Introduction

In a significant ruling that clarifies the legal framework for financial transactions between individuals, the Dubai Court of Cassation has recently issued a judgment that establishes important precedents regarding reimbursement claims, implied contracts, and the burden of proof in financial disputes. This May 2025 decision offers valuable insights into how UAE courts address claims for financial restitution in the absence of formal agreements.

Case Background

The case involved an appellant who had made several payments allegedly on behalf of and for the benefit of the respondent. These payments included:

1. Funds for the purchase of real estate units (approximately AED 3,060,097)
2. Payment for a BMW vehicle registered in the respondent’s name (AED 425,000)
3. Personal financial assistance to the respondent (AED 705,030)
4. Financial support to the respondent’s family (AED 23,845)
5. Rental and insurance payments for real estate units (AED 102,000)

The total amount claimed was AED 4,575,036, along with 5% legal interest from the date of entitlement until full payment, plus AED 100,000 as compensation for material and moral damages.

The appellant claimed these payments were made at the respondent’s request and that the respondent had acknowledged this obligation in electronic correspondence. However, the respondent denied any indebtedness and challenged the basis of the claim.

First Instance and Appeal Rulings

The Cassation Court’s Analysis

The Court of Cassation overturned the lower court’s ruling based on several key legal principles:

1. Burden of Proof and Documentary Evidence

The court affirmed that while the general principle is “innocence of liability,” the burden of proof falls on the claimant to establish their case. However, the court found that the appellant had provided substantial documentary evidence, including:

• Bank transfer records
• Payment receipts
• A signed undertaking document
• Email correspondence

The court considered these documents as sufficient evidence to establish that payments were indeed made by the appellant for the benefit of the respondent.

2. Principles of Unjust Enrichment

The court applied Articles 318 and 319 of the UAE Civil Transactions Law regarding unjust enrichment. These provisions establish that:

• No person may take another’s property without legitimate cause
• If such taking occurs, the property must be returned to its owner
• Unjust enrichment requires three conditions:

1. Enrichment of one party
2. Corresponding impoverishment of another party
3. Absence of legal justification for this transfer of wealth

The court found that the respondent had been enriched at the appellant’s expense without legal justification.

3. Voluntary Payment on Behalf of Another

The court also referenced Article 325 of the Civil Transactions Law regarding voluntary management of another’s affairs. This legal principle addresses situations where a person voluntarily handles matters for another without being officially appointed as an agent, guardian, or custodian.

While the court noted that the appellant had not established formal authorization from the respondent for the payments, the documentary evidence, particularly the signed undertaking and electronic correspondence, demonstrated that the payments were made at the respondent’s request and for their benefit.

4. Legal Interest Rates

The court addressed the claim for legal interest, noting that:

• Interest rates should reflect current economic conditions
• The previously standard 9% annual rate was no longer appropriate given current market conditions
• A 5% annual interest rate from the date of judicial claim until full payment was more appropriate

This represents an important adaptation of interest rates to current economic realities, with the Court of Cassation acknowledging the need to align legal interest with prevailing market conditions.

The Court’s Final Decision

The Court of Cassation:

1. Overturned the lower court’s ruling
2. Ordered the respondent to pay the appellant AED 3,060,097 plus 5% legal interest from the date of claim until full payment
3. Ordered the respondent to pay appropriate legal costs and attorney fees

The court rejected the claim for AED 100,000 in moral and material damages, finding insufficient evidence to support this aspect of the claim.

Key Legal Principles Established

This ruling reinforces several important legal principles in UAE jurisprudence:

1. Electronic correspondence, bank transfers, and signed undertakings can establish financial obligations even in the absence of formal contracts.
2. The court will not allow one party to retain benefits received at another’s expense without legal justification.
3. While the burden initially falls on the claimant, once prima facie evidence is presented, the burden shifts to the respondent to disprove the claim.
4. Legal interest rates should reflect current economic conditions rather than adhering to historical standards.
5. Obligations can arise from conduct and communications between parties even when not formalized in written contracts.

Practical Implications

This ruling has significant implications for individuals and businesses in the UAE:

1. Maintain comprehensive records of all financial transactions, including bank transfers, receipts, and electronic communications.
2. Clarify the purpose and expectations for financial transactions, preferably in writing.
3. Courts will consider a holistic view of the evidence rather than requiring formal contracts for all financial obligations.
4. The court relied heavily on expert analysis of the financial transactions, highlighting the importance of financial experts in complex disputes.

Conclusion

The Dubai Court of Cassation’s ruling provides valuable guidance on how UAE courts approach claims for financial reimbursement in the absence of formal agreements. It emphasizes the importance of documentary evidence and confirms that substantial justice will prevail even when formal legal requirements are not perfectly satisfied.

This case also demonstrates the UAE judiciary’s pragmatic approach to financial disputes, balancing the need for documentation with recognition of implied obligations that arise from the parties’ conduct and communications.

For legal practitioners, this ruling serves as an important reference point when advising clients on financial transactions and potential reimbursement claims, highlighting both the evidentiary requirements and the substantive legal principles that will guide judicial decision-making in such cases.

Having said that, Contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.

*Disclaimer: our blogs, law updates, and FAQ’s are freely distributed for educational purposes and to showcase recent updates and regulations in the UAE’s framework.

If you have any questions and need assistance, contact us at our number or book an appointment online.