Courts of Law Amendment Bill [B8-2016]: Department response to submissions; Justice Administered Fund Bill [B26-2015]: deliberations & adoption

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Justice and Correctional Services

13 September 2016
Chairperson: Dr M Motshekga (ANC)
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Meeting Summary

A delegation from the Department of Justice and Constitutional Development (DoJCD) responded to public submissions on the Courts of Law Amendment Bill and the Justice Administered Fund Bill.

Response to Association of Debt Recovery Agents
DoJCD expressed confidence that the Association of Debt Recovery Agents' concern over additional workload for courts is unfounded.

Response to Law Society of South Africa
DoJCD rejected its submission that the Bill should be reviewed in its entirety and be withdrawn from the parliamentary process to allow stakeholders sufficient time to consider its adverse implications. It also rejected the Law Society's point that the Stellenbosch case was the catalyst for the Bill, stating that DoJCD started preparations on the Bill before the application was brought in the Stellenbosch case, as evident in a first draft of the Bill published in February 2013.

Response to the South African Human Rights Commission
DoJCD noted the comments of the South African Human Rights Commission

Responses to the General Council of the Bar of South Africa
DoJCD noted the submissions of this body.

Responses to the Legal Aid South Africa
DoJCD noted the uncritical comments of this body and affirmed that its use of ‘she’ and ‘her’ is in line with legislative practice.

Responses to the Commission on Gender Equality
DoJCD noted the comments of this body.

Responses to Microfinance South Africa
DoJCD noted that the submission does not make specific comments on the provisions of the Bill. It responded that emoluments attachment orders (EAOs) are limited in the Bill to 25% of a debtor’s salary. It admitted that while a register of EAOs could assist in providing information on the number of EAOs against a debtor, it will have implementation difficulties through management and supply of wrong information. To counter this, it suggested that EAOs could possibly be listed at credit bureaus. It restated the Bill’s aim to curb reckless lending, foster responsibility in granting credit, and end the cycle of over-indebtedness.

Responses to the Banking Association of South Africa
DoJCD noted the comments of this body.

In discussion, Committee members sought clarity on the meaning of seven days in the Bill, practical implications of ‘interests and costs outstanding’ and specificity in the meaning of interest, and courts’ power to exercise discretion with respect to the court’s oversight functions over debtors.

Members highlighted the need for a national credit bureau, given that credit bureaus are not really independent and a centralised bureau will promote access to justice. DoJCD stated that it would consult with the Department of Trade and Industry on the desirability of a national registry of credit bureaus. It conceded that the Bill is silent on capping an emolument attachment order (at 25%) for multiple loans. Members also expressed concern over an employer’s duty to provide data on an employee’s remuneration, noting the need for a paralegal project to assist employee access to justice and the need to interpret the Bill in simple language that communities can understand. They stressed the importance of law reform and legal transformation. A member remarked that the salary slip of a debtor would not be a true reflection of indebtedness, especially for the majority of people in the rural areas who operate with indigenous credit unions such as stokvels. Members agreed that legislation needs to take stokvels into consideration.

A member expressed concern at the ‘colossal’ role of the clerk of court, to which DoJCD responded that the role of the clerks must not be a judicial role. It expressed concern over retrospective provisions in light of the Constitutional Court judgment on the Stellenbosch case. The Committee then halted deliberations on the Bill pending the Constitutional Court judgment that would be delivered that day.

Justice Administered Fund Bill deliberations on responses
DoJCD assured members that, contrary to the General Council of the Bar’s fears, the Guardian’s Fund would remain under the Administration of Estates Act. Members expressed satisfaction with the work done on the Fund Bill. However, they queried the provision for deficit and drew attention to the need for a transitional financial regulation. They sought clarity on investment of money not immediately required, tracing Fund beneficiaries and the fate of unclaimed monies. DoJCD explained that monies in excess of R300 000 go into the reserve account where it will stay for ten years before entering the National Revenue Fund. This implies that there is no forfeiture of funds to the state. It explained that transitional provisions are unnecessary, given that the Bill merely gives legal effect to existing measures. It also explained that beneficiaries now receive their monies within two to four days via EFT. The provision for deficits resulted from DoJCD’s inadequacies. The reserve account caters for deficits and forfeited/unclaimed monies for a maximum period of 10 years. Money in the reserve account is invested for short periods because it is prudent. The investments are immediately withdrawable.

