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Tips, advice, and information for South African business owners

13 Mar

Updating The Small Claims Court

Earlier this month, the Department of Justice and Constitutional Development announced that the claims limit for the Small Claims Court will be increased from R15,000 to R20,000. The increase will take effect from 1 April, 2019, and is intended to expedite civil claims.

One of the questions that occasionally pops up is whether small business owners can use the Small Claims Court or not. Ultimately, that depends on whether your business is a juristic person (such as a close corporation or company) or whether you are trading as a sole proprietor or partnership.

Only natural persons may use the Small Claims Court, which is a boon for sole proprietors and partnerships since it is a much quicker, easier, and less expensive legal option. Simply issue a letter of demand, apply for a summons, and present your case at the court hearing. If all goes according to plan, it should only take a month or so to settle your claim and be on your merry way.

Unfortunately, things don’t always go according to plan. While the Small Claims Court can issue judgments, it can’t enforce them. Furthermore, those judgments can be appealed. In either circumstance, you would need to escalate the matter to a Magistrate or High Court for relief, which can be prohibitively expensive for a claim of R20,000 or less.

In addition to these constraints, small juristic persons (i.e. micro close corporations and companies) have no access to the Small Claims Court whatsoever. This is grossly unfair considering the Small Claims Court system was established to broaden access to justice and expedite civil claims. Forcing SMEs to defend their legal rights in the same manner as listed companies is a clear contradiction of this intent.

The Small Claims Court system should have been overhauled years ago:

1. Allow claims from juristic persons with an asset value or annual turnover below R2 million (in keeping with the Consumer Protection Act).
2. Raise the claim limit to R100,000.
3. Empower the Small Claim Courts to resolve appeals and execute judgments.

These three changes would be a huge benefit for thousands of small business owners. The fact that SMEs don’t yet have access to a simple, quick, and cost efficient justice system is yet another reminder of the vast gulf between the rhetoric and reality of small business development.

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