How the new garnishee ruling will impact lenders, debtors
The Constitutional Court’s judgment to change the management of emoluments attachment orders, also known as garnishee orders, is regarded as a “100% win” for indebted people in South Africa, according to Odette Geldenhuys, a senior associate at Webber Wentzel.
Geldenhuys is the pro bono attorney for the applicants who initially brought the case in the Western Cape High Court last year. She told Fin24 she is pleased with the outcome of the case on Tuesday.
"The big change which we thought would be fair, is that decisions of whether a salary should be attached by an EAO (garnishee order) now cannot be made by a clerk of the court any more. The court now has put that decision to the magistrate, and it also gives the magistrate two tests to look at: firstly, whether it would be just and equitable to grant the EAO and secondly, what the debtor will be able to afford," she said.
An EAO or garnishee order is a court order that compels a debtor's employer to pay his or her debt from their salary.
What the ruling means for lenders
For lenders, the situation is no different if they intend to use a garnishee order to ensure they get their money back. However, the matter has been removed from the hands of the clerk to the magistrate, who now has directions on how and what to consider before issuing a garnishee order.
The Constitutional Court backed seven of the eight rulings made by High Court Judge Siraj Desai of the Western Cape High Court earlier this year. The only difference the Constitutional Court introduced was with section 65J(2) of the Magistrates' Court Act, which was inconsistent with the constitution.
Judge Desai called for the legislation to be scrapped as it did not make provision for judicial oversight to be extended for granting a garnishee order to debtors. However, Geldenhuys explained that this would require the rewriting of legislation, which would be a time-consuming process.
The Constitutional Court introduced words to the existing legislation to make it constitutional. It makes provision in the legislation for “poor people” to have access to justice. This change will be applicable from the moment judgment is handed down, she added. There is not going to be a period of referring the problematic sections of legislation to Parliament to have new law drafted.
The ruling is not retrospective. “Retrospectivity would be unfair to credit providers,” she said. Credit providers at the time garnishee orders were issued were operating according to the law of the day, she explained. However, the judgment made by the court has clarified issues on its constitutionality.
What the ruling means for debtors
"We believe, when it comes to the attachment of someone's salary, an extra step is not a bad idea, because of the havoc over-indebtedness causes in society. We expect the magistrate's court will now draw up guidelines and requirements," she said.
Geldenhuys emphasised that the judgment is not saying to debtors they do not have to pay. Rather, it is about what is fair and equitable regarding the attachment of someone's salary to make sure they pay their debt, while the rest of their life can still go on.
"And linking back to reckless lending, credit providers will hopefully not make reckless lending as easily as up to now," said Geldenhuys. She said she would keep an eye on the implementation of the new process.
She also pointed out that important orders made in the high court now have to be implemented. The judgment highlights that organisations like the SA Human Rights Commission, the National Credit Regulator and even the state have to do all within their power to educate consumers about their rights in terms of this Constitutional Court judgment.
"So, now civil society can go to those entities and ask what they are doing about it," said Geldenhuys.
The high court also ordered the Stellenbosch University Law Clinic to provide a copy of the judgment to law societies so they can investigate the conduct of those in the legal fraternity who assisted credit providers in the garnishee order case.
"The court confirmed that credit providers cannot go to far away courts to obtain EAOs (garnishee orders). They must go to the court closest to the debtors," said Geldenhuys.