Enforcement Denial Compensation in Turkish Law
- In this article, we will discuss the conditions, rate, and liquid claims regarding the compensation imposed against the debtor who denies the enforcement in line with the Execution and Bankruptcy Law (EBL). At the end of the article, we will provide examples from the Supreme Court decisions.
What is Enforcement Denial Compensation?
Enforcement denial compensation is a type of compensation regulated in the Execution and Bankruptcy Law (EBL), which is payable by the debtor to the creditor as a result of resisting or obstructing enforcement proceedings. This legal concept applies when the debtor intentionally delays or obstructs enforcement procedures. Its primary purpose is to compensate the creditor for the damages caused by such resistance or obstructions.
Two Methods for the Creditor When a Monetary Debt is Not Paid: Debt Lawsuit and Enforcement Without Judgment
When the debtor does not pay the monetary debt, the creditor has two options: First, they can initiate an debt lawsuit and enforce the court decision obtained, or they can directly apply to the enforcement office and proceed with enforcement without judgment.
Annulment of Objection Lawsuit: What Is It and When Is It Filed?
An annulment of objection lawsuit is filed by the creditor against the debtor who objected to the debt claim. The creditor requests the annulment of the objection by proving the existence of the debt within one year from the date of notification of the objection.
Conditions for Enforcement Denial Compensation
The generally accepted conditions for sentencing the debtor to enforcement denial compensation are:
The creditor initiating enforcement without judgment,
The debtor objecting to the payment order,
The annulment of objection lawsuit being filed within the prescribed period,
The creditor making a request,
The debtor’s objection being found unjustified.
Objection and Denial Compensation in Enforcement Proceedings: When and How Is It Imposed?
The objection made by the debtor against the enforcement proceedings initiated by the creditor causes the suspension of the enforcement proceedings. In this case, the creditor must file an annulment of objection lawsuit to nullify the objection.
As a result of the lawsuit, the court may decide to accept or reject the objection. The court’s decision can be in favor of either the debtor or the creditor.
If the debtor withdraws the objection or the annulment of objection lawsuit is rejected, the court will decide that the debtor is unjustified and impose denial compensation.
Even if the debtor accepts the annulment of objection lawsuit, the court will impose denial compensation against the debtor since the lawsuit was initiated because of the debtor.
If the lawsuit is concluded with a settlement, the procedure is carried out in accordance with the agreement of the parties.
For denial compensation to be imposed, the annulment of objection lawsuit must be concluded against the debtor. If the lawsuit becomes irrelevant, denial compensation is not imposed.
If the debtor pays the entire debt before the annulment of objection lawsuit is filed, the creditor’s right to file a lawsuit is forfeited, and denial compensation cannot be claimed.
If the debtor pays part of the debt before the annulment of objection lawsuit is filed, the creditor may have the right to file a lawsuit for the contested part, and if the court finds the lawsuit justified, denial compensation may be claimed for this part.
The court’s decision on the merits of the case does not always mean that the debtor’s objection is unjustified.
Liquid Claims and Right of Objection: When Can the Debtor Be Justified?
In some cases, the debtor may be justified in objecting to the payment order even if they lose the lawsuit. One such situation is the liquid nature of the claim. A liquid claim is defined as a claim that is certain, ascertainable, and calculable. This concept can lead to different interpretations in practice because each situation may vary.
If the claim is not liquid, the debtor is considered justified in objecting, and even if the annulment of objection lawsuit is lost, denial compensation is not imposed. For example, if the debtor knows or can easily calculate the amount of the claim and the amount can be determined without any additional agreement or court-appointed evaluation, the claim is considered liquid.
A claim does not have to be documented to be considered liquid. For example, a “bank claim arising from credit card spending” is a liquid claim, whereas a “claim arising from causing a fire due to negligence” is an example of a non-liquid claim.
Points to Consider in Denial Compensation Lawsuits: Request, Objection, and Amendment
To claim denial compensation, the creditor must explicitly state this request in the lawsuit petition (the debtor in the response petition).
In other words, the court cannot automatically impose denial compensation without a request.
If the creditor did not request denial compensation in the lawsuit petition and later made this request during the trial process, and if the defendant did not approve this request – that is, objected to the expansion of the claim – the creditor may seek amendment to request denial compensation in their favor.
When Should the Creditor File an Annulment of Objection Lawsuit or a Collection Lawsuit?
Since denial compensation can only be awarded in an annulment of objection lawsuit, it cannot be imposed in a collection lawsuit.
Therefore, the creditor initiating the lawsuit characterizes it as an annulment of objection lawsuit and, if they win the case, requests 20% compensation in their favor, while the debtor accepting the objection agrees to pay 20% compensation if they lose the case.
