Absa response to widow raises more questions than it answers

A rural KwaZulu-Natal Midlands widow who has been fighting for access to her late husband’s provident fund for the past three years, was told that if she wants to know where the cash is, she must get a court order.

Noseweek first wrote about the case of Mandisa Happy Dlamini in November 2015 (“Absa accused of being ‘shameless liars’”, nose193). Ever since her husband Bernard died in May 2013, she has been in an endless battle with Absa Consultants and Actuaries (ACA), who manage the Private Security Sector Provident Fund (PSSPF), to pay out her late husband’s death benefit. All in vain. In July 2013 Dlamini, who had been unemployed and pregnant with Bernard’s child at the time of his death, asked her former employer Gail Meyer, an estate agent from Durban, for help.

It was only in October 2015, after Noseweek had contacted Absa Consultants, as well as Vunani Benefit, which claims to trace beneficiaries (generally unsuccessfully), and the PSS Provident Fund trustees, that Dlamini received a hurried payment of R51,184 into her bank account – but without any written or telephonic explanation.

On 21 January this year, after constant pestering, Meyer received a “Death Benefit Notice” explaining the October 2015 payment to Dlamini.

Apart from the awkwardly late condolence message, it raised more questions than it answered. The reckoning said that the provident fund, to which Bernard had contributed for 12 years, amounted to R118,940, of which 35% or R53,564 would go to Mandisa  and a further 10% would be payable to Bernard’s stepson. It made no mention of what would be payable to the newborn son, or anyone else – Bernard had two other children from other relationships.

Eventually Dlamini wrote a pleading letter to the PSSPF chairman Robert Dube on 9 May 2016:

 “Mrs Meyer told me that when she asked you about [the payments] you said the balance was paid to Bernard’s mom and his other two children from other girlfriends. This is not true. My mother-in-law received no money and there is no proof of payment to the other children. Had it not been for Mrs Meyer’s help, I would have received nothing. You must please tell me how the money was divided. I believe I have a right to know, being Bernard’s wife when he died”.

She got no reply.

Then out of the blue on 5 June this year ACA fund manager Beverly Phillips informed Meyer that the money for Mandisa’s baby boy would now be paid into a trust; set up by Bophelo Life which would collect fees along the way for this service.

“On receipt of the birth certificate (which is outstanding), his portion (21%) will be transferred to the Trust Fund to set up the Trust,” said Phillips.

Meyer had already sent Vunani and ACA the birth certificate in October 2015. They, again, seemed to have lost the documents.

 “ACA are a bunch of liars. How many more people like Mandisa are being treated like this? I have power of attorney, means of communication and a lawyer, working pro bono, but it has been a battle to get this far. It makes no sense to set up a trust for such a small amount (about R25,000) and it is bizarre that despite all our communications, this is the first time we have heard of such a trust. Surely Mrs Dlamini can be trusted to use the money in her child’s best interests,” said Meyer.

Fund chairman Dube told Noseweek that the only way Mandisa would know who had got what, was if she were to obtain a court order compelling them to release the trustees’ resolution. He assured Noseweek that no funds had been deducted by the bank or Vunani “from a slice of [Mandisa’s] benefit”. But PSSPF did skim off R1,175 in “fees”.

Meyer has since asked an attorney to pursue the court order. Meanwhile ACA was served a 120-day termination notice by the PSSPF in May. The fund said its reason was that they had “not been entirely satisfied with the service”.  Who would have thought?

Sent several questions by Noseweek, Zintle Letlaka, replying for ACA, said: “Absa acknowledges termination of its contract to the Private Security Sector Provident Fund (PSSPF). Absa will continue to fulfil its contractual obligations to PSSPF until the end of the notice period. Bound by client confidentiality, Absa will not comment further on the matter.”

