Case
Comment
On March 2 2011 the Court of Final Appeal clarified conflicting interpretations of the law which had been endorsed by two separate Court of Appeal judgments. The case in question related to a civil claim for damages to be deducted in a criminal proceeding. The court had to define, in a tort law situation arising from a wrongful act (in which the debtor has no responsibility for the fact that the petitioned amount is yet to be defined), the date from which the obligation becomes liquid, and hence, the date from which the debtor is in default. Given the time that such procedures can take in court, it is easy to understand the significance of this decision.
Case
On May 26 2005 (Case 43/2005) the Court of Appeal ruled that the obligation becomes liquid on the date of the first verdict, but on July 29 2010 (Case 598/2009) it ruled that this happens only upon the delivery of the res judicata (ie, the final decision, without appeal).
The Court of Final Appeal settled the conflicting judgments by establishing a unitary interpretation of the dispute in three steps. First, it recalled the general principles of tort law and their use by the judge. Next, it analysed the time at which the debtor is considered to be in default with respect to the need to quantify the amount of compensation. Finally, it applied the findings of its decision to the case at hand and established a mandatory interpretation.
The ruling began by referring to the general principle of liability, as set out in Article 447 of the Civil Code, which states that:
"Whoever, with intent or recklessness, unlawfully infringes the rights of others or any statutory provision to protect foreign interests, is obliged to compensate the victim for the damages resulting from the violation."
Compensation is, in turn, subject to the principle of natural restitution, which reads (as per Article 556 of the code):
"Whoever is required to repair a tort must restore the pre-existent situation, as if the event that requires the reparation had not taken place."
However, this type of solution is often unfeasible or even undesirable – in such cases, the court opts for the solution in Article 560 of the code (ie, pecuniary compensation). To calculate the amount of compensation, Article 560(5) states that:
"the pecuniary compensation is the result of the difference between the assets of the victim in the latest date that can be taken into account by the court, and [the victim's situation] at that same date if there was no tort."
Therefore, the judge is required to set this value in the verdict, contrasting the actual situation of the victim with the hypothetical situation in which it suffered no tort.
The court stated that even if the provision in question (ie, Article 560(5)) does not apply to the determination of compensation for personal injury, the principle of equity – which serves as a fundamental criterion for compensation in personal injury cases and which must also be applied in this case – requires that the court's evaluation be made at the earliest possible moment, so that it is as fair and accurate as possible.
The court explained that the situation of arrears is caused by the delay in fulfilling a particular obligation, which implies that the debtor must compensate the creditor for damages caused by this delay (in accordance with Article 793(1) of the code). Article 794(1) of the code states that "the debtor is in default only after being judicially or extra-judicially called to comply". Moreover, Article 794(2) of the code states that if the obligation arises from tort law, the delay shall be counted from the date that the tort was committed.
However, the situation under consideration required a more thorough analysis, because the claim in question was not accurately quantified. Article 794(4) of the code implies that one is in arrears when the exact owed amount is determined, stating that "if the credit is illiquid, there are no arrears while it does not become liquid, unless the lack of liquidity is attributable to the debtor". It is therefore necessary for the debtor to take notice of the due amount. Combining this conclusion with the need for the court to weigh the consequences of damage on the legal rights of the victim as soon as possible, the court held that the amount is net when the court defines it, whether the ruling is delivered at first instance or later. It also reinforced this conclusion by conjecturing that if the court had to wait for the res judicata for the debtor to be in arrears, this would give the latter an unjustified advantage and would encourage the misuse of legal process in order to delay this outcome.
Finally, the Court of Final Appeal summarised the case, asserting that pecuniary damages for tort law, property damage or personal injuries bear interest on arrears from the date of the judicial decision that fixes the amount, be that at first instance or on appeal, or in an executory procedure to settle the obligation.
Comment
This Court of Final Appeal jurisprudence comprehensively addresses a dispute that has dragged on for several years, since its scope includes all pecuniary damages for tort law, property damage or personal injuries. Its main advantage, as was argued by the court, is to prevent the manipulation of the process, removing any advantage in the debtor's delaying the enforceability of the decision, because interest on arrears will be applied starting from the date of the decision which determined the amount of compensation. The debtor is thus more inclined to accelerate the procedure or reach an agreement, rather than appealing endlessly merely to entangle the creditor in a long and costly process. However, this ruling will only lighten the load of appeals that drag out these procedures, and will not reduce the number of such proceedings before the Macau courts; creditors will not fail to bring an action if they deem it to be justified and debtors will not stop challenging decisions that they consider unfounded.
For further information on this topic please contact Pedro Cortés or Frederico Rato at Rato Ling Vong Lei & Cortés Advogados by telephone (+853 2856 2322), fax (+853 2858 0991) or email ([email protected] or [email protected]).