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[2015] ZAWCHC 99
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University of Stellenbosch Legal Aid Clinic and Others v Minister of Justice And Correctional Services and Others (16703/14) [2015] ZAWCHC 99; 2015 (5) SA 221 (WCC); [2015] 3 All SA 644 (WCC); (2015) 36 ILJ 2558 (WCC) (8 July 2015)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
Case No: 16703/14
DATE: 08 JULY 2015
In the matter between:
THE UNIVERSITY OF STELLENBOSCH
LEGAL AID
CLINIC
......................................................................................................
First
Applicant
VUSUMZI GEORGE
XEKETHWANA
..........................................................................................................
Second
Applicant
MONIA LYDIA
ADAMS
...............................................................................................
Third
Applicant
ANGELINE
ARRISON
...............................................................................................
Fourth
Applicant
LISINDA DORELL
BAILEY
.........................................................................................
Fifth
Applicant
FUNDISWA VIRGINIA
BIKITSHA
.............................................................................
Sixth
Applicant
MERLE
BRUINTJIES
...............................................................................................
Seventh
Applicant
JOHANNES PETRUS DE KLERK
….......................................................................
Eighth
Applicant
SHIRLEY
FORTUIN
.....................................................................................................
Ninth
Applicant
JEFFREY
HAARHOFF
.................................................................................................
Tenth
Applicant
JOHANNES
HENDRICKS
......................................................................................
Eleventh
Applicant
DOREEN ELAINE
JONKER
....................................................................................
Twelfth
Applicant
BULELANI
MEHLOMAKHULU
.......................................................................
Thirteenth
Applicant
SIPHOKAZI
SIWAYI
...........................................................................................
Fourteenth
Applicant
NTOMBOZUKO
TONYELA
..................................................................................
Fifteenth
Applicant
DAWID VAN
WYK
..................................................................................................
Sixteenth
Applicant
And
THE MINISTER OF JUSTICE
AND CORRECTIONAL
SERVICES
.........................................................................
First
Respondent
THE MINISTER OF TRADE AND
INDUSTRY
..................................................
Second
Respondent
THE NATIONAL CREDIT
REGULATOR
.............................................................
Third
Respondent
MAVAVA TRADING
279
..........................................................................................
Fourth
Respondent
ONECOR (PTY)
LIMITED
........................................................................................
Fifth
Respondent
AMPLISOL (PTY)
LIMITED
....................................................................................
Sixth
Respondent
TRIPLE ADVANCED INVESTMENTS
40
..........................................................
Seventh
Respondent
BRIDGE
DEBT
….....................................................................................................
Eighth
Respondent
LAS MANOS INVESTMENTS
174
..........................................................................
Ninth
Respondent
POLKADOTS PROPERTIES
172
............................................................................
Tenth
Respondent
MONEY BOX INVESTMENTS
232
...................................................................
Eleventh
Respondent
MARAVEDI CREDIT SOLUTIONS (PTY)
LIMITED
..................................................................................................................
Twelfth
Respondent
ICOM (PTY)
LTD
..............................................................................................
Thirteenth
Respondent
VILLA DES ROSES
168
...................................................................................
Fourteenth
Respondent
MONEY BOX INVESTMENTS
251
...................................................................
Fifteenth
Respondent
TRIPLE ADVANCED INVESTMENTS
99
.......................................................
Sixteenth
Respondent
FLEMIX & ASSOCIATED INCORPORATED
ATTORNEYS
...................................................................................................
Seventeenth
Respondent
ASSOCIATION OF DEBT RECOVERY
AGENTS
.............................................................................................................
Eighteenth
Respondent
And
SOUTH AFRICAN HUMAN RIGHTS
COMMISSION
.................................................................................................................
Amicus
Curiae
JUDGMENT: WEDNESDAY, 08 JULY 2015
DESAI J
[1] The facts underpinning this
application relate to the debt collection procedure employed by the
micro-lending industry and give
rise to significant disquiet, if not
alarm.
[2] The emoluments attachment order
(EAO) contemplated in section 65J of the Magistrates’ Court Act
32 of 1944 (The MCA) permits
the attachment of a debtor’s
earnings and obliges his or her employer (the garnishee) to pay out
of such earnings specific
instalments to the judgment creditor or his
or her attorney. The instalments are to be paid until the judgment
debt and legal costs
are paid in full.
[3] The fact that the debtor is a low
income earner is immaterial. His employer is compelled to deduct from
his monthly salary or
weekly wages the amount specified in the EAO
and pay it to the creditor for the debts allegedly owed by him. There
is no statutory
limit on the amount which may be deducted from the
earnings of a debtor in terms of an EAO. Nor is there a limit on the
number
of EAOs which may be granted against a particular debtor.
