Al Jaber & Anor v Al Ibrahim & Anor

For service out of the jurisdiction, a contractual claim for interest is ordinarily accessory to the claim for repayment of the principal. It is not a separate claim for jurisdictional-gateway purposes. Once the principal claim has a good arguable case within a gateway, the accessory interest claim falls within it too.

The claimant must nevertheless show a serious issue to be tried. A term requiring interest on a loan cannot be implied merely because the loan is substantial or commercial. The ordinary requirements for implication in fact must be satisfied: necessity for business efficacy, obviousness, or lack of commercial or practical consequence without the term. On the evidence, the interest claim had no realistic prospect of success.

The claimants appealed against Burton J’s order of 21 July 2016 concerning permission to serve the second defendant outside the jurisdiction. The underlying claim sought repayment of a US$30 million oral loan and interest. Nothing had been agreed expressly about interest.

The Judge permitted service out in respect of the principal claim but not the interest claim. He treated the two claims as separate and held that the claimants lacked a good arguable case for an implied interest term. The appeal concerned whether the interest claim was accessory to the principal claim and whether it raised a serious issue to be tried.

1. Disposition. The appeal failed in practical effect. The refusal of permission to serve the second defendant out of the jurisdiction in respect of pre-demand interest was upheld, although the Judge’s reasoning on bifurcation was rejected. Simon LJ gave the leading judgment; Newey and Arden LJJ agreed.

2. Service out. Under Civil Procedure Rules 1998 Part 6.36, Practice Direction 6B paragraph 3.1 and Part 6.37, the claimant had to establish a serious issue to be tried, a good arguable case that a gateway applied, and that England and Wales was the proper forum. The approach was stated by reference to Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438 (HL), VTB Capital Plc v Nutritek International Corporation [2013] 2 AC 387 and Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192 at [7].

3. Accessory interest claim. The principal and interest arose from one contractual loan. The interest was accessory to the principal and was not a separate claim for gateway purposes. The Judge therefore erred in treating the two claims separately. Once the principal claim had a good arguable case within a gateway, the accessory interest claim satisfied the gateway as well. Elder v Northcott [1930] 2 Ch 422 and Hollis v Palmer (1836) 5 LJ (CP) 266 supported that conclusion.

4. Implied term. The making of a loan does not, as a matter of law, imply an obligation to pay interest. The question whether an interest term could be implied in fact was governed by the ordinary requirements identified in Marks & Spencer plc v BNP Paribas Securities Services Co (Jersey) Ltd [2016] AC 742 at [14]–[21]. The term had to be necessary to give business efficacy, obvious in the relevant sense, or necessary to avoid the agreement lacking commercial or practical consequence without it. Commercial common sense alone was insufficient.

5. The first claimant’s evidence that he expected some benefit, and would have accepted equity instead of principal and interest, was equivocal. It did not establish necessity, obviousness or the required commercial consequence. The claimants therefore had no realistic prospect of proving an implied pre-demand interest term and there was no serious issue to be tried.

6. The Court exceptionally resolved that merits issue at the jurisdiction stage under the overriding objective in Civil Procedure Rules 1998 Parts 1.1 and 1.4. Full argument had been heard and further relevant evidence was unlikely. The Court stressed that this was highly unusual and unlikely to be appropriate in other jurisdiction cases.

• Court of Appeal (Civil Division) — In [2018] EWCA Civ 1690 , dismissed the appeal in practical effect. It rejected the bifurcation reasoning but held that the interest claim had no serious issue to be tried.
• High Court of Justice, Queen’s Bench Division, Commercial Court — Burton J held that service out could proceed for the principal claim but not for the interest claim.