DEBT COLLECTION IN ZIMBABWE
By Nomathemba Ndlovu
Debt refers to anything that can be lawfully owed or claimed by one person to and from another. It is not limited to money but may also include goods and services. A debtor is any person who owes another, the creditor a certain sum of money or owes performance or service arising from some legal basis. A debt, which is the prerequisite link between the two, is defined in Section 2 of the Prescription Act (Chapter 8:11) as including anything that may be sued for or claimed by reason of an obligation arising from statute, contract, delict or otherwise. Debt collection is a matter close to many people’s hearts at the moment. Whether you are on the creditor or the debtor is side of the line, it is essential to understand the process to be able to make appropriate decisions.
Essentially debt collection is a specific type of litigation. The claim arises from the failure to pay for services rendered, or for goods sold and delivered or failure to service a loan. The creditor renders an account and if the debtor fails to pay according to the terms agreed between the creditor and debtor, the creditor can issue a final demand for payment. In the case of Kessel v Davis 1905 TS 731 @ 733 it was stated that “the object of a demand before summons…is to ensure that a debtor, whose liability has arisen without any date having been fixed for complying with it, should be called upon on a definite date to discharge it before he is rendered liable to be brought into court.”
If after being served with the final letter of demand, the debtor fails to pay, the creditor then can hand over the matter to lawyers (in the legal profession we say “the creditor instructs his attorney”). This involves the appointment of such a lawyer as special agent for the creditor to act for and on his behalf to institute legal proceedings against the debtor, such briefing also involves providing the lawyer with all the relevant information and materials concerning the debtor and the debt involved.
Should the debtor comply with the letter of demand, the matter does not go any further as it would have been settled and this saves both costs and time for both parties. In the absence of a response, the instructed attorney proceeds to cause summons to be issued. This is a legal document issued out of Court and is served on the Defendant by either the Messenger of Court (in the case of a Magistrate court claim) or the Sheriff (in the case of a High Court claim).
Summonses are a cornerstone of the credit litigation process. It is essential to have the debtor’s correct physical address. Without the correct physical address, the Sheriff or Messenger of Court would not know where to deliver the Summons, the critical first step in the process of litigation.
If the creditor does not know the debtor’s current physical address, a Tracing Agent may have to be engaged to establish the debtor’s whereabouts. This saves the creditor unnecessary charges by the Sheriff or Messenger of Court arising from arriving at an incorrect address and not being able to serve the Summons and then having to be sent out again. The common legal thrust underlying these cases is basically that summonses must be issued against an existing natural or juristic person. If there is no legal or natural person who answers to the names in the summons then the summons is void ab initio.
After service of Summons the debtor can defend or admit the claim. If they admit liability for the debt they can enter into an arrangement to pay the debt off over time. This might be in the form of an Acknowledgement of Debt or an agreement which is made an Order of Court. It is often the case that a creditor will much rather have the debt paid off over time, than have to pay the costs involved in litigation. As long as the debtor is open about the need to pay off the amount, and sticks to the payment arrangement, there is really no reason why a debt collection matter should go to trial. It will of course save even more time and costs if the debtor comes forward with a proposal to pay off the debt when the letter of demand is received.
Where the debtor is disputing the claim he can enter an appearance to defend. If the debtor defends the claim, then the creditor will proceed with litigation to recover the contested amount, possibly going all the way to trial. Reasons for defending a summons might be that the summons is against the wrong debtor, that the service or goods were defective in some way or the amount of the debt is disputed, amongst other reasons. At any stage along the sometimes arduous journey to trial, the parties can agree on settlement and bring their dispute and the associated stresses to an end.
Of course the debtor might never respond in any way to the summons. After the proper time period without reply, the creditor can apply for Default Judgment. That is to say where the debtor has not entered appearance to defend the matter and did not consent to judgment within the stipulated period of time, the creditor can apply for a Default Judgment, which, if granted, will allow the creditor to obtain a Warrant of Execution for the Judgment Debt.
When a creditor obtains a judgment they are entitled to enforce it. Enforcement relates to the actual implementation and benefiting from the court order in line with the remedy or relief granted to the winning party. A warrant is a legal document or order authorising, empowering and instructing the messenger of court or deputy sheriff to attach, remove and sell by public auction, the assets /property of the judgment debtor for purposes of recovering the judgment debt. The Sheriff or Messenger of court delivers the Warrant to the debtor (who is now, after the Judgment has been given, called the Judgment Debtor) and the debtor either pays the debt or if the debtor cannot or will not pay the debt the Sheriff or Messenger of court attaches (and possibly removes for sale) items sufficient to cover the Judgment Debt and costs. After selling attached property the Sheriff or the Messenger of Court pays the judgment creditor what is due to him in terms of the court order. Should there be a surplus after deduction of costs incurred, it is handed over to the judgment debtor. Where the judgment debt exceeds the value of the assets, the remaining part of the debt can be recovered through other means like Garnishee or Civil imprisonment.
It is cheaper to settle a debt before the commencement of legal proceedings than to allow the matter to go to court and having to pay pursuant to a court order as the debtor in the process will be liable for the costs of suit, interest and the execution costs which can be quite high. More often than not, sales in execution do not realise enough money to cover the judgment debt.
While care has been taken to ensure that this publication is accurate, Kanokanga & Partners accepts no liability for any prejudice, loss or, damage of whatsoever nature which may arise from reliance on any of the information published herein. The contents of this publication are for general information purposes only. The purpose of this publication does NOT constitute our legal or professional advice. Readers are advised not to act on the basis of the information contained herein alone. Every situation depends on its own facts and circumstances.Next Step