his week’s landmark judgment against illegally obtained emolument attachment orders (EAOs) from Stellenbosch is not the end of the battle.
The debt-collecting law firm that was nailed says it will probably appeal “certain aspects” of the judgment while the judgment itself will only help people if employers come to the party and use the judgment to clear their payrolls of illegal deductions.
The case involved EAOs ( often called garnishee orders, on the salaries of 12 people in and around Stellenbosch, largely farm workers who had defaulted on loans.
All of these EAOs were the work of law firm Flemix and Associates on behalf of various microlenders.
All of them were found to be unlawful and invalid after the loans themselves had been massively usurious. One applicant had a net income of R2 260 a month but had been granted a loan requiring monthly repayments of R1 574. After almost inevitably defaulting, the applicants had been slapped with EAOs that sometimes claimed their entire salaries.
Western Cape High Court Judge Siraj Desai’s judgment was scathing of the microlenders and their lawyers.
He ordered that Flemix’s conduct be reviewed by the Law Society for ethical breaches and lambasted the lenders for their clearly “perfunctory or nonexistent” affordability checks on borrowers.
Flemix director Alanza Flemix-Jordaan told City Press in an emailed response to questions: “We are considering the written judgment in conjunction with our legal team.”
The judgment “has far-reaching implications for the credit industry”, she said.
The case against Flemix and its microlender clients was driven by millionaire businesswoman Wendy Appelbaum, with Stellenbosch University’s Legal Aid Clinic representing the applicants and law firm Webber Wentzel’s pro bono office in Cape Town providing instruction.
Appelbaum took up the cudgels in 2013 after discovering that workers on her Stellenbosch wine estate DeMorgenzon were losing large chunks of their incomes to EAOs.
This was a common complaint during the wildcat farm strikes that year, which saw many employers taking note of the overindebtedness of their workers, with many arguing that abusive credit practices, not only low wages, had been at the heart of the uprising.
Odette Geldenhuys from Webber Wentzel, the instructing attorney on the applicants’ side, said the expectation was that Flemix would not only scrap the EAOs but repay the money collected from the 15 applicants using the illegal EAOs.
“Since they were unlawful, they were unlawful from the beginning,” she told City Press.
The judgment implied that Flemix should scour the rest of their 150 000 cases, covering the collection of R1.6 billion in debts for 45 different microlenders, and refund other unlawful ones, argued Geldenhuys.
According to Judge Desai, it “is safe to assume that thousands, if not tens of thousands, from Ms FlemixJordaan’s 150 000 cases involving ordinary working people in debt are having significant portions of their salaries or wages deducted based on unlawfully obtained EAOs”.
While the judgment should empower people all over the country to battle other unlawful EAOs, there won’t be an automatic wave of cancellations. It is now up to employees, employers and interest groups to weed out the unlawful cases using the Desai judgment. The effect could nonetheless be dramatic. Kem Westdyk, general manager of Summit Garnishee
DEBT CRUSADER Wendy Appelbaum