Courts of Law Amendment Bill

Purpose of Bill Amends various sections of the Magistrates’ Courts Act, 1944 (Act No. 32 of 1944)(MCA) mainly — to address alleged abuses in the civil debt recovery system; and to provide for the rescission of judgment where the judgment debt has been settled Amends the Superior Courts Act, 2013 (Act No. 10 of 2013) by the insertion of a new section 23A which provide for the rescission of judgment with the consent of a judgment creditor and for the rescission of judgment where the judgment debt has been settled

Background in respect of amendments to the MCA There is widespread abuse of the civil debt recovery system in the magistrates’ courts Department of Trade and Industry’s (dti) removal of adverse consumer credit information project, includes proposals for the rescission or abandonment of judgments where the debt has been settled. Transfer of regional courts judgments to district courts for the debt collection process

Background in respect of amendments to the SCA Rescission or abandonment of judgments forms part of dti’s removal of adverse credit information project MCA and Rules provide for rescission of judgments with consent of judgment creditor but there are no substantive provisions in the SCA dealing with rescission of judgment with consent of the judgment creditor The rescission of judgments in the High Courts under Uniform Rules 31(2) and 42 are based on the common law – applicant must show good cause, which includes the existence of a bona fide defence

Background in respect of amendments to the SCA continued/ Court application to declare Uniform Rule 42 unconstitutional - unequal application of the law –MCA and Rules deal with the rescission of judgment with the consent of the judgment creditor, no similar provisions in respect of the High Court - challenge abandoned but it seems prudent to amend the common law position Different High Court judgments – RFS Catering Supplies – judgment rescinded Vilvanathan – judgment not rescinded Kalikhan – court urged to develop common law meaning of the words “on good cause shown” to include where the judgment debt has been settled and the judgment creditor has consented to the rescission. Court dismissed the application but identified the need for intervention by the legislature

Clause 1 Insertion of definition Definition of the National Credit Act, 2005 inserted in the MCA

Clause 2 Amendment of section 36 The dti suggested an automatic procedure to enable judgment debtors to rescind a judgment where the judgment debt has been settled, in line with section 71A of the NCA, but reports of fraudulent rescissions have emerged and a automatic rescission process does not seem appropriate A simple application procedure is inserted which provides for the rescission of a judgment where the judgment debt has been settled— Application is brought by way of a prescribed form; May be heard in chambers; No cost order, unless it is opposed, in which case the court may make a cost order it deems fit

Clause 3 Amendment of section 45 Section 45 provides for parties to consent to the jurisdiction of a court. The original purpose was to submit to the jurisdiction of a lower court although the amount of the claim exceeded the lower court’s jurisdiction. The proviso is interpreted to allow consent to jurisdiction notwithstanding that the court does not have jurisdiction in terms of sections 28 and 29 Provision is abused by requiring consumers to consent to the jurisdiction of a court far away from where the consumer stays, carries on business or is employed, making it difficult for that consumer to challenge a judgment or order made at that court

Clause 3 Amendment of section 45 continued/ The amendment of section 45 provides that— parties may consent to the jurisdiction of either the court for a district or court for a regional division, to determine any action or proceeding otherwise beyond its jurisdiction in terms of section 29(1) Consent given in proceedings in terms of section 57, 58, 65 or 65J by a defendant or judgment debtor to the jurisdiction of a court that does not have jurisdiction in terms of section 28, is of no force and effect

Clause 3 Amendment of section 45 continued/ University of Stellenbosch Legal Aid Clinic and 15 Others v Minister of Justice and Correctional Services and 16 Others – Court declared that section 45 does not permit a debtor to consent to the jurisdiction of a magistrate’s court other than that in which the debtor resides or is employed in respect of the enforcement of a credit agreement in terms of the NCA

Clause 4 Amendment of section 57 Section 57 - admission of liability and undertaking to pay the debt in instalments The court must enter judgments and authorise instalment orders, and not the clerk of the court More documentary proof of income and expenditure of debtor is required If the claim is based on the NCA, it must be dealt with in terms of that Act Court may authorise an EAO if the defendant is employed and the court is satisfied that the defendant will have sufficient means left for his or her maintenance and that of their dependants The court can make a cost order as it deems fit in order to curb excessive costs charged by attorneys

Clause 5 Amendment of section 58 Section 58 – Consent to judgment or to judgment and order for payment of judgment debt in instalments The court must enter judgment and make instalment order, not the clerk of the court More documentary proof of income and expenditure of the debtor is required If the claim is based on the NCA, it must be dealt with in terms of that Act Court may authorise an EAO if the defendant is employed and the court is satisfied that the defendant will have sufficient means left for his or her maintenance and that of their dependants The court may make a cost order as it deems fit

