Abu Dhabi Commercial Court orders bank to release vehicle mortgage after financing repaid

The Abu Dhabi Commercial Court of First Instance ruled that a bank must lift the mortgage on a man's vehicle after the financing was fully repaid and issue a certificate confirming completion of the procedures. The court stressed that an outstanding personal loan does not justify maintaining a mortgage on a vehicle in the absence of proof that it was pledged as collateral for that loan. A man filed a lawsuit against a bank seeking a clearance certificate for the vehicle financing, a no-objection certificate, and an order requiring the bank to take the necessary steps to release the mortgage and remove the restriction on the vehicle. He also sought recovery of court fees and expenses. He said he purchased a vehicle through financing provided by the defendant bank, to be repaid in monthly instalments over five years. He stated that he had paid all instalments due by the end of the financing period, but the bank refused to issue the clearance and no-objection certificates required to release the mortgage. The bank insisted on maintaining the mortgage because of a separate debt arising from a personal loan, despite the absence of evidence showing that the vehicle or the registered mortgage had been designated as security for that loan. In response, the bank's lawyer submitted an explanatory memorandum requesting that, before the case was decided, the plaintiff be required to provide the original documents relating to the two loans. The bank also requested the appointment of a banking expert to review the dispute between the parties. The court-appointed banking expert concluded, after examining the financing agreements, account statements and the parties' financial relationship, that the plaintiff had obtained vehicle financing with an original value of AED360,000. The expert found that the plaintiff settled the entire outstanding balance using part of a personal loan obtained from the bank, paying AED242,218. As a result, the vehicle finance account was closed and its balance reduced to zero. The expert also stated that the bank failed to provide any evidence of an agreement allowing it to retain the vehicle as security for the personal loan. In its judgment, the court stated that it adopted the expert's findings because they were based on sound grounds. It found that the relationship between the parties arose from a vehicle loan granted by the bank, with the vehicle mortgaged in the bank's favour as security for that financing. The court also noted that the plaintiff later obtained a personal loan of AED1.12 million, from which AED244,640 was allocated on the same date to settle the entire outstanding vehicle loan balance, including early settlement fees. This resulted in the closure of the vehicle loan account and a zero balance. The court rejected the bank's argument that the vehicle loan had been repaid using funds from the personal loan and that the plaintiff therefore remained indebted. It said the source of the repayment funds does not alter the legal effect of settling the vehicle loan debt. Nor does it, by itself, constitute evidence that the mortgage was extended to secure the personal loan. The court added that the expert had specifically asked the bank to explain the legal basis for maintaining the mortgage after the vehicle financing had been fully settled. However, the bank failed to provide any evidence of an agreement with the plaintiff allowing the mortgage to remain as security for the personal loan. The court ruled that the plaintiff had fully discharged the debt arising from the vehicle financing loan. It ordered the bank to take the necessary steps to lift and cancel the mortgage registered in its favour over the vehicle and to provide the plaintiff with proof that the procedures had been completed. The court also ordered the bank to pay court fees and expenses, including conciliation and settlement fees, as well as AED200 in legal costs, while rejecting all other claims.