The Committee welcomed the Bill which was many years in the making and adopted it.

Meeting report

The Chairperson requested a list of major stakeholders so the Committee could send the Department's response document to them. He introduced Mr Matiase as the replacement for Mr Malema.

Courts of Law Amendment Bill: Department response to submissions
Mr Lawrence Bassett, DOJCD Chief Director: Legislative Development, called on Ms Engela Steyn, Senior State Law Adviser for Legislative Development, to respond on his behalf. He remarked that the Bill is a technical document. He also drew attention to the Critical Issues note it had provided on the information the Committee had sought about consumers. He noted that the Constitutional Court is giving judgment in the Stellenbosch case today.

Response to Association of Debt Recovery Agents (ADRA)
Ms Engela Steyn, Senior State Law Adviser: Legislative Development, stated that ADRA had commented on the Stellenbosch case, the need for a responsible debt recovery industry, DoJCD’s responsibility for a sustainable debt enforcement mechanism, balancing the interests of the creditor and the debtor, and accommodating the interests of the general population. It is unclear if ADRA’s recommendation that a financial enquiry should follow only when the debtor or an interested party opposes the implementation of an EAO - it is unclear if the proposal is for another debt collection procedure different from the one set out in section 65A of the Magistrates’ Court Act or whether it is additional. On the concern expressed about additional workload for courts, it appears that since Rule 12(5) was put into operation and two circulars issued by DoJCD directing officials to strictly follow court process and procedures, most section 57 and 58 judgements are dealt with by magistrates.

Mr Bassett added that DoJCD consulted on the submission of additional workload for the courts and was assured that the courts are not overwhelmed.

Response to the Law Society of South Africa (LSSA)
LSSA submitted that the Bill should be reviewed in its entirety and be withdrawn from the parliamentary process to allow stakeholders sufficient time to consider the adverse implications and avoid lengthy debates in courts. It also noted that the Stellenbosch case was the catalyst for the Bill, and that the court noted the following defects:
- No limit on 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 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 granting of EAOs; and,
- Ineffective review remedy for the attachment of debtors’ earnings.

DoJCD responded that it started preparation of the Bill before the application was brought in the Stellenbosch case. Indeed, a first draft of the Bill was published in February 2013.

Responses to the South African Human Rights Commission
DoJCD noted the comments of the South African Human Rights Commission

Responses to the General Council of the Bar of South Africa
DoJCD noted the submission.

Responses to the Legal Aid South Africa
DoJCD noted the uncritical comments of Legal Aid South Africa. It affirmed that its use of ‘she’ and ‘her’ is in line with legislative practice.

Responses to the Commission on Gender Equality
DoJCD noted the comments of the Commission on Gender Equality and referred to its responses next to the relevant clauses (see document).

Responses to the Microfinance South Africa (MFSA)
DoJCD responded that the MFSA does not make specific comments on the provisions of the Bill, except to suggest that EAOs should not be banned or limited and that a register of EAOs should be implemented. DoJCD responded that EAOs are limited in the Bill to 25% of a debtor’s salary. DoJCD further responded that while a register of EAOs could assist in providing information on the number of EAOs against a debtor, it will have implementation difficulties through management and supply of wrong information. EAOs could possibly be listed at credit bureaus, which could assist with information on the number of EAOs against a debtor. Finally, DoJCD responded that the proposed amendments must be seen in the light of efforts by the Department of Trade and Industry (DTI) to curb reckless lending and end the cycle of over-indebtedness. Regulating EAOs is intended to foster greater responsibility in granting credit.

Responses to the Banking Association of South Africa
DoJCD noted the comments and referred to its response next to the relevant clauses (see document).

Discussion
The Chairperson asked what seven days means in the Bill and was assured it means seven working days.

Mr Bassett stated that DoJCD proposes to mark amendments in the Bills with double underlining. Members did not object.

Mr L Mpumlwana (ANC) asked what 'interest and costs outstanding' means in practice. He sought specificity in the meaning of interest.

Ms Steyn stated that ‘days’ means calendar days.

Mr L Mpumlwana (ANC) responded that the standard practice is seven working days.

Mr Bassett noted that the three-month limitation in clause 57 is onerous and unrealistic. DoJCD requested the Committee consider comments on the clause in a way that will make it less onerous.

The Chairperson asked whether it is not desirable to make a national registry of credit bureaus.