However, if the creditor does not have evidence to prove the debtor’s objection is unjustified and their own claim exists, and if they intend to prove it with the debtor’s commercial book records or an oath, they may not risk paying an additional 20% compensation if they lose the case and instead file a regular collection lawsuit instead of an annulment of objection lawsuit.
The Creditor Won the Case, But Is the Objection Unjustified?
For denial compensation to be imposed, it must be decided that “the debtor’s objection is unjustified“. However, the creditor winning the case does not automatically prove “the debtor’s objection is unjustified”.
Therefore, it is necessary to determine when the objection is justified and when it is unjustified and set criteria for this.
For example, in a compensation claim based on a tort mentioned above, which is a non-liquid claim, the debtor cannot know how much they owe (how much damage they caused to the other party).
In this case, if the parties cannot agree, it is determined by the court. Therefore, even if the debtor objects to a compensation claim due to a tort, it is not considered unjustified by the court even if the creditor’s claim is found justified. Because in this situation, the debtor has the right to object, and denial compensation cannot be imposed.
For denial compensation to be imposed in favor of the creditor, the debtor does not need to be in bad faith. For the debtor’s objection to be considered unjustified, it does not matter whether they objected to the payment order in bad faith. The debtor’s bad faith may only affect the determination of the compensation amount.
If the person objecting to the payment order is not the debtor but a guardian, custodian, curator, or heir, it must be proven that these individuals objected to the payment order in bad faith for the debtor to be sentenced to enforcement denial compensation.
Enforcement Denial Compensation: How Much Is Paid?
The amount of denial compensation: The rate of denial compensation determined by the court cannot be less than 20%.
The debtor cannot claim a lower compensation by proving that the creditor’s damage rate is less than 20%.
Note: Although the compensation amount is set at a minimum of 20% (while the judge has the authority to impose a higher amount), in practice, courts generally do not exceed the 20% rate.
The Supreme Court, in cases where the plaintiff requested a rate of less than 20% (e.g., 15%) for enforcement denial compensation in the lawsuit petition, demands that the request be limited to the requested amount, citing “the court cannot rule more than what is requested (CPC Art. 26)”.
If the creditor claims that the damage caused by the debtor’s objection is more than 20% and proves this, denial compensation above 20% should be imposed. No interest is applied to the imposed denial compensation. Denial compensation can only be awarded as a result of the “annulment of objection lawsuit”.
Example Supreme Court Decisions
In a Supreme Court decision regarding interest claims in the context of enforcement denial compensation, a decision was made in favor of the creditor: “(…) it is unquestionable that the amount of delay interest can be known, calculated, and determined by the defendant member, and it is possible to claim enforcement denial compensation for the interest claim, which has the nature of a liquid claim.
Since there is no distinction made in EBL Art 67 between the principal and accessories of the claim in terms of enforcement denial compensation claims, the court should have accepted the enforcement denial compensation claim based on the determined delay interest amount, while the rejection of the enforcement denial compensation claim regarding the delay interest without considering this issue was incorrect.(…)”
In a Supreme Court decision, a liquid claim was considered a condition for enforcement denial compensation and a decision was made in favor of the debtor: “(…) since such claims do not have the characteristic of being liquid, which is a condition for enforcement denial compensation, it is not possible to impose denial compensation against the debtor in annulment of objection lawsuits filed against enforcement proceedings. Therefore, the court’s decision to impose 40% enforcement denial compensation on the debtor was contrary to the law, and the decision was overturned in favor of the defendant.(…)”
In a Supreme Court decision regarding liquid claims in the context of enforcement denial compensation, a decision was made against the creditor: “(…) it is not possible to accept that the claim subject to the annulment of objection lawsuit is liquid and that this amount can be determined by a simple calculation.(…)”
For an enforcement proceeding initiated before 2012, when the compensation rate was calculated at a minimum of 40%, the Supreme Court decided that a compensation rate of 20% could not be applied nowadays.
“ (…) the continuation of the proceeding, the joint and several collection of 20% compensation from the defendants due to the liquid claim, and the decision was appealed by the plaintiff’s attorney. Since the reduction of the enforcement denial compensation rate from 40% to 20% in EBL Art 67/2 is a substantive law change, the enforcement denial compensation rates should be considered according to the dates of the enforcement proceedings. In the specific case, since the enforcement proceeding forming the basis of the lawsuit was initiated before the aforementioned legal change came into effect on 05.07.2012, the court should have imposed an enforcement denial compensation rate of at least 40%, not 20%, and the decision was incorrect and required reversal.(…)”
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