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Thread: Garnishee orders and in duplum

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    Site Caretaker Dave A's Avatar
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    Garnishee orders and in duplum

    What should we as employers do when we see a garnishee order against an employee that we can see is legally flawed?

    I've been pondering the question ever since receiving a garnishee order against one of my employees a couple of months ago. Even if I ignore the question of jurisdiction (the matter was heard in Nelspruit despite the fact that the contract arose in Johannesburg and the employee is now resident in Durban), and the issue of notices, how on earth can a judge justify granting a court order that patently contravenes the in duplum rule? Interest and legal costs make up over 70% of the order!

    I see I am not the only person that has noticed:

    The University of Pretoria was sufficiently concerned five years ago to carry out a study into what it called the "undesirable practices relating to garnishee orders". Sadly, its *recommendations regarding changes to the Magistrate's Act and increased training for court clerks have not been heeded, and flawed orders are still being rubber-stamped.
    Full story from M&G here
    The trouble with opportunity is it normally comes dressed up as work.

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    Diamond Member AndyD's Avatar
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    I would act for the employee. I hate garnishee orders putting the onus on employers to do the dirty work in the first place so I'd have no qualms in sending the order back to the collection agency stating the obvious legal flaw and stateing I was refusing to administer it on the grounds I would be a willing and knowing participant in an illegal activity.
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    Diamond Member Vanash Naick's Avatar
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    Quote Originally Posted by Dave A View Post
    What should we as employers do when we see a garnishee order against an employee that we can see is legally flawed?

    I've been pondering the question ever since receiving a garnishee order against one of my employees a couple of months ago. Even if I ignore the question of jurisdiction (the matter was heard in Nelspruit despite the fact that the contract arose in Johannesburg and the employee is now resident in Durban), and the issue of notices, how on earth can a judge justify granting a court order that patently contravenes the in duplum rule? Interest and legal costs make up over 70% of the order!

    I see I am not the only person that has noticed:
    A very good evening to you Dave,
    You definitely on to something![ I am not in the debt collecting industry: This is just for intellectual curiosity!!!]
    The reason why this seems confusing is simply because one has to consult both the Magistrates Court Act 32 of 1944(as amended) as well as The Magistrates Court Rules itself. In terms of the Magistrates Court Act, the relevant section is 65(J) and in terms of the Magistrates Court Rules the relevant rules are rule 46 and rule 47. The emolument application and order can actually take place only in 2 circumstances 1: application proceedings in particular ‘ex parte application,’(Section 72 Magistrates Court Act) or 2:at financial enquiry proceedings in terms of section 65(A)
    The confusion is further compounded by the simple fact that the forms or rather the precedent or even still better the template mentioned in that are mentioned in rule 47(1) is not found at the end of the Rules(Googled), they are found at the end of the Rules purchased from Government Printers or downloaded from a reputable website such as Juta or Sabinet. This is the missing link. It’s called ‘Annexure 1: Forms: Numerical list.’ If one, however, downloads several copies, one of them is bound to have this annexure which the other downloaded rules just seem to be missing. The added reason for the confusion is that when anyone reads the words ‘garnishee,’ in the Act, they immediately think that this is a reference to the employee whereas in actual fact it refers to the employer.


    The short answer is that the Emolument Attachment Order itself should be issued from the district where the employer of the judgment debtor resides, carries out his business or is employed(Here we mean employer not employee). The real emphasis here is actually on the employer and not really the employer. For instance, I am creditor A, I have obtained a judgment against debtor B. As at this time both I as the creditor and B as the debtor reside in Johannesburg so the Judgment is granted by the Magistrates Court for the District of Johannesburg; Debtor B decides to move to Cape Town, he now lives there and works for employer C, in practice I simply instruct counsel to an attorney I’ve never even met who lives in Cape Town where the employer carries out his business. This attorney in Cape Town then goes to the Magistrates Court for the district of Cape Town and the actual order is issued from this court(Cape Town). It does not matter which Magistrates Court issued the judgment, what matters is that the employer must reside or carry on business or if the State the employer must be employed in the district from which the emolument order is issued.

