Sheikh Mohamed Bin Issa Al Jaber v Sheikh Walid Bin Ibrahim Al Ibrahim & Anor

An alleged oral loan may be enforceable under Saudi law; writing is generally recommended rather than a mandatory condition of validity. Agency likewise need not be written: actual authority may arise from words or customary dealings, and unauthorised acts may be ratified.

Under the Rome Convention, the applicable law is determined by the country with which the contract is most closely connected. A loan is presumptively connected with the lender’s habitual residence, subject to the circumstances as a whole. On the evidence, the alleged loan was more closely connected with Saudi Arabia. The claim nevertheless failed on the facts because the payment was not proved to be a loan and was probably an advisory fee.

The claimant alleged that a US$30 million payment made in January 2002 was an oral loan to the defendants for establishing the Al Arabiya television channel. The second defendant contended that it was a fee for services assisting the claimant with the leasing and refinancing of property in Saudi Arabia.

The court assessed extensive historic documentary and witness evidence, including competing transfer instructions and evidence concerning the parties’ businesses, the property transactions and Al Arabiya’s funding. It also considered, contingently, the governing law, the enforceability of an oral loan under Saudi law, agency and limitation.

1. Factual disposition. The claim was dismissed. The claimant had not established on the balance of probabilities that the payment was a loan connected with Al Arabiya. The contemporary documents did not identify the claimant as a lender, the alleged urgent funding need was improbable, the payment was not shown to have been used for Al Arabiya, and the claimant’s evidence contained serious inconsistencies. The payment was very probably an advisory fee payable to the second defendant.
2. Evidence. In a historic dispute with limited documentation, contemporaneous documents, inherent probabilities, witness motives, the overall evidence and the absence of expected documents were important. The court also applied the principle that, after a notice to prove, the party relying on a document must adduce sufficiently credible evidence of its provenance.
3. Applicable law. Under Article 4 of the Rome Convention, as incorporated by the Contracts (Applicable Law) Act 1990, the alleged loan would have been governed by Saudi law. Although the lender’s habitual residence supplied the starting presumption, the circumstances as a whole connected the alleged agreement more closely with Saudi Arabia.
4. Saudi law. The court preferred the expert evidence that writing a loan was recommended under the relevant interpretation of Verse 282 of the Qur’an, but was not a mandatory precondition of validity. There was no general requirement that an agency agreement be written. Actual authority could be conferred orally or by customary dealing, and an unauthorised act could be ratified. The claim would not have been time-barred under Saudi law.
5. Authority and alternative conclusion. Had a loan been proved, the evidence would not have established that the second defendant had authority to bind the first defendant. The loan would therefore have bound only the second defendant.