Debt collection in Zimbabwe

The Prescription Act of Zimbabwe defines a debt as including anything that may be sued for or claimed by reason of an obligation arising from statute, contract, delict or otherwise. This therefore means that a debt can arise mainly in these three ways which are:

• i. Debts arising from contract: these debts arise after a party to an agreement or contract defaults payment as agreed in the contract thereby creating a debt. For example, in a lease agreement a tenant fails to pay rentals as agreed in the lease contract.
• ii. the defendant has committed adultery which the plaintiff regards as incompatible with the continuation of a normal marriage  relationship
• iii. Debts arising from a delict: these debts arise as a result of someone committing a legal wrong to another. For example, damaging another person’s property.

Debt collection is a process whereby a creditor or through someone else for example a debt collector, an individual, or a company pursue debts owed by debtors. The process of debt collection is done so as to quickly recover the amounts of money owed by the debtors to the creditors. Debt collection can be done through several ways for example negotiations, legal actions, execution and sale of property.
Section 16 of the Prescription Act states that, prescription starts to run once the date becomes due for payment. Once a debt becomes due, it must be collected. The Prescription Act provides that, an ordinary debt prescribes within a period of 3 years. 2 This means that, if a period of 3 years lapses before one starts legal process to collect the debt one may no longer be entitled to recover the debt at law. The running of the prescriptive period can be interrupted by instituting legal proceedings to recover the debt or where the debtor acknowledges the debt.
Debt collection can be done by anyone mandated by the creditor to do so on his or her behalf for example an agent or through a lawyer. The Legal Practitioners Act [Chapter 27:07] does not prohibit people who are not lawyers from collecting debts as such on behalf of other persons. The Act prohibits persons other than registered legal practitioners from suing or threatening to sue on behalf of a creditor for a fee. 3 The demand by a person who is not a lawyer must only serve a purpose of only gently reminding the debtor of his or her outstanding debt. The demand must not go beyond to threaten for legal action if the debtor fails to comply with the demand.

This type of debt collection can be said to be an informal debt recovery procedure; it does not involve the issuing of court process. The agent uses informal ways so as to enquire into the creditworthiness of the debtor and try to persuade him or her to pay the debt. This type of debt recovery helps the creditor to assess the potential of the debtor to pay the debt. After the creditor ascertains this, he or she can informally demand payment.If the technique fails the creditor can then resort to formal means of recovering the debt.

After the creditor has exhausted the informal recovery procedures and has been unsuccessful he or she can then seek the services of a legal practitioner with the details of the debtor and the latter's creditworthiness. The legal practitioner will then act in accordance with the client's instructions formally.

Courtesy Call

After receipt of initial instructions, the lawyer will contact the debtor and explain that he or she is representing the creditor. The lawyer will clarify that it is a courtesy call and that, should the debtor pay immediately, court proceedings will no longer be necessary. However, should they fail to make payment, formal proceedings will proceed. The debtor can then plead with the lawyer that he or she cannot pay the amount in one instalment, the lawyer may request that they sign an Acknowledgement of Debt. This document sets out the debt, when the debtor is to make payment and specifies any other payment terms the parties would have agreed to. If the debtor does not make payment in terms of the Acknowledgement of Debt, the lawyer will proceed with legal action.

Letter of Demand

A letter of demand is a written notice to the debtor demanding or requiring payment of the debt. A letter of demand may include the following; a description of the amount owed, how the debt was incurred (e.g., unpaid fees for services rendered), the amount of interest or penalties for late payment, the consequences of not paying (e.g. a lawsuit) and reference to the relevant documents such as invoices, contracts or other relevant communications. The information in a letter of demand gives the debtor clear notice that legal remedies to recover the debt may soon follow. A letter of demand is not filed with the court. The purpose is simply to give the debtor one last opportunity to take the debt seriously and pay up before further steps are taken to recover the balance due. Advantages of a legal letter of demand are that; it gives out a straightforward message that the creditor is serious about the debt collection and about taking legal action. It also puts the debtor in mora, this is important especially where the debt arose by way of an oral agreement. Putting the debtor in mora means the debtor cannot later claim that payment was not yet due, which claim could be a valid defence.

Summons and Response

If the debtor after being served with a letter of demand and still fails to pay the outstanding debt, the lawyer will proceed with summons against them. The summons must be issued at the court with jurisdiction over the matter. Once the Messenger of Court/Sheriff has successfully served the summons on the debtor, the debtor must either file its consent to an order being granted or its notice of intention to defend the legal action being instituted. If the debtor fails to serve and file its notice of intention to defend within the prescribed period, the creditor is entitled to proceed with a request for default judgement. The creditor also has an option of filing an application for summary judgement, if an appearance to defend was entered in circumstances where there is no genuine defence to the creditor’s claim and the appearance to defend is entered to delay the process. This is usually an option where there is a valid Acknowledgment of Debt signed by the debtor. If the Summary Judgement Application is dismissed or the debtor defends the action a number of processes are followed before final judgment is given. These processes are: Pleadings: these are court papers exchanged between the parties and filed in Court in which the creditor validates their case and the debtor details the facts upon which their defence is based. Discovery: Both parties have the right to request documents (e.g.: invoices, delivery notes) in each other’s possession to prove or disprove a case. Trial: Oral and written evidence is led from each side and the court is required to make a decision, either to give a judgment or dismiss the action.

Judgement

If the judgement is granted in the creditor’s favour, there are numerous mechanisms a creditor has to recover the debt which are as follows:

Warrant or Writ of Execution:

Once the judgment has been granted, the creditor may proceed and obtain a warrant of execution which authorises the Messenger of court/ Sheriff to execute against the debtor’s property. The Messenger of court/Sheriff is required to make an inventory that reflects the goods that are under attachment and an estimate valuation. The Messenger of court/Sheriff subsequently removes the attached goods and arranges a sale in execution. Usually the first warrant is to attach movables however, in cases where the attached movable goods do not satisfy the debt, a warrant of execution against immovable property may be issued.

Garnishee Order

If the debtor has money in a bank account or earns a consistent salary, an application can be made in which the bank or employer is ordered to pay the amount directly over to the credito

Writ of Execution Against immovable property

If the warrant or writ of execution against movable property does not satisfy the judgment debt, a Writ of Execution Against Immovable Property can be issued where the judgement debtor owns immovable property

Increased recovery rates: lawyer-led debt collection efforts yield higher recovery rates as compared to debt collection by agents who at law can not issue letters of demand or take legal action against the debtor Enhanced credibility: having a lawyer involved in the debt collection process sends a strong message to the debtor that the creditor is serious about collecting the debt