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Cape Town - The application by the University of Stellenbosch Legal Aid Clinic and 15 individuals regarding garnishee orders continues in the Cape Town High Court this week.
The application is to determine whether it is constitutionally permissible for a person’s wage or salary to be attached, without any form of judicial oversight, in order to satisfy a judgment debt.
Most of the individuals bringing the application are impoverished and employed as farmworkers, cleaners and general workers at the university and in the greater Stellenbosch area. They have very basic or non-existent levels of financial literacy.
READ: Trapped by garnishee fraud
The respondents in the application by the Stellenbosch Legal Aid Clinic and others are the minister of justice and correctional services, the minister of trade and industry, the National Credit Regulator (NCR), Mavava Trading, Onecor, Amplisol, Triple Advanced Investments, Bridge Debt, Las Manos Investments, Polkadots Properties, Money Box Investments, Maravedi Credit Solutions, Icom, Villa des Roses, Money Box Investments, Triple Advanced Investments and Flemix & Associates.
The two government departments are respondents, because the application is asking for amendments to sections in the Magistrate's Court Act dealing with garnishee orders as well as amendments to the National Credit Act.
The other respondents are the creditors who obtained the garnishee orders against the individual applicants and the legal firm which allegedly acted on behalf of all the creditors.
The applicants allege, among other things, that in many instances garnishee orders had been obtained in Magistrate's Courts outside the area of jurisdiction relating to where the loans had been obtained.
Netwerk24 reported that the well known business woman and owner of a wine estate Wendy Appelbaum discovered that some of her workers were battling with garnishee orders.
"This is not about me, but about people who have been greatly impaired by an unfair system," she told Netwerk24 outside court. "It is about providing them with access to the courts and laws in order to recover their dignity."
According to Adv. Anton Katz SC, who appears on behalf of the applicants, the case relates to people's constitutional rights and that the Magistrate's Courts are not the appropriate place to obtain these types of orders. He also disputes the process by which such orders are obtained.
Netwerk24 also reported that Marius Jonker, CEO of the Association of Debt Recovery Agents (ADRA) said this case could have far reaching consequences.
Apparently there is currently no unanimity regarding the interpretation of the process and provisions are not applied consistently by the courts.
ADRA has recently become part of the case, because Jonker said it wants to help the court in the investigation and in finding the correct interpretation of the various provisions., according to Netwerk24.
Financially unsophisticated consumers
"Consumers who are under-educated, financially unsophisticated and employed in the lower end of the wage scale, are also particularly vulnerable to incurring debt as a result of predatory lending practices and reckless lending by credit providers," according to the University of Stellenbosch Legal Aid Clinic, Fin24 reported in December.
"When they are unable to repay the debt, the issuing of emoluments attachment orders, without judicial oversight and in the absence of a limit on the amount of the deductions which can be made from a debtor’s salary, can trap people in a vicious cycle of debt from which there is little, if any hope of escape."
In the view of the University of Stellenbosch Legal Aid Clinic the rule of law itself is implicated when court orders are issued by administrative officials without judicial oversight and without due regard to the constitutional rights of persons affected by their orders.
READ: Garnishee order system 'deeply flawed'
Garnishee
An employer (garnishee), for instance, on whom such an emoluments attachment order (EAO) has been served, is obliged to make the deductions required by the EAO from the judgment debtor’s salary or wages. These amounts must then be paid over to the judgment creditor or its attorney.
The relevant legal provisions do not provide for any form of prior enquiry by a court into whether the judgment debtors can actually afford the deductions to be made from their salaries in terms of the EAO.
The Magistrates’ Court Act also does not require a magistrate to authorise the issuing of an EAO against a judgment debtor who has consented in writing to an EAO.
The entire process of preparing, issuing and serving an EAO is determined by the judgment creditor, without judicial oversight, according to the applicants.
The University of Stellenbosch Legal Aid Clinic and the individual applicants would, therefore, like amendments to the law to allow for judicial oversight over the issuing of EAOs.
The application, is, however, not seeking the abolishment or limiting of EAOs.
The applicants would also like a declaration regarding the section of the Magistrates Court Act, which allows parties in dispute, under certain circumstances, to consent to the jurisdiction of a court other than that which will have jurisdiction in the normal course. The applicants seek that this section cannot be used to obtain EAOs in courts far away from employers who have to administer the EAOs.
READ: Major garnishee fraud uncovered
Public importance
According to the University of Stellenbosch Legal Aid Clinic the provisions and application of the law being challenged in this application is of significant public importance.
"The application raises significant constitutional issues relating to an endemic and continuing failure of justice arising from the manner in which EAOs are granted by clerks of Magistrates Courts," according to the applicants.
"This issue has implications for the livelihoods and very survival of vulnerable low income debtors, whose wages or salaries are subject to an EAO."
The University of Stellenbosch Legal Aid Clinic is concerned that the current EAO process is impacting negatively on many thousands of debtors, and thus negatively on the economy.
The University of Stellenbosch Legal Aid Clinic said it also "shares the widespread public concern about evidence of endemic abuse of EAOs by credit providers as well as allegations of systemic fraud and corruption in the process of issuing of EAOs".
The department of justice has indicated that it will oppose the matter, while the department of trade and industry and the NCR have filed notices of their intention to abide by the court's decision. Maravedi Credit Solutions has indicated that it will not oppose the relief sought.
The rest of the respondents have also indicated that they are opposing the application.
ALSO READ: Debtors to fight garnishee orders in court
