Cash Handed to a Brokerage Employee: Court of Cassation 2022/820

An investor opens an account at a brokerage firm and hands the money over in cash to the firm's employee who is looking after them, so that it can be put to work. Months later, when the investor asks about the account, two pieces of news follow: there is no money in the account, and that employee has left the job. The firm, for its part, argues that this money never reached it, does not appear in its records, and that the investor cannot prove the claimed amount with written evidence. In cases of this kind the debate comes down to two questions: is the brokerage firm liable for money that remained off the books, and by what evidence can the amount handed over be established?

In its decision of 7 February 2022, Docket No. (E.) 2020/7682, Decision No. (K.) 2022/820, the 11th Civil Chamber of the Court of Cassation (Yargıtay) unanimously upheld the judgment of the Adana 3rd Commercial Court of First Instance, which had held the brokerage firm liable for its employee's failure to transfer the money received from the customer into the account. In that judgment the court based the existence of the loss, and the part of it exceeding the amount of the partial claim, on the employee's statements in the criminal proceedings, which amounted to an admission.

💼 Investment money handed over in cash

According to the statement of claim, the claimant had an investment account opened within the defendant brokerage firm. For the assets in the account to be used in buying and selling investment instruments, the claimant alleged that he handed a total of 233,000 TL in cash to an employee of the defendant company on different dates. As Türkiye had not yet moved to the new Turkish lira in 2003, the decision also refers to this amount as "233 billion TL".

Some time later the claimant went to the firm to check his account and learned that there was no money in it and that the employee to whom he had handed the money had left the job. He therefore argued that the brokerage firm was strictly liable as the employer for its employee's acts and, reserving his rights in respect of any larger amount, requested collection of 20,000 TL for the time being.

As the first sentence of the decision shows, the case had come before the Court of Cassation earlier and had been quashed; the judgment under review is the decision of the Adana 3rd Commercial Court of First Instance of 23 September 2020, Docket No. (E.) 2019/121, Decision No. (K.) 2020/704, given after following the quashing. The content of the first quashing decision is not in this text.

🛡️ The brokerage firm's defence: no written evidence

The defendant brokerage firm asked for the claim to be dismissed, stating that the claimant alleged he had handed over 233,000 TL in cash on different dates but could not prove with written evidence that he had given this amount. The focus of the defence is that there is no record at all showing that the money entered the firm's cash desk or a customer account.

This is a line often met in brokerage disputes: the firm argues that it cannot be held liable for a money movement that is not reflected in its own records, and that a handover made within an employee's personal relationship does not bind the firm.

🏛️ Findings of the commercial court

In the proceedings after the quashing decision, the court also assessed, besides the civil case file, the evidence of the criminal proceedings conducted against the employee. The findings listed in the text of the decision are as follows:

The court determined that the dispute centred on the amount of the money the claimant gave the employee to be paid into the account. The fact that the money had not been entered in the brokerage firm's records did not remove liability; according to the court, the employee's failure to transfer the money received from the customer to the customer's account constituted gross fault within the meaning of Article 100 and also a tort within the meaning of Article 55 of the repealed Code of Obligations No. 818. The brokerage firm was held liable for this loss under the principle of concurrent liability.

As to the amount, the court accepted that the employee's statements amounting to an admission did not contain a precise figure, but stated that it was established that the loss caused to the claimant exceeded the 20,000 TL claimed. The court therefore decided to accept the claim and to collect from the defendant 20,000.00 TL with advance interest from 30 July 2003.

⚖️ Court of Cassation: no error in the assessment of evidence

The defendant brokerage firm appealed the judgment. In its short reasoning, the 11th Civil Chamber of the Court of Cassation relied on two points: that the court had given its judgment in line with the quashing decision it had followed, and that there was no error in the assessment of the evidence. All of the defendant's grounds of appeal were therefore rejected, the judgment was upheld, and it was decided unanimously on 7 February 2022 that the remaining appeal judgment fee of 1,024.65 TL be collected from the defendant.

🔗 The legal basis of liability

The most notable aspect of the decision is that, instead of resting liability on a single basis, it assesses contractual and tort liability together:

What is decisive in this approach is not whether the money entered the firm's records, but whether the employee received the money on behalf of the firm and in the course of his duties. Remaining off the books is itself the employee's fault; the firm's attempt to escape liability by relying on it was not accepted. The finding that the claimant and the employee had not acted in concert also played a part.

For a similar basis of liability for bank employees, see the decisions on a bank employee's promise of returnsTR and on foreign currency handed in cash to a branch managerTR; for shares lost because of the act of a brokerage firm employee, see the decision on return in kind of lost sharesTR.

🔎 Proof: admission, statement of account and forged document

The evidence in the case makes the decision instructive for the assessment of proof as well as for liability. Some of it points in opposite directions:

Evidence that appears against the claimant: The statement of account and the inspector's report show that the account never reached the alleged level. The portfolio document submitted by the claimant bears no stamp or signature and was found to be forged. The claimant was also unable to submit a receipt or bank slip directly showing that he gave the 233,000 TL.

Evidence that appears in the claimant's favour: In the criminal proceedings the employee admitted that he took money from the claimant and did not enter it in the records. He also used another customer's account as a pooled account.

The court resolved this picture as follows: the fact that the statement of account shows no money proves not that the money was not given but that it was not transferred to the account, which is in any case the allegation. The forged portfolio document was excluded as evidence, but this did not defeat the claimant's whole claim. The employee's admission-type statements, though without a precise figure, were regarded as sufficient to show that the loss exceeded the partial amount claimed. Because the claim was a partial claim for 20,000 TL, the court did not have to determine the whole amount to the last kuruş; it was enough that the loss was established to be no lower than the amount claimed.

🆕 Notes on today's legislation

The events took place in 2003, and the decision was given under the provisions of the repealed Code of Obligations No. 818. In the TBK, in force since 1 July 2012, the employer's liability is regulated in Article 66 and liability for the acts of auxiliary persons in Article 116. TBK Article 66 provides that an employer running an enterprise can be released from liability only by proving that the working organisation of the enterprise was suitable to prevent the damage from arising. TBK Article 116/3 states that, for professional services that may be carried on only by law or with the permission of the competent authorities, an agreement that the debtor will not be liable for the acts of auxiliary persons is absolutely void. Because brokerage activity is carried on with the permission of the Capital Markets Board, this provision is also important for exclusion-of-liability clauses in brokerage contracts.

Although handing over money in cash is today restricted by the record-keeping and segregation rules of capital markets legislation, the approach that was upheld remains current in showing how liability can be established where a handover remained off the books.

❓ Frequently asked questions

For detailed information and legal support, you can contact Savun Law & Consultancy. Contact details are on the contact page; other decisions on brokerage firm and investment account disputes are on the Precedent DecisionsTR page.