The most common mistake in recovering a commercial debt is thinking of the process in a single way, as “first a formal notice, then an action”. In fact the choice of the right route depends on the legal nature of the document you hold, and that choice can change the recovery period by months and sometimes by years.
First identify the document
On what is your claim based?
- Cheque, promissory note or bill of exchange: Attachment proceedings specific to negotiable instruments may be brought. On this route the debtor's objection does not of itself stay the proceedings; the objection is examined by the enforcement court and, as a rule, the proceedings continue until a decision is given. It is one of the fastest routes.
- A court judgment or a document in the nature of a judgment: Enforcement proceedings with judgment are brought. The debtor's right of objection is extremely limited.
- Mortgage or pledge: Proceedings by way of realisation of the pledge are mandatory. Direct attachment proceedings cannot be brought for a claim secured by a pledge.
- Invoice, current account, contract: Proceedings without judgment are brought by way of general attachment. On this route a simple objection by the debtor stays the proceedings.
Proceedings without judgment and objection: critical time limits
In proceedings without judgment a payment order is served on the debtor. If the debtor objects within seven days of service, without needing to give any reason, the proceedings are stayed. The creditor then has two routes:
- Setting aside the objection: If you hold a qualified document within the meaning of the Enforcement and Bankruptcy Act (such as a private deed whose signature has been acknowledged, a notarial deed, or an official register record), application is made to the enforcement court. This is a swift examination of narrow scope; the period for application is six months from service of the objection.
- Annulment of the objection: If there is no qualified document, an action is brought before the general courts. The period for this action is one year from service of the objection and is a forfeiture period. Enforcement denial compensation of at least twenty per cent of the claim may be awarded against a debtor who objected without justification.
An objection is not the end of your claim. It is merely a turning point determining the route by which you continue.
Mediation: a step that cannot be skipped
In respect of commercial claims and compensation claims whose subject matter is the payment of a sum of money, having applied to a mediator before bringing an action is a procedural prerequisite. An action brought before this stage is completed will be dismissed on procedural grounds. By contrast, no mediation requirement applies to commencing enforcement proceedings; proceedings may be initiated directly. The requirement takes effect at the stage of an action to annul the objection.
Timing: precautionary attachment
The tool most often overlooked in practice is precautionary attachment. In files where there is a risk that the debtor will dissipate assets, it allows those assets to be provisionally seized before the proceedings or the action conclude. It is generally granted against security.
A precautionary attachment used at the right moment turns a judgment to be obtained three years from now, with nothing behind it, into a claim recoverable today. The reverse is equally true: every week of delay reduces the prospect of recovery.
Four questions to ask before deciding
- Which route of proceedings does the document I hold open?
- What are the debtor's known assets and capacity to pay?
- If the debtor objects, do I hold a qualified document?
- How valuable is the continuation of the commercial relationship to me?
In most files the answers to these four questions reveal the right strategy of their own accord. If the answer to the fourth is “very valuable”, a well-negotiated payment protocol is usually the most productive solution.