Mr Bassett responded that further consultation with the DTI is needed on this.

The Chairperson stated that such a credit bureau is needed in order not to leave the nation in the hands of private credit institutions.

Mr Mpumlwana agreed with the Chairperson because credit bureaus are not really independent. They are paid and controlled by their clients. He raised concerns on jurisdiction over debt recovery vis-a-vis contracts.

Mr S Swart (ACDP) urged caution in making remarks on credit bureaus without consulting with the DTI as it may be irresponsible. He noted that the DTI is doing good work regarding the independence of credit bureaus.

The Chairperson stated that Rules of Parliament enjoin the Committee at looking at the desirability of legislation or proposed legislation.

Ms C Pilane-Majake (ANC) stated that a centralised credit bureau will promote access to justice. This is because people who pay off their debts could still have their names on the roll of debtors. A central system could solve this.

The Chairperson observed that credit bureau activities must be in the public interest, which necessitates further investigation on the merits of a centralised credit bureau system.

Mr Bassett noted that the proposed amendments to sections 57 and 58 are similar.

Mr Matiase sought clarity over the court’s power to exercise discretion with respect to the court’s oversight functions over debtors.

Ms Steyn stated that the powers of magistrates over debtors are problematic because the court may lack evidence over the judgement debtor’s ability to pay the debt.

Mr W Horn (DA) asked what would happen when a person takes out various loans and is subjected to an emolument attachment order of 25%. How will the orders be shared between the loans? If there will be capping, why not institute a system to deal with multiple loans?

The Chairperson stated that there is a notice to other creditors informing them of an attachment order.

Mr Bassett conceded that the Bill is silent and DoJCD will reflect on this and return

Mr N Matiase (EFF) noted that emoluments attachment orders are the most abused credit tool. He suggested that capping can limit this abuse as there seems to be no other available mechanism.

The Chairperson agreed with Mr Matiase.

The Chairperson noted that Members’ questions and the list of critical issues prepared by DoJCD should be compiled so that Members can take them for debate to the people through community radio stations.

Responding, Mr Bassett sought to expand on the document they prepared in order to incorporate members’ questions. Members agreed.

Mr Mpumlwana asked what would happen if an employer fails to provide data on an employee’s remuneration.

Ms Steyn stated that clause 8 provides for furnishing of information on a garnishee order. DoJCD believes that the employer can furnish the employee’s salary advice. An amendment could be made to compel employers to furnish information on an employee’s financial situation.

The Chairperson noted that the victim of the credit process is the poor employee because credit institutions and employers are the ‘big’ people. There is thus need for a paralegal project to assist employees’ access to justice. He expressed displeasure on the slow progress in the paralegal project. He warned against an idealistic piece of legislation.

Mr Mpumlwana asked whether DoJCD cannot be asked to interpret the Bill in a simple language that communities can understand through radios.

The Chairperson remarked that the Committee cannot discuss the Bill in an elitist manner. There is need for the agenda to advance the holistic aim of ensuring access to justice for the poor.

Mr Matiase stated that the Chairperson’s comments are important. He noted the current independent panel is looking at the effectiveness of legislation and Parliament seems to be lacking in a review of legislation relating to the court system. A whole generation of South Africans are still stuck in the third world and need to be carried along with the South Africans living in the first and second worlds.

The Chairperson agreed with Mr Matiase that law reform and legal transformation are important. He stated that the Committee can assist the review panel now instead of waiting for its report since its work is long term.

Ms M Mothapo (ANC) remarked that the salary slip of a debtor would not be a true reflection of the situation, especially for the majority of people in the rural areas who operate with indigenous credit unions such as stokvels. The Eurocentric set up of the courts does not favour limitation of unnecessary expenses. She asked the Committee to take this into consideration.

The Chairperson agreed with Ms Mothapo’s comments. He observed that the legal system is very technical. Paralegals operating in rural areas would understand the situation there better and therefore better deal with access to justice. Legal aid is very important because legal services are very expensive. He remarked that rural people survive on stokvels, and bury people without assistance from funeral homes because of stokvels. However, stokvels are not catered for in our modern world and legislation needs to take stokvels into consideration.

Mr Mpumlwana stated that the expenses of extended families should be taken into consideration. The extended family is different from the European conception of family. Extended families often make contributions and affidavits should be considered as acceptable proof of expenses.

