Taiwan - If The Holder Of A Check Asserts That It Was Issued And Delivered Due To A Loan Provided To The Drawer, While The Drawer Contends That No Loan Was Received, The Holder Shall Assume The Burden Of Proof For The Fact That The Loan Has Been Provided.

Legal News & Analysis - Asia Pacific - Taiwan - Banking & Finance

23 October 2020

 

The Supreme Court rendered the 109-Tai-Shang-Zi-47 Decision of May 6, 2020 (hereinafter, the “Decision”), holding that if the holder of a check asserts that it was issued and delivered due to a loan provided to the drawer, while the drawer contends that no loan was received, the holder shall assume the burden of proof for the fact that the loan has been provided.
 

According to the facts underlying this Decision, Appellant A asserted that Appellant Company B had borrowed NT$5 million and NT$50,000 from A, who wired a total of NT$5.05 million to Company B.  Company B issued checks to repay the loan by installment.  However, only part of the checks were cashed with outstanding payment not received since some of the checks (hereinafter, the “Checks at Issue”) were dishonored.  Attempting to collect payment to no avail, A sought Company B’s payment of NT$5.57 million based on the legal relationships of consumer loans and negotiable instruments.  Company B contended that the Checks at Issue were successively issued and delivered only out of the belief in A’s statement that issuing checks could enhance the company’s credit standing and was conducive to getting loans from banks.  In addition, A did not deliver the loan.  Even if the loan was indeed made, Legal Representative C of Company B successively wired payments and delivered third-party checks to A to fully repay the loan, and A should not lay any further claim.
 

According to the Decision, although promissory notes are non-causal securities, still the obligor of a negotiable instrument may assert the disputes with the holder of the negotiable instrument as a defense against the holder of the negotiable instrument according to the contrario interpretation of Article 13 of the Negotiable Instruments Law.  Although the obligor of the negotiable instrument is required to assume the burden of proof for the disputed grounds, still the causal relationship as the basis of the negotiable instrument should be confirmed and the court should conduct substantive examination of such causal relationship before the principle for assigning the burden of proof for the respective legal relationship may apply if the parties dispute over the validity, establishment or lapse of the causal relationship.  If the holder of a check asserts that it was issued and delivered due to a loan provided by the holder to the drawer, while the drawer contends that no loan was received, the holder shall assume the burden of proof for the fact that the loan has been delivered.
 

It was further indicated in the Decision that since A asserted that the relationship was a relationship of loan and the loan had been delivered, A should certainly assume the burden of proof for the fact that the loan had been delivered.  The original trial court is certainly problematic for failing to confirm the basic causal relationship for the checks between the parties before setting the burden of proof and for electing to conclude that Company B’s contention that A should assume the burden of proof for the delivery of the loan was unacceptable.  Therefore, this Decision reversed the original decision for its mistake in violating laws and regulations and remanded it to the Kaohsiung Branch of the Taiwan High Court.
 


 

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Oli Wong, Lee Tsai & Partners

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