[4] The problems with regard to the
latter omissions are graphically illustrated in these proceedings. In
respect of the Second
Applicant herein, an EAO was granted for more
than half his salary. The Fourth Applicant was even less fortunate.
The clerk of
the court issued three EAOs on the same day attaching
almost her entire salary.
[5] Section 65A of the MCA provides
that following an enquiry by a magistrate into a debtor’s
financial position, the Court
may make such order as it deems “just
and equitable”. However, in respect of the present applicants,
the clerk of the
court issued EAOs attaching their earnings without
any evaluation of their ability to afford the deductions to be made
from their
salaries and without deciding whether or not the issuing
of an EAO itself would be just and equitable. The whole process of
obtaining
the EAOs was driven by the creditors without any judicial
oversight whatsoever.
[6] As Mr A Katz SC, who appeared with
Mr S Magardie on behalf of the applicants, correctly pointed out, the
most disturbing feature
of this matter is the manner in which the
respondents – the micro-lenders – forum shop for courts
which would entertain
the applications for judgment and the issuing
of EAOs. It is common cause that most of the orders were obtained
from courts located
a great distance from where the debtors resided
and worked. The debtors’ rights to access the courts and enjoy
the protection
of the law were clearly compromised in these
instances.
[7] Worse still, were the attempts by
some of the respondents’ counsel to defend such practices. I
shall revert to this aspect
in due course.
[8] Another feature of this matter
which warrants immediate noting is the manner in which the consents
to jurisdiction and the judgments
themselves were obtained. The
circumstances described by the parties – both the debtors and
the representatives of the micro-lending
industry – lead to the
irresistible conclusion that the consents obtained were not given
either voluntarily or on an informed
basis.
[9] This application focuses sharply on
the processes employed by the micro-lenders to secure repayment of
the loans. It was argued
on their behalf that their conduct falls
squarely within the relevant legislative framework and the law
pertaining to such matters.
Whether they are correct is the central
issue before me.
[10] The First Applicant in these
motion proceedings is the University of Stellenbosch Legal Aid
Clinic. It is a law clinic which
assists several thousand persons a
year with legal advice and representation. Its clients are
principally low wage earners in the
Cape winelands area and nearby
towns. In the course of its work the clinic encountered evidence of
the apparent large scale abuse
of EAOs by credit providers and
allegations of fraud in the process of the EAOs being issued.
[11] Moreover the clinic’s
uneducated and financially unsophisticated clients were frequently
the victims of predatory lending
practices by credit providers which
ultimately resulted in them defaulting on their payments. What
followed was an EAO and a cycle
of debt from which there was little,
if any, hope of escape.
[12] Relying upon documentary reports
and other research, First Applicant contended that as a result of the
abuse of the EAO system,
millions of people across the country are
trapped in the same situation.
[13] The First Applicant brings this
application in the public interest in terms of Section 38(1)(d) of
the Constitution, Act no.108
of 1996 (the Constitution). It may, of
course, also bring this application in its own interest as it relies
on the objective unconstitutionality
of a statute for the relief it
seeks (Section 38(1)(a)).
[14] The Second to Sixteenth Applicants
are clients of the first Applicant and bring this application in
order to protect and advance
their own rights and interests. They are
all adult women or men, mainly employed, if employed at all, as
general workers on the
lower end of the wage scale. Save for the
three who reside in Paarl or Macassar, they are all resident in
Stellenbosch.
[15] The first respondent is The
Minister of Justice and Correctional Services. Mr DO Potgieter SC
with Ms L Dzai appeared on his
behalf. Potgieter SC stated
unequivocally that save for the costs order sought against him, the
First Respondent will abide by
the decision of this court. In effect,
the State is not opposing the relief sought by the applicants.
[16] The Fourth to Eleventh and
Thirteenth to Sixteenth Respondents are described as “the
credit providers”. The Seventeenth
Respondent, Flemix, a firm
of attorneys, is their external debt collector and also acts on their
behalf in opposing these proceedings.
[17] Flemix, the Seventeenth
Respondent, specialises in debt collection and provides such services
to forty-five credit providers.
It has “150 000 active cases”
and the total value of the books that it collects is R1 597 585
832.00 (that is, over
one and a half billion rands). Flemix and the
credit providers on whose behalf it acts, are represented in these
proceedings by
Mr PF Louw SC and Ms Karrisha Pillay
[18] The Eighteenth Respondent in these
proceedings is the Association of Debt Recovery Agents (ADRA). It was
admitted at its own
instance with the agreement of the parties and
the consent of this court. ADRA is a non-profit organisation. It
purports to represent
the interests of the ‘formal’ debt
collection industry. Its counsel were Mr DE Van Loggerenberg SC and
Mr J Malan.