Mr M Maila (ANC) remarked that in rural areas, there are unwritten laws on burial ceremonies and membership of societies. He sought clarity on the role of the clerk of court, whose role seems colossal. What does the law compel the clerk of court to consider with respect to EOAs?

Ms Steyn explained that the role of the clerk of court is problematic because of the question of consent to EAOs. This is why the Bill seeks to vest the power of confirming EAOs on the courts.

Mr Bassett noted that the role of the clerks must not be a judicial one, which is partly what the Stellenbosch judgement sought to address. It is also one of the main objectives of the Bill.

The Chairperson stated that both the clerk of court and presiding officers need to be re-educated on the new realities of the Bill. They do not seem to take account of the situation in rural areas. This is why there is a need to introduce indigenous languages into legal education.

Mr Bassett stated that retrospective provisions are frowned on by the courts. There is need to consider legislative retrospectivity in light of the Constitutional Court judgment on the Stellenbosch case.

The Chairperson asked members whether it is not best to halt deliberations on the Bill pending the Constitutional Court judgment today. Members agreed.

Justice Administered Fund Bill: deliberations and adoption
Mr Lawrence Bassett stated that the comments on the Bill do not necessitate any substantial amendments. He called on Adv van der Walt, State Law Advisor in the DoJCD to respond.

Adv Alta van der Walt, State Law Advisor, stated that the concern of the General Council of the Bar was that the Guardian’s Fund would fall under this Bill. She pointed out that the Guardian’s Fund does not fall under the Justice Administered Fund as the Fund is only for maintenance money, money paid by order of court, money received which cannot be allocated immediately, and interest. The GCB’s concern was only that the Guardian’s Fund would no longer be under the Administration of Estates Act.

The Chairperson asked her to go through the Justice Administered Fund Bill clause by clause, and for members to comment when they deem it fit.

Clause 2: Provision for the Justice Administration Fund

Clause 3: Financing of the Fund – The Bill provides that the following monies on behalf of third parties must be administered through the Fund:
(a) Money paid to court in terms of maintenance orders under the Maintenance Act, 1998
(b) Money received as bail in terms of the Criminal Procedure Act, 1977 or any Act of Parliament;
(c) Money paid to court in terms of any Rule of Court or any other law;
(d) Money received which can not immediately be allocated into any of the categories listed in paragraphs (a) to (c); and,
(e) Interest earned, or bank charges raised on money paid into or retained by the Fund.

Clause 4: Management, control and administration of Fund – The Bill provides that the Director-General is accountable for the Fund.

Clause 5: Bank accounts and reserve account – The accounting officer must, within the Fund, open and maintain bank accounts as he or she deems fit and assign to each such bank account a name that clearly identifies the account, one of which must be a separate account to be known as the reserve account. The Minister, in consultation with the Minister of Finance, may, by notice in the Gazette, determine a limit on the maximum credit balance permitted in the reserve account. Any unclaimed money and money which cannot immediately be allocated must within 30 days of its receipt be paid into the reserve account. If a beneficiary claims an amount of money that has been paid into the reserve account or the allocation of money that has been paid into the reserve account becomes known, within ten years after it has been paid into the reserve account, the reserve account will be debited and the money will be paid to the beneficiary or be allocated correctly. The funding for any deficit, not covered by the reserve account, is to be negotiated with the National Treasury within the prescribed budgetary framework, subject to an appropriation by Parliament.

Clause 6: Utilisation of money in the Fund – Money in the Fund must only be used for allocated purposes. The bank costs relating to bank accounts, opened and maintained in respect of the Fund, must be defrayed against the interest earned in respect of those accounts and any net balance of interest earned on those accounts must be paid into the reserve account. The accounting officer must ensure that any amount in excess of the amount in the reserve account contemplated in section 5(3) is paid over to the National Revenue Fund.

Clause 7: Investment of money not immediately required – Any money in the Fund which is not required for immediate use, may be invested with a financial institution approved by the Minister of Finance and may be withdrawn when required. Any unexpended balance of the money of the Fund at the end of any financial year shall be carried forward as a credit of the Fund to the next succeeding financial year. Any interest which may accrue to money invested as contemplated in subsection (1) must on a monthly basis be paid into the reserve account.

