1. Courts of Law Amendment Bill
BRIEFING TO PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY ON 13 JUNE 2017

2. 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 more judicial oversight over judgments and emoluments attachment orders (EAOs);
to provide for the rescission of judgment where the judgment debt has been paid;
to transfer regional courts judgments to district courts for the debt collection process

3. Purpose of Bill continued
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 paid

4. Background in respect of amendments to the Magistrates’ Courts Act
There is widespread abuse of the civil debt recovery system in the magistrates’ courts
Constitutional Court judgment in University of Stellenbosch Legal Aid Clinic and others
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 paid

5. 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 paid, 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 paid—
Application is brought by way of a prescribed form;
May be heard in chambers;
The court may make a cost order it deems fit

6. Clause 3 Amendment of section 45
Section 45 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
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

7. Clause 3 Amendment of section 45 continued/
University of Stellenbosch-case
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

8. Clause 4 Insertion of section 55A
The Constitutional Court ordered that the court must authorise an EAO after satisfying itself that it is just and equitable that an EAO be issued and that the amount is appropriate
Section 55A seeks to provide guidance to courts as to the factors a court must take into consideration when deciding if an order is just and equitable

9. Clause 5 Amendment of section 57
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 it is just and equitable that an EAO be issued and the amount is appropriate
The court can make a cost order as it deems fit in order to curb excessive costs charged by attorneys

10. Clause 6 Amendment of section 58
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 it is just and equitable that an EAO be issued and the amount is appropriate

11. Clause 7 Amendment of section 65
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 it is just and equitable that an EAO be issued and the amount is appropriate

12. Clause 8 Amendment of section 65E
Section 65E(1)(c) – the reference to consent to an EAO is removed and the court must be satisfied that it is just and equitable that an EAO be issued and the amount is appropriate

13. Clause 9 Amendment of section 65J
An EAO must be issued from the court where the judgment debtor resides, carries on business or is employed
An EAO may only be issued after authorisation by the court
Amount or total amount of instalments payable may not exceed 25% of the debtor’s basic salary
Provision is made for the division of the amount to be committed to an EAO where there is more than one EAO
A notice of intention to have an EAO issued 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

14. Clause 9 Amendment of section 65J continued/
The court may rescind or amend the EAO or make any order including an order as to the division of the amount available
Judgment creditor or attorney must furnish the garnishee (employer) and debtor with quarterly 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

15. Clause 9 Amendment of section 65J continued/
The judgment creditor or attorney must, if he or she does not accept the reasons for believing or knowing that the debtor will not have sufficient means, set the matter down for hearing
The court may rescind or amend the EAO or make any order including an order as to the division of the amount available
A garnishee who unreasonably fails to timeously deduct the amount of the EAO or unreasonably 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

16. Clause 10 Amendment of section 65M
Section 65A(1) - implies regional courts cannot conduct financial enquiries
The amendment provides for the transfer of judgments of regional courts to district courts to conduct financial enquiries, similar to position with regard to High Court judgments

17. Clause 13 Insertion of section 106C
Section 106C - offences relating to judgments, EAOs 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

18. Clause 14 Insertion of section 23A in the SCA
Section 23A provides for the rescission of judgment with the consent of the judgment creditor and where the judgment debt has been paid
Similar to section 36 of the MCA

19. Clause 15 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

20. Clause 15 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

21. Clause 16 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

22. Current position of Bill
The Bill was introduced into Parliament in May 2016
Submissions were received in August 2016
Public hearings took place in August 2016
Deliberations took place in September, October and November 2016
Approval was sought and obtained from the National Assembly in terms of rule 286(4)(c) to insert section 55A as it was not part of the Bill as introduced
The Portfolio Committee approved the Bill on 10 May 2017
The National Assembly approved and transmitted the Bill to the NCOP on 6 June 2017

