The Debtor's Objection in Debt Enforcement Based on Invoice Receivables and the Remedies Available to the Creditor

General Overview

In commercial life, one of the legal remedies most frequently resorted to for the collection of receivables arising from the sale of goods or services is non-judgment debt enforcement. The creditor may initiate enforcement proceedings against the debtor on the basis of the invoice they have issued, current account records, dispatch notes, delivery documents, contracts, reconciliation letters, or payment records.

However, if the debtor objects to the payment order within the prescribed period, the proceedings are stayed, and in order to collect the receivable the creditor must legally set aside the objection. At this stage, the remedy to which the creditor will resort varies according to the nature and evidential weight of the documents that form the basis of the receivable.

In invoice receivables, the matter to be assessed is not merely whether an invoice has been issued. Whether the goods that are the subject of the invoice have been delivered or the service performed, whether the debtor objected to the invoice within the prescribed period, the nature of the commercial relationship between the parties, to which debt any partial payments have been credited, and the legal basis of the interest claimed must all be examined together.

The Effect of the Debtor's Objection on the Proceedings

In non-judgment debt enforcement, after the payment order has been served on the debtor, the debtor may object within the statutory period to the debt, the interest, the jurisdiction, or the signature. An objection made by the debtor within the prescribed period stays the enforcement proceedings.

In this case, the creditor cannot directly proceed with attachment through the same enforcement file. For the proceedings to continue, the debtor's objection must be removed or annulled. Consequently, although objecting to the payment order does not result in the creditor waiving the receivable, under enforcement law it obliges the creditor to take a new legal step.

At this stage, the fundamental issue is the nature of the documents held by the creditor. In some cases, removal of the objection may be requested before the enforcement court, while in other cases an action for annulment of the objection must be brought before the general court.

The Distinction Between Removal of the Objection and Annulment of the Objection

Where the creditor holds documents of a nature suitable for the removal of the objection within the meaning of the Enforcement and Bankruptcy Act, the remedy of removal of the objection may be sought before the enforcement court. This remedy requires a more limited and document-based examination compared with the action for annulment of the objection to be brought before the general court.

That said, in receivables based on invoices, the existence of the invoice alone is often not considered sufficient for the removal of the objection. The presence, alongside the invoice, of evidence such as a delivery document, dispatch note, written contract, acknowledgment of debt, current account reconciliation, or commercial book records strengthens the creditor's legal position.

If the documents held by the creditor are not sufficient for the removal of the objection, the bringing of an action for annulment of the objection before the general court comes into play. In an action for annulment of the objection, the court assesses together the commercial relationship between the parties, the invoices, the commercial book records, the payments made, the fact of delivery or performance of services, and all the evidence in the file.

If the creditor is found to be in the right at the conclusion of the proceedings, the debtor's objection is annulled and continuation of the stayed enforcement proceedings becomes possible. For this reason, which remedy the creditor will resort to must be determined not merely according to the existence of the receivable that is the subject of the proceedings, but according to the documents by which that receivable can be proven.

The Evidential Weight of the Invoice

The invoice is one of the important documents in proving a commercial relationship. However, the issuance of an invoice does not in every case and on its own mean that the receivable has been conclusively proven. At this point, whether the invoice was served on the debtor, whether the debtor objected to the invoice within the prescribed period, and whether the goods or services in the content of the invoice were in fact delivered or performed must be separately assessed.

Particularly in the sale of goods, dispatch notes, delivery records, weighbridge receipts, e-mail correspondence, WhatsApp conversations, current account reconciliations, and partial payment records are among the evidence that strengthens the creditor's claim. These documents are important in establishing that the goods that are the subject of the invoice were delivered to the debtor or that the commercial relationship in fact took place.

In service invoices, on the other hand, correspondence showing that the service was performed, work delivery records, project records, approval and acceptance documents, the contract between the parties, or other records establishing that the service was rendered are significant. This is because, in service relationships, the fact of delivery is more abstract in nature compared with the sale of goods, so performance may need to be separately supported by documents.

Consequently, in debt enforcement proceedings based on invoice receivables, the invoice should not be assessed on its own but together with the commercial relationship as a whole and supporting evidence.

The Problem of Partial Payment and Set-Off

One of the matters frequently encountered in practice in invoice receivables is the debtor's making of a partial payment. The debtor may have made a single payment for debts arising from more than one invoice without clearly stating to which invoice that payment relates. In this case, from which debt the payment is to be deducted, the amount of the remaining balance receivable, and the commencement of interest must be carefully calculated.

It is important that the invoice items be shown separately in the enforcement request, that the payments made be clearly set off, and that the balance receivable be stated in a manner that leaves no room for doubt. Otherwise, the debtor may assert that the receivable that is the subject of the proceedings is uncertain, that the set-offs of payments were made erroneously, or that the receivable was miscalculated.

On the other hand, a partial payment may in some cases also carry the quality of significant evidence as to the existence of the commercial relationship and the debt. The debtor's having made a partial payment in respect of the receivable that is the subject of the invoice may indicate that at least a certain portion of the commercial relationship and the debt between the parties has been acknowledged. However, this must be separately assessed in each specific case.

Commercial Interest Claim

Where the parties are merchants and the receivable arises from a commercial transaction, a commercial interest claim may come into play. However, when making an interest claim, the type of interest, the interest rate, and the date on which interest commences must be carefully determined.

If a payment day has been agreed in the contract, this date; if there is a due date on the invoice, the due date; if a notice has been sent to the debtor, the notice date; or the date on which the conditions of default were realised may be significant for the commencement of interest. For this reason, the date on which default arose must be separately assessed in each case.

Determining the wrong commencement of interest or conducting the proceedings on the basis of the wrong type of interest may strengthen the debtor's objection. This situation may give rise to defences to the effect that the receivable that is the subject of the proceedings has been shown to be greater than it is, that the interest calculation is erroneous, or that the receivable is not liquid.

For this reason, before initiating enforcement proceedings, the principal receivable, partial payments, set-off amounts, the type of interest, the commencement of interest, and the interest accrued up to the date of the proceedings must each be calculated separately.

The Importance of the Creditor Managing the Process Correctly

In debt enforcement proceedings based on invoice receivables, success does not depend solely on initiating enforcement proceedings. Before the proceedings, the documents that form the basis of the receivable must be gathered, the invoice and current account records must be checked, the delivery or performance of services must be made provable, and any partial payments must be correctly set off.

In the event of the debtor's objection, the creditor must determine the most appropriate legal remedy according to the documents held. Whether there are sufficient documents for the removal of the objection, whether it is more correct to bring an action for annulment of the objection, and on which evidence the action will be based must be assessed in the light of the specific case.

In this context, keeping commercial books in accordance with the rules, obtaining reconciliation letters, preserving delivery documents, and retaining correspondence between the parties will significantly strengthen the creditor's ability to prove their case in disputes that may arise in the future.

Conclusion

In debt enforcement proceedings based on invoice receivables, the collection of the receivable does not consist solely of initiating the proceedings. The basis of the invoice, delivery or performance of services, partial payments, set-off transactions, the interest calculation, and the debtor's possible objections must be assessed before the proceedings.

Since the proceedings will be stayed if the debtor objects to the payment order, the creditor will need to resort to the removal of the objection or the annulment of the objection according to the nature of the documents held. The choice between these two remedies must be made taking into account the documents by which the receivable can be proven and the nature of the dispute.

In the collection of commercial receivables, establishing the process correctly from the outset both prevents loss of time and strengthens the collectability of the receivable. For this reason, in proceedings based on invoice receivables, careful preparation of the documents and the legal strategy before the proceedings is of great importance.