Court Rejects CNY 6,608,000 Loan Claim Due to Lack of Agreement
In a recent appellate decision, the court upheld a trial ruling dismissing a claim by Ms. Zhang against Haifu Company for repayment of a 6,608,000 yuan loan. The plaintiff had transferred the funds but failed to prove a mutual agreement to lend. The ruling underscores the strict evidentiary requirements in Chinese civil litigation for establishing a valid loan contract.
The dispute arose in early 2011. Ms. Zhang alleged that in mid-March 2011, Haifu Company needed working capital and its legal representative, Mr. Li, approached her for a loan. She claimed the parties agreed on a monthly interest rate of 3 percent. On March 21, 2011, Ms. Zhang wired 6,608,000 yuan from her account at a state-owned bank to Haifu Company’s account. When she later demanded repayment, the company refused. Ms. Zhang sued in the trial court, seeking the principal plus interest at a reduced rate of 1.5 percent per month from the transfer date. Haifu Company denied any borrowing relationship, asserting that the money was a personal loan from Mr. Li to the company, and that any claims between Ms. Zhang and Mr. Li were separate matters.
During the hearing, Ms. Zhang presented a bank payment voucher showing the transfer. She also introduced a written statement dated September 13, 2011, executed by Mr. Li when he was still Haifu Company’s legal representative. In that statement, Mr. Li acknowledged that the 6,608,000 yuan was a loan from Ms. Zhang to the company. Haifu Company challenged the credibility of this evidence. It pointed out that Mr. Li was not a shareholder or manager of the company at the time of the transfer, that his status as legal representative was later changed, and that he was involved in other litigation with the company. The company argued that Mr. Li had a personal interest in fabricating the loan. The trial court found the evidence insufficient and dismissed the claim.
On appeal, the court reviewed the case de novo. It held that in a civil loan dispute, the creditor must prove both the existence of a lending agreement and the actual delivery of funds. The burden of proof lies with the party asserting the loan. Here, Ms. Zhang provided only the payment record. When Haifu Company denied the loan relationship, she needed to produce evidence of mutual intent to create a loan. The sole evidence she offered was Mr. Li’s statement. The court found that at the time of the transfer Mr. Li was neither a shareholder nor a director of Haifu Company, and his later role as legal representative was temporary and disputed. Given his ongoing financial disputes with the company, his testimony had low probative value without corroboration. Therefore, the court agreed with the trial court that Ms. Zhang had not met her burden of proof.
The appellate court emphasized that an unjust enrichment claim against Haifu Company for receiving the funds without a valid loan would be a separate cause of action, which the trial court was not required to address sua sponte. The court also noted that the amount involved was large and that typical lending practices would include a written agreement or promissory note. The absence of such documentation, combined with the conflicting circumstances, made the claimed loan relationship implausible. Accordingly, the appeal was dismissed, and Ms. Zhang was ordered to pay the appellate costs.
This case serves as a practical reminder that a bank transfer alone does not establish a loan. Chinese courts require clear proof of mutual consent to borrow and lend, especially when the amount is significant. Parties should always obtain a signed loan contract, acknowledgment, or other written evidence of the agreement. The decision also highlights the risk of relying on statements from individuals who have conflicting interests with the opposing party. For anyone involved in similar transactions, careful documentation is essential.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.