How much the SA road fund pays out for the average accident claim

The Road Accident Fund (RAF), the public entity which compensates people injured in road accidents in South Africa, has reported a 46% rise in revenue for the 2015/16 financial year, to R33.2 billion.
This, it said, is despite having to cope with a legacy plagued by complex and legalistic hurdles, spiralling costs, insufficient funding to pay claims, and long standing insolvency.
A spiralling deficit of R143 billion directly related to the provision for outstanding claims on hand and still to be received, meant that liabilities exceeded assets by R145 billion, RAF said.
The fund said that claims liabilities increased by 33% to R154 billion from R116 billion in the previous financial year.
It said that the average value of a claim paid increased by 24% from R114,969 to R143,127, while claims processing improved by 15% to R32.3 billion.
The RAF said that the average claimant legal and other costs paid per claim increased by 33% from R90,563 to R120,385.
It added that the average RAF legal and other costs paid per claim increased by 32% from R21,564 to R28,476.
Additional highlights of the work conducted in 2015/16 include the following:
  • A total of 188,864 new claims were received and 188,759 were finalised. In comparison: 173,174 claims were registered and 183,933 finalised in 2014/15; 147,168 and 240,783 respectively in 2013/14; and 150,312 and 162,130 in 2012/13.
  • Despite an increase in new claims being received the RAF managed to attend to all of these and still reduce the balance of open and unfinalised claims slightly to 217,000 claims, with a noticeable reduction in older claims remaining open.
  • During the year under review, the RAF finalised an average of 715 claims each working day of the year compared to 697 in the previous year.
  • Total revenue increased by 48% to R33,2 billion from R22,7 billion in the previous financial year as a result of a 50 cent per litre increase in the RAF Fuel Levy and minimal increase in the volume of fuel sold over the previous year.
  • Total expenditure for the year, excluding the increase in the provision for outstanding claims, increased by R4.3 billion to R34.2 billion (2014/15: R29.7 billion) as a result of improved productivity in claims settlements and higher claims costs.
  • Claims expenditure – excluding the provision for claims incurred – of R32.3 billion accounted for 94% of total expenses, with the balance being made up of employee costs, i.e. R1.28 billion (4%) and administration and other costs, i.e. R618 million (2%).
  • Effective financial management saw larger sums of money managed in an effective manner with an improvement in internal controls and unqualified audit opinion obtained.
  • 13,4% of overall expenditure went to legal fees, from a high of 29% five years ago. The RAF would still prefer that this money is spent on taking care of car crash victims, rehabilitation and other post-crash care expenses.
  • A total of R424 million worth of fraudulent claims were identified before payment was made and 391 people were arrested with 231 convicted for fraud against the RAF.
The accident fund said that of the individual claim payments/settlements made per category:
  • R1.2 billion was paid in medical costs;
  • R120 million was spent on funeral costs;
  • R6.6 billion was spent on legal and other expert costs;
  • R8.7 billion was paid in general damages – primarily to persons not seriously injured; and
  • R16.4 billion was paid for loss of earnings and support for those who qualified.
The RAF said that while the extra R10 billion revenue boost alleviated some of its immediate challenges, it does not solve the reality that the Fund is still short of sufficient cash to honour all finalized claims and this is exacerbated by the fact that the fuel levy remains flat at 154 c/l of fuel sold in 2016.
Beyond the money, the value of the fund’s claim payments has touched lives, evidenced by the fact that over 8,414 funeral claims were paid by the RAF in the year under review (in the context of 14,000 road fatalities per annum).
“Reducing the frequency, severity and impact of accidents remains the Fund’s highest priority, as the estimated cost of road crashes to South Africa’s economy remains staggeringly high at an estimated R306 billion per annum,” it said.


Creditors and your pension money

CAPE TOWN – In this advice column Deidre Phillips from Bowmans answers questions from a reader about creditors’ access to retirement funds.
Q: I have three questions. 
Firstly, will creditors have access to your retirement fund savings if you take it all as a lump sum?
If you do take a lump sum, is an employer obligated to inform your creditors that you are now in possession of a sizable amount of money?
And if an employer has a garnishee court order against it in terms of which it is required to make deductions from an employee’s salary, what happens if the employee resigns before the debt is settled? Will the order fall away or must the debt be settled by requesting that the fund deduct the outstanding debt from the member’s withdrawal benefit and pay the amount over to the creditor?

A: Section 37A of the Pension Funds Act protects a member’s retirement fund benefits from his or her creditors. This is subject only to certain limited deductions, which include:
  • Deductions in terms of the Income Tax Act (i.e. tax payable to SARS on the benefits that are paid by the fund to the member)
  • Deductions in terms of a maintenance order granted in terms of the Maintenance Act
  • Deductions in respect of a home loan granted by the fund to the member or a home loan guarantee furnished by the fund to a third party (such as a bank) in respect of a loan granted to the member in terms of the Act
  • Deductions in relation to a share of a member’s “pension interest” awarded to a former spouse in terms of a divorce order
  • Deductions of any amount due by the member to his or her employer in respect of compensation for any damage caused to the employer in respect of theft, dishonesty, fraud or misconduct by the member and in respect of which the member has (i) in writing admitted liability to the employer; or (ii) judgment has been obtained against the member in any court.

