Ceyda Ceylan Uygun

Senior Attorney

31.10.2023

The Legal Concept Of Excessive Damage Within The Framework Of Judicial Decisions

The Legal Concept of Excessive Damage within the Framework of Judicial Decisions


I.               INTRODUCTION
One of the consequences of default in relation to money debt is excessive damage. The condition of damage and fault is what distinguishes the excessive damage from default interest. In the article of the Turkish Code of Obligations regulating the excessive damage, we see that there is a presumption of fault. The presumption of fault is valid for the proof of fault. The case law of the Court of Cassation and the decision of the Constitutional Court shed light on the regulation of liquidated damages in the Turkish Code of Obligations. In this article, the concept of liquidated damages is analysed within the framework of legal conditions and case law.
 
II.             CONCEPT AND CONDITIONS OF RECOGNISATION OF COLLATERAL DAMAGES
Article 112 of the Turkish Code of Obligations ("TCO") states that;
If the creditoar suffers a loss in excess of the default interest, the debtor is obliged to compensate for this loss, unless the debtor proves that he is not at fault. If the amount of damage exceeding the default interest can be determined in the pending lawsuit, upon the request of the plaintiff, the judge shall also rule on the amount of this damage when deciding on the merits.” 
Within the scope of this regulation, we see that there are conditions for collateral damage including;
(i)             Default of the debtor in the performance of the money debt,
(ii)            Excess of damage,
(iii)           Appropriate causal link,
(iv)           Fault.
These conditions in the TCO are examined in detail below.
 
A.    DEFAULT OF THE DEBTOR IN THE PERFORMANCE OF MONETARY DEBT
In order to be able to claim compensation for the collateral damage, the debt must be a monetary debt. Because concrete evidence is sought in the case of collateral damages. Although it is generally accepted in the doctrine that there will be no transcendental damage in moral damages receivables, it is understood that there are different justifications in this regard. While there are authors who argue that there will be no transcendental damage for such receivables because this provision is only foreseen for property damages, there are also authors who state that there is no provision in the article stating such a restriction, on the contrary, it is clear that the article covers all kinds of damages that are not covered by default interest, but since it is not possible to divide the moral damage into parts, it is not possible to talk about the part that cannot be covered by interest and therefore it is not possible to talk about transcendental damage for this item.1
 
B.    COLLATERAL DAMAGE
This condition is clearly understood from the phrase "if it suffers a loss exceeding the default interest" in TCO 122/1. However, there is no explanation on the type and nature of the damage. In Turkish-Swiss Law, damage is used in a narrow sense, i.e. to express material damage. 2
 
C.    APPROPRIATE CAUSAL LINK
There must be a causal link between the creditor's debt and the damage in order to compensate for the collateral damage.
 
D.    FAULT
As can be understood from the expression "fault" in the law, the debtor must be at fault in order to be compensated for the collateral damage. In the event of a default without fault, no claim may be made for liquidated damages. The degree of fault is not important in terms of liability for excessive damage, and it is possible to speak of the debtor's intention, gross or slight negligence. In this context, the debtor is liable for all kinds of defects.3
 
III.          PROOF OF COLLATERAL DAMAGE WITHIN THE FRAMEWORK OF JUDICIAL DECISIONS
The important issue in proving the collateral damage is that the loss in the value of money from the date of the debtor's default to the date of payment of the debt is greater than the legal default interest. Generally, the collateral damage is caused by high inflation. According to some opinions in the doctrine, the loss incurred due to the decrease in the purchasing power of money due to inflation may be considered as collateral damage. In this case, the burden of proof shall be fulfilled due to inflation. However, in the decision of the 11th Civil Chamber of the Court of Cassation E.2021/5036 K. 2023/847 T. 15.2.20234 dated 15.2.20234, the claim for collateral damage due to the decrease in the purchasing power of money due to the increase in inflation was rejected both by the local court and the Regional Court. The grounds of the decision are that the claim of the creditor is based on presumptive and abstract assumptions and cannot be concretised and the case is dismissed on the merits on the grounds that the creditor has not submitted concrete evidence to the file.4
 
            There were two different practices of the Court of Cassation regarding the proof of the collateral damage. Accordingly, in its previous judgements, the Supreme Court had accepted that the special damages should be proved concretely. Issues such as high inflation and the increase in exchange rates did not prove the realisation of liquidated damages; the plaintiff's burden of proof in this regard continued. In the doctrine, there is a view that the main obligation of the claimant is to prove the damage arising from the late payment.
 
