The Cairo Court of Appeal Reverses a Judgment on Bounced Checks Because there was no Underlying Obligation


Judgment
26 September 2022 By ASHRAF ALI

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Ashraf Ali, a Partner in AMERELLER’s Cairo office, successfully represented a leading international manufacturer in the case.

The court reversed the lower court’s decision and rendered judgment in the client’s favor by reasoning that the court must examine the underlying transaction behind a bounced check before issuing a verdict.

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In the Name of Allah, Most Merciful, Most Compassionate

Cairo Court of Appeal

North Cairo Directorate

Fourth Commercial Circuit (currently)

Eightieth Commercial (previously)

Judgment

In the name of the people

 

With the presidency of Judge Medhat Abdelfattah Mohamed, President of the Court, and the membership of Judge Amgad Watany Mahran, Head of the Court, and Judge Amgad Mohamed Saeed, Head of the Court.

In addition to the attendance of Mr. Alaa El Din Matouk, the Secretary.

In the publicly held session at Cairo Court of Appeal Courthouse located in Abbasseya

The following Judgment was rendered

In Appeal docketed under No. 239 of the Judicial Year 22, Commercial, North Cairo

Brought by:

    • J.G
    • Ashraf Ali Adel, the Lawyer, attended as T.J.G representative.

Against

    • G
    • Ministry of Finance

The Facts

In the session of 22/7/2018 two judgments rendered by this court, then on 26/5/2021, which the court relegates to them to avoid repetition due to the admissibility of such relegation under the law.

The Appellant Company (“T.J.G.”) was represented by an attorney at the session of 27/7/2021.

On 27/7/2021, the representative attorney submitted a docket of documents which included an official copy of the judgment rendered by Cairo Criminal Court in Lawsuit No. 2108/2020 plenary, South Cairo against first and second Appellees.

The Appellee Company (“T.G”) was represented by an attorney who submitted four dockets of documents and memorandum of defense which included filing an interlocutory request to add a new reason for the appeal without changing the original request.

The new request is Appellant’s unjustifiable enrichment and the demand to refund what the company gained therefrom unjustifiably, in accordance with the provisions of Article 532 of Law No. 17 of 1999 “Trade Law” and Article 179 of the Civil Law.

The Court

At the final pleading session held on 26/8/2021, T.J.G. representative submitted a memorandum of defense, in which he requested to cancel the appealed judgment and re-adjudicate non-acceptance of the case due to the existence of an arbitration clause, in addition to the rejection of the lawsuit because the cheques were forged and the company was discharged from the liability of payment, in addition to the illegality of the claim for such cheques and its statutory limitations. T.G. representative submitted a notification of the interlocutory request to add a new cause for appeal “enrichment without cause” while the original request remains unchanged. He also submitted a docket of documents comprising a certificate of what took place in appeal no. 6808 of 24 JY, a copy of the judgment rendered in appeal no. 906 of 2020, Economic Court of Cairo. Where both parties requested the judgment, accordingly, the court decided to reserve the appeal for judgment and postponed its issuance to the session of today.

Whereas, in respect of the formalities, the court previously ruled to accept the appeal in form by virtue of the judgment rendered in the session of 22/7/2018.

Whereas in respect of the pleading submitted by the Appellant Company not to accept the preliminary lawsuit due to the existence of an arbitration clause. It is evident from the papers of the case and the defense of the Appellant Company, and its legal representative that it denied its connection with the memorandum of understanding, which was signed by its General Manager (“GM”), with the Appellee Company, without its knowledge, and in violation of the authorities vested upon the GM by virtue of the commercial register of the Company, dated 20 November 2014. The said arbitration clause, upheld by the Appellant Company, was mentioned in the afore-mentioned memorandum. However, the documents lacked any proof that that memorandum was issued with the knowledge and approval of the legal representative of the Company. Therefore, the said pleading lacks any factual or legal ground and is contradictory to the defense submitted by the Appellant Company, leading the court to overrule it.

