By Bouwer van Niekerk

Much has been written in the press and elsewhere about the recent judgment of University of Stellenbosch Legal Aid Clinic and Others v Minister of Justice and Correctional Services and Others (WCC) (unreported case no 16703/14, 8-7-2015) (Desai J) – the highly publicised matter concerning the ostensible abuse of emolument attachment orders (EAOs) by micro-lenders and debt collectors. An in depth study about the morality and legality of the EAOs falls outside the ambit of this article. Rather, this article will evaluate the court’s reasoning as to how it concluded that, in proceedings brought by a creditor for the enforcement of any credit agreement to which the National Credit Act 34 of 2005 (NCA) applies, s 45 of the Magistrate’s Courts Act 32 of 1944 (MCA) does not permit a debtor to consent in writing to the jurisdiction of a magistrate’s court other than that in which that debtor resides or is employed.

In the judgment, the court pointed out that the most disturbing feature of the matter was the manner in which micro-lenders forum shopped for courts to entertain their applications for judgment and the issuing of EAOs. It was common cause that the micro-lenders obtained most of their orders from courts located great distances from where the debtors resided and worked. It was argued and accepted that by doing this, the debtors were denied their rights to access the courts and enjoyment of the protection of the law.

In considering the issue of jurisdiction, the court found that the legislative provisions that are relevant are:

• Section 45 of the MCA, which provides for circumstances in which parties may consent to the jurisdiction of a court to determine any action that is otherwise beyond its jurisdiction.
• Section 65J(1)(a) of the MCA, which provides that an EAO must be issued from the court of the district where the employer of the judgment debtor resides, carries on business or is employed.
• Section 90(2)(k)(vi)(bb) of the NCA, which provides that the provision of a credit agreement is unlawful if it expresses on behalf of the consumer a consent to jurisdiction of any court seated outside the jurisdiction of a court in which the consumer resides or works.
• Section 91 of the NCA, which provides that a credit provider must not directly or indirectly require or induce a consumer to enter into a supplementary agreement that contains a provision that would be unlawful if it were included in a credit agreement.

The court found that s 45 and 65J of the MCA cannot be read together. The court held that, due to the fact that s 65J(1)(a) stipulates that EAOs may be issued from the court of the district where the employer of the judgment debtor resides, carries on business or is employed, the narrow provisions of s 65J cannot be reconciled with the broad provisions of s 45.

The court also found that ‘[i]t is a well-established principle in law that where two provisions are contradictory, the provision that is specific trumps the provision that is general. In this case, the provisions of section 65 are specific in that they govern emoluments attachment orders. Accordingly, section 65J quite clearly trumps section 45.’

The court furthermore found that the broad approach taken by s 45 directly contradicts and undermines ss 90 and 91 of the NCA, as the underlying rationale to the limitation of jurisdiction contained in ss 90 and 91 is the protection of consumers. Thus, s 45 of the MCA undermines the objects or purposes of the NCA.

In addition, the court found that the fact that the NCA’s jurisdiction provisions trump s 45 is also supported by the following:

• The interpretative principle that states that when the provisions of a later Act are inconsistent with the provisions of an earlier Act, the later Act supersedes the earlier provisions. The NCA came into force on 1 June 2006, while s 45 of the MCA came into force in July 1945.
• The NCA establishes a protective regime aimed at preventing the exploitation and abuse of consumers. The broad consent provided for in s 45 of the MCA fails to protect consumers. In the circumstances it is clear that s 45 of the MCA is inconsistent with ss 90 and 91 of the NCA and is trumped by the latter provisions.

Taking cognisance of the above, the court found that if s 45 is properly interpreted in the context of the MCA (and also in light of the Bill of Rights), it does not apply to causes of action based on agreements covered by the NCA. ‘It follows that when a debtor admits that he or she is liable for a debt and consents to an EAO, section 45 does not permit that debtor to consent to the jurisdiction of a court outside of the district where the debtor works or resides.’

Although I agree with the eventual finding of the court, I am of the opinion that the court had an ideal opportunity, in addition to the above, to consider and incorporate the findings made in National Credit Regulator v Nedbank Ltd and Others 2009 (6) SA 295 (GNP). In this case, the court had among others to, consider in which magistrate’s court a debt counsellor must bring an application for debt counselling on behalf of an over-indebted consumer. This is significant, as the consumer’s rights were evaluated in the context of the NCA and in respect of agreements that are governed by the NCA. Similarly, in the case under discussion, the ruling that the court made was also in the context of proceedings brought by a creditor for the enforcement of any credit agreement to which the NCA applies.

In the National Credit Regulator case, the court dealt with the question of jurisdiction as follows:

‘The general rule regarding jurisdiction is “actor sequitur forum rei. The plaintiff (or applicant) ascertains where the defendant (respondent) resides, goes to his forum, and serves him with the summons (notice of motion) there”. Having regard to this general rule, an applicant must bring his or her application in the magistrate’s court that has jurisdiction in respect of the person of the respondent.’

The court then proceeded to deal with s 28 of the MCA – the section that deals with jurisdiction in respect of persons.

Section 28(1) reads as follows: ‘Saving any other jurisdiction assigned to a court by this Act or by any other law, the persons in respect of whom the court shall, subject to subsection (1A), have jurisdiction shall be the following and no other;’ (my italics). In interpreting this section, the court found that the debt counsellor must refer the matter to the appropriate magistrate’s court, to wit the one that has jurisdiction in respect of the person of the consumer. The reasoning was that this is so due to the fact that the essential purpose of the debt review procedure is to protect the consumer who is over-indebted or to whom reckless credit has been granted.

Due to the fact that the use of EAOs necessarily implies that a consumer is either over-indebted or someone to whom reckless credit has been granted or both, coupled with the fact that those agreements are governed by the NCA, I am of the opinion that the reasoning by the court in the National Credit Regulator case is exactly akin to the reasoning that the court (in the case under discussion) should have, in addition to its reasons, included in making its ruling pertaining to jurisdiction.

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

This article was first published in De Rebus in 2015 (Oct) DR 59.