Clause 6 Amendment of section 65 Section 65 – offer by judgment debtor after judgment Court must order the judgment debtor to pay the judgment debt in instalments, not the clerk of the court More documentary proof of income and expenditure of the debtor is required If the claim is based on the NCA, it must be dealt with in terms of that Act Court may authorise an EAO if the defendant is employed and the court is satisfied that the defendant will have sufficient means left for his or her maintenance and that of their dependants

Clause 7 Amendment of section 65E Section 65E – orders at a financial enquiry and postponement of proceedings Section 65E(1)(c) – the reference to consent to an EAO is removed and the court must be satisfied that the debtor will have sufficient means for his or her maintenance and that of his or her dependants before authorising an EAO

Clause 8 Amendment of section 65J Section 65J provides for EAO’s (emoluments attachment orders) An EAO must be issued from the court where judgment debtor resides, carries on business or is employed An EAO may only be issued where the court has authorised an EAO Amount or total amount of instalments payable may not exceed 25% A notice of intention to obtain an EAO must be served on the debtor and employer who may file notice of opposition If creditor or attorney does not accept reasons for opposition, matter may be set down in court for hearing

Clause 8 Amendment of section 65J continued/ Clerk of the court must ensure that the court has authorised the EAO and has jurisdiction before issuing the EAO Judgment creditor or attorney must furnish the garnishee (employer) and debtor with monthly statements containing particulars of payments received and balance owing, free of charge After service of an EAO, if a garnishee believes or becomes aware or it is otherwise shown that the debtor will not have sufficient means left or that the amounts claimed are erroneous or not in accordance with the law, the judgment creditor or attorney must be notified without delay

Clause 8 Amendment of section 65J continued/ The judgment creditor or attorney must request the court to rescind or amend the EAO or make any order it deems fit and reasonable A garnishee who fails to timeously deduct the amount of the EAO or fails to timeously stop deductions after the full debt has been paid, is liable to repay additional costs and interest or any amount deducted after the debt has been paid, to the judgment debtor

Clause 9 Amendment of section 65M Section 65M – enforcement of judgments of the High Court Section 65A(1) - notice to be issued from the court of the district – implies regional courts cannot conduct financial enquiries The amendment provides for the transfer judgments of regional courts to district courts to conduct financial enquiries, similar to position with regard to High Court judgments

Clause 10 Amendment of section 73 Section 73 deals with the suspension of execution of a debt when an instalment order is made The heading is replaced to align the heading with the contents of the section A consequential amendment is brought about in subsection (1), following the amendments of the other sections in respect of EAO’s

Clause 11 Amendment of section 86 Section 86 – Respondent may abandon judgment If a party abandons a judgment in his or her favour because the judgment and costs have been settled, no judgment is entered in favour of the other party

Clause 12 Insertion of section 106C Section 106C - offences relating to judgments, EAO’s and instalment orders It will be an offence if a person requires another person who applies for a loan, to consent to judgment or any instalment order or EAO prior to the granting of the loan: Penalty is a fine or imprisonment not exceeding three years It will be an offence if a person fraudulently obtains or issues a judgment or instalment order or EAO: Penalty is a fine or imprisonment not exceeding three years

Clause 13 Insertion of section 23A in the SCA Section 23A provides for the rescission of judgment with the consent of the judgment creditor. A simple application procedure to court for the rescission of a judgment where the debt has been settled – similar to section 36 of the MCA

Clause 14 Transitional provisions All legal proceedings in terms of the sections to be amended by the Bill, which were instituted prior to the commencement of the Bill, must be continued and concluded as if Bill had not been passed: Provided that the original judgment, instalment order or EAO upon which the proceedings are based, was obtained and granted in accordance with the law An investigation or prosecution or other legal proceedings in respect of conduct which would have constituted an offence in terms of section 106C, which was initiated before the commencement of the Act, must be concluded, instituted and continued as if the Act had not been passed

Clause 14 Transitional provisions continued/ Provision is made for a judgment creditor or a judgment debtor or any other person affected by a default judgment and subsequent order which is believed to have been irregularly obtained, to apply for the review thereof Prescribed form in Schedule Assistance by clerk or registrar of the court Operation of subsection ceases after a period of three years from the date on which the Act or the last provisions of the Act has come into operation, to avoid possible abuse of the provisions

Clause 15 Short title and commencement Comes into force on a date fixed by proclamation in the Gazette and different dates may be fixed in respect of different provisions A concern was raised that the transitional provisions in clause 14 might not benefit debtors who are currently over-indebted due to irregular judgments and orders. Although provisions of retrospectivity are usually frowned upon as they could infringe on the rights of people, it is submitted that in this instance, many debtors will be assisted if provisions of retrospectivity are introduced. Provision is made that some of the clauses will apply with effect from 8 July 2015, the date of the judgment in the Stellenbosch-case, in which it declared certain parts of section 65J of the MCA to be unconstitutional