[19] Lastly, the South African Human
Rights Commission (HRC) sought admission as an amicus curiae. It was
admitted as such. Some
of the issues which arise in this matter fall
within their mandate to promote the respect of human rights and
monitor and prevent
rights abuses, especially in vulnerable
communities who are at greater risk of exploitation. They were
represented at the hearing
by Mr J Brickhill and Ms E Webber.
[20] The relief ultimately sought by
the applicants at the end of the hearing is largely contained in its
Notice of Motion. In the
said document it sought declarators, inter
alia, that:
“The words “the judgment
debtor has consented thereto in writing” which appear in
section 65J(2)(a) of the MCA…;
and section 65J(2)(b)(1) and
section 65J(ii) of the MCA are inconsistent with the constitution and
invalid to the extent that they
fail to provide for judicial
oversight over the issuing of an EAO against a judgment debtor.”
[21] They further sought an order
declaring invalid EAOs obtained with the written consent of the
debtors in jurisdictions alien
to them on the basis that it was not
permitted by legislation.
[22] The other principal relief sought
by the applicants related to the setting aside of the EAOs granted
against each of them,
it being contended that the orders were
unlawful and invalid.
[23] Pivotal to the debt collection
procedure employed by the respondents (those represented by Flemix)
was the written consent
of the debtor. Having defaulted on his or her
debt, the debtor was asked to sign, and did sign, a written consent
to judgment;
the payment of the debt by way of instalments; the
issuing of an EAO against him; and the jurisdiction of a court
located some
distance from his home.
[24] It may be that a debtor would
readily concede that he has defaulted on his payment of the debt.
However, it is most unlikely
that he would knowingly and willingly
agree to pay instalments he cannot afford, have the instalments
deducted from his salary
and agree that the matter be decided in a
court which he cannot hope to access should he wish to mitigate the
harsh consequences
of the EAO.
[25] The individual applicants alleged
that they either did not sign the consents, that the documents were
not explained to them
or that they signed the documents under
pressure from the debt collectors.
[26] The Flemix respondents are not in
a position to deny the allegations as none of the individual debt
collectors who are available
could recall their interactions with the
applicants. A third party is simply not in a position to deny the
allegation against the
debt collectors who cannot be traced.
[27] Ms AE Jordaan, an attorney, who
deposed to an affidavit on behalf of Flemix, suggests that the debt
collectors would not have
acted in the manner alleged by the
individual applicants because they have received extensive training
which requires them to “at
all times act scrupulously and
honestly as debt collectors”.
[28] It is an unassailable fact that a
debt collection agent is not remunerated for a “negative”
trace back. That means
if a debt collector fails to obtain the signed
consents of the debtor, he is not paid. The debt collector is
accordingly not independent
and is under pressure to obtain as many
signed consents as possible in order to be adequately remunerated.
The written consents
to EAOs are in the circumstances obtained by
debt collectors who “execute hundreds of instructions annually”
and who
have a vested interest in procuring the debtors consent.
[29] In the case of six of the written
consents to judgment, the witnesses in whose presence these documents
were required to be
signed were not physically present at the time
the individual applicants allegedly signed the documents. The Flemix
debt collectors
and “witnesses” unlawfully placed their
signatures on the consent to judgment documents ex post facto in
breach of
Rule 4(2) of the MCA. The debt collectors were clearly
neither scrupulous nor honest in this instance.
[30] Ms Jordaan contended that a
detailed income and expenditure statement was completed by the
individual applicants during their
consultations with the debt
collectors. None of these income and expenditure statements or any of
the debtors payslips –
which the Flemix debt collectors
training manual requires to be obtained from the debtors – were
made available to the court.
In all likelihood none exist.
[31] The suggestion that a debtor would
willingly agree to an EAO in terms of which almost half his salary is
deducted monthly,
is far-fetched and simply incapable of fair minded
support.
[32] The consents, it seems, were
signed neither voluntarily nor on an informed basis. Their validity
is accordingly open to serious
doubt. The same would apply to any
judgment or EAO issued in terms thereof. A court confronted with such
a document will of necessity
approach it with a great deal of
circumspection.
[33] The individual applicants were all
granted loans, often at interest rates of 60% per annum, from a “loan
originator”
who previously operated in the Stellenbosch area.
The loans were granted without reasonable steps being taken to assess
the applicants’
existing financial means and obligations prior
to concluding the credit agreement. The individual applicants were
granted the loans
with the repayments at times exceeding 50% of their
monthly income. The affordability assessment was either perfunctory
or non-existent.
