A “garnishee order” issued in a jurisdiction other than where you live or work is unlawful, and a garnishee order issued by a clerk of the court is “unconstitutional”. These are the far-reaching implications of a High Court ruling handed down by Judge Siraj Desai this week.
If you have a garnishee order against you (the proper name being an “emoluments attachment order” or EAO), you need to check where it was issued, in light of the ruling.
Hailed as “a victory for the poor”, the ruling not only gives relief to 15 low-wage earners whose EAOs were found to have been obtained unlawfully, it also provides a declarator (legal clarity) that sections of the Magistrates’ Court Act (MCA) are inconsistent with the Constitution and invalid, because they fail to provide for “judicial oversight” over the issuing of an EAO against a debtor who has a judgment against him or her.
Judicial oversight refers to the scrutiny of a magistrate, as opposed to a clerk of the court rubber-stamping the order. A magistrate is supposed to hear an EAO application and consider whether or not the debtor can afford the amount the creditor wants deducted from the debtor’s income.
The judgment states that the EAO system established by the MCA fails to comply with principles in international law, in that:
* EAOs may be issued by a clerk of the court without the involvement of a judicial officer (a magistrate);
* Debtors are not given the opportunity to appear in court before an EAO is issued; and
* 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 is not an effective remedy if the MCA is interpreted to mean that to do so, a debtor must go to the court in which the order was issued, which could be far away from where the debtor lives.
Desai’s ruling must be confirmed by the Constitutional Court, but if the respondents apply for leave to appeal, it will halt the application for confirmation.
Flemix & Associates Incorporated Attorneys, the main respondent in the case, plans to apply for leave to appeal “certain aspects of the judgment”, Alanza Flemix-Jordaan, one of the firm’s directors, said this week.
If Flemix is not granted leave to appeal and the Constitutional Court does confirm the judicial oversight aspect of the judgment, it is unlikely to apply retrospectively, attorney Stephen Logan says.
No one knows exactly how many EAOs are in force in South Africa, but there are estimated to be about 2.5 million, according to Clark Gardner, the chief executive of Summit, a company that offers audit services to employers who have employees with EAOs, and to individuals with EAOs.
Gardner says, based on his experience, about 40 percent of EAOs are obtained in the wrong jurisdiction.
The case Desai presided over was brought by the University of Stellenbosch’s Legal Aid Clinic on behalf of 15 low-wage earners who had EAOs issued against them in courts far from where they live or work, effectively denying them the right to access the courts.
The debtors had all given consent to the judgments and to the issuing of an EAO in a court far from their homes. On this matter, Desai says it may be that they conceded they had defaulted, but “it is most unlikely that they would have knowingly and willingly agreed to pay instalments they couldn’t afford, have the instalments deducted from their wages and agree to the case being decided in a court that they could not access should they wish to mitigate the harsh consequences of the EAO”.
In his judgment, Desai says the facts underpinning the application “give rise to significant disquiet, if not alarm”.
“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 debtor.”
One of the applicants in the case has an EAO of more than half his salary, and another had three EAOs issued against her on the same day, by a clerk of the court, attaching almost her entire salary.
The judgment states that the individual applicants were all granted loans “often at interest rates of 60 percent a year”. It says t he affordability assessment was either perfunctory or non-existent. One assessment indicated that the consumer’s sole expense was groceries of R50 a month. Some applicants’ assessments reflected no expenses at all. “These were quite obviously reckless loans and, unsurprisingly, the applicants defaulted on their payments,” the judgment says.
The case highlights a flaw in the debt collection system that allows for the collecting of credit that was extended recklessly. Reckless lending is unlawful under the National Credit Act (NCA). A magistrate is a debtor’s only hope of redress in the event of reckless lending, unless the consumer is in debt counselling, in which case the debt counsellor must check for reckless lending and report it to a magistrate or the National Consumer Tribunal.
Businesswoman Wendy Appelbaum, who was instrumental in bringing the application, was “thrilled” by the verdict. “It has ramifications for those not represented in this case, and it was worth all the time and energy invested in it. But it shouldn’t be that private individuals have to bring a case like this. Government should be looking after the poor,” she says.
Odette Geldenhuys, a senior associate at Webber Wentzel and the attorney who acted pro bono for the University of Stellenbosch, says the application to the Constitutional Court is “something to look forward to”. The Constitutional Court has “the power to go even wider and look at the range of socio-economic rights that have been impacted by the abuse of EAOs”.
WHAT THE EAO RULING MEANS FOR YOU
If you have an emoluments attachment order (EAO) that was issued in a Magistrate’s Court in a jurisdiction far from where you work or live, the ruling by Judge Desai this week means you may be able to get it rescinded.
While the judgment is only binding in the Western Cape (where it was handed down), it has “persuasive authority” in all jurisdictions, attorney Stephen Logan says.
To rescind a court order is to cancel or revoke it.
The only way to obtain a rescission is by way of an application in the court where the default judgment was issued. Logan says you can also go to your nearest High Court and apply for the judgment (default judgment or consent to an EAO) to be taken on review.
Having an EAO rescinded does not expunge your debt. You remain liable for the debt. This is because a default judgment is valid for 30 years; it does not prescribe. A debt prescribes, or lapses, only if your creditor does not institute civil proceedings against you within three years of your last payment.
An EAO can be reinstated within the 30-year judgment term.
WHAT IS AN EAO?
A garnishee order is the common (and incorrect) name for an emoluments attachment order (EAO). An EAO is a court order that compels your employer to deduct from your wages or salary money that you owe a creditor who has taken default judgment against you. EAOs are a popular means of collecting unsecured debt from you rather than attaching property. If you own property, creditors could attach it. Instead, they attach your wages or salary. For debtors who work in low-paid jobs, their wages are invariably their only asset and means of survival.