By Bouwer van Niekerk and Amy Parker

MBD Securitisation (Pty) Ltd v Booi (FB) (unreported case no A263/2014, 2-7-2015) (Daffue J)

A lot has been written about the recent judgment of Desai J in University of Stellenbosch Legal Aid Clinic and Others v  Minister of Justice and Correctional Services and Others 2015 (5) SA 221 (WCC). It has, among others, been labelled a victory for the poor, vulnerable and marginalised by the South African Human Rights Commission (Jenna Etheridge ‘Garnishee judgment “victory” for poor – Commission’ www.fin24.com, 9-7-2015). No doubt much more will still be written about the social implications of the use of emolument attachment orders (EAOs), and whether the use (abuse) thereof can pass Constitutional muster.

However, this case note will not focus on those issues. Rather, it will firstly consider a judgment that dealt with substantially the same legal issues as the Stellenbosch judgment, this one delivered in the Free State High Court. Not as publicised, the judgment of MBD Securitisation (Pty) Ltd v Booi (FB) (unreported case no A263/2014, 2-7-2015) (Daffue J) (delivered six days before the Stellenbosch judgment) focuses on, among others, the proverbial nuts and bolts of the prerequisites of vesting jurisdiction in a specific court in the issuing of EAOs. Although the facts are equally bizarre and the findings against the credit provider are as damning as in the Stellenbosch judgment, this article will concentrate on the court’s rationale in considering a court’s jurisdiction in the issuing of EAOs. It will then evaluate the rationale of the court in comparison to the rationale applied in the Stellenbosch judgment, and consider whether this judgment may or may not answer the questions posed by the Stellenbosch judgment to the Constitutional Court.

In attempting to go on this confined legal sojourn, one cannot but give a broad outline of the extraordinary facts surrounding this judgment, as they are (in the words of the court) ‘unbelievably peculiar’:

‘This is an appeal which has to be adjudicated by judges of the Free State High Court in Bloemfontein. The judgment of a magistrate in Henneman, a small Free State town some 180 km to the north of Bloemfontein, is the subject of the appeal. The appellant and plaintiff in the court a quo, is a company with its head and/or registered office apparently in Johannesburg. … The respondent, and defendant in the court a quo, is resident and employed in the small town of Alice close to East London in the Eastern Cape, approximately 620 km to the southeast of Bloemfontein and some 800 km from Henneman. The cause of action, whatever it may, did not arise in Henneman or the Free State Province for that matter. There is no indication in the papers where it had arisen, if at all’ (para 1).

The respondent, it is told, signed two documents, albeit ostensibly in ignorance. The first document was a notice, as embodied in s 129 of the National Credit Act 34 of 2005 (NCA), which incorporated a letter of demand envisaged in ss 56 and 58 of the Magistrate’s Court Act 32 of 1944 (the Act). The second document signed was a consent to judgment in terms of ss 45, 58 and 65J of the Act. The appellant’s attorneys, situated in Nelspruit, sent a request for judgment in terms of s 58 of the Act accompanied by the aforementioned signed documents to the Henneman Magistrate’s Court. Judgment was subsequently granted by an unknown party at the Henneman Magistrate’s Court. The judgment included an order that the respondent make payments of R 300 per month following the service of an EAO granted pursuant to the judgment by consent. The EAO was subsequently issued out of the same court a few months later at the request of the appellant’s attorneys.

In the court a quo, the respondent obtained an order rescinding the judgment taken against her in terms of magistrate’s court rule 49(8). The court a quo set aside the EAO and confirmed that the appellant was not entitled to such an order, nor the benefits derived therefrom.

The appellants saw it fit to appeal the order granted in the court a quo.

That being the case, let us now return to the confines of the topics to be considered.