23. Departmental interventions for operational efficiencies to the courts
The DOJCD and OCJ have jointly embarked on interventions to put in place measures to minimize and eradicate the incidents of the issuing of fraudulent court orders
The following circular directives were issued by the Department:
1. Circular 30/2014 dd 17 March 2014 – court clerks are directed to refrain from the irregular granting of sec 57 and 58 default judgments and the issuing of EAOs. (Magistrate Kellerman judgment supported by the review judgment of Judge Raulinga Limpopo - HC review case no 86/2013 is referenced)
2. Circular 89/2016 dd 14 Sept 2016 – deals with judicial oversight for the granting of EAO’s in terms of sec 65J of the Act

24. Circular directives issued by the Department continued/
3. Circular 77/2015 dd 22 September 2015 – deals with the curbing of abuse of default judgments and issuing of EAO’s by clerks of courts
4. Circular 25/2016 –registered credit bureaus access to judgments
5. Circular 01/2010 – withdrawal of all magistrates stamps from clerks and departmental officials
6. Circular 36/2012 dd 8 May 2012 – deals with the authenticity of court orders granted and provision of new date stamps for all registrars

25. Court Orders Integrity Committee
The Committee is chaired by the Judge President Mlambo, of the Gauteng Division of the High Court
The Committee is multi-sectoral with representatives from the Judiciary, SAPS, OCJ, DOJCD, Organized Legal Profession and NPA
It was established for the purposes of unravelling the prevalence and practices of fraudulent activities relating to court orders at both the Superior and Magistrates’ Courts

26. Mandate of Court Orders Integrity Committee
1. Identify patterns and processes employed by the perpetrators in an effort to assist the focus of investigations on a national scale
2. Ensure early detection of patterns of corruption at all stakeholders which negatively impact on the efficacy of the justice system
3. Advise on steps to capacitate the Courts and stakeholders in an effort to eradicate the scourge of fraudulent court orders
4. Advise on the requirements an automated court system will have on addressing these concerns
The Committee is also mandated to look into educating the public on court processes and creating public awareness on steps to eradicate these fraudulent practices
All judges will have specifically designed security stamps in line with the stamps provided to the magistrates

27. Security featured date stamps
- In 2014 all magistrates in the lower courts were issued with multi-inked date stamps specifically designed to provide additional security in order to prevent the fraudulent issuing of court orders - The authenticity of the stamp used in the court order is verified through Ultra Violet light scanners
Proposed Future Developments - The use of watermark documents to print court orders is being explored - The use of system generated court orders reflecting Unique Identification Number (UIN)

28. INSOLVENCY
Background:
The draft Insolvency Bill emanates from an investigation by the South African Law Reform Commission (SALRC). The Insolvency Act, 1936 is old and has been amended a number of times but has never been reviewed as a whole in order to modernize and align it with the constitutional dispensation and international developments in the law of insolvency. The main aim of the investigation by the SALRC was therefore to consolidate, and unify and simplify the laws relating to the insolvency, in accordance with prevailing circumstances and developments, and to balance and satisfy the needs of the different stakeholders.

29. Some of the proposals emanating from the SALRC Report
(a) Effective, speedy and fair procedures
Uniform provisions
Notice, records and money transfers by electronic means
Creditors’ committees
Composition
Business rescue
Treatment of creditors and secured claims for property rates and taxes

30. POLICY CONSIDERATIONS FOR THE INSOLVENCY BILL
The introduction of a pre-liquidation composition for natural person debtors (the Insolvency Act, 1936 provides for post-liquidation composition only) is under consideration.  
The Insolvency Act, 1936 provides for composition in respect of natural persons only after the first meeting of creditors of an insolvent estate.  This means that a debtor can only propose/offer composition after the liquidation proceeding have commenced.  There has been a concern that the requirement that the liquidation of the estate of a natural person must be to the advantage of creditors leaves debtors trapped in debt with no other options.  The view is held that pre-liquidation composition is more beneficial for both debtors and creditors than liquidation is.

31. POLICY CONSIDERATIONS FOR THE INSOLVENCY BILL
What does pre-liquidation composition entail?
Pre-liquidation composition provides an option for a debtor who is not in a position to apply for liquidation to make an offer to creditors.  The composition is to be administered by an Administrator, who must assist the debtor in drawing up an offer of composition.  The composition is binding on concurrent creditors but does not affect the rights of secured and preferent creditors unless they consent to the composition.   A new option could entail a debtor with debts totaling a prescribed amount offering a composition to creditors.  Debtors falling outside this bracket are still left with liquidation as an only option.   An offer of composition does provide a limited moratorium on legal action against the debtor. 