It is important to note, however, that once a benefit has been paid to a member by a fund it loses the special protection provided by the Act. This is so because the benefit is no longer due by the fund.
So to answer the first question, no amount can be attached or claimed in the fund before it is paid to the member. However, once a retirement benefit is taken as a lump sum then as soon as the member receives payment of that lump sum, his or her creditors can lay claim to it.
If the retirement benefit is rather paid as a monthly pension, then the only amount that can be attached by creditors is the monthly amount once it is paid to the member. The balance remaining in the fund stays protected.
To answer your second question, an employer has no obligation in terms of the Act to notify a member’s creditor that the member has received his or her retirement benefit.
Finally, when it comes to garnishee court orders, the obligation on the employer to deduct from the employee’s salary and to make payment to the creditor will fall away when the employee resigns. This is because there is no longer any salary from which to deduct.
Note that section 65J(8) of the Magistrates’ Courts Act, 1944 provides that when the judgment debtor (the employee) leaves employment before the debt is settled in full, then the employee must advise the judgment creditor in writing of the name and address of his new employer. The judgment creditor may then cause a certified copy of the garnishee order to be served on the new employer.
It is not uncommon for garnishee orders to also place an obligation on the (previous) employer to notify the judgment creditor that the employee has left service. However, the fact that an employee had resigned and may become due a withdrawal benefit from a fund does not automatically translate into the fund being obliged to deduct the outstanding debt owed to the creditor from the member’s withdrawal benefit. Such a deduction will be unlawful and contrary to section 37A of the Act.
Deidre Phillips is senior associate in the Banking and Financial services regulatory team at Bowmans.
If you have any questions you would like answered by financial planning or financial services regulatory law experts, please send them to editor@moneyweb.co.za.



Concourt confirms your rights on issuing of EAOs

Emoluments attachment orders (EAOs), colloquially known as “garnishee orders” – have been abused by unscrupulous credit providers for years. As a result, countless debtors have been denied many of their constitutional rights, including their right to access justice, and have found themselves in debt bondage because of the many EAOs against them.
But a decision by the Constitutional Court this week will put a stop to the abuses, because it confirms key orders contained in an important High Court judgment that addresses problems with the law governing the issuing of EAOs, the Magistrates Court Act (MCA). This week’s Constitutional Court judgment also changes sections of the MCA that were unconstitutional, Odette Geldenhuys, a
senior associate at law firm Webber Wentzel and the attorney for the applicants in the matter, says.

The Constitutional Court judgment follows an application from the Western Cape High Court to confirm an order of constitutional invalidity – in other words, the highest court in the country was asked to confirm a judgment that declared aspects of a law to be “constitutionally invalid”.
The Western Cape judgment was handed down by Judge Siraj Desai in July last year following an application by the University of Stellenbosch Legal Aid Clinic (Uslac) brought in the public interest. Uslac’s clients are mostly impoverished farm and general workers, many of whom are battling to survive because of EAOs.

