Abu Dhabi Court of Cassation, Civil Appeal No. 31 of 2022, judgment of 5 April 2022
Insolvency means that a debtor's debts equal or exceed his assets (Article 401 of the Civil Transactions Law). A debtor in that position may apply under Articles 3 and 7 of Federal Decree-Law No. 19 of 2019 on Insolvency to settle his obligations, and the court must weigh all his circumstances, his responsibility for the causes of insolvency and the creditors' legitimate interests (Article 403). The burden of proving insolvency lies on the applicant: a person who has taken others' money and claims to have nothing must show an external event, such as fire, a slump in trade, theft or seizure, that caused the loss.
An individual borrower had taken property finance for four apartments and two cars, plus a personal loan, from a bank. Final judgments ordered him to pay more than AED 17.2 million. He applied to the court for insolvency relief under Federal Decree-Law No. 19 of 2019. The first-instance court rejected the application and the Court of Appeal upheld that decision, finding that he had not explained what happened to the money or the financed apartments and cars, or why the losses occurred and whether he was responsible.
The Court of Cassation, sitting in chambers, declared the appeal inadmissible under Article 183(1) of the Civil Procedure Law. It set out the framework: insolvency, under Article 401 of the Civil Transactions Law, is the state in which debt surrounds the debtor's property by equalling or exceeding it; a debtor in that state may file an unopposed application under Articles 3 and 7 of the Insolvency Law with the documents listed in Article 3, which the court decides within five working days. Before granting relief, the court must take into account, under Article 403 of the Civil Transactions Law and the Insolvency Law, all the debtor's circumstances, his responsibility for the causes, and the creditors' legitimate interests. The applicant bears the burden of proof. Drawing on the Maliki principles underlying the Civil Transactions Law, the Court said that someone who takes other people's money and then claims to have nothing is not believed unless he proves an event beyond his control. The applicant had produced no such evidence, so his claim was unsupported, and his grounds were only an attempt to reopen the trial court's assessment of the facts.
Individual debtors seeking relief under the UAE personal insolvency regime must document where borrowed funds and financed assets went and show that the loss resulted from events outside their control. Large bank debts and judgments alone did not establish insolvency. The case was decided under Federal Decree-Law No. 19 of 2019 and the 1985 Civil Transactions Law.
| Articles 3 and 7 of Federal Decree-Law No. 19 of 2019 on Insolvency |
| Articles 401 and 403 of Federal Law No. 5 of 1985 (Civil Transactions Law) — text of articles 401, 403 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
| Article 183(1) of Federal Law No. 11 of 1992 (Civil Procedure Law) Decided under this law; it has been replaced by Civil Procedure Code. |
“فإنه على مُدعي الاعسار - وعلى ما جرى به قضاء هذه المحكمة - إثبات إعساره ، فمن ادعى العدم عليه إثباته”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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