Abdullah Nasser Bin Obaid & Ors v Khalid Abdullah Al-Hezami & Ors

A settlement release covering claims arising out of or connected with prior proceedings must be construed by identifying the particular cause of action relied on. A payment may have featured in earlier litigation without every later claim concerning that payment being released. Claims for repayment of loans were not connected with proceedings in which the payments had been alleged to fund property acquisitions, where the loan claims had never been pleaded, evidentially advanced or included in the trial issues. Rectification requires convincing proof, on the balance of probabilities, that the written instrument fails to record an actual intention shared and outwardly expressed by the parties, or that one party knowingly failed to correct the other's relevant mistake. The decision-maker's intention is required, rather than that of a mere negotiator.

The claim concerned the scope of a Settlement Deed executed during the trial of earlier English proceedings between former business partners. The Deed settled claims arising out of or connected with those proceedings and preserved litigation in other jurisdictions except to the extent of an overlap with the English claims.

After the settlement, claims were brought in Saudi Arabia for repayment of several payments as loans. Some payments had previously appeared in the English pleadings but had been deleted; another had never been pleaded. The claimants sought declarations that the Saudi loan claims were not released and, alternatively, rectification of the Deed. The defendants sought the contrary declarations and consequential relief. The central issues were the construction of the release and whether rectification was available.

1. Construction. The relevant inquiry was not whether the payments were generally connected with the earlier action, but whether the particular causes of action relied on were claims arising out of or connected with that action. The release was wider than the pleaded issues, but its scope still depended on the nature of the cause of action.
2. Claims that deleted payments had funded English property acquisitions would have fallen within the release because those claims had been pleaded and later abandoned. By contrast, claims that the payments were loans repayable by the first defendant had never been pleaded, did not feature in the evidence or agreed trial issues, and were not claims arising out of or connected with the earlier action.
3. The same analysis applied to the January 2015 Payment and the August 2013 Payment. A property-acquisition claim concerning the former would have been released, but a loan claim concerning either payment was not. The claimants therefore obtained declarations that the Saudi loan claims were not settled or released. Wider declarations that no claim concerning the payments could ever fall within the release were refused because the result would depend on the precise cause of action.
4. Rectification. The rectification claims did not arise following the construction conclusion, but were determined hypothetically. Common mistake failed because there was no shared intention that claims concerning the deleted payments would be excluded and no outward expression of accord. Unilateral mistake failed because the defendants did not know, and had no reason to believe, that the claimants misunderstood the release. The drafting process remained an ongoing negotiation between sophisticated, well-advised parties.
5. The court concluded that rectification for either common or unilateral mistake would have failed.