Any attorney worth their salt will tell you that taking a judgment against a debtor is less than half the battle won. It’s what happens after the judgment that will make taking legal action worthwhile. Executing on a monetary judgment is a road with many forks, but the road less travelled is utilising the very powerful provisions of section 65 of the Magistrates Court Act, 32 of 1944 (“the Act”).
What are Section 65 proceedings?
Any monetary judgment can be enforced using section 65, irrespective of whether the judgment debtor is an individual or a legal entity.
The section provides a judgment creditor with a mechanism to call a judgment debtor to appear in court to undergo an inquiry into his/her financial position. The information obtained at the enquiry will enable the court to ultimately make an order that would include a payment plan to satisfy the debt on terms that are affordable to the judgment debtor.
Can section 65 be used to enforce High Court or Regional Court judgments?
This is where the real power of section 65 lies. Although section 65 proceedings are governed by the Act and conducted in the Magistrate’s Court, section 65M makes provision for the enforcement of a judgment granted by any division of the High Court of South Africa or the Regional Division even if the Judgment amount exceeds the jurisdiction of the Magistrate’s Court.
This is done by filing a section 65A(1) notice, a certified copy of the Judgment of the High Court or Regional Court as well as an affidavit or affirmation by the Judgment Creditor or a certificate by his / her attorney specifying the amount still owing under the Judgment and how such amount is arrived at. Once this has been done, such judgment shall have all the effects of a judgment of the Magistrate’s Court where the Section 65 proceedings are to be held.
What is the process?
Once a judgment has been granted (or a file has been opened in terms of section 65M of the Act), and the judgment has remained unsatisfied for a period exceeding 10 days, the judgment creditor may issue a Form 40 Notice in terms of section 65A(1)(a) of the Act (“the Section 65 Notice”). The Section 65 Notice is issued out of the court of the district in which the judgment debtor – if he/she is a natural person – resides, carries on business or is employed, or if the judgment debtor is a juristic person, out of the court of the district in which the registered office or main place of business of the juristic person is situate.
Although it is not a requirement in terms of the Act, it is noteworthy that in some magisterial districts, the judgment creditor is required to first issue a letter to the judgment debtor to demand that the judgment debt be satisfied within 10 days, failing which a Section 65 Notice would be issued.
The Section 65 Notice calls upon the judgment debtor (or if the judgment debtor is a juristic person, a director or officer thereof as representative of the juristic person) to appear before the court on a particular day and at a particular time to undergo the financial enquiry described above.
Once a Section 65 Notice has been issued, it should be served in terms of Rule 9 of Rules Regulating Conduct of Proceedings in the Magistrates Court (“the Rules”). If service cannot for some reason be effected in the manner described in Rule 9 of the Rules, the judgment creditor can approach the court in terms of Rule 10 of the Rules for an order allowing service of the Section 65 Notice in another manner. The court should, however, be satisfied that no other manner of service can be effected and that the judgment debtor will receive the Section 65 Notice through the manner of service requested in the Rule 10 application.
The Section 65 Notice should be served at least 10 days before the court date specified in the Section 65 Notice. Some magisterial districts require that proof of service in terms of Rule 9 or 10, as the case may be, be filed at least 10 days before the court date in order for the matter to be enrolled.
The financial enquiry
The financial enquiry is usually not held on the date reflected in the Section 65 Notice (“the first appearance”). During the first appearance, the judgment debtor is requested to hand up any financial documents they would have brought to court to substantiate their financial position. If they haven’t brought any documents with them, they will be ordered to provide certain specified documents to the judgment creditor by a certain date.
Financial documents include, but are not limited to, a list of assets and liabilities (and documentary proof thereof), financial statements, salary advices or other proof of income, and bank statements. The judgment creditor can request the court to order that the judgment debtor provides further documentation if they are of the view that the court requires better information to properly conduct the financial enquiry.
In order to enable the judgment creditor to thoroughly consider the financial documents provided, the matter is postponed to the next available court date that is suitable for the parties.
As long as all the required documents have been provided and are properly in the court file, the financial enquiry is conducted at this next appearance. In some magisterial districts, the financial enquiry is held in camera, but more often than not, it is held in open court.
The purpose of the financial enquiry is for the court to consider the judgment debtor’s assets and income on the one hand versus their liabilities and expenses on the other. The court must be satisfied that the after the judgment debtor has met their essential responsibilities, there is a surplus that can be used to settle the judgment debt. The court applies a test of “needs versus wants”. Any expense that the judgment debtor can live without, is scrapped and that amount is allocated towards settling the judgment debt. Once that exercise is completed, the surplus amount becomes the monthly repayment the judgment debtor must pay towards the judgment debt, and this arrangement is made an order of court.
There is nothing stopping the judgment debtor from making a settlement offer of monthly instalments before a financial enquiry is conducted. It is the judgment creditor’s discretion as to whether such an offer should be accepted or rejected. In some magisterial districts the settlement agreement is made an order of court; however, in other districts, even if the parties agree to a settlement, the court proceeds with the financial enquiry in order for it to be satisfied that the judgment debtor can afford the monthly payments proposed in the settlement.
What happens if the judgment debtor fails to appear at the Section 65 proceedings?
Should the judgment debtor fail to appear on the date specified in the Section 65 Notice or on the date to which the Section 65 proceedings haven been postponed, the court may, at the request of the judgment creditor, authorise the issue of an arrest warrant directing the Sheriff to arrest the judgment debtor (or in the case of a juristic person, the representative who failed to appear), and bring them to court at the earliest possible date in order for the court to conduct an enquiry.
Potholes in the road
Whilst the Act is clear on the process that should be followed in section 65 proceedings, the process is not always straightforward and can be complicated by the nuances in different magisterial districts. Section 65 proceedings, if used correctly, are a powerful tool to ensure monetary judgments are worth more than the paper they are written on. It is therefore important that you approach a legal representative with expertise in section 65 proceedings to ensure the process is as efficient as possible.
Laura Sibanda
Associate
073 999 0593
laura@NLAteam.com