The Second Applicant’s affordability
assessment indicates his sole expense to be groceries of R50 per
month. In the case
of the Ninth Applicant her only expense is
groceries of R100 per month. The affordability assessments in respect
of the Fourth
and Fifteenth Applicants reflect that they have no
expenses at all.
[34] The aforementioned loans were
advanced in breach of Section 81 of the National Credit Act, 34 of
2005 (NCA) which seeks to
prevent the granting of reckless credit
through affordability assessments.
[35] The Fourth Applicant’s
monthly net income at was R3759.82 at the time she was granted a loan
of R7982.00 which was to
be repaid in six instalments of R1986.00 per
month.
[36] The Eighth Applicant’s
monthly net income was R2260.00. He was a granted a loan of R6280.00
to be repaid in monthly instalments
of R1574.00.
[37] The Fourteenth Applicant’s
monthly disposable income at the time of the loan was R1221.53. She
was granted a loan of
R1842.00 to be repaid in six monthly
instalments of R513.00.
[38] The above reflects the nature and
extent of the loans advanced. These were quite obviously reckless
loans and unsurprisingly
the applicants defaulted on their
repayments.
[39] Legislation provides no statutory
limit on the EAOs which may be granted against a debtor or the amount
which may be deducted
from his or her salary or wages. Significant
amounts of a debtor’s net salary are deducted from his or her
earnings in terms
of the EAOs. There is no “sufficient reason”
for the unrestricted deprivation of a debtor’s earnings and
means
of support.
[40] The attachment of a debtor’s
salary or wages to secure payment of a debt amounts to an attachment
of property. The depletion
of a debtor’s income as a
consequence of it being attached to pay a judgment debt may lead to
the subsequent loss of other
property such as a house or movable
assets owned by the debtor. The reduction of a low earning debtor’s
income has a direct
impact on his right to shelter, health and family
life.
[41] The individual applicants are a
group of low income earners living in Stellenbosch, supporting
themselves and their families
on salaries of between R1200.00 and
R8000.00 per month. The group includes farmworkers, cleaners and
security guards. For debtors
who work in low paid and vulnerable
occupations, their salaries or wages are invariably their only asset
and means of survival.
A substantial reduction of this asset has the
potential of reducing human dignity. The State, if it is a party to
the grant of
the EAO, has the duty to refrain from conduct which
results in the debtor being left impoverished or facing a life of
“humiliation
and degradation” (See: Minister of Home
Affairs and Others v Watchenuka and Another 2004(4) SA326 paras 27 –
32). The
ability of people to earn an income and support themselves
and their families is central to the right to human dignity (See:
Section
10 of the Constitution). Any court order or legislation which
deprives a person of their means of support or impairs the ability
of
people to access their socio-economic rights constitutes a limitation
of their right to dignity.
[42] The Constitution provides that
when interpreting the Bill of Rights, a court may consider foreign
law (See Section 39(1)(a)).
In this case a comparison between South
African and foreign law highlights the shortcomings of the EAO scheme
established by the
MCA and relied upon, and exploited, by the Flemix
respondents. The foreign jurisdictions recognise the problems which
arise from
the abuse of EAOs by unscrupulous creditors. These
jurisdictions address the problem by employing protective measures at
the time
when the attachment order is issued.
[43] The court’s attention has
been directed by Mr P Brickhill and Ms E Webber to the solutions
adopted in five jurisdictions.
[44] In the United States of America,
federal law places a cap on the amount of an employee’s
earnings that may be garnished
in any one week at only 25% of a
debtor’s after-tax income may be attached per week.
[45] In Germany, a limit is also
imposed upon the amount of income that may be attached. Detailed and
precise tables prescribe the
amount of earnings that can be attached
according to the band of income into which the debtor’s
earnings fall and the number
of his or her dependents. The tables are
revised regularly and the system is progressive in that a higher
proportion of earnings
is attached when individuals earn more. In
addition, some forms of remuneration, such as annual bonuses and
certain security payments,
cannot be attached. Other special
circumstances, such as disability, are also taken into account and
allow a debtor to retain a
larger proportion of his or her salary.
[46] In Australia, when the earnings of
a debtor are attached, the debtor must be left with a minimum amount
of $447.70, adjusted
regularly.
[47] In Rwanda, legislation imposes a
cap of one third of the salary of a debtor. Only this proportion may
be attached.
[48] In England and Wales, legislation
provides for a Protected Earnings Rate (PER). The PER is the amount
of money that is required
by the debtor to support himself and his
family. It includes expenses such as food, rent, mortgage,
electricity and gas. The exact
amount of the PER is determined by a
court or a court official, taking into account the circumstances of
the individual.
