INTERNATIONAL DEBT COLLECTION

WHAT IS A DEBT?

Section 2 of The Prescription Act(Chapter8:11) defines a debt as including anything that may be sued for or claimed by reason of an obligation arising out of statute, contract, delict or otherwise.

WHAT IS DEBT COLLECTION?

Debt collection is a process of pursuing a debtor to pay debts owed. There are two main forms of debt collection. The first is where a creditor on his own behalf collects a debt. The other is where an agent is employed to collect a debt for a fee. Debt collection is a practice that arose and has existed since time immemorial. It has existed for as long as there has been a debt (see- The Law Society of Zimbabwe v Cephas Madyanyoka v Wellcash Debt Collectors HH 796-18)

WHAT IS INTERNATIONAL DEBT COLLECTION?

International debt collection is the process of recovering debt(s) from a foreign client

COLLECTING INTERNATIONAL DEBT IN ZIMBABWE.

International debt is collectable in Zimbabwe. When seeking to collect an international debt from Zimbabwe, the starting point is to look at the document(s) which form the basis of the claim. This is important as the documents may contain a dispute resolution clause which sets out how disputes arising from the transaction will be resolved. If the parties agreed that their disputes will be resolved by way of arbitration then the debt collection cannot be done through the courts unless the court finds that the agreement is null and void, inoperative or incapable of being performed. Article 8 of the Model law which is attached as a schedule to the Arbitration Act (Chapter 7:15) provides that:

A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

In the absence of a dispute resolution clause, the debt collection process will be governed by the debtor’s national laws.

In terms of section 15(d) of the Prescription Act (Chapter 8:11), except where an enactment provides otherwise, debts prescribe after three years. Thus, a creditor must institute appropriate debt recovery proceedings within three years from the date when the debt is due unless the running of prescription was interrupted by for instance, an admission of liability. Where the debt collection is done through the courts, the creditor being a peregrinus is expected to deposit with the court security for costs to cover the debtor’s costs in the event that the creditor’s claim is dismissed with costs. Unless the parties agree on the amount of the security of costs, same will be determined by the court through the Registrar of Court in the case of the High court and the Clerk of Court in the case of the Magistrates Court.

The basis of the rule requiring a peregrinus to provide security for the costs of an incola defendant was set out by SANDURAJP (as he then was) in Zendera v McDade & Anor 1985 (2) ZLR 18 (H) at 20A-D as follows:

“The issue relating to the furnishing of security for costs by a plaintiff who is a peregrinus is discussed by the learned authors of The Civil Practice of the Superior Courts of South Africa 3rd ed at p 25. There the learned authors have this to say:

‘A peregrinus who initiates proceedings in our courts must, as a general rule, give security to the defendant for his costs, unless he has within the area of jurisdiction of the court immovable property with a sufficient margin unburdened to satisfy any costs which may arise.

The presence of immovable property is a defence to a claim for security, but the doctrine has not been extended to include movable property.

The court has, however, a discretion to dispense with security in exceptional cases but should exercise its discretion sparingly.’

The aforesaid costs are recoverable where the creditor’s claim succeeds.

In Zimbabwe debtors hardly pay upon receiving a telephone call or a letter of demand from the creditor or their agent. It takes much more than a telephone call or a letter of demand for a debtor in Zimbabwe to settle their debt. Unless a creditor institutes arbitration or litigation proceedings chances of them recovering an international debt in Zimbabwe are remote.

WHO MAY COLLECT AN INTERNATIONAL DEBT?

There is no legislation in Zimbabwe governing debt collection. Be that as it may, our law through section 9(2)(b) of the Legal Practitioners Act (Chapter 27:07) recognises registered legal practitioners as the only agents entitled at law to sue or threaten to sue for a fee. The said provision proscribes persons who are not licenced or registered legal practitioners in possession of a valid practising certificate from,

a) instructing or assisting any other person to sue out
b) or threatening to sue out any summons or process
c) or commence, carry on or defend any action, suit or other proceeding
d) in any court of civil or criminal jurisdictions for a fee, commission

Section 9(2)(b) does not permit a person who is not a registered legal practitioner to threaten to sue out or threaten to sue out any summons or process against another person for a fee. A debt collector is not permitted in terms of s9 to threaten that property will be seized or that it will take further legal action should the debtor fail to satisfy the debt. It cannot threaten to take action that it does not intend to take or it cannot take. A debt collector may not send a document that appears as if it is from a court or legal practitioner or is part of a legal process. The section also prohibits any person from instructing or assisting any other person to sue out or threaten to sue out any summons or process for a fee, commission or gain or reward. This means that a third party as in a debt collector is not permitted to assist a creditor to sue out or threaten to sue out for a fee. A third party may not commence, carry on or defend any action, suit or other proceeding for a fee if he is not a registered legal practitioner without a valid practising certificate. The law bars debt collectors from carrying out work reserved for legal practitioners. (see The Law Society of Zimbabwe and Cephas Madyanyoka v Wellcash Debt Collectors HH796/18)

Thus, the recovery of an international debt in Zimbabwe can only lawfully be done through registered and practising legal practitioners who possess a valid practising certificate in terms of the Section 9 (2) (6) of the Legal Practitioners Act [Chapter 27:07].