Challenging a proposed distribution of the proceeds of a seizure or sale requires a detailed knowledge of the procedures. Creditors and debtors have specific ways of defending their financial interests.
Legitimate grounds for challenge
There are two main situations in which a distribution of funds may be contested:
- Failure to meet the legal deadline for project development
- Questioning the very content of the distribution plan
The issue at stake is fundamental: the final distribution determines who will be paid, in what order and for what amount.
Failure to meet project development deadlines
When the agent in charge of the sale (commissaire de justice) does not respect the one-month deadline for drawing up the draft allocation (which may be extended), article R.251-10 of the Code of Civil Enforcement Procedures authorises any interested party to refer the matter directly to the enforcement judge.
As stated by the Court of Cassation (2nd Ch. civ., 5 January 2017, n°15-28.798), "the one-month time limit given to the pursuing party to notify the debtors of the proposed amicable distribution is not subject to any sanction".. The application for judicial distribution will be granted.
The negligent creditor is nevertheless exposed to a civil liability action based on article 1240 of the Civil Code.
Challenging the content of the allocation plan
The preliminary conciliation phase
The French system favours amicable settlement before legal recourse. Thus, the agent responsible for distribution must organise an attempt at conciliation within one month of the first dispute (art. R.251-6 of the Code of Civil Enforcement Procedures).
An important feature is that the party summoned who fails to attend is deemed to have accepted the agreement reached in his absence. It is then impossible to contest the agreement.
If agreement is reached, payment is made immediately. If no agreement is reached, a record of the points of disagreement will be drawn up.
Recourse to the enforcement judge
If no agreement is reached, the case is referred to the enforcement judge at the place of sale (art. R.251-8 of the Code of Civil Enforcement Procedures). The judge then determines the distribution of all the funds, even if partial agreements have been reached (Civ. 2e, 25 Sept. 2014, no. 13-15.597).
The judge may validly hear the agent in charge of the sale to clarify certain technical points.
Deadlines to be met
Each creditor and the debtor have 15 days from notification of the draft to contest it. To be valid, the notification must specify :
- This 15-day period
- The possibility of a reasoned objection
- Consequences of no response (project deemed accepted)
Contrary to the former system of distribution by contribution, current case law seems to favour individual rather than collective acceptance. Each interested party is time-barred on expiry of his or her own personal time limit.
Appeal and provisional execution
The enforcement judge's decision is subject to appeal. Important detail: this appeal does not suspend enforcement, but the first president may suspend enforcement.
This is why article R.251-8 paragraph 2 of the Code of Civil Enforcement Procedures provides for the immediate deposit of the sums to be distributed as soon as the matter is referred to the judge.
Special case of ships and boats: article R.4123-22 of the Transport Code provides for the suspensive effect of the appeal.
Jurisdictional issues
The enforcement judge does not always have jurisdiction to settle all disputes. In a tax case (Com. 31 March 2004, no. 00-16.092), the Court of Cassation censured a ruling for failing to ask a preliminary question.
For ships, boats and aircraft, specific procedures are laid down in the Transport Code (articles R.4123-17 et seq. for boats, R.5114-39 et seq. for ships, R.6123-11 et seq. for aircraft).
The proposed distribution will be notified to the registered creditors and the debtor. A reasoned objection must be made by a lawyer within 15 days of receipt.
Legal support tailored to the issues at stake
Challenging a proposed distribution requires in-depth technical knowledge and compliance with strict deadlines. An error or delay can result in the permanent loss of rights to sometimes considerable sums of money.
The firm is available to analyse your situation and determine the most appropriate strategy for safeguarding your rights in these complex proceedings. Early intervention can often prevent costly disputes.
Sources
- Code of civil enforcement procedures, articles R.251-1 to R.251-11
- Code of civil procedure, articles 1281-1 to 1281-12
- Transport Code, articles R.4123-17 to R.4123-24, R.5114-39 to R.5114-46, R.6123-11 to R.6123-17
- Court of Cassation, 2nd Civil Chamber, 5 January 2017, no. 15-28.798
- Court of Cassation, 2nd Civil Chamber, 25 September 2014, no. 13-15.597
- Court of Cassation, Commercial Chamber, 31 March 2004, No. 00-16.092
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