32. POLICY CONSIDERATIONS FOR THE INSOLVENCY BILL
What does pre-liquidation composition entail?
Pre-liquidation composition accommodates debtors who are able to offer some kind of payment to creditors and does not accommodate debtors with no assets and no income.
No income, no assets” estates
Other jurisdictions (Ireland, UK) provide for the administration of “no asset and no income” matters by government institutions.   In terms of the UK Insolvency Act, 1986, section 251 a debtor may be discharged from all qualifying debts after a debt review process.  During the investigation by the Commission, the view was that government does not have sufficient capacity to provide for the administration of no asset estates – if creditors do not contribute to the costs of administration.    The question was also raised whether the issue of debt relief should be addressed in insolvency legislation which is concerned mainly with the regulation of the insolvency process.

33. POLICY CONSIDERATIONS FOR THE INSOLVENCY BILL
Observations about “No income, no assets” estates:
This might be better addressed in the National Credit Act
Unintended consequences must be avoided, eg consumers/debtors may incur more debt if they know their debts will be written off
Court should be able to make no order if that order will not be just and equitable

34. INSOLVENCY BILL
Status
The development of a draft Bill is work in progress and an interdepartmental task team will be convened shortly to discuss the policy options, whereafter a broad public consultation process will take place.
It is anticipated that the Bill will be submitted to Parliament during the 2018 Parliamentary session for consideration.

35. DEBT COLLECTORS AMENDMENT BILL
Background:
One of the main objects of the Bill is to require attorneys who do debt collecting to register with the Council for Debt Collectors established by the Debt Collectors Act, 1998 (the Act). At present attorneys do not have to register with the Council at all. The view is held that the extension of the scope of the Council for Debt Collectors to investigate and prosecute cases of misconduct in the case of attorneys will contribute to uncovering irregularities in the debt collection industry and preventing further abuses.
Other amendments to the Act will also facilitate the improved application of the Act in the interests of all, including debtors. These amendments, for instance make provision for the appointment of inspectors to assist the Council with the investigation of complaints and to improve the provisions relating to misconduct.

36. DEBT COLLECTORS AMENDMENT BILL
Status of the Bill
The Bill has been made available for comments which are being considered.
It is anticipated that the Bill will be submitted to Parliament during the 2017 Parliamentary session for consideration.

37. Legislation regulating sheriffs
1. Sheriffs are regulated by:-
Sheriffs Act 90 of 1986
Regulations under the Sheriffs Act
Other legislation eg:
Consumer Protection Act 68 of 2008
Superior Courts Act 10 of 2013
Magistrates’ Courts Act 32 of 1944 
2. No rules of court regulate sheriffs directly 
3. Some rules indirectly impact on the functions of sheriffs eg.
Uniform Rule 4 – Service of documents
Uniform Rule 45 – Execution
Uniform Rule 46 – Execution against immovable property
Uniform Rule 68 – Tariffs for sheriffs
Magistrates’ Courts rules of similar application

38. Update on rules of execution against immovable property
The rules regulate the process in the High Court and the Magistrates’ Courts.
The High Court (Uniform Rule) Rule 46 and the Magistrates’ Courts Rule 43 is in the process of being amended.
3. These amendments seek to minimise the risk of person’s homes being sold without:-
adequate consultation and involvement
proper judicial oversight
regard to deprivation of property
regard to the right to adequate housing

39. Impact of the amendment to the rules
Provide the procedure to declare residential immovable property executable
Assist judgment debtors to oppose such applications
Assist judgment debtors to make submissions to the court
Assist the court in considering the application
Set out power of the court
Require the court to consider alternative options of satisfying the debt
Require the court to consider and set a reserve price
Require the sheriff to report to the court
2. Impact of rule amendments on Sheriffs
Sheriff to effect personal service unless another form of service is authorised by court

40. Thank you