This is a significant step in reforming micro-lending industry, says law clinic attorney
Flemix & Associates, a firm of debt-collecting attorneys, has been found guilty and fined for forum shopping, the practice of obtaining court orders against debtors in cities and towns far from where they live.
The Legal Practice Council last week confirmed to GroundUp that it had found Alanza Flemix-Jordaan, director of Flemix, guilty of one of the three counts brought against her firm. Flemix was ordered to pay a R30,000 fine. The ruling was made on 4 October 2019 but has not yet been reported in the media.
Flemix was involved in obtaining numerous garnishee orders, also known as emolument attachment orders (EAOs), which force an employer to deduct money owed to a creditor directly from the monthly salary of the person in debt.
Forum shopping used to be widely practiced by credit collectors. It resulted in many borrowers not being able to attend their hearings in person, denying them access to the courts and justice.
The Legal Practice Council's ruling comes four years after Western Cape High Court Judge Siraj Desai declared the garnishee orders against 15 consumers "invalid and unlawful", in a lawsuit brought by the consumers and Stellenbosch University Law Clinic against several creditors represented by Flemix.
In his 2015 judgment, Desai ordered an investigation into the practice of debt collecting at Flemix to establish whether it had breached its ethical duties. Desai also noted that Flemix had about 150,000 files with a book value of about R1.6 billion.
We have been unable to determine if the Legal Practice Council's findings against Flemix related to practices before or after Judge Desai's ruling.
On Thursday, Flemix confirmed that it was charged with three counts of unprofessional conduct.
The first count was for bringing the profession into disrepute by engaging in forum shopping; assisting credit providers to misapply and abuse the law regulating the granting of EAO's; and submitting certain fraudulent documents to the courts to obtain default judgments and EAOs.
The second count was for contravening the rules of the code of conduct for attorneys by making statements in documents which were untrue, which Flemix-Jordaan knew or reasonably ought to have known were untrue.
And the third count was for contravening the rules for failing to reply to a request from a specific debtor.
"After a thorough investigation through the course of three days during which evidence was led by the Legal Practice Council we were [only found guilty of engaging in forum shopping]," said Flemix.
"Flemix & Associates Inc. was fined R30,000. This was as a direct result of the negative media coverage received before, during and after the Stellenbosch matter, again driven by Mrs [Wendy] Appelbaum and her media team. As a firm we are extremely happy that this is behind us now and that we were found not guilty on charges brought on unfounded allegations," the firm said.
Despite the case against Flemix making national news at the time, very little was shared by the Legal Practices Council about its disciplinary hearing against Flemix on its website. According to Section 38 of the Legal Practice Act, the council is required to publish all disciplinary hearings on its website.
Stephan van der Merwe, senior attorney at the Stellenbosch University Law Clinic, said: "We were unaware of the finding. We assume that the Legal Practice Council will communicate the conviction and penalty, in terms of section 38 of the Legal Practice Act, in due course. We also note the response by Flemix and Associates, and must strongly disagree that Ms Flemix-Jordaan's guilt was 'a direct result of the negative media coverage' the case received. We would argue that the finding of guilt resulted from the illegal forum shopping she actively engaged in, as pointed out by Judge Desai in the Western Cape High Court."
Van der Merwe said that the hearing and finding of guilt against Flemix is a significant step in further reforming the micro-lending industry.
In response to the allegations made by Flemix, Applebaum said: "I am unashamed and incredibly proud of the fact that I funded that case and could make a difference. And there's more [money] if this case needs to continue. The worst part about Flemix's statement is that I don't need a media team. I have never had a media team ... Something this obvious and disgusting as this woman's behaviour speaks for itself."
"As far as I'm concerned, Ms Flemix-Jordaan is as guilty as sin and that is why the law was changed because [forum shopping] was found to be abusive," Applebaum said.
GroundUp is being sued after we exposed dodgy Lottery deals involving millions of rands. Please help fund our defence. You can support us via Givengain, Snapscan, EFT, PayPal or PayFast.