Objection to a Payment Order in Non-Judgment Enforcement and Action for Annulment of Objection

Failure to perform debts on time in commercial and legal relationships may require creditors to resort to legal enforcement. One of the most commonly used methods in practice is “Non-Judgment Enforcement”under the ordinary attachment procedure, which can be initiated directly for monetary or security claims without a court judgment.

Against this method, which gives the creditor a relatively rapid route to attachment, the legislature has also provided the debtor with a practical protection mechanism: objection to the payment order. If the debtor’s objection is unjustified or made in bad faith, however, the process does not end; the creditor may instead proceed with an “Action for Annulment of Objection” and may also seek the financial sanction known as “20% enforcement-denial compensation” This article summarises this process as a guide for the parties.

1. Debtor’s Defence Mechanism: Objection to the Payment Order

When the creditor applies to the enforcement office, a “Payment Order” (Sample No. 7) is sent to the debtor. To stop the enforcement proceedings, the debtor must comply with strict procedural rules:

• Objection period: Under the ordinary attachment procedure, an objection may be filed with the enforcement office within 7 days from service of the payment order. The method of service and any exceptions must be assessed separately.
• Objection to jurisdiction: If the proceedings are considered to have been initiated before an enforcement office lacking jurisdiction, the objection to jurisdiction should be raised within the prescribed period and should identify the enforcement office considered competent.
• Stay of proceedings: A timely and duly filed objection automatically and immediately stays the enforcement proceedings. After this stage, the creditor cannot carry out attachment measures against the debtor unless the objection is overcome through the appropriate legal route.

2. Creditor’s Response: Action for Annulment of Objection

A creditor whose enforcement proceedings are stayed by the debtor’s objection may seek to overcome the objection and continue the proceedings by filing, before the competent court such as a civil court of first instance, commercial court or consumer court, an Action for Annulment of Objection action.

• Mediation: In commercial, employment or consumer disputes, whether mandatory pre-litigation mediation applies should be checked separately before filing the action according to the nature of the claim and the relevant legislation.
• Time limit for filing the action: Under Article 67 of the Enforcement and Bankruptcy Law, an action for annulment of objection may be filed within one year from notification of the objection to the creditor. Even if this special period expires, the receivable itself and the possibility of bringing an ordinary debt action under general provisions should be assessed separately, subject to limitation and other conditions.
• Burden of proof: In an action for annulment of objection, the creditor bears the burden of proving the alleged receivable with legally admissible evidence such as contracts, invoices, current-account records and bank receipts.

3. Financial Sanction: 20% Enforcement-Denial Compensation

The law provides for compensation in circumstances where a debtor unjustifiably objects to enforcement proceedings, for example merely to gain time or delay the creditor.

Enforcement-denial compensation is not automatic in an action for annulment of objection. If the creditor has requested it, the objection is found unjustified and the receivable is liquid/determinable, compensation may be awarded under Article 67; the statutory minimum is twenty percent of the receivable forming the basis of the judgment.

• The receivable must be liquid (determinable): The amount of the receivable must be capable of being known or calculated by the debtor or based on a fixed contractual basis. Where the amount can only be determined through court proceedings or an expert report, such as non-pecuniary damages or compensation depending on fault, enforcement-denial compensation may not be available.
• The compensation must be requested: For the court to award this compensation, the creditor must have expressly requested enforcement-denial compensation in the statement of claim.

4. Outcome of the Process and Attachment Stage

The effect of a judgment annulling the objection on the enforcement file is determined by considering the scope and enforceability of the judgment. Attachment may be requested when the relevant stage of the proceedings and other statutory conditions are met; interest, costs and compensation are calculated separately in each file.

Kaplan Law Firm We provide legal services in non-judgment, judgment and negotiable-instrument enforcement proceedings, objections to payment orders and actions for annulment of objection. For existing enforcement files or uncollected receivables, you may contact us through our Contact page.

Related reading: The time limits are different in the special enforcement procedure based on cheques and promissory notes: Negotiable-instrument attachment procedure for cheques and promissory notes.

Source: Enforcement and Bankruptcy Law, Arts. 65, 67 and 168 (Ministry of Justice).