Con Court changes rules around garnishee orders

The Constitutional Court handed down a landmark judgement in the case of emoluments attachment orders (EAO), also known as garnishee orders. The case challenged the constitutionality of the implementation of EAOs that are granted by clerks of the court, as opposed to the magistrate.

Odette Geldenhuys, senior associate at Webber Wentzel, played an integral part in the court case. Moneybags spoke to her about the judgement and what this means for EAOs.

The court ruling

“EAOs still remain as a method of debt collection. The change that was introduced was that, as with immediate effect, EAOs can no longer be issued by a clerk of the court, but it must be granted by a magistrate,” explains Geldenhuys.

“The second part is that when a magistrate, in deciding whether or not to grant an EAO or not, must consider two criteria. The first is, will it be just and equitable to grant the order? The second is, will the debtor afford the amount that is being suggested as the monthly deduction, in terms of the EAO?”

In addition to the above ruling, the Constitutional Court also ruled that the only magistrate’s court that can be used to issue an EAO is the one closest to where the debtor lives or works. This is to ensure that both the credit provider and the debtor have the opportunity to speak before the court on the matter. “It’s about just making sure that both parties get a chance to put their facts before the magistrate, and the magistrate can make an informed decision,” adds Geldenhuys.

However, these changes do not proscribe the EAOs implemented prior to the court’s decision.

Affordability

As already stated, before issuing an EAO, there are certain criteria that magistrates need to follow for all EAOs post the court ruling on 13 September.

“The court will look at firstly what the person earns, and then the magistrate will look at the expenses. There are no guidelines yet as to what paperwork the magistrate’s courts will require. I assume that the magistrate’s courts will develop a standard documentation that they would want to look at that will give them all the same guidance,” says Geldenhuys.

The EAO

Geldenhuys highlighted that the law allows for anyone with an EAO to approach the court to have it amended or changed. Furthermore, there is no limited to the number of EAOs a person may have against them.

However, in the case where a credit provider wants to impose an EAO on a person who already has one, Geldenhuys noted that this should be examined. “That is an important situation to then understand why that debtor received another loan or entered into another credit agreement, because at the point that debtor entered into that credit agreement or entered into that loan, they were already indebted. So a credit provider at that point should have far clearer checks as to whether to extend credit to somebody who is also indebted.”

Changing the law

The Constitutional Court further “ordered the reading-in, and severance of, certain words in section 65J(2)(a) and (b) in order to remedy the constitutional defect.”

Geldenhuys explains that this is a technicality, as it refers to the change that the court decided in that only a magistrate may issue an EAO, and therefore the language used in the law needs to reflect these changes. The amendments to the law took immediate effect on 13 September 2016 following the ruling.

 

Handy tip: If you are struggling with debt, you can apply for debt counselling on Justmoney, our sister publication.



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