Judge Desai’s judgment, which was widely hailed as a victory for the poor, found that the EAOs against Uslac’s clients were obtained unlawfully and that sections of the MCA were inconsistent with the constitution and hence invalid.
Instead of confirming his order of constitutional invalidity, which would have necessitated having Parliament amend the MCA, the Constitutional Court made changes to the relevant sections of the Act, and confirmed other orders made by Judge Desai.
“The effect of the order is that, with immediate effect, no EAO may be issued by a clerk of the court; it can only be granted by a magistrate if the magistrate is satisfied that it is just and equitable that the EAO be issued and that the amount is appropriate,” Geldenhuys says.
Furthermore, an EAO cannot be issued by a magistrate in a far-off jurisdiction; it can be issued only by a magistrate in the jurisdiction where the debtor lives or works.
Each of these effects of the judgment – which applies to EAOs issued from now on (not retrospectively) – protects you in the following ways if a creditor seeks to obtain an EAO against you:
1. Judicial oversight
An EAO can be issued by a magistrate only. It cannot be issued by a clerk of the court, which is what commonly happens. The Constitutional Court judgment says that this case is a prime example of why judicial oversight (the scrutiny of a magistrate or judge) over the execution process is required.
An EAO is “clearly burdensome”, the judgment says. “It severely constricts the autonomy of the debtor to decide how [he or] she will pay off the debt. It is also inflexible, as it does not adapt to the debtor’s changing circumstances from week to week. It goes directly off a debtor’s wages – and these wages will often form the means for the debtor’s day-to-day survival. These are all important considerations to be borne in mind when deciding whether an EAO should be granted. What is more, a debtor’s personal circumstances may well have changed in the interim between when a judgment debt is entered and ordered to be paid in instalments and when an EAO is sought. It is, therefore, crucial that these considerations are taken into account at the time the EAO is sought.”
2. Jurisdiction
An EAO must be issued in the same jurisdiction as the judgment debtor; in other words, where the debtor lives or works. This is to ensure that the debtor is able to place his or her circumstances before the court, and in so doing can exercise his or her right to access justice.
You can no longer agree to a credit provider applying to a magistrate in a jurisdiction other than where you live or work for an EAO to be issued against you. If you are forced to give such consent, it will automatically be invalid.
3. Appropriate
The EAO must be of an amount that is “appropriate”, the Constitutional Court judgment says. One of Uslac’s clients earned R2 420 a month and had an EAO of R1 194, leaving him with a net income of R1 263.
The judgment says a court that determines a request for the issuing of an EAO should be guided by certain factors: it must take into account the nature of the debtor’s income and the amount the debtor needs for upkeep and to support dependants. “The validity of an EAO depends on whether the debtor has sufficient residual income to support herself and her dependants. Thus such an order may only apply to funds that are in excess of the amount she needs for the maintenance of herself and her dependants.”
Geldenhuys says the judgment strikes a fine balance between the rights of debtors and the rights of creditors. “The judgment says that the EAO granted by the court must be ‘just and equitable’ and the amount must be ‘appropriate’.
“The choice of words here is very important. ‘Just and equitable’ requires the magistrate to consider the situation of both the credit provider and the debtor in deciding whether to grant an EAO. Requiring that the amount to be paid in terms of the EAO be ‘appropriate’ signals that the amount must not only be affordable for the debtor, it must also be fitting in relation to the outstanding debt.”
A magistrate in the Western Cape says that although he does not expect the judgment to stem the use of EAOs, it will take longer to issue these orders because of the application process and, consequently, they will be more costly for the creditor, and eventually for the debtor.
“Attorneys will have to put in more work when bringing these applications. Before bringing the application, they will have to have a good sense of the debtor’s income and expenses so that they know what the debtor can afford to pay in instalments,” he says.
• An emoluments attachment order, often called a “garnishee order”, is a court order to attach a debtor’s salary and deduct from it instalments that are paid by the debtor’s employer to the debtor’s creditor in settlement of a judgment debt.
• Execution is a process of enforcing a court order. Depending on the nature of the order granted, execution may be against the person or the property of the judgment debtor.



Garnishee ruling to benefit millions

“A LANDMARK decision which will have a lasting 
positive effect on the lives of millions of South Africans, most especially the poor.”
This is how Western Cape High Court Judge Siraj Desai described a ruling handed down in the Constitutional Court yesterday.

The ruling means that with immediate effect, no garnishee orders – also known as emolument attachment orders (EAOs) – can be issued without oversight by a magistrate.
Judge Desai’s ruling ensured that employers in the Western Cape would be exempt from enforcing garnishee orders against employees obtained in another 
jurisdiction or outside the province.