Clause 8: Regulations – The Minister may make regulations, in consultation with the Minister of Finance, On how the Department receives money and pays it into the Fund, and how money in the Fund is accounted for, paid to parties entitled to it, and paid to the National Treasury. The clause also provides for the writing-off of losses against the reserve account and incidental matters.

Clause 9: Financial instructions – The accounting officer may, in consultation with National Treasury, issue financial instructions, which are not in conflict with this Act, the Public Finance Management Act or regulations made, or instructions issued, in terms of section 76 of the Public Finance Management Act, prescribing further procedures to be followed in respect of the management, control and administration of the Fund.

Clause 10: Short title – This provides for short citation of the Bill.

As a conclusion, Mr Bassett stated that the Bill seeks to put in place a proper statutory legal framework for the management, control, and accountability of monies in trust.

Mr Swart noted that the Bill is a culmination of 20 years’ work. He expressed satisfaction that it is about to be resolved. He however queried the provision for deficit in clause 6. Under what circumstances would the Fund incur a deficit when it is supposed to be receiving monies? Is it for cases of loss, theft or maladministration? He asked where the Guardian Fund fits in with losses in terms of the Administration of Estates Act. He also wondered whether there is need to cross-reference to existing legislation or make a transitional financial regulation arrangement.

Ms Pilane-Majake thanked DoJCD for its work on the Bill. She asked whether an enabling regulation is not needed to ensure proper financial control measures in order to remove the problems of the past that mitigated proper accountability measures for third party funds. There is need for enabling legislation to make the Bill a living document that will sort out the problem of third party funds.

Ms Mothapo sought clarity on clauses 3 and 7 on finances of fund and investment of money not immediately required. How are these two to be reconciled? In terms of section 174 of the Criminal Procedure Act (CPA), an accused would be discharged at the end of the case and the bail money is supposed to be handed to him or her. Which money would then be used in terms of clause 7? Also, people from rural areas are not easily traceable because of unclear addresses. How would DoJCD trace Fund beneficiaries? Also, what would happen to unclaimed monies? Is unclaimed money still accruable to the state?

Mr Horn expressed concern over the practicality of monies not required for immediate use. He asked whether the prescription of 10 years in section 3(b) for monies to be claimed is sufficient. Is the provision for money not required for immediate use, clear enough?

Responding, Adv van der Walt explained the essence of clause 5(3). She stated that the comments received from the Minister of Finance indicated that monies in excess of R300 000 go into the reserve account where it will be held for ten years. From there, it goes to the National Revenue Fund. If there is no prescribed period for amounts of R300 000 and below, the Prescription Act takes effect – which is for 30 years. So there is no forfeiture of funds to the state.

On investment of money not immediately required, it is prudent to invest such monies.

On transitional provisions, nothing in the system is really going to change as the Bill merely gives legal effect to existing measures.

The Guardian Fund is regulated by the Administration of Estates Act. The purpose of the Bill is to give a legal basis to what is already in existence. The processes are already running smoothly. They just need a legal basis.

Mr Johan Johnson, Chief Director: Third Party Funds, DOJCD, explained that the Bill seeks to ensure a regulatory framework. Previously, beneficiaries waited for 20-25 days to receive their monies. Now, it is merely 2-4 days and they receive it by EFT without having to take taxis or make legal service expenses. On deficits, DoJCD is a victim of its own inadequacies. DoJCD created a reserve account to deal with deficits and forfeited/unclaimed monies. The maximum period for keeping it in the reserve account is ten years, not thirty. However, keeping the money in the reserve account without investment is not prudent. The investments are made conservatively, for short term, and are immediately withdrawable.

The Chairperson thanked Mr Johnson.

Mrs Pilane-Majake asked how deficits will be managed.

Mr Johnson replied that DoJCD has not applied its mind to managing deficits and might take promptings from the Auditor-General. He noted that unlike in the past, 99% of beneficiaries receive their money through EFT. In the last year, only 190 000 cash payments were made on maintenance. DoJCD has converted many of its maintenance orders to direct payments. The big challenge here is how to ensure that maintenance payments are paid by men.

The Chairperson asked members if they have any problem with the Bill. No one raised objection. He declared the Bill acceptable and desirable. Members agreed.

Mr Swart moved for adoption of the Bill. He was seconded by Ms Pilane-Majake.

The Chairperson thanked everyone. He asked DoJCD to study the Constitutional Court judgement and return to the Committee. He discharged DoJCD and the meeting went into a closed session at 1 pm.

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