Settlement deed fails to release claims brought in subsequent foreign proceedings (Abdullah Nasser Bin Obaid and ors v Khalid Abdullah Al-Hezaimi and ors)

26 Oct 2022

Dispute Resolution analysis: The Court has ruled that various payments pleaded before being deleted on amendment fell outside the scope of a subsequent settlement deed and release. The release clause would not have been rectified had it been construed in the alternative.

Abdullah Nasser Bin Obaid and ors v Khalid Abdullah Al-Hezaimi and ors [2022] EWHC 2460 (Ch)

What are the practical implications of this case?

This is an interesting case in relation both to the proper interpretation of a release clause in a settlement deed and in relation to the circumstances in which rectification of such clauses are required on the grounds of common or unilateral mistake. It confirms existing authorities that no special principles of interpretation are to be applied when construing such clauses. Where common mistake is claimed, it is necessary to show an actual common intention (as opposed to an objective intention as would be perceived by a reasonable person observing the parties’ communications) and this is a demanding test which affords appropriate respect to the primacy of the final, agreed written terms of a contract. Convincing proof is needed before rectification may be considered on this basis. Where unilateral mistake is claimed, the relevant mistake must be made by the true decision-maker and not simply a negotiator. The Court cited with approval the principles set out in FHSC Group Holdings Ltd v GLAS Trust Corporation Ltd [2020] Ch. 365 and Global Display Solutions Ltd v Financial Solutions Group Ltd [2021] EWHC 1119 (Ch) in relation to the state of mind required of the contractual party who opposes rectification and the broader principles applicable to a plea of unilateral mistake.

What was the background?

In June 2017, Mr Bin Obaid, applied for and obtained a worldwide freezing injunction, a proprietary injunction and issued proceedings against Dr Al-Hezaimi. Mr Bin Obaid alleged that a number of payments had been made by him and on his behalf to Dr Al-Hezaimi for the purpose of investing in English real property. Mr Bin Obaid claimed that various properties acquired thereafter and any rental income and surplus monies belonged to the Claimants beneficially. They sought declarations to that effect, an order requiring transfer of title, damages and/or equitable compensation, an order for an account, interest and further or other relief. By the time the claims came to trial, various proceedings had already commenced in Saudi Arabia between the Claimants and Defendants. During the course of the trial, a settlement agreement was made in the form of a deed in June 2019 and the trial concluded without judgment being given. On various dates in 2019, the First and Third Claimants issued eight sets of further proceedings in Saudi Arabia. There is a dispute between the parties as to whether the 2019 Saudi Proceedings remain live or are capable of being revived. However, in September 2020, the Claimants issued proceedings for a declaration as to whether the settlement deed had the effect of releasing claims in relation to various payments originally referred to in the Claimants’ 2017 pleadings but subsequently removed by amendment and, in the alternative, for rectification of the settlement deed so as to provide that claims relating to those payments were not released. The Defendants counterclaimed for a declaration that the claims in the 2019 Saudi Proceedings were settled by the settlement deed and for indemnities, injunctions and damages for breach of the deed.

What did the court decide?

The Court concluded that, on a true construction, the settlement deed did not settle, release or waive the claims that the various payments made were loans to Dr Hezaimi, including the claims made on that basis in the 2019 Saudi Proceedings. There is no special rule of interpretation applicable to the release clauses in settlement agreements (as already determined in Schofield v Smith [2022] EWCA Civ 824). The release clause referred in terms to claims “arising out of or in connection with (i) the English Proceedings”. It was not drafted as a general release or global settlement of all disputes. The proper question for the court to ask when construing that clause was whether any particular claim was a claim or cause of action arising out of or in connection with the 2017 action. This involved identifying first the cause of action which is being relied on and then to consider whether that cause of action falls within the definition in the release clause. Each of the claims made in the 2019 Saudi Proceedings were considered and held to fall outside the scope of the release clause in the settlement deed. It was, therefore, unnecessary to consider the alternative rectification arguments. Nevertheless, the Court those arguments based on rectification for common mistake and unilateral mistake. Had the conclusions on the interpretation of the release clause been different, the Court would have refused rectification on the grounds of either common or unilateral mistake.

Case details

Court: High Court of Justice, Business and Property Courts, Business List

Judge: Joanne Wicks KC (sitting as a Deputy High Court Judge)

Date of judgment: 4 October 2022

Article by Phillip Patterson – first published by LexisNexis


Phillip Patterson

Call: 2008


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