    The ‘garnishee,’ is in actual fact the employer and not the employee! The employer as the ‘garnishee,’ is entitled to a collection fee or commission if you will of up to 5% of all amounts deducted by him(the employer) from the salary of the employee!
    As at today’s date 7 December 2012, our Courts require the judgment creditor to do two things simultaneously: 1: Where the debtor has consented to judgment or in a case where the debtor does not consent to judgment[and a final letter of demand has being sent to the debtor] also send a register letter to the employer to inform the employer that emolument is imminent .
    1. In practice I have already obtained a judgment against Mr B. I essentially now only want it to be executed by way of emolument order. I know for a fact where the employee resides[as I done a trace on Mr B], I know that he works for Mr C(the garnishee) who lives in Cape Town. Since there’s no prescribed format for the letter, I simply state: ‘Dear Mr C, I have obtained a judgment against Mr B, your employee in the Johannesburg Magistrates Court, an Emolument order is imminent. I will advise either telephonically or in writing as soon as reasonably possible[the idea is basically start to get HR to make preparations so there’s no surprise!!]
    2. The second step is an ex parte application aka notice of motion form 1 in the Rules of court‘ Annexure : Forms: Numerical list.’(This is just a form supported by an affidavit)
    3. The third step is not really difficult, it’s a matter of duplicating a precedent/template/or form that is already in the Magistrates Court Rules (as amended): ‘Annexure 1: Forms: Numerical list.’ Form 38
    4. From there the sheriff is called upon to serve the order



    Last edited by Vanash Naick; 07-Dec-12 at 08:27 PM. Reason: typo..
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    What about SARS using a similar situation as a garnishee order on earnings? for an employee for a prior years SITE/PAYE when they were not employed with you.
    A minimum wage earner at that! This matter has already taken approx 8 hours of our executives working hours! Our company as the Agent of SARS has fines and penalties for non payment - the only notification/communication was through SARS Employer Efiling when we down loaded the new software for the EMP501 submission.

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    Site Caretaker Dave A's Avatar
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    Nothing quite like putting these problems down, getting some input, and sleeping on it.

    The problem for the employer (and for the employee for that matter) is legal costs incurred fighting the matter will exceed the "potential savings." And there's little doubt debt collectors take advantage of this.

    In this case I'm going to try to use this same dilemma to achieve the correct result.

    The order sets out the capital, the interest and the costs - and then states that the order requires payment of x amount per month until the debt is satisfied. The employee does not dispute the debt or the capital quantum. So I'll comply with the order until the amount paid over reaches double the principle, and then issue notice that we consider the debt satisfied by virtue of the in duplum rule and will be making no further payments.

    Next move - the collection agency. And if they pursue, at least we're now at a point where we can incur legal costs defending the matter and seek an award for our costs. I would think only a fool would press on at that point.
    The trouble with opportunity is it normally comes dressed up as work.

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    Platinum Member Mike C's Avatar
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    then issue notice that we consider the debt satisfied by virtue of the in duplum rule
    Hi Dave - could you expand a little on the "in duplum rule" for me, as I am not aware of it.

    @Vanish

    The employer as the ‘garnishee,’ is entitled to a collection fee or commission if you will of up to 5% of all amounts deducted by him(the employer) from the salary of the employee!
    I was not aware of this either!

    It seems a shame that the person who has defaulted has to pay all these additional costs when they are obviously struggling to meet their present expenses. Yes! I know that it is their fault in the first place, but I can't help feeling for them.
    An education isn't how much you have committed to memory, or even how much you know. It's being able to differentiate between what you do know and what you don't. - Anatole France

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    Site Caretaker Dave A's Avatar
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    Quite a good page on in duplum here.

    S 103.5 of the National Credit Act is as follows:

    Despite any provision of the common law or a credit agreement to the contrary, the amounts contemplated in section 101(1)(b) to (g) that accrue during the time that a consumer is in default under the credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under that credit agreement as at the time that the default occurs.
    The issue of in duplum first came up on TFSA here. There are other threads that touch on it in the National Credit Act forum too.
    The trouble with opportunity is it normally comes dressed up as work.