In evaluating the relevant legislation applicable to a court’s jurisdiction in issuing EAOs, the court focuses its attention on the interpretation of magistrate’s court r 4(4), read with magistrate’s court r 12(5), read in conjunction with s 58(1) of the Act, while simultaneously considering the impact of the NCA thereon. We deduce the following from the court’s rationale:

• Section 58 of the Act allows for the clerk of the court to enter judgment in favour of a plaintiff if the written request for judgment is accompanied by a letter of demand, if there is one, and the defendant’s written consent to the judgment.
• Magistrate’s court r 4(4) expressly refers to magistrate’s court r 12(5).
• Thus, magistrate’s court r 12(5) applies to a request for judgment in terms of
  s 58 of the Act.
• Magistrate’s court r 12(5) stipulates that the ‘registrar or clerk of the court shall refer to the court any request for judgment on a claim founded on any cause of action arising out of or based on an agreement governed by the [NCA] … and the court shall thereupon make such order or give such judgment as it may deem fit’ (our italics).
• Accordingly, the clerk of the court cannot grant judgments by consent, which are based on a cause of action based on the NCA; it must refer such a request for judgment in terms of the NCA to a magistrate for determination.
• In terms of s 90(2)(k)(vi)(bb) of the NCA, a provision in a credit agreement is unlawful if it contains a consent to jurisdiction of ‘any court seated outside the area of jurisdiction of a court having concurrent jurisdiction and in which the consumer resides or works or where the goods in question (if any) are ordinarily kept.’ This prohibition is extended to supplementary agreements in terms of
  s 91(2) of the NCA.
• Section 91(2) of the NCA in turn prohibits: ‘A credit provider must not directly or indirectly require or induce a consumer to enter into a supplementary agreement or sign any document, that contains a provision that would be unlawful if it were included in the credit agreement’.
• In such circumstances, s 28 of the Act does not vest jurisdiction over the consumer insofar as the issuing of EAOs are concerned, as the consumer neither resides nor is employed in the district of jurisdiction.
• Section 29 of the Act also does not apply to the court’s discretion to issue EAOs, as the whole cause of action did not arise in the jurisdiction of the court.
• Also (having regard to s 65J of the Act), the judgment creditor is duty-bound to refer the matter to the magistrate’s court where the consumer resides for the EAO to be issued there.
• Section 45(1) of the Act likewise does not apply in the issuing of EAOs, as the legislature had in mind to make it as convenient as possible for parties to approach a court in order to obtain speedy resolution of a dispute (para 24 – 26, 28, 30 – 32, 34 – 35 and 46 of the judgment).

If what is deduced above is correct, then the conclusion is clear: In circumstances where the cause of action of a debt is founded in an agreement governed by the NCA, and application is made for the enforcement of such a debt, then application for an EAO in enforcement of the debt must be made within the parameters set by the NCA; a court having concurrent jurisdiction and in which the consumer resides or works or where the goods in question (if any) are ordinarily kept. In addition, and taking cognisance of the impact of magistrate’s court r 12(5), a court (ie, a magistrate) shall make such order or give such judgment as it may deem fit.

In the Stellenbosch judgment it was declared that the words ‘the judgment debtor has consented thereto in writing’ in s 65J(2)(a) and s 65J(2)(b)(i) and s 65J(2)(b)(ii) of the Act, are inconsistent with the Constitution and invalid to the extent that they fail to provide for judicial oversight over the issuing of an EAO against a judgment debtor.

However, if what is deduced above is indeed the correct manner in which to interpret all the applicable sections and rules pertaining to the issuing of EAOs, then (at least insofar as all debts governed by the NCA are concerned) Constitutional oversight will be superfluous, as judicial oversight is already catered for in terms of magistrate’s court rule 12(5). Cadit quaestio?

• See ‘Debt collection system to be changed’ 2015 (Aug) DR 3 and ‘The use of emolument attachment orders, jurisdiction and forum shopping under the spotlight’ 2015 (Oct) DR 59. 

Bouwer van Niekerk BA (Law) LLB (SU) Post Grad Dip Labour Law (UJ) Cert Business Rescue Practice (Unisa & LEAD) is an attorney and Amy Parker BCom (Law) LLB (SU) is a candidate attorney at Smit Sewgoolam Inc in Johannesburg.

This article was first published in De Rebus in 2015 (Nov) DR 40.