The Court of Cassation General Assembly on the Unification of Judgments ("CCGAUJ") has ruled with its decision numbered 2017/6 E. 2018/9 K. and dated 05.10.2018 ("Decision") that the contractual attorney fee that must be paid to the attorney in accordance with the attorney fee agreement between the attorney and client, is not included in the attorney fee that both parties will be responsible for the payment of in favor of the other party's attorney, "In cases concluded with an agreement, and that are left without further follow-up," which is regulated in Article 165 of Attorneys' Law numbered 1136 ("Law") , and which is a joint liability situation of the fee. The Decision was published in the Official Gazette dated 20.03.2019 and numbered 30720.1
In this article, the concept and types of attorney fees and liability issues related to their payment shall be discussed, and then the justification of the Decision shall be examined.
Attorney Fees and Types
Advocacy is a public service. However, a private law relationship is established between an attorney who provides legal assistance to his/her client for a fee and the business owner (client). In the doctrine, it is accepted that this relationship is a special type of proxy agreement set out in the Turkish Code of Obligations.
An attorney agreement freely established between the attorney and the client who requests legal assistance is a contract in which the attorney undertakes to provide legal assistance, and the client undertakes the debt payment to the attorney in return for the work done. Article 163 of the Law determines the scope of the attorney agreement and has made it obligatory to provide attorney services in exchange for a fee. In this context, the most important factor that distinguishes the attorney agreement from other proxy contracts is the attorney fee.2
Attorney fees are regulated, in detail, in Article 164 of the Law. According to the said Article, there are two types of attorney fees:
- Contractual attorney fee: The fee arising from the contractual relationship between the attorney and the client.
- Legal attorney fee (counterparty's attorney fee): The fee, which is ruled for the benefit of the party who is determined to be right at the end of the proceedings in accordance with the Tariff, and which is in the nature of trial expenses.
Joint Liability for the Attorney Fee
Pursuant to Article 165 of the Law, "(...) both parties will be responsible for the payment in favor of the other party's attorney in cases concluded with an agreement, and which are left without further follow-up." In this context, joint liability is not only foreseen for the settlement, but also for the cases that result in an agreement between the parties, and are left without further follow-up.
In practice, the parties may elect to pursue the case or enforcement proceedings without notifying the court, even though they have resolved the dispute by settlement, or the plaintiff may waive the lawsuit, or the defendant may accept the case as a result of their agreement. In such cases where there is no clear settlement agreement, it is stated that there is a hidden (covered) agreement. In cases where such hidden settlement is found, the law stipulates joint liability for both the attorney and the client for the counter party attorney's fee.
However, both the business owner and his/her opponent undertake the responsibility for the payment of the attorney fee in cases that result in an agreement with the aforementioned Article, and/or which are left without further follow-up. However, it is not clear from the Article whether the joint liability of the business owner and the opponent as mentioned in the Article includes the contractual attorney fee to be paid to the attorney according to the attorney fee agreement between the attorney and the client. The Decision clarifies this issue.
Justification of the Decision
The Decision has stated that the contractual attorney fee is not within the scope of liability under Article 165 of the Law. The justification of the decision is as follows:
- To hold the counterparty/opponent responsible for the "contractual attorney fee" arising from the contractual relationship between the attorney and the client, who is not the party of this relationship, and who has had no opportunity to determine the conditions, violates the principle of privity of contracts, which is one of the basic principles of the law of obligations, and the principle of freedom of contract, which is protected under Article 48 of the Constitution.
- The security law principle also includes the confidence that the legislation in force will continue. In this context, it cannot be expected from a person, who settles or concludes a dispute of any agreement, to foresee that he/she becomes obliged to pay an attorney fee arising from a contract to which he/she is not a party. Consequently, the acceptance that the attorney fee is under the joint liability of both the business owner and the opponent undermines the principle of legal security.
- Attorney fee refers to an amount or value corresponding to the legal assistance of the attorney. Therefore, the fact that the opponent who does not receive any legal assistance from the attorney of the business owner is held jointly responsible for the attorney fee arising from the contract concluded between the business owner and attorney does not comply with the nature and purpose of the attorney fee.
- Lastly, the settlement institution ensures the re-establishment of social peace, which is disrupted by filing a lawsuit, and ensures that the parties obtain their rights and receivables as soon as possible. In addition, the settlement is encouraged by the Code of Civil Procedure, which regulates the judge's invitation of parties to settlement. It is also not right to place an obstacle before the implementation of such an important institution in terms of procedural law in the form of holding the person (the opponent), who is not a party to the contract, responsible for the contractual attorney fee.
The CCGAUJ has, therefore, ordered and judged based on the above-stated explanations:
"That the 'contractual attorney fee' that must be paid to the attorney in accordance with the attorney fee agreement between the attorney and client, is not included in the attorney fee that both parties will be responsible for the payment of in favor of the counter party's attorney, 'in cases concluded with an agreement and which are left without further follow-up,' that is one of the 'joint liability situations of the fee' as regulated under Article 165 of the Law."
The Justifications of Dissenting Votes
Three dissenting vote justifications were drafted against the Decision.
In the first of these justifications, it was stated that the subjects of the attorney agreement, attorney fee and joint liability as to fee, regulated in Articles 163, 164 and 165, respectively, of the Law follow a certain order and system. Also, Article 165 is quite clear considering that it was created as a sanction provision in order to enable an attorney, who has been excluded, to collect the attorney fee. There is no gap in the Law, and the Article in question does not have a need for interpretation in its current form. In this case, by accepting that Article 165 does not cover the contractual fee, this will result in changing the clear provisions of the law through interpretation, does not comply with the purpose, and the written technique and system of the Law is a special law.
In the second dissenting vote, it is stated that in some legal regulations, those who are not parties to a contract are held responsible for the contracts, and Article 165 of the Law is one of these regulations; Moreover, it is defended that there will be no injustice or aggrievement since, if the contractual attorney fee agreed between the business owner and the attorney is paid by the opposing party, it may always be directed to the side of the attorney agreement.
On the other hand, the last dissenting vote states that the "attorney fee" term in Article 165 of the Law is considered to include both the contractual fee and the legal fee as part of the trial expenses for the client, but may cover only the legal fee with regards to the opposing party's participation in the settlement.
The CCGAUJ has ruled through its decision numbered 2017/6 E. 2018/9 K. and dated 05.10.2018 ("Decision") that the contractual attorney fee, which must be paid to the attorney in accordance with the attorney fee agreement between the attorney and client, is not included in the attorney fee that both parties will be responsible for the payment of in favor of the other party's attorney, "In cases concluded with an agreement, and that are left without further follow-up," under Article 165, and removed the conflicts between the different chambers of the Court of Cassation.
2 While in the last paragraph of Article 502 of the Turkish Law of Obligations, it is stipulated that the attorney will be entitled to the fee only if there is a contract or custom, and the proxy contract is not mandatory, the attorney agreement is foreseen to be a fee for work performed. If the contract is made free of charge, the situation should be reported to the bar association.
Originally published 27 August, 2020
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