Al Othman Holding v Al Rajhi Holding: authority to bind and limitation in family business disputes

In a dispute between two prominent Saudi Arabian family business groups, the High Court has provided important guidance on actual authority in family-owned companies and the requirements for acknowledging time-barred debts under the Limitation Act 1980.

The case concerned a loan agreement signed in November 2014, under which Al Rajhi Holding WLL was to lend $5 million to Al Othman Holding Company. The loan arose from Al Othman's desire to exit an unsuccessful investment in Nutech Energy Alliance Ltd. Rather than sell its shares (which would have triggered obligations under a shareholders' agreement), the parties agreed on a loan structure repayable from future distributions.

The agreement was signed by Yaser Alsharifi, Al Rajhi's Managing Director of Investments, and Abdulmohsen Al Othman on behalf of the Claimant. However, no payment was ever made, and proceedings were not issued until September 2023, nearly nine years later.

The authority question

Al Rajhi defended the claim on the basis that Alsharifi lacked authority to sign the agreement without approval from the Al Rajhi Family Council and Group Board. The court found that whilst such approval was indeed required before binding commitments could be entered, Alsharifi nonetheless had actual authority to sign.

Mrs Justice Dias concluded that although Khalid Al Rajhi (the Defendant's CEO and sole authorised signatory) had not seen the final executed agreement and did not subjectively intend to create an immediate payment obligation, he had given Alsharifi authority to agree to the terms of the deal as they stood. Applying an objective test, this was sufficient to confer actual authority, even if neither party fully appreciated that signature would create an immediate binding obligation.

The court rejected arguments based on ostensible authority and ratification as unnecessary given the finding on actual authority, though expressed considerable doubt about whether either would have succeeded.

The limitation defence

Having found the agreement valid and binding, the court nonetheless held the claim was time-barred. The primary limitation period expired on 24 November 2020, and the Claimant needed to establish a written acknowledgment of the debt before that date to reset the limitation clock.

The Claimant relied on email exchanges in October 2018 between Ronald Rizk (Al Othman's representative) and Khalid Mattar (Al Rajhi's Deputy CEO). However, Rizk had referred to a "sale" of shares rather than a loan, and neither Mattar nor Al Rajhi was aware of the signed loan agreement at that time.

Applying the principles from Kleinwort Benson Ltd v South Tyneside MBC, Mrs Justice Dias held that an acknowledgment must relate to the specific claim being asserted. The 2018 exchanges concerned what the parties understood to be a sale transaction, not a loan agreement. This could not constitute acknowledgment of a claim under the loan agreement, regardless of what the parties subjectively believed about the commercial effect of their arrangement.

The court also dismissed an alternative argument that discussions in 2022 had extended the payment date to June 2023, noting these referred only to a non-binding verbal agreement rather than the written loan agreement.

The claim therefore failed on limitation grounds despite the loan agreement being valid and binding when executed in 2014.

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