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‘Garnishee’ battle hots up

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The backlash against unlawful “garnishee” orders is gaining momentum, with open season being declared on large sections of the debt-collection industry.

Another court victory in the Western Cape last week saw lenders and debt collectors Capitec Bank, Bayport Securitisation, Real People, Sanlam Direct Axis, Van Heerden and Vennote and Debt Management Consultancy voluntarily agree to let employers simply stop paying existing garnishee orders. This after they were threatened with a court case.

They settled with three companies partly owned by Cape Town lawyer and businessman Tinus Slabber: Tuffy, Franco Ceccato and Queue Shoes – agreeing to let them disregard emolument attachment orders (EAOs), often called garnishee orders, on 13 of their employees.

The order they signed reads: “All employers in the Western Cape are exempt from compliance with the terms of all emolument attachment orders issued ... outside the Western Cape.”

This is “pending the final outcome” of an appeal in the Constitutional Court against a landmark judgment in July that was won by the Stellenbosch Law Clinic.

In July, Western Cape High Court Judge Siraj Desai declared a number of garnishee orders procured by debt-collection attorneys unlawful on two grounds.

One is that they are signed off by court clerks without any real judicial oversight, leading to patently unfair and onerous garnishee orders.

The other is that they are executed at magistrates’ courts situated far away from debtors when the law requires them to be issued at the nearest court to them, making them nearly impossible to challenge.

Both abuses have been described as endemic in the debt-collecting industry and Desai’s judgment gives employers enough ammunition to shoot down countless garnishee orders.

Slabber used this judgment last week, roping in the same legal team that won the Stellenbosch Law Clinic case funded by Wendy Appelbaum.

The debt-collection industry is, however, collectively appealing the Desai judgment in the Constitutional Court with the hearing set down for March next year.

In the meantime, Slabber’s success shows it is open season on at least some unlawful garnishee orders.

Horror stories

Copies of the 13 garnishee orders he targeted, and which were included in court documents, show the increasingly familiar horror stories of small debts ballooning into long-term liabilities due to fees and interest rates of up to 43%.

In a copy of a garnishee order attached in court papers, Capitec turned a debt of R5 683 into a total of R9 461. Bayport transformed a debt of R9 584 into one of more than R17 000.

Responding to questions, Capitec’s head of communications, Charl Nel, said it had not agreed “to any suspensions of emolument attachment orders”.

Nor did the court specifically declare the Capitec garnishee orders invalid, he added.

Instead, the settlement made Slabber’s companies drop their demands for a declaration that the garnishee orders were unlawful – in exchange for the wait-and-see relief related to the Constitutional Court case.

“Capitec Bank uses emolument attachment orders as a last resort and 8% of the people we handed over to legal agents ended up with an attachment order,” said Nel.

Only one of the six lenders really put up a fight.

Bayport Securitisation sent one of Slabber’s attorneys, Odette Geldenhuys of Webber Wentzel, a threatening email at the end of August saying the Desai judgment had no effect on any other garnishee orders.

“Should you advise your client to withhold payment in terms of Bayport’s valid order, you will be acting outside the scope of the law and will be reported to the relevant law society,” read the email from Bayport legal manager Rochelle Maharaj. The email was included in court papers.

Bayport COO John White told City Press: “It is standard Bayport practice to issue EAOs within the appropriate jurisdiction.” He said Bayport did not expect the Desai judgment to have a significant impact on the company.

Threatening to sue

The papers also included a letter dated September 4 from Bayport’s lawyers threatening to sue if the Desai judgment was used to justify stopping payments on a garnishee order.

They said the judgment had no effect until the Constitutional Court appeal was heard.

This was true of one part of the Desai judgment – the issue of court clerks signing off on garnishee orders.

But it is not true of the “forum shopping” issue where EAOs are unlawful when they are issued from the wrong magistrates’ court.

Despite its protests, Bayport signed the order allowing the EAOs to stop once it was called on to defend its position in court.

In his affidavit for last week’s case, Slabber accuses the lenders of “forum shopping” for the EAOs at far-flung courts to prevent the targets from challenging the orders.

Of the 13 workers in last week’s case, some had EAOs executed against them in Joburg and East London although they and their employers were based in Cape Town.

Getting the EAOs set aside in the magistrates’ courts where they are issued is prohibitively expensive for people saddled with these kinds of microloans, said Slabber.

He had previously set aside an unlawful EAO against one of his employees in courts all over the country and the exercise cost R25 000 – more than many of the debts in question.

The Association of Debt Recovery Agents obtained a legal opinion recently that insisted employers and employees must jump through that expensive hoop despite the Desai judgment.

Slabber’s case put that to the test and won, at least as far as the Western Cape is concerned.

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