While in respect of the subject matter of the appeal, and the pleading asserting the extinguishment of the cheques, the basis of the lawsuit, subject to a statute of limitations, and since the Appellant Company had added a new cause for the appeal, which is demanding to implement the provisions of Article 532 of the Commercial Law, to obligate the Appellant Company to refund what it gained unjustifiably, which is cheque’s amount, basis of the litigation. Accordingly, the court rules, in respect of the subject matter of the appeal, to examine the real cause of the debt, represented in the cheques, as the basis of the litigation.

Based on the foregoing, the court concludes from the  rest of the case fillings and the documents submitted by both parties to the appeal, in addition to the documents contained therein, that the cheques, the basis of the litigation, were drawn and signed by the GM of the Appellant Company individually, with no actual return from the Appellee Company, for the following reasons: First: the reason why the cheques bounced at the drawee bank is that they lacked a second signature, which means it lost its validity. Second: the commercial register of the Appellant Company clearly states that the signatory of cheques, the (“GM”) was granted all authorities necessary to undertake the management of the Company and running of its daily affairs. The register also granted limited and restricted powers consistent with the purpose behind granting him such powers, such as determining a maximum limit of the value of bank cheques that he may sign in Egyptian Pounds, letters of guarantee and the like. These powers did not include a right to sign cheques in Euro, but only the right to make transfers in Euro. This issue proves that the First Appellee exceeded the powers vested upon him and the Appellee Company accepted that, in light that the purpose of the commercial register is the publication of correct information for all those dealing with the Company. Third: investigations conducted by the public prosecution in Case No. 2116 of 2016 administrative, Kasr El Nil, registered under no. 55 of 2017 High Public Funds Inventory, and the memorandum of disposition issued on 24/1/2017 by High Public Prosecution of Public Funds, reveal that the First Appellee admitted to signing the cheques, basis of the litigation, to guarantee the obligations of the Appellant Company arising out of the memorandum of understanding dated 30/11/2014 – which was signed by exceeding his powers and authorities. The public prosecution concluded from its investigations that the accusation against him is duly and undoubtedly established and that he has collided with the Appellee Company in embezzling records, records and cheques belonging to the Company and concluded agreements with it without the knowledge of the board of directors. The Public Prosecution decided, in its discretion, not to proceed with the criminal investigation against him because no actual damage was occurred on the Appellant Company and the company merged into it, and to halt all dealings on the cheques being reported, to make a copy of the documents indicating the facts of the forgery in the written instruments of one of the cheques and using and sending them to the competent public prosecution office. This all indicates that the cheques, basis of the litigation, were signed without any actual consideration collected by the Appellant Company. Fourth: The financial statements of the Appellant, which were ratified by the auditor of the company for the financial year ending in December 2015, submitted by the Appellant Company among its documents, failed to show any transactions with the Appellee Company or any rights payable to any third party. Fifth: The certificate received from the Egyptian Tax Authority at the session dated 23/2/2021 proves that by questioning the attorney representing the Appellee Company on 18/10/2020, he declared that his company provided the Appellant Company with certain services for a value of 450 thousand Egyptian Pounds, and no invoices were issued in respect of those services because the cheques were not paid. When he was questioned once again on 25/10/2020 he changed his testimony and stated that the previous transactions were not related to any supplies, rather, they were credit debts because of the existence of a memorandum of understanding between the two companies. This contradiction clearly indicates the absence of any credibility in the defense of the Appellee Company and the untruthfulness of its claims.

Based on the foregoing, the court concludes from all the above that the cheques, basis of the litigation, were drawn and signed for no actual return that was gained or collected by the Appellant Company. This renders the appeal to be based on valid and reasonable legal grounds and makes the appealed judgment worthy of being cancelled, which is the ruling found by the court that re-adjudicates the dismissal of the lawsuit once again and the rejection of the reason added to the appeal.

So

The court overturned the appealed judgment and adjudicated the rejection of the subject of the lawsuit, and to obligate the Appellee Company to pay all expenses for both degrees of litigation plus an amount of three hundred Egyptian Pounds for attorney fees. This judgment was issued and read out to us in public at the session held on Wednesday, corresponding to 29/9/2021.

 

The Secretary                                                                                     Vice President of the Court


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The Cairo Court of Appeal Reverses a Judgment on Bounced Checks Because there was no Underlying Obligation

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