacles to court access rights of debtors;
- Involuntary and uninformed consents to jurisdiction and judgments;
- No representation before the grant of EAOs; and,
- Ineffective review remedy for the attachment of debtors’ earnings.
While the LSSA supported changes aimed at addressing most of the above legal defects, it cautioned against the introduction of measures that would compromise the power of a magistrate to provide judicial oversight. It submitted that the requirements listed in section 57, especially (c) and (d), were excessively prescriptive and may lead to practical challenges for plaintiffs and their attorneys.
The Chairperson wondered why a distinction should be drawn between the common law and Roman-Dutch law, which Adv Bellairs responded to.
He said that the 25% maximum cap was too high, and was arbitrary. He argued that there should be unfettered judicial discretion for magistrates to determine the appropriate cap, because high income earners could get away with unpaid debts.
Responding to the Chairperson’s query, he said that there was an unfortunate perception that the majority of judges were white and were biased towards white litigants. He proposed that the phrase ‘relevant documentary evidence’ should replace ‘documentary evidence, not more than three months old’ and ‘latest bank statement’ in the Bill. This was because not all debtors had bank accounts.
The Chairperson asked the LSSA why its call for a stakeholders’ summit should not include consultations with the Houses of Traditional Leaders, given that such consultations would bring out the voices of the people. Should the Committee return to consultations?
Adv Bellairs replied that the LSSA’s suggestion of a colloquium was not restricted to lawyers and bankers, but included all stakeholders.
Mr Swart asked the LSSSA to respond to some of the concerns raised by members after the ADRA presentation. There had been broad consultations, and accordingly, the suggestion of a colloquium at this point of deliberations was unworkable, though it might have benefits. He gave the example of the Legal Practice Bill, which had taken ten years to complete. If the issue was referral to the National House of Traditional Leaders (NHTL), on the ground that issues of customary law were involved, then the question of consultation would become different. That was not the case yet. The main issue was reckless lending practices in terms of existing rules and without the necessary judicial oversight.
Mrs Mothapo noted that the judgment in the Gundwana case [Gundwana v Steko Development CC and others 2011 (3) SA 608 (CC)] had been delivered on 11 April 2011, while the Stellenbosch case had come up in 2012. Why had the Rules Board failed to take amendment action on all the rules which the court had declared unconstitutional? She contended that the Rules Board had done nothing for five years, and Adv Bellairs should not have accused the Department of being in a rush to amend the Bill.
Ms Breytenbach supported the proposal to refer to ‘relevant documentation,’ as it gave the court more discretion. She expressed displeasure over the Chairperson’s statement that white magistrates were biased in favour of whites, saying that it was disrespectful to say the least. The assertion that white magistrates were biased in favour of the rich was offensive.
The Chairperson responded that Committee Members were public representatives, and as such had a duty to bring to the attention of Parliament and those who appeared before it, peoples’ perceptions. So he was expressing the perception of the people he represented. He had a duty to represent the public and bring to the attention of Parliament what people thought of the work Parliament was doing.
Ms Breytenbach replied that the Chairperson had made the perceptions sound like his own opinion.
Adv Bellairs stated that the law was applied in a fair and non-discriminatory manner, regardless of the racial identity of the magistrate. It was not in the LSSA’s power to determine who would participate in their proposed dialogue. He denied the statement that the LSSA had taken no remedial action for five years, until the Department had taken action. This was because making amendments to the rules of court was the duty of the Department, not the Rules Board.
The Chairperson remarked that during deliberations on the Legal Practice Act, the LSSA had made an unfulfilled promise to make inputs.
AdvBellairs replied that there had been various comments from the Rules Board dealing with legislation affecting court procedure. However, he could not speak on behalf of the Rules Board, even though he was a member.
Briefing by Banking Association of South Africa (BASA)
Ms Adri Grobler, BASA consultant, said that the BASA generally supported the Bill. There were, however, concerns over some aspects of the Bill, and it was proposed that:
- An EAO should be granted as a last resort;
- The debtor must be in arrears regarding debt for a period of at least nine months;
- Before the court grants an EAO, it should consider the quantum of the debt/judgment to ensure that the in duplum common law principle has not been breached;
- A judgment creditor should be obliged to inform all registered credit bureaux of a granted EAO;
- To ensure that the combined value of EAOs does not exceed 25% of an employee’s salary, system changes must be effected, which would require an implementation period of six to 12 months;
- There should be clarity in the garnishee (employer’s) compliance with combined EAOs that exceed 25% and the judgment creditor’s duty to verify information provided by the employer, references to salary (i.e. whether gross or net), means test or method of measure the garnishee (employer) must apply to determine whether the judgment debtor has sufficient means and whether his/her expenses were necessary, and sanctions placed on the garnishee.
The BASA recommended that the obligation should remain with the employee (judgment debtor) or judgment creditor to provide the garnishee with sufficient notice to start and continue deductions, and to cease deductions in the event that the judgment debt and costs had been paid in full.
Mr Horn sought clarity on the proposal for a 90-day period for arrears regarding debt. He also sought clarity regarding the duty placed on judgment creditors, the proposal that a judgment debtor/employee should have a say in how deductions started and ceased, and the recommendation that clause 4 be amended to illustrate clearly whether a judgment creditor could proceed to accept an offer made by a judgment debtor, if no documentary evidence was available. He noted that the Bill sought to address the cycle of abuse of EAOs. Accordingly, the purpose of the Bill was being defeated by some of the BASA proposals.
Ms Grobler clarified that the debt arrears referred to in her presentation were for a period of at least nine months, not 90 days. She explained that the debtor’s involvement in the deductions was merely to furnish information to the employer.
The Chairperson advised the BASA to make further written submissions if it wished. He asked Mr Lawrence Bassett, Chief Director of Legislation in the Department of Justice, to respond to Ms Grobler and Committee Members’ submissions.
Mr Basset said that the Department would consider all the submissions and comments, and return to the Committee afterwards. Accordingly, he would respond only briefly now. Not all the comments had been straightforward, while some had been weighty. The Department had started summarising the responses. Regarding the request for a colloquium by the LSSA, he noted that three versions of the Bill had been drafted so far since 2012. The Bill had witnessed a considerable amount of consultation in the course of its revisions. The Department had worked closely with the Department of Trade and Industry and the Treasury, and had also listened to all the relevant inputs from other organisations and stakeholders. Accordingly, he had reservations on holding a colloquium on the Bill.
The Chairperson commented that Members were not in favour of a colloquium on the Bill, as it would further delay it. However, the Department had ‘left its door open’ for further consultations. He acknowledged the inputs and values of the various presentations, and discharged the presenters.
Report on outcome of Committee meeting on Court Rules
The Chairperson read the report of the outcome of the Committee’s meeting of 29 August 2016 on court rules, titled: ‘Report of the Portfolio Committee on Justice and Correctional Services on the revised Draft Rules 2015 made in terms of section 7(3) of the Promotion of Administrative Justice Act, 2000 (Act No 3 of 2000), dated 31 August 2016. He then called on Members to respond.
Mr Horn called for amendment of the title of the report.
The Chairperson accepted the proposal, and the report was adopted by the Committee.
The meeting was adjourned.
- Association of Debt Recovery Agents submission
- MicroFinance South Africa Annexure B
- MicroFinance South Africa Submission
- South African Human Rights Commission submission
- Legal Aid south Africa submission
- Law Society of South Africa submission
- Cape Bar Council submission
- Banking Association South Africa