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    Diamond Member Vanash Naick's Avatar
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    Three possible remedies(see point 7 though!): The judgment debtor can 1:file a complaint with the relevant law society and/or 2:the National Credit Regulator;3: Alternatively test whether the National Credit Act and its regulations are in line with the common law position of in duplum and specifically whether the codification of this rule reflects the true intention of the legislators; the best, cost effective way to test this in court is through a University Law Clinic or legal aid board.(We won’t know for certain unless there is an unambiguous court ruling, based on how courts have interespreted the common law position, so , case law should ideally be used!. It will be interesting to see what transpires either way.
    I’ll start with a huge hurdle section 103(5) of The National Credit 34 of 2005 itself:Despite any provision of the common law or a credit agreement to the contrary, theamounts contemplated in section 101(l)(b) to (g) that accrue during the time that a consumer is in default under the credit agreement may not, in aggregate, exceed theunpaid balance of the principal debt under that credit agreement as at the time that thedefault occurs.


    I’d like to take this opportunity to demonstrate in practice how our Common Law is developed. To do so, I think it necessary to say a little about our Common Law. I’ve taken this common law aspect from a previous thread. We must appreciate that our Common Law is one of 5 authoritative sources of South African Law.

    1. Common Law( This is Roman- Dutch law as influenced by English law, it’s developed by our courts, it remains in force unless a statutory position states otherwise e.g. the common law position of power of attorney as at today’s date is that the same can be provided verbally, tacitly or in writing UNLESS a statutory provision states otherwise; and/or where a statute is silent about a certain matter, the court will have a look at what common law has to say on that particular matter[ our Common law originated in ancient Rome, Rome had colonies, all its colonies had to accept it’s law; so when Rome colonised most of Europe including the Nederlands, the Netherlands had to accept Rome’s law. As the Netherlands developed original Rome law, they called it Roman- Dutch Law. Now, we know the story of Jan van Riebieck and company, when the first settlers started to arrive in what was then the Cape Colony, they brought along with them, this very Roman Dutch law. This Roman Dutch law was then developed in the Cape, it was a starting point if you will. Now, we know that South Africa was at one stage a British colony, they brought with them English case law. This is why I say Common law is Roman Dutch law as influenced by English Law. We still continue to develop this Common law in South Africa. This development is on-going. After 1994, our African Customary Law also known as indigenous law has had a great influence on Common law)
    2. There isn’t a ‘one size fits all,’ when it comes to the way our courts develop our common law alternatively there are no hard and fast rules. One thing that appears to be consistent is that the courts always ask a simple question: What is the intention of the Legislators?(Our Legislators are those 400 people in Parliament who make law e.g. The National Credit Act 34 of 2005 is an Act of Parliament aka Statute aka enacted text aka Codified law aka legislation)
    3. If you ask a simple question: where is the one place I can find all our Common Law written down in one neat bundle? Then the simple answer is that there is no one nice neat bundle! It can be rightfully said that our Common Law is the unwritten law of South Africa simply because it’s not contained in written law aka statutes etc
    4. The common law in duplum law postulates that when the interest accrued on a debt is equal to the debt itself, then the running of the interest must stop. The rule stems from public policy(boni mores)
    5. Section 39(2) of the Constitution of 1996 provides that “when interpreting any legislation, and when developing the common law or customary law, every court, tribunal or forum must promote the spirit, purport and objects of the Bill of Rights.”
    6. Our Common Law has its own sources: The old writers, Legislation; case law, academic opinion and customary law. By and large these authoritative old writers can be rightfully and objectively justifiably seen as those who wrote on the law of Holland. The most influential old writers remain: 1: Hugo de Groot(best writings: Inleiding tot de Hollandsche Rechtsgeleerheid aka Inleidinge and De Jure Bellie ac Pacis Libri(De Jure Belli ac Pacis); 2: Simon van Groenewegen(best writings: Tractatus de Legibus Abrogatis);3:Simon van Leeuwen(best writings: Het Rooms- Hollandsche Recht), My personal favourite remains 4:Johannes Voet. His dad was a professor of law(best writings: Commentarius ad Pandectas)
    7. It’s noteworthy that the National Credit Regulations does allow for additional costs to be attached to the original debt. To be perfectly clear, we have two statutes here: 1: The National Credit Act 34 of 2005 and, 2: The National Credit Regulations. Section 171 allows for enabling legislation to give effect to the Act itself, the Minister is therefore allowed to make such regulation , such regulations having been made and are available in the National Credit Regulations;
    8. Chapter 5 of the National Credit Regulations are applicable to fees such as interest, legal costs etc. Section 103 of the Act itself codifies the common law position! The common law position includes only interest and not collection fees, legal costs etc.
    9. Here is where it gets interesting: It can be said that the common law in duplum rule has been codified(developed or put into writing by virtue of chapter 5) however, the only way to test this is that if a matter such as this goes to court and the court is simply told that it was never the legislators intention for such high costs to be incorporated into a debt on the premises that such costs are at immediate odds with the ‘purpose’ of the National Credit Act 34 of 2005, section 3. Among other factors the purposes of the Act include promoting and advancing the social and economic welfare of South Africans and promoting the development of a credit market that is accessible to all South Africans, and in particular to those who have historically been unable to access credit under sustainable market conditions.
    10. So it really begs a question is excessive costs in line with promoting and advancing the social and economic welfare of South Africans and a further question: Did the legislators intend for collection fees and interest to over shadow the original debt that is to be more than the original debt itself was( in spite of what the regulations say) and ultimately does the common law position still apply??
    11. To further understand what we actually dealing with here, one need to consult section 105 of the National Credit Act 34 of 2005 itself which provides(1) The Minister, after consulting the National Credit Regulator, may prescribe a method for calculating- (a) a maximum rate of interest; and(b) the maximum fees contemplated in this Part,applicable to each subsector of the consumer credit market, as determined by the Minister. (2) When prescribing a matter contemplated in subsection (I), the Minister must 30 consider, among other things- (a) the need to make credit available to persons contemplated in section 13fa); (b) conditions prevailing in the credit market, including the cost of credit and the optimal functioning of the consumer credit market; and (c) the social impact on low income consumers. (3) When establishing regulations contemplated in this section, the Minister-(a) must establish different maximums for credit agreements within each subsector of the consumer credit market; and (b) may prescribe the method, consistent with section 101(3), for allocating service fees between the provision of credit and the provision of related financial services, in circumstances in which a credit provider offers multiple financial services under a single agreement
    Last edited by Vanash Naick; 10-Dec-12 at 12:52 PM.
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    Platinum Member Mike C's Avatar
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    Hi Vanash - thank you for your very erudite reply. I must confess, however, that my eyelids started to droop about half-way through your explanation (my problem, not yours).