Commenting on the 
Concourt ruling yesterday, he said: “Lots of hard work went into drafting the judgment – and to think when I made it last year the DA laughed 
at me.”
The Concourt ruled yesterday that aspects of the enforcement of garnishee orders are unconstitutional.
Garnishee orders can now be granted only by a judge or a magistrate. They also need to be granted in the jurisdiction of the debtor, and the debtor must be warned via registered letter that they have 10 days to pay the debt if they want to avoid its granting.
These orders give creditors the right to debit the wages of indebted individuals.
The ruling has been welcomed across the board as it will ensure that the collection of unpaid debt is more just 
and equitable.
Minister of Justice and Correctional Services Michael Masutha welcomed the “landmark” judgment yesterday.
“We welcome today’s (Tuesday’s) Constitutional Court judgment on issuing of the garnishee order. The judgment will ensure just and fair 
services to ordinary people, especially the poor,” Masutha said.
He said the department would make sure all the 
concerns raised in the judgment are immediately attended to. “Our people must receive qualitative justice services,” said Masutha.
He explained the judgment was consistent with the Courts of Law Amendment Bill, which was introduced by the department in Parliament in May.
Credit Ombud Nicky Lala-Mohan said the judgment set a solid ground for future garnisheeing.
“What the Concourt did was that it confirmed the ruling of the judge in Cape Town (Desai).
“Certain aspects of the emolument orders are unconstitutional,” he said.
Lala-Mohan said there had been an abuse of workers, with many unaware of the correct process to follow.
“This case goes a long way in curbing abuse. A lot of attention has been gained because of this case.
“Now you will have a proper manner in which emolument attachments will be dealt with.”
He also said lenders were still entitled to collect their debt, but need to follow the correct procedure.
Stellenbosch University’s Legal Aid Clinic paralegal adviser, Mathilda Rosslee, said: “I am so happy with what has transpired. The judgment is really overwhelming.
“It just confirmed that it was what we are trying to protect and the constitutional right.”
The clinic had taken the matter to court, but it was opposed by debt collector 
Flemix & Associated Incorporated Attorneys.
Judge Raymond Zondo ruled that the amount to be deducted needed to be appropriate, and that the order would only be for future EAOs.
Rosslee, who has been fighting this battle since 2012, said workers found themselves in situations were the majority of their salaries had been deducted without their consent or understanding of the amount.
“Our average client is illiterate, with some of them not being schooled at all. Some cannot even read English.
“They (debt collectors) give them papers to sign that an agent has sent them. What the workers are actually signing is Section 129, together with consent and justification.
“So this has become a problem. We needed to protect these consumers,” she said.
The matter was dismissed with costs.



Constitutional Court to rule on forced wage deductions

ALMOST 2-million emolument attachment orders could be affected by a Constitutional Court judgment due to be delivered on Tuesday.
The ground-breaking case was originally heard in the High Court in Cape Town in February 2015, and it challenges the constitutionality of the process of granting emolument attachment orders in the context of unsecured lending.
The case was brought to court by the University of Stellenbosch’s Legal Aid Clinic and others against the minister of justice and correctional services and others.
In March 2015, the Constitutional Court heard an appeal against the high court’s judgment during which the highest court was urged to declare sections of the Magistrates’ Act unconstitutional. The Legal Aid Clinic also urged the Constitutional Court to set aside all emolument attachment orders issued in the wrong jurisdiction or signed off by a clerk of the court instead of a magistrate.
Clark Gardner, CEO of Summit Financial Partners, estimates that there are as many as 2.5-million emolument attachment orders in existence, and about 1.9-million of them could fall foul of a Constitutional Court ruling if it finds in favour of the Legal Aid Clinic.
The case goes to the heart of the unsecured lending industry, which has relied heavily on access to emolument attachment orders to enforce the payment of loans that were often made recklessly.
Although unsecured lending has tapered off in the wake of the slowdown in economic activity, supporters of the Legal Aid Clinic’s move say changes must be made before the inevitable pick-up in unsecured lending activity. There is also the possibility that Tuesday’s judgment will apply to emolument attachment orders that have already been issued.
In response to the persistent demands for change, the portfolio committee on justice and correctional services is looking at proposed amendments to the Courts of Law Act that are aimed at preventing much of the abuse around garnishee orders.
In his July 2015 ruling in the case, Judge Siraj Desai declared that all 15 of the emolument attachment orders in the case had been issued unlawfully, invalidly and were of no force and effect.
Desai slated debt-collecting law firm Flemix and Associates for shopping around for magistrate’s courts that would sign off on emolument attachment orders regardless of how far this was done from the residence or place of work of the debtor.
This made it almost impossible for debtors to challenge the terms of the order.
The judge also hit out against the practice of using clerks to issue emolument attachment orders rather than magistrates, which meant there was no judicial oversight of the process.