Sahara Energy Resource Limited v Societe Nationale de Raffinage SA

Lord Justice Snowden : Introduction

1. This is an appeal against a decision of Mrs. Justice Cockerill (as she then was) given on 9 December 2024: [2024] EWHC 3163 (Comm) . The central issues are ones of contractual interpretation.

2. The action arose out of various unpaid invoices for the sale of crude oil between the claimant/appellant (“Sahara”) as seller, and the defendant/respondent (“Sonara”), as buyer. The main underlying contract was entered into in 2013 (the “2013 Contract”), and the dispute related to cargoes shipped between 2013 and 2016.

3. Sonara was (very) late making payment of the amounts due. The principal amount of the invoices and contractual interest was eventually paid after the issue of proceedings. This meant that by the time the matter came to trial, Sahara had three remaining live categories of damages claim, i) what the parties referred to as a claim for “Incremental Interest”. This was the difference between the contractual rate of interest under the 2013 Contract and the rate which Sahara had been required to pay from time to time to its banks; ii) a claim for excess interest and penalty charges which had been levied by Sahara’s banks for its failure to make payment on various letters of credit which it had used to finance the relevant cargoes. The parties referred to this as a claim in respect of “Penal Charges”; and iii) a claim for foreign exchange losses said to have arisen from the depreciation of the Euro against the US dollar during the period of delay in payment where the relevant cargo was to be paid for in Euros, but the Euro had depreciated against the US dollar during the period of delay. The parties referred to this as a claim for the “FX Differential.”

4. The main issue at the trial was whether the claims for Incremental Interest and FX Differential were the subject of a legally binding agreement for payment. That was alleged to have been contained in a document entitled “Joint Report”. The Joint Report was produced at the end of what it described as a “Reconciliation Meeting” held between the parties at Sonara’s refinery in Limbe, Cameroon, on 4 and 5 September 2019. The Joint Report was signed at the end of the meeting by most of the persons attending, and subsequently was also signed by the director-general of Sonara, who also imprinted his corporate stamp on it.

5. After a title and a summary of the Agenda that had been discussed at the meeting, the Joint Report contained a number of tables (or “boxes”). The first table appeared under a heading “2013 Outstanding on Principal” and recorded a sum due of Euros 8,803,819.72. The second table appeared under the heading “Reconciled Claims”. It listed claims for contractual interest, late payment interest and a number of other items such as exchange rate commission and late letter of credit charges in respect of other cargoes from 2014, 2015 and 2016, in the total sums of Euros 27,278,137.61 and USD 4,973,474.62.

6. The third table appeared under the heading “Undisputed Claims”. It contained the claims for Incremental Interest and FX Differential in the total sum of USD 76,967,673.97.

7. There was then a fourth table under the heading “Disputed Claims” which contained the claim for Penal Charges in the sum of USD 50,760,089.41. That table contained an extra column headed “Comments”. This included a comment to the effect that Sonara rejected the claim for Penal Charges.

8. The judge held that the Joint Report was a binding legal agreement for payment of the stated amounts by Sonara, but only in relation to the 2013 Outstanding on Principal claim and the Reconciled Claims. The judge held that there was no legally binding agreement in relation to the claims for Incremental Interest and FX Differential that were included in the table headed Undisputed Claims.

9. The judge further held that the reference to Undisputed Claims in the Joint Report was not an acknowledgement of those claims for the purposes of section 29(5) of the Limitation Act 1980 , with the result that unless covered by a contractual indemnity in the 2013 Contract, they would be statute barred.

10. Finally, the judge held that the contractual indemnity in the 2013 Contract did not, as a matter of interpretation, apply to any of the Undisputed Claims or the Penal Charges; but even if it did, the limitation period would have commenced from the date of the first loss recoverable thereunder, rather than commencing separately from each loss claimed.

11