Khaberni - The Dubai Primary Civil Court ruled that the gift contract made by a debtor for the benefit of his son regarding a property in Dubai is not valid, after it was proven he had a debt of about 109 million dirhams to the benefit of a bank, in an attempt to remove the property from the general guarantee and evade paying obligations, and ordered the re-registration of the property in the name of the debtor, to enable the bank to execute upon it, with the defendants also being ordered to pay fees, expenses, and attorney’s fees.
The details of the case go back to the bank plaintiff providing banking facilities to the first defendant before he stopped paying, and it was proven that he had an outstanding debt exceeding 109 million dirhams by final judgments and bonds, followed by execution procedures against him for several years.
According to the lawsuit documents, despite the proven debt and execution proceedings, the debtor disposed of one of his real estate assets by transferring the ownership of land to his son under a gift contract without compensation, which the bank considered an attempt to remove the property from the public guarantee and harm the rights of the creditors.
The bank resorted to the judiciary demanding that this transaction be deemed ineffective against it, and reapplied registration of the property in the name of the debtor, noting that the gift was made after the debt was incurred and proven as an enforcement instrument, and after the start of enforcement procedures, revealing an intention of deceit.
On the other hand, the defendants argued that the lawsuit should not be accepted, based on the clauses of the Central Bank law, and they insisted on the validity of the real estate registration and that the gift was conducted correctly and in good faith, in addition to arguing the presence of other assets owned by the debtor sufficient to settle the debt.
The court explained in the reasons for its decision that the argument against accepting the lawsuit based on the bank not obtaining sufficient guarantees does not apply to the lawsuit concerning the ineffectiveness of the transaction, as it is an independent lawsuit aimed at protecting the general guarantee of the creditors, and thus rejected this argument.
The court also rejected the argument based on the validity of real estate registration and good faith, affirming that this protection applies to reciprocal transactions, such as selling, but in the case of a gift - a transaction without compensation - the creditor is not required to prove the bad faith of the recipient, nor does the latter benefit from the protection of good faith.
It pointed out that simply because the transaction was between the father and his son, and without compensation, amid a huge debt and ongoing execution procedures, it constitutes a strong presumption of awareness of the debtor’s financial situation, revealing an intention to harm the creditors.
Regarding the argument of the existence of other assets, the court clarified that the burden of proving solvency rests on the debtor, and it is necessary for him to prove he possesses free and apparent assets sufficient to pay the debt, which was not the case, as it turned out that the assets referred to were either mortgaged or disputed, and not suitable for settling the debt.
The court confirmed that the debtor’s money represents the general guarantee for the creditors, and he is not allowed to dispose of it in a way that harms this guarantee, especially if the debt has engulfed his assets, pointing out that the nature of the gift reduces this guarantee, and is considered a harmful action if conducted under these circumstances.
Applying this to the fact, the court found that the conditions concerning the ineffectiveness of the transaction were met, since the debt preceded it, and was proven by an execution instrument, and the transaction occurred after the start of the execution procedures, in addition to proving damage by removing the property from the financial responsibility of the debtor, and the latter failing to prove the existence of other assets sufficient for payment.
The court also deduced the debtor’s malicious intent from the circumstances of the transaction, particularly since it was conducted without compensation and for the benefit of a relative, which reinforces the presumption of deceit to harm the creditor.
The court concluded by ruling the gift contract invalid against the bank, with the property being re-registered in the name of the debtor, returning it to the general guarantee, and enabling the creditor to execute upon it to satisfy its rights.
• The court deduced the debtor’s malicious intent and his intention to harm the creditor, from the circumstances of the transaction in the property without compensation, and for the benefit of one of his relatives, amid a huge debt.
