Court of Cassation Rules Beneficiary Must Prove the Cause for Issuing a Cheque

Client: A prominent figure in the business and commercial sector

Practice Area: Commercial Litigation / Banking & Finance

Outcome: The Court of Cassation accepted all grounds of appeal, annulled the judgments of the lower courts, and remanded the case to the Court of Appeal for reconsideration. The ruling established a fundamental judicial principle in cheque disputes: the beneficiary bears the burden of proving the cause for which the cheque was issued.

The Court of Cassation Establishes a Fundamental Judicial Principle: The Beneficiary Bears the Burden of Proving the Reason for Issuing a Cheque This case concerns a commercial cheque dispute involving an amount of AED 6,600,000 (six million six hundred thousand dirhams). The beneficiary (the respondent) filed a lawsuit against our client before the Dubai Court of First Instance, demanding payment of the cheque’s value together with statutory interest.

The claim was based on a cheque previously issued by our client, with the respondent alleging entitlement to its payment. However, when the cheque was presented to the bank, it was dishonored as time-barred (stale date cheque). Upon being asked to settle the amount, our client refused to pay.

The Court of First Instance proceeded with the case and, despite the beneficiary’s failure to submit any legal documentation proving entitlement to the full amount, issued a judgment obligating our client to pay the cheque value (AED 6,600,000) plus 5% annual statutory interest. Our client appealed this decision before the Court of Appeal, which upheld the lower court’s ruling in full, reaffirming our client’s obligation to pay.

Our office took over the case at the cassation stage, after the Court of Appeal’s judgment had been issued. We immediately undertook a detailed review of the grounds for cassation and the supporting documents and filed a petition before the Court of Cassation based on the following:

• 1- Both the Court of First Instance and the Court of Appeal relied on insufficient presumptions to establish the legitimacy of the debt, disregarding the fact that the beneficiary provided no evidence substantiating entitlement to the full amount. This constitutes a fundamental legal flaw warranting reversal of the judgment.
• 2- The ruling obligated our client to pay the full cheque amount on the presumption that the cheque was issued for a legitimate cause, while overlooking the absence of tangible evidence that the sum represented a loan as alleged, or that our client had actually received the amount. In doing so, the judgment inverted the rules of evidence, improperly shifting the burden onto the drawer to disprove the cause of issuance—whereas, in law, the burden rests with the beneficiary.
• 3- The court also disregarded the expert report, which confirmed the absence of any underlying cause for issuing the cheque to the respondent and the lack of any civil or commercial relationship between the parties, thereby rendering the judgment legally defective and subject to annulment.
• 4- Established legal principles affirm that the cause of issuing the cheque is intrinsically linked to the underlying relationship between the drawer and the beneficiary—whether a prior debt, loan, or any legitimate financial transaction. The cause is fundamental in determining the drawer’s liability to pay. The mere existence of a cheque does not suffice to prove a debt or financial right; it must be tied to a valid financial or contractual relationship.
• 5- The burden of proof lies with the beneficiary to demonstrate the cause and its legitimacy by producing clear evidence such as contracts, receipts, or correspondence. While the trial court has discretionary authority to assess the legitimacy of the cheque’s cause based on documents, testimonies, and expert reports submitted, this discretion is not absolute.

The judgment must expressly explain how the cause was inferred from the evidence, clearly showing that all documents and reports were examined before the decision was reached. Any judgment that disregards evidence or expert findings constitutes a violation of law and a valid ground for cassation. The Court of Cassation accepted all our grounds of appeal, annulled the challenged judgment, and remanded the case to the Court of Appeal for reconsideration.

This ruling underscores the necessity of linking a cheque to a clear and legitimate cause, and the importance of verifying evidence and facts before issuing a judgment. Through this decision, the Court of Cassation has established a vital judicial principle in cheque disputes: a beneficiary is not entitled to claim payment of a cheque unless he proves the cause for which the cheque was issued in his favor.