Recovery For Unjust Preliminary Injunctions

July 2011

Concept

The preliminary injunction – also known as interim or interlocutory injunctions – is one of the provisional remedies for the purpose of preserving the perspective rights of the parties which is subject of a legal action until the final determination is given and it is regulated in Article 101 of Civil Procedural Code (“CPC”) and Article 389 of the New Civil Procedural Code (“New CPC”) which shall enter into force on October 1, 2011. The preliminary injunction may be granted upon request of one of the parties either prior to or following the filing of the action to redress the pecuniary loss.

The party, making motion for a preliminary injunction is obliged to provide with a security deposit in order to pay the damages sustained by the other party or the third parties in case the request for preliminary injunction is determined to be unjust. In the case that the motion for preliminary injunction is determined to be made unjustly and therefore the interim decision is reversed, the enjoined party and the third parties may claim the harms inflicted on them as a result of wrongfully-issued interim decision triggered by unjustly made preliminary injunction motion.

The Conditions for Action and Judgment

Despite the fact that the action to recover damages resulting from unjust preliminary injunction is not clearly expressed in CPC, in practice the action is being filed on the grounds of Article 110. However, Article 399. of New CPC embodies this action in the Code with a specific provision. .

The text of the article is as follows:
“(1) The party requesting the preliminary injunction shall be obliged to indemnify the damages resulting from unjust preliminary injunction in case the preliminary injunction is determined as unjust or the rescission of injunction occurs or a rescission of injunction is decided upon objection.
(2) The action for damages resulting from unjust preliminary injunction shall be filed in the same court where the main case is being examined.
(3) The right to file the action is subject to lapse of time of one year following the finalization of the decision or the rescission of the injunction.”

First condition to file a legal action to recover the damages resulting from unjust preliminary injunction is that the preliminary injunction decision must have been executed. In other words, the claimant must have been wrongfully restrained and adversely affected as a result of enjoining enforcement.

Secondly, the injunction must have been proven to be an unjust and erroneous decision. In case the main lawsuit is rejected and the judgement is given in disfavour of the party requesting preliminary injunction, the interim decision for the preliminary injunction shall be accepted as unjustly granted. Accordingly, the finalization of the decision regarding main lawsuit should be waited in order to claim the damages resulting from unjust preliminary injunction. Besides, the party requesting preliminary injunction is obliged to file the main lawsuit within 10 days – 2 weeks according to New CPC – following the promulgation of preliminary injunction decision. Thus, in case the main lawsuit is not filed within this period of time, the rescission of preliminary injunction shall occur and the preliminary injunction shall be deemed as unjust and granted wrongfully hence the entitlement is gained for the action to claim restitution or recover damages resulting from unjust preliminary injunction decision. The word “unjust” is defined in New CPC. Accordingly, a preliminary injunction shall be deemed as unjust in case the preliminary injunction is determined to be as unjust at the time of motion or the rescission of injunction occurs or a rescission of injunction is decided upon objection.

Some landmark decisions of High Court of Appeals are presented below:
The lawsuit is filed regarding claim of damages resulting from unjust preliminary injunction. The fact that the preliminary injunction is unjust is stated upon the dismissal of the action filed by the bank regarding annulment of the letter of guarantee. (11th Civil Chamber of High Court of Appeals, dated 04.02.1991 and numbered 1990/8459 – 1991/519)

“The Plaintiff claimsits damages resulting from unjust preliminary injunction. The party requesting preliminary injunction is obliged to indemnify the damages caused to wrongfully enjoined party resulting from unjust preliminary injunction. Strict liability principles shall be executed for damages resulting from unjust preliminary injunction. A final decision for the main lawsuit is not required to accept the preliminary injunction as unjust. Accepting the file as non filed is also sufficient for accepting the preliminary injunction as unjust.” (7th Civil Chamber of High Court of Appeals, dated 23.07.2008 and numbered 2008/1996 – 2008/3247)

“In order to be obliged to indemnify the damages resulting from unjust preliminary injunction, the omission of the party requesting the preliminary injunction is not required. The fact that the preliminary injunction is being unjust shall be sufficient without seeking any wrongdoing. (4th Civil Chamber of High Court of Appeals, dated 27.02.1975 and numbered 1973/13954 – 1975/2496)

Third condition for the action to recover for damages resulting from unjust preliminary injunction is the fact that the enjoined party or the third parties shall incur some damages. The damage shall be calculated to cover the period in between the date of preliminary injunction and its rescission.

Another condition for action for damages resulting from unjust preliminary injunction is the cause and effect connection between the damages and the preliminary injunction.

The indemnification obligation of the party is based on the principles of strict liability. In other words, the omission, negligence or intention of the requesting party is not required. Even if the requesting party is of the opinion that the request is just and acts with a good faith, he or she may be still obliged to indemnify the other party.
However, strict liability rules shall be applied only for the pecuniary damages. Indemnification of the moral damages is subject to negligence or intention of the requesting party according to Article 49 pf the Code of Obligations.

The venue and competent court regarding a legal action for damages resulting from unjust preliminary injunction has been subjected to general provisions of territorial and subject-matter jurisdiction rules. However, this action shall be filed in the same court where the main lawsuit is examined according to New CPC. This action is subject to lapse of time of one year. The lapse of time shall run following the finalization of the decision.

The party claiming the damages resulting from unjust preliminary injunction may be redressed from the security deposit that the requesting party had posted when it requested the preliminary injunction. As a result of this fact, the security deposit may not be returned to the requesting party until the decision for legal action to recover damages resulting from unjust preliminary injunction is finalized even if the main lawsuit has been finalized.

Conclusion

The legal action for recovering damages resulting from unjust preliminary injunction is a way to protect the rights of the restrained party or third parties which shall incur some damages resulting from an unjust preliminary injunction. This action is highly common in practice.