Harb v HRH Prince Abdul Aziz Bin Fahd Bin Abdul Aziz

Whether an oral agreement creates contractual obligations is assessed objectively, by reference to the words and conduct of the parties in context. Subsequent conduct and evidence of subjective understanding may assist in determining what was agreed and whether legal relations were intended. An agreement may be intended to become binding only after a specified event, including the provision of documents satisfactory to a party and communication of acceptance. If the agreement would otherwise be immediately binding but leaves an essential obligation unclear, it may be unenforceable for uncertainty. The modern illegality doctrine requires a structured assessment of the prohibition’s purpose, competing policies and proportionality. A false statutory declaration may constitute an offence without proof that the maker understood its legal consequences, but enforcement will not necessarily be denied where the counterparty substantially contributed to the illegality.

The claimant alleged that the defendant orally agreed to pay her £12 million and procure the transfer of two flats in return for her retracting allegations concerning the defendant’s father and obtaining confidentiality statements from her lawyers. The defendant denied any agreement and alternatively relied on lack of intention to create legal relations, uncertainty and illegality.

The claim had previously succeeded at trial before Peter Smith J, but the Court of Appeal allowed an appeal and ordered a retrial: [2016] EWCA Civ 556. The issue at the retrial was whether an enforceable agreement had been formed and, if so, whether any defence prevented enforcement.

1. Agreement and objective construction. Applying the principles stated in Blue v Ashley [2017] EWHC 1928 (Comm), the court assessed the parties’ communications objectively, while taking account of the surrounding circumstances, subsequent conduct and contemporaneous evidence. An agreement of some kind was reached in the early hours of 20 June 2003. The Prince demanded a retraction and lawyers’ confidentiality statements, and it was probable that he promised to arrange payment of £12 million and transfer of the two flats.
2. Intention to create legal relations. The agreement was not intended to be immediately binding. Objectively, the parties intended that it would become binding only if Mrs Harb supplied a retraction and statements satisfying the Prince’s requirements and he communicated acceptance. The evidence did not establish unequivocal acceptance. The proposed written contract was intended to record the arrangement and did not itself disprove a prior oral agreement.
3. Uncertainty. If the agreement had been immediately binding, it would have been too uncertain to enforce because the precise extent of the required retraction was unclear. The promised consideration was sufficiently identifiable: £12 million and the two flats.
4. Illegality. The court considered the alternative defence under Patel v Mirza [2016] UKSC 42; [2017] AC 467. A knowingly false material statement in a statutory declaration falls within section 5 of the Perjury Act 1911, without requiring proof that the maker appreciated that the conduct constituted an offence. Nevertheless, refusing enforcement would be disproportionate. The statutory declaration was not required by the agreement, the Prince had demanded a false retraction, and denying enforcement would undermine the policy favouring settlement.
5. Disposition. The claim was dismissed because the agreement was not intended to be immediately binding and did not subsequently become binding, or alternatively because it was too uncertain to enforce.

• Supreme Court: refused permission to appeal from the Court of Appeal’s retrial decision on 21 December 2016.
• Court of Appeal: allowed the defendant’s appeal from Peter Smith J’s first-instance judgment and ordered a retrial: [2016] EWCA Civ 556; [2016] 3 FCR 194.
• High Court (Chancery Division): following the retrial, dismissed the claim.