Navigating debt collection

In section 2 of the Prescription Act the word ‘debt’ is defined to include anything which may be sued for or claimed by reason of an obligation arising from statute, contract, delict or otherwise. 1 A debtor as defined in Black’s law dictionary is any person who owes another, the creditor a certain sum of money or owes performance or service arising from some legal basis. When a debtor fails or neglects to pay their debt on due date , a creditor will institute a debt collection process for the recovery of the debt. Debt collection is the process of pursuing a debtor to pay debts owed. The creditor may collect the debt either on their own or employ an agent to collect the debt for a fee or commission. It is important that all persons involved in the debt collection process be conversant with the process. This article will focus on debt collection where a creditor employs the services of a legal practitioner.

Where a creditor employs the services of a legal practitioner, the chosen legal practitioner may make a courtesy call to the debtor, reminding them to pay the debt due to the creditor. In the event that the debtor does not heed the call, the lawyer may institute the debt collection process by preparing a letter of demand. Our courts have held in Masiya v DDF & Another (HH 119-16, HC 8754/14) [2016]; that a debt does not become due until the claimant is aware or ought reasonably to have become aware, of the facts from which the debt arose. 2 It went on to define the word “facts” to generally mean the material or broad facts from which a cause of action arises or all the facts which a plaintiff must prove to obtain judgment in his favor. In another case ,Asharia v Patel & others 1991 (2) ZLR 276 (SC) ,the court stated that “The general applicable rule is that where time for performance has not been agreed upon by the parties, performance is due immediately on conclusion of their contract or as soon thereafter as is reasonably possible in the circumstances. But the debtor does not fall into mora ipso facto if he fails to perform forthwith or within a reasonable time. He must know that he has to perform. This form of mora, known as mora ex persona, only arises if, after a demand has been made calling upon the debtor to perform by a specified date, he is still in default…” Simply put, a letter of demand puts the debtor in default . However, when there is a contract which fixes the time for performance, mora (mora ex re) no demand is necessary to place the debtor in mora. A letter of demand must contain information such as the nature of the debt ,how the debt arose ,the amount due, the full names and address of the debtor .Where the letter of demand is drafted by a person or agent who is not a legal practitioner, such a letter must not make threats of legal action against the debtor. 4 The rationale behind this is that legal practitioners are the only agents entitled at law to sue or threaten to sue for a fee. This position is stated in section 9 (2) (b) of the Legal Practitioners Act which provides that “ Subject to any other law, no person other than a registered legal practitioner who is in possession of a valid practicing certificate issued to him shall- (a) ...; or (b) For or in expectation of any fee, commission, gain or reward in any way instruct or assist any other person to sue out or threaten to sue out any summons or process or to commence carry on or defend any action, suit or other proceeding in any court of civil or criminal jurisdiction; or…”

A debtor after receiving a letter of demand may comply with it by paying the debt or negotiating with the creditor and coming up with a payment plan which stipulates the time within which the debt will be paid. In that case, the matter would have been settled. This saves both costs and time for all parties involved. The legal practitioner as the debt collector would be entitled to a collection fee of ten per cent on the first thousand USD and five per cent on the next four thousand USD as regulated by the Law Society of Zimbabwe (Amendment) By-laws, 2014 (No. 15) and 2% on the remaining balance as per section 70 (2) ( c) of the Law Society of Zimbabwe By-laws, 1982 .

In the event that the debtor does not comply with the letter of demand, the creditor can instruct their legal practitioner to institute court proceedings so as to recover the debt. This is done by way of summons. The summons must be filed according to the rules of the relevant court (either the high court or magistrates court depending on issues of jurisdiction).The general prescription period for all debts is 3 years . This means that after three years such a debt cannot be retrieved unless prescription was interrupted by for instance,an admission of liability.

If a defendant admits liability after the service of summons ,they may either sign an acknowledgement of debt or enter into a consent judgement .Such consent to judgment must be in writing and signed by the defendant personally or by his legal practitioner . The plaintiff may then make a chamber application for judgment in terms of the consent.

The main bone of contention in debt matters under litigation is usually whether or not the debtor is truly indebted to the creditor for the amount claimed. Without any documentation or records to show that the debtor indeed owes the creditor, this may be difficult to prove. It is important therefore for a debtor have signed an acknowledgment of debt in which they accept liability to pay the creditor a specific amount. This is a document signed by the debtor, as an acknowledgment of a specific amount of money owed to the creditor. In the case of Dhlakama v Jacaranda Real Estate (Private) Limited (862 of 2022) [2022] the court set out 3 requirements for an acknowledgement of debt these are:

• 1. The acknowledgment of debt should be made by the debtor or his agent.
• 2. The acknowledgment of debt must be made expressly or tacitly acknowledging the existence of liability.
• 3. The acknowledgment of debt must be made to the creditor or his agent.

An acknowledgement of debt is recognized in our courts as a liquid document.

In cases where the plaintiff’s claim, is for a debt o, if after receiving the summons, the debtor fails to file its appearance to defend within the prescribed time period, the creditor may, without notice to the defendant, make a chamber application to the Court to grant an order against the debtor. This is called a default judgement and is provided for under rule 22 of the High Court rules 2021.

Where a debtor has signed an acknowledgement of debt ,but goes on to enter an appearance to defend ,the creditor can make an application for summary judgement for what is claimed in the summons and costs at any time before a pretrial conference is held according to rule 30(1) of the High court rules or Order 15 rule 1 (1)(a) of the magistrates court rules. The basis of this application would be that in his or her belief, there is no genuine and sincere defence to the action and that appearance to defend has been entered solely for purposes of delay.

Where there is a judgment made in favor of the creditor, be it judgement by consent, summary judgement ,default judgement or even a judgment given by the court after an opposed hearing or a trial, a creditor can enforce that judgement to recover what is owed to him by the debtor.This may be done by way of :

• Writ of Execution
  - This is provided for in rule 69 of the High court rules. The court, directs the Sheriff or other similar official to take possession of property owned by a judgment debtor. The property may then be auctioned in order to satisfy the debt.
• Garnishee order
  - This is an order directing a third party to seize the debtor’s assets, usually wages from employment or money in a bank account, to settle an unpaid debt.
• Imprisonment for debt
  - This is provided for under rule 73 of the high court rules which provides that where the sheriff has issued a return which shows that the debtor has insufficient goods or no goods to satisfy the judgment debt, the creditor may cause summons for civil imprisonment to be issued against the debtor , commanding the judgment debtor for him to attend court and show cause why an order for personal attachment should not be issued against him ..

There are lawful ways of collecting debts.The process of collecting outstanding debts is called debt collection.The debt collection process is made easier where there is documentary evidence of the debt eg in the form of an acknowledgment of debt.Unlike debt collectors,lawyers are authorized by law to demand and even sue debtors for payment of outstanding debts.It is not in the interests of a debtor to have a judgment entered against him as that will adversely affect their creditworthiness.