    In a nutshell are you saying that the In Duplum rule exists but has not yet been tested in a court of law - and that if it is, there is ambiguity enough for it to not apply?
    An education isn't how much you have committed to memory, or even how much you know. It's being able to differentiate between what you do know and what you don't. - Anatole France

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    Site Caretaker Dave A's Avatar
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    I suggest the standing of common law is a red herring in this particular discussion as the issue is now decided by legislation ever since the National Credit Act became of force and effect.

    For the sake of clarity, find below section 101 (1) (b) to (g) refered to by S 103 (5), which you will note includes collection costs.

    b) an initiation fee, which-

    i) may not exceed the prescribed amount relative to the principal debt; and

    ii) must not be applied unless the application results in the establishment of a credit agreement with that consumer;

    c) a service fee, which-

    i) in the case of a credit facility, may be payable monthly, annually, on a per transaction basis or on a combination of periodic and transaction basis; or

    ii) in any other case, may be payable monthly or annually; and

    iii) must not exceed the prescribed amount relative to the principal debt;

    d) interest, which-

    i) must be expressed in percentage terms as an annual rate calculated in the prescribed manner; and

    ii) must not exceed the applicable maximum prescribed rate determined in terms of section 105;

    e) cost of any credit insurance provided in accordance with section 106;

    f) default administration charges, which-

    i) may not exceed the prescribed maximum for the category of credit agreement concerned; and

    ii) may be imposed only if the consumer has defaulted on a payment obligation under the credit agreement, and only to the extent permitted by Part C of Chapter 6; and

    g) collection costs, which may not exceed the prescribed maximum for the category of credit agreement concerned and may be imposed only to the extent permitted by Part C of Chapter 6.
    The trouble with opportunity is it normally comes dressed up as work.

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