[49] These provisions place
restrictions upon the officials who issue the EAOs and do not require
a debtor to subsequently initiate
a review or challenge. Rather, the
needs of the debtor are considered from the beginning. The same
result is achieved by requiring
judicial oversight when each EAO is
issued.
[50] If I understood Louw SC correctly
he was not averse to the introduction in South Africa of legislation
to the effect that only
a proportion of the earnings of a debtor may
be attached or that a cap be placed on the amount that can be
attached. Katz SC did
not express any clear view in this regard.
Perhaps it was not necessary for him to do so as he argued strongly
for judicial oversight.
In any event, the objective conditions in
this country with its vast disparities of wealth may result in a
“cap” or
the proportion of a debtor’s salary being
attached, impacting differently on the various sectors of our
society. If that
proposition is correct, judicial oversight would be
the only remaining mechanism for dealing with EAOs without
compromising the
dignity of the poor.
[51] The right of access to courts is
fundamental to the rule of law in a constitutional state. The Flemix
respondents are obtaining
judgments and EAOs against the applicants
in courts far removed from their homes and places of work and in
places which they could
not hope to reach, the right to approach the
courts was seriously jeopardised, if not effectively denied. This
violation of the
rights of debtors to access courts and enjoy the
protection of the law was the product of the Flemix respondents’
forum shopping
for courts which would entertain their applications
for judgments and the issuing of EAOs. As Katz SC contended, quite
correctly
in my view, this is the most disturbing feature of the debt
collecting processes employed by the micro-lenders.
[52] The applicants reside in
Stellenbosch but the judgments were granted and EAOs issued in
Kimberley, Winberg and elsewhere. Their
employers are also in
Stellenbosch whereas Section 65J of the MCA expressly states that the
EAO must be issued from the court of
the district in which the
employer of the judgment debtor resides, carries on business, or is
employed.
[53] Section 65J creates some
safeguards for the implementation of an EAO against a judgment
debtor, such as the right to dispute
the existence or validity of the
order or the correctness of the balance claimed and the power of the
court to set aside or amend
an EAO on good cause. These protections
are effectively meaningless when the person whose salary or wage has
been attached under
an EAO, his or her employer is unable to access
the court which issued the order. In order to obtain the said
judgments and EAOs
the Flemix respondents relied upon the consents.
The circumstances in which the consents were obtained is referred to
earlier on
in this judgment.
[54] Flemix and ADRA contend that their
conduct in using the provisions of Section 45 of the MCA for the
purposes of “navigating
around” magistrates’ courts
which would allegedly “simply refuse to entertain Section 58
matters”, does
not constitute forum shopping.
[55] They argue that it is “well-nigh
impossible to obtain judgments” in certain magistrates’
courts. Flemix refers
to examples from 23 listed magistrates’
courts, which do not include the Stellenbosch Magistrates’
Court, where the
employers of the individual applicants reside. If
litigants are unhappy with the outcome of the matters in a particular
magistrates’
court, there are several lawful remedies available
to them for redress.
[56] Again, as Katz SC suggests, the
assertion by Flemix and ADRA that their conduct was not forum
shopping but a means of ensuring
that their clients’ (the
micro-lenders) were afforded their constitutional right of access to
courts, is extraordinary. The
Constitutional Court (see: Chirwa v
Transnet Ltd and Others 2008 (4) SA (CC) at 124) and the Supreme
Court of Appeal (see; S v
J (695/10)
[2010] ZASCA 139
at para 38)
have criticised the practice of litigants engaging in forum shopping
by initiating proceedings in courts of their choosing
for the purpose
of convenience or procedural advantage.
[57] The conduct of the Flemix
respondents, and I suppose Flemix itself, in using Section 45 of the
MCA to bypass courts in areas
in which the debtors, or their
employers, reside, in order to obtain judgements in courts which
would otherwise not have jurisdiction
and which in any event would
have no jurisdiction to issue an EAO against that debtor is a patent
case of forum shopping. It is
forum shopping within the ordinary
meaning of that term.
[58] The fact that the teams of lawyers
acting on behalf of Flemix and ADRA, consisting of experienced senior
and junior counsel,
have argued against that conclusion reflects
poorly upon them. Incidentally, ADRA was founded inter alia to uphold
the ethical
standards of the debt collectors.
[59] Flemix, a firm of attorneys, is
unduly embedded in its clients’ case. It has deposed to
affidavits on behalf of its clients,
the micro-lending industry. It
may have properly defended the validity of the impugned provisions of
the Act or its clients’
role in the industry, but its role in
“navigating” around courts to obtain judgments against
the debtors is susceptible
to criticism and may be in breach of their
professional ethics. Their professional body is best placed to decide
this matter.
