By Farah Einstein, Senior Associate and Nadia Shaik, Associate of Hadar Incorporated, Specialist Property Law Firm
This article first appeared in Asset Magazine’s March 2023 edition

In our previous article, we explained that obtaining a court judgment is only the first step towards recovering the full value of a debt. We must not however overlook the intrinsic value of a court judgment in and of itself.

In addition, a judgment granted against a defaulting debtor serves as a powerful tool in the potential recovery process. The debtor is blacklisted which hinders their ability to secure financing, enter any important contracts and maintain a good credit record. This long-term inconvenience alone can serve as an incentive for a debtor to settle a debt.

In this article we delve deeper into additional legal remedies available to a creditor after obtaining. These remedies are utilized in an effort to compel debtors to fulfil their payment obligations. We deal with the potential obstacles faced by creditors and the positives that may result from these further steps.

Obstructions in turning a judgment into a payout

Securing the writ or judgment does not ensure that the full (or partial) value of a debt is automatically recovered. There are numerous practical obstacles that creditors encounter in pursuing execution of judgment debts. Some examples are debtors evading the creditor by changing their places of residence or business, debtors not possessing any movable assets whatsoever or possessing movable assets that are not of any significant value.

There are also other considerations:

• Certain movable assets, particularly pertaining to debtors that are natural persons, may not be attached by the Sheriff. Such items include clothing, beds, bedding, and similar items that are necessary for the debtor’s immediate wellbeing or survival. This also includes food and tools of trade necessary for a debtor to earn a living.
• Assets belonging to a third party may not be attached, and this includes items that are currently financed or leased, most commonly vehicles.

That said, as with litigation in general, for every obstruction there are several alternative possible remedies available to be pursued. In our experience, the trick is to be strategic in considering the most viable options available to a creditor.

Financial enquiries

In a situation where a creditor has no reasonable prospect of recovering on a judgment debt through attachment of the debtor’s movable assets, creditors can embark on a financial inquiry into the debtor’s financial position before deciding on which alternative remedies to pursue.

Such inquiry enables a creditor to access private information not openly available to creditors including, amongst other things, the debtor’s bank accounts. Such information includes the list of all assets owned by the debtor and provides the true financial position of the debtor, allowing for a proper and full consideration.

The advantage of this process is that it could become evident that the debtor indeed possesses substantial funds or other assets of value (for example movable assets not located at a place of residence or business) that could settle the judgment debt (or a portion of it).

This exploratory and strategic step in the process assists the creditor in a making an informed decision to continue (or not!) to pursue execution against the debtor. This decision is made with due consideration for the prospects of a successful recovery and is not simply on a hope and a prayer.

Emoluments attachment order

Another potential remedy available against a natural person debtor is an emoluments attachment order. In essence, an order is granted that compels a debtor’s employer to withhold a fixed amount from every salary payment due to the debtor and to pay this amount directly to the creditor until the judgment debt is settled. There are serious ramifications for any employer who fails to comply with such an order, ensuring monthly repayments being made.

Although it may take several months or years for the judgment debt to be satisfied, the creditor has the advantage of receiving regular monthly payments whilst interest continues to accrue on the judgment debt.

Sale of immoveable property (or registering a caveat)

An alternative remedy available to a creditor in pursuing of a judgment debt is to pursue the attachment and sale of any immoveable property owned by a debtor.

Although very effective this option carries some complexities and a significant legal cost. If a suitable immovable property has been identified, an application can be made to Court to declare such property eligible for sale in execution.

The most significant stumbling block in pursuing this remedy against a natural person is that such person’s Constitutional right to adequate housing causes conflict against a creditor’s right to recover a debt and a debtor’s constitutional right to housing.

That said, such applications are more likely to succeed if:

• The debtor is a natural person who owns more than one immovable property and therefore has alternative housing available.
• The debtor is a juristic entity and its immovable property can be sold without consideration for the Constitutional rights available to a natural person.

Another remedy which we have successfully pursued for clients is registering a caveat over a debtor’s immovable property. Although this does not generally result in an immediate payment, the registration of a caveat ensures that the debtor cannot sell such immovable property without first satisfying the judgment debt. In several matters debtors have offered the full amount owed, plus interest and costs, such that they can sell their immovable property.

Liquidation (juristic debtor) or sequestration (natural debtor)

We consider applying to the Court for the liquidation or sequestration of a debtor as a potential last option given the time and cost implications. A further consideration is that a debtor may have various other creditors in pursuit (commonly SARS!) that this remedy may not necessarily assist with the recovery of a judgment debt.

There are however situations which clearly justify pursuing this remedy. In such circumstances, an application for the liquidation or sequestration of a debtor effectively serves to have a natural person declared bankrupt or for an insolvent juristic entity to be wound up.

A curator is appointed in the case of a natural person and a liquidator in the case of a juristic entity and their role is to investigate the debtor’s financial affairs to identify and sell assets for the benefit of creditors.

Each case requires individual consideration

The prospects of recovery against each debtor must be considered on its own merits and circumstances. Although there are many challenges in converting a judgment debt into a payout, there are also several measures in the process that can be taken to ultimately push the debtor to pay the debt.

In conclusion, we have provided an overview of the various processes and remedies that are available to creditors seeking to recover a debt from a defaulting debtor. However, it is important to note that every case is unique, and it is crucial to approach each case with careful consideration and a tailored strategy. If you require further guidance or more detailed information on how to pursue your debtors, we encourage you to contact our experienced Team for expert advice and assistance. We are committed to helping our clients recover the full value of their debts and will work with you to develop a comprehensive and effective debt recovery plan.