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Court of Appeal declares no interest in loan agreement

18/07/18

In a judgment handed down today in Sheikh Mohamed Bin Issa Al Jaber and MBI & Partners UK Limited v Sheikh Walid Ibrahim Al Ibrahim and Sheikh Majid Bin Ibrahim Al Ibrahim [2018] EWCA Civ 1690, the Court of Appeal (Arden, Simon and Newey LJJ) rejected as unarguable the contention that an oral agreement for a loan, made in a commercial context, should have an implied term for interest simply because the lender expected to receive some unspecified benefit from the loan.

The claimants (an “international” businessman of Saudi origin and a company that he controlled) alleged that they lent US$30m to two Saudi brothers pursuant to an oral loan agreement that made no mention of interest, to help them launch a new Arabic language broadcasting service. At first instance before Burton J, the defendant brothers challenged jurisdiction on the basis that (amongst other matters) there was no good arguable case that there had been any oral agreement for a loan, let alone one that provided for interest.

Burton J found that there was a good arguable case that there was a loan, but not one that provided for interest. On that basis, he granted permission to serve the claim for repayment of the loan out of the jurisdiction, but not the claim for interest, which he regarded as a separate cause of action.

The Court of Appeal found that Burton J was wrong to bifurcate the jurisdictional analysis, and should only have asked whether the claim as a whole (including both principal and interest) satisfied the jurisdictional test. Nevertheless, the Court proceeded to consider the second defendant’s respondent’s notice point that the claim for interest was unarguable and should therefore not be allowed to proceed in any event.

In finding for the second defendant, the Court summarised concisely two centuries of jurisprudence on the treatment of interest at common law and the implication of terms.

The judgment appears here.

Neil Calver QC and Daniel Piccinin appeared for the second defendant, instructed by Macfarlanes LLP.

Tom Pascoe appeared with Neil Calver QC at first instance.