[60] The Flemix respondents do not
dispute that the EAOs issued to the Second to Ninth and the Twelfth
to Fifteenth Respondents
were all issued in magistrates’ courts
other than those in which the employers of the said applicants reside
or carry on
business.
[61] The EAOs against these applicants
were therefore issued in breach of the statutory requirements
contained in Section 65J (1)(a)
of the MCA.
[62] The Flemix respondents have no
answer to the applicants’ contention that no other court other
than the court in the area
in which the garnishee (the employer)
resides is entitled to issue an EAO. This is clear from Ms Jordaan
statement:
“It matters not where judgment
was obtained – for purposes of the EAO system the only court
that has jurisdiction to
issue an EAO is the court which is closest
to the employer.”
[63] Louw SC, in oral argument,
conceded that the relevant EAOs had to be set aside.
[64] As no defence whatsoever has been
raised in respect of paragraph 4 of the Applicant’s Notice of
Motion – the setting
aside of the EAOs against the individual
applicants - it follows that the said EAOs must be declared unlawful
and set aside.
[65] That, however, is not the end of
this matter. This application relates to twelve EAOs and all were
irregularly, if not unlawfully,
obtained. Ms Jordaan, the attorney
for the Flemix respondents, states that there are 150 000 active
cases. In the light of how
the debt collecting agents secured the
consents, the forum shopping involved and the fact that all the EAOs
in this matter were
unlawfully obtained in the wrong jurisdiction, it
is safe to assume that thousands, if not tens of thousands from Ms
Jordaan’s
150 000 cases involving ordinary working people in
debt, are having significant portions of their salaries or wages
deducted based
on unlawfully obtained EAOs.
[66] I am not at liberty to inquire
into any, or all, of those orders. Yet I cannot in good conscience
ignore their plight. I trust
that the Flemix respondents and Ms
Jordaan will not pursue EAOs obtained against the debtors in the
wrong jurisdiction. That may
in fact be illegal. The First, Second
and Third Respondents, the HRC and the Law Society must endeavour to
ensure that appropriate
measures are in place to monitor the
situation.
[67] The International Labour
Organisations’ Protection of Wages Convention (the Convention)
places an obligation on each
state to prevent the violation of
socio-economic rights by private actors in its jurisdiction. While
South Africa is not a party
to the Convention (which came into force
in 1952) 97 states have ratified it. As a consequence the Convention
has probably reached
the status of international customary law which
is binding on all states. At the very least, the Convention’s
provisions
are highly persuasive.
[68] The Convention contains a number
of provisions that are aimed at protecting debtors. For example, it
provides that:
“Wages may be attached or
assigned only in a manner and within limits prescribed by national
laws or regulations.
Wages shall be protected against
attachment or assignment to the extent deemed necessary for the
maintenance of the worker and his
family.”
[69] In addition, the Convention
requires that the judiciary or another impartial body capable of
providing an adequate remedy must
supervise the attachment of wages
and that the laws or regulations of the states shall prescribe
appropriate penalties and remedies
for violations of the provisions
of the Convention.
[70] The ILO’s recommendation
concerning the Protection of Wages contains similar restrictions to
those in the Convention.
It provides inter alia that:
“All necessary measures should be
taken to limit deductions from wages to the extent deemed to be
necessary to safeguard the
maintenance of the worker and his family…
. Before a decision for such a deduction is taken, the worker
concerned should
be given a reasonable opportunity to show cause why
the deduction should not be made.”
[71] Similarly, the UN Guiding
Principles on Business and Human Rights (the RUGGI principles) place
a duty upon the state to take
measures to prevent the abuse of human
rights in their territory by business enterprises. States are obliged
to reduce legal and
practical barriers that may deny individuals a
remedy.
[72] The Human Rights Council
resolution 26/22 of 15 July 2014 raises the concern of legal and
practical barriers to remedies for
business related human rights
abuses, which may leave those aggrieved without an effective remedy,
through judicial or non-judicial
avenues.
[73] While reports of the UN General
Assembly and Human Rights Council are not binding, they are highly
persuasive and generally
express the current consensus among States.
[74] It seems to be firmly established
in international law that states have a duty to protect their
citizens against the abuse
of human rights by business enterprises in
their territory. Where such abuses do occur, states have a duty to
provide victims with
an effective remedy. These duties should be
taken into account in the interpretation of the provisions of the MCA
and the Constitution.
[75] The South African EAO system
established by the MCA fails to comply with the principles set out
above in that:
1. EAOs may be issued by a clerk of the
court without the involvement of a judicial officer.
2. Workers are not given an opportunity
to make representations before an EAO is issued.
3. When an excessive portion of a
debtor’s earnings is attached, the remedy provided by the MCA
is the opportunity to review
and set aside the order. However, this
will not be an effective remedy if Section 45 of the MCA is
interpreted such that it allows
indigent debtors to consent to the
jurisdiction of distant courts.
[76] The Constitutional Court has
emphasised the general principle that there must be judicial
oversight where an applicant seeks
an order to execute against or
seize control of the property of another person. This principle has
been reiterated in a number
of Constitutional Court judgments.
[77] In Chief Lesapo v The North West
Agricultural Bank and Another
[1999] ZACC 16
;
2000 (1) SA 409
(CC) the court stressed
that, not only is a person entitled to have a legal dispute resolved
by an independent court or tribunal,
but “any constraint upon a
person or property shall be exercised by another only after recourse
to a court of law”
(see: Chief Lesapo at para 16).
[78] The Constitutional Court in Jaftha
v Schoeman and Others
[2004] ZACC 25
;
2005 (2) SA 140
(CC) dealt with the
constitutional validity of section 66(1)(a), which provided for the
sale in execution of property (in this
case people’s homes) in
order to satisfy a debt. The court in effect held that section
66(1)(a) of the MCA was unconstitutional
and invalid due to its
failure to provide for judicial oversight over sales in execution
against the immovable property of judgment
debtors.
[79] In Gundwana v Steko Development CC
and Others
2011 (3) SA 608
(CC) the constitutional Court reasserted
the constitutional requirement of judicial oversight of execution
against the property
of the individual.
[80] The principles in the Lesapo,
Jaftha and Gundwana cases are clearly applicable when EAOs are
issued. Those cases dealt with
sales in execution of property in
order to satisfy a judgment debt. EAOs are execution orders that are
made against a salary or
wages of an individual in order to satisfy a
judgment debt. In Jaftha and Gundwana the impugned sections prescribe
a process for
execution similar to the process prescribed in section
65J(2) of the Act. In all these cases the absence of judicial
supervision
and the consequences of the execution process infringes
several of the debtors’ constitutional rights. As I have
already
stated, the attachment of an excessive portion of a debtor’s
earnings infringes on the right of the debtor and her family
to
dignity, as well as their rights to access to healthcare, food,
education and housing.
[81] In all of the above cases the
debtors are vulnerable and necessarily over indebted. In this context
there is a real risk of
abuse by unscrupulous creditors. In the light
of the obvious similarities, the arguments for judicial oversight in
Lesapo, Jaftha
and Gundwana apply with equal force to the issuance of
EAOs.
[82] The respondents claim that it is
simply not possible for every execution order to be overseen by a
magistrate and that the
process provided by the impugned provision
facilitates the collection of debt in the most viable manner. And
they assert that the
scheme is constitutionally valid because it
allows the debtor to have the execution order subsequently varied or
set aside.
[83] These grounds of justification
were held to be unsound or insufficient by the Constitutional Court
in the cases cited.
[84] The process of issuing an EAO
requires an evaluation of the amount of money to be attached per
month as compared to the amount
needed by the debtor to support
herself and her family. On the reasoning in Gundwana, judicial
oversight over the issue of an EAO
must be mandatory (rather than
being subject to the discretion of the clerk of the court) and must
occur when the execution order
is issued (not subsequently, when an
attempt might be made to have the execution order varied or set
aside).
[85] Section 65J(2)(b)(i) and section
65J(2)(b)(ii) of the MCA are in the circumstances constitutionally
invalid to the extent that
they allow for EAOs to be issued by a
clerk of the court without judicial oversight. This is so both with
regard to international
law and to the current jurisprudence of the
Constitutional Court.
[86] The issue of jurisdiction arises
in the context of Prayer 3 of the applicants’ Notice of Motion
and the counter-application
brought by the Flemix respondents. In
effect it seeks a declarator that section 45 of the MCA does not
permit a judgment debtor
to consent in writing to the jurisdiction of
a magistrate’s court other than the one in which that debtor
resides.
[87] The legislative provisions that
are relevant to the question of jurisdiction are the following:
1. Section 45 of the MCA provides that
in certain circumstances parties may consent to the jurisdiction of a
court to determine
any action that is otherwise beyond its
jurisdiction.
2. Section 65J(1)(a) of the MCA which
provides that an EAO must be issued from the court of the district
that the employer of the
judgment debtor resides, carries on business
or is employed.
3. Section 90(2)(a)(k)(vi)(bb) of the
NCA provides that the provision of a credit agreement is unlawful if
it expresses on behalf
of the consumer a consent to jurisdiction of
any court seated outside the jurisdiction of a court in which the
consumer resides
or works.
4. Section 91 of the NCA provides that
a credit provider must not directly or indirectly require or induce a
consumer to enter into
a supplementary agreement that contains a
provision that would be unlawful if it were included in a credit
agreement.
[88] Sections 45 and 65J of the MCA
cannot be read together. Section 45 provides that the parties may
consent to the jurisdiction
of a court that does not ordinarily have
jurisdiction. Section 65J (1)(a) stipulates that EAOs may be issued
from the court of
the district in which the employer of the judgment
debtor resides, carries on business or is employed. The narrow
provisions of
section 65J cannot be reconciled with the broad
provisions of Section 45.
[89] It is clear from the heading of
section 65J (“Emoluments attachment orders”) that the
section is intended to cover
a specific regime to govern EAOs. The
cluster of provisions in this section covers all of the aspects
relevant to EAOs.
[90] It is a well-established principle
in law that where two provisions are contradictory, the provision
that is specific trumps
the provision that is general. In this case,
the provisions of section 65 are specific in that they govern
emoluments attachment
orders. Accordingly, Section 65J quite clearly
trumps section 45.
[91] It seems to me that the protection
of consumers is clearly the underlying rationale to the limitation of
jurisdiction in sections
90 and 91. By contrast, section 45 takes a
broad approach to jurisdiction, which directly contradicts and
undermines sections 90
and 91. It undermines the objects or purposes
of the NCA. The NCA’s limitation of section 45 is in the
circumstances necessarily
implied.
[92] The fact that the NCA’s
jurisdiction provisions trump section 45 is also supported by the
following:
1. The interpretative principle that
states that when the provisions of a later Act are inconsistent with
the provisions of an earlier
act, the later act supersedes the
earlier provisions. The NCA came into force on 1 June 2006, while
section 45 of the MCA came
into force in July 1945.
2. The NCA establishes a protective
regime aimed at preventing the exploitation and abuse of consumers.
The broad consent provided
for in section 45 of the MCA fails to
protect consumers. In the circumstances it is clear that section 45
of the MCA is inconsistent
with sections 90 and 91 of the NCA and is
trumped by the latter provisions.
[93] If section 45 is properly
interpreted in the context of the MCA and in the light of the Bill of
Rights, it does not apply to
causes of action based on agreements
covered by the NCA. It follows that when a debtor admits that he or
she is liable for a debt
and consents to an EAO, section 45 does not
permit that debtor to consent to the jurisdiction of a court outside
of the district
where the debtor works or resides.
[94] The court places on record its
indebtedness to the amicus curiae and their counsel Mr Brickhill and
Ms Webber for their contribution
to these proceedings.
In the result IT IS ORDERED THAT:
1. The emolument attachment orders
issued against the Second to Sixteenth Applicants in favour of the
Fourth to Sixteenth Respondents
and set out in annexure A to the
Notice of Motion, are declared to be unlawful, invalid and of no
force and effect.
2. It is declared that:
2.1 the words “the judgment
debtor has consented thereto in writing” in section 65J(2)(a)
of the Magistrates’
Act 32 of 1944 (“the Magistrates’
Court Act”) and;
2.2 section 65J(2)(b)(i) and section
65J(2)(b)(ii) of the Magistrates’ Court Act, are inconsistent
with the Constitution of
the Republic of South Africa Act, 1996 (“the
Constitution”) and invalid to the extent that they fail to
provide for
judicial oversight over the issuing of an emolument
attachment order against a judgment debtor.
3. It is declared that in proceedings
brought by a creditor for the enforcement of any credit agreement to
which the National Credit
Act 34 of 2005 (“the
National Credit
Act&rdquo
;) applies, section 45 of the Magistrates’ Courts Act
does not permit a debtor to consent in writing to the jurisdiction of
a magistrates’ court other than that in which that debtor
resides or is employed.
4. The First to the Third Respondents,
the HRC, the Law Society and the Advice Offices are urged to take
whatever steps they deem
necessary to alert debtors as to their
rights in terms of this judgment.
5. The Eighteenth Respondent’s
application to strike out is dismissed with costs.
6. The Seventeenth and Eighteenth
Respondents’ counter-applications are dismissed with costs.
7. Fourth to Eighteenth Respondents
(excluding the Twelfth Respondent) are ordered to pay the Applicants’
costs, including
the costs of two counsel, jointly and severally.
8. A copy of these proceedings is to be
forwarded by the First Applicant to the Law Society of the Northern
Province for it to determine
whether Ms AE Jordaan and Flemix &
Associates Incorporated have breached their ethical duties
particularly with regard to forum
shopping to secure emolument
attachment orders.
DESAI J