            In the decision of the Constitutional Court dated 21/12/2017 and numbered 2014/2267, the Constitutional Court concluded that the receivable was paid with a significant loss of value against inflation and therefore an extraordinary burden was imposed on the applicant. This decision is based on the opinion that the rigid interpretation that the applicant must also prove that the applicant has suffered damage, which is not considered sufficient by the courts of first instance in the calculation of the loss incurred due to the decrease in the value of money due to the high inflation rate, violates the right to property. After this judgement, the differences of opinion in the doctrine continued to increase.5
 
In the Court of Cassation, different practices continue between the chambers between the concrete proof method and the violation decision. In the decisions of the chambers that require concrete proof, there are justifications as follows; “The legislator has adopted as a rule that there is a loss in case of late payment or non-payment of a monetary debt. In other words, it is accepted as a legal presumption that the creditor has suffered a loss in the amount of default interest. Apart from this, the plaintiff does not have the legal possibility to benefit from any presumption". "General economic conjunctural facts such as the rapid depreciation of the currency against foreign currency due to the economic crisis in the country, high inflation, etc., which do not directly express the damage of the plaintiff, do not indicate the existence of the collateral damage mentioned in Article 105 of the CO (TCO. 122.)” 6
 
On the other hand, in some Court of Cassation chamber decisions, the following judgements were made by considering the findings in the violation decision:
“In order to determine the collateral loss, it is necessary to determine the amount to be found by taking into account the rate of increase in the annual inflation rate in each year, the reflection of this rate on the prices of goods, the interest rates given to deposits and government bonds, the change lists regarding the exchange rates against the Turkish Lira, to be requested from the plaintiff, to investigate them from the relevant official institutions or organisations, if necessary, and the decrease in the value of money during this period by making use of the opinion of experts in this field, the amount of damage suffered by the creditor due to the decrease in purchasing power is to be determined by collecting and averaging the above-mentioned elements and since the requested receivable is in the nature of a compensation receivable due to its basic legal structure and the economic and social environment in the country is also effective in the occurrence of this damage and it is inevitable that real or legal persons living in the country are not affected by this, and finally  characteristics of each concrete case within the period from the maturity date of the bill subject to the lawsuit until 07.06.2012, when the receivable subject to the enforcement proceedings was assigned, by subjecting the amount to be found to the evaluation within the framework of Articles 51 and 52 of the TCO (42 and 43 of the abolished CO), and then deducting the amount of default interest received while collecting the principal receivable from this amount of loss, and determining and determining whether the plaintiff has an collateral loss and its amount within the framework of the result to be obtained.… ” 7

 
IV.           STATUTE OF LIMITATIONS
The statute of limitations for the claim for collateral damage is controversial. According to one opinion, this depends on the statute of limitations of the principal debt. According to another opinion, it should be evaluated independently from the original debt and the two and ten-year statute of limitations regarding the tort should be applied. Another opinion is that the liquidated damages are in the nature of a new debt and should be subject to the ten-year general limitation period regulated in Article 146 of the TCO. This is also the opinion of the Court of Cassation.
 
 
V.             CONCLUSION
The expression of the collateral damage, which describes the damage that is not covered by default in money receivables, comes to the agenda with disagreements on its proof. Generally, the content subject to collateral damage is inflation. The collateral damage explained by Article 122 of the TCO tries to compensate for the imbalance. For this reason, there are differences of opinion in the doctrine and different decisions of the Court of Cassation.

 In conclusion, this comprehensive review of additional damages in the context of international arbitration is important in terms of damages not covered by default in money claims. Additional damages are also controversial in terms of their proof. In general, the content subject to additional damages is inflation. The additional damages explained by Article 122 of the Turkish Code of Obligations (TBK) attempt to compensate for the imbalance suffered. For this reason, there are disagreements in the doctrine and disagreements in line with the different decisions of the Court of Cassation. In this context, it is necessary to understand the issue of proof in particular and to integrate this information into the case to be opened with strategic decisions for sustainable success and innovative approaches in terms of lawsuits related to the request for additional damages.
 
References:

1-     http://tbbdergisi.barobirlik.org.tr/m2023-165-2109 syf.10 p.2
2-     Tekinay vd., 1993, s. 547-548; M. Kemal Oğuzman - M. Turgut Öz, Borçlar Hukuku Genel Hükümler C. 2, Vedat Kitapçılık, 10. Baskı, İstanbul, 2013, s. 39, dpn. 96; Reisoğlu, 2012, s. 170; Kılıçoğlu, 2013, s. 702.
3-     Kılıçoğlu, s. 907; Akçaal, s. 1079; Eren, s. 1233; Keser, s. 487
4-     https://www.lexpera.com.tr/ictihat/yargitay/11-hukuk-dairesi-e-2021-5036-k-2023-847-t-15-2-2023
5-     http://tbbdergisi.barobirlik.org.tr/m2023-165-2109  syf.25 p.2
6-     2 Y. 5. HD., 21.01.2019 tarih, 2017/17121 esas, 2019/604 karar; Y. 13. HD., 30.05.2019, 2016/10665 esas, 2019/6982 karar
7-     Y. 15. HD., 04.03.2019, 2018/1494 esas, 2019/932 karar; Y. 11. HD., 27.06.2019 tarih, 2018/193 esas, 2019/4929 karar; Y. 15. H. D., 6.12.2018 tarih, 2018/3765 esas, 2018/4907 karar; Y. 15. H.D., 25.4.2018 tarih, 2017/2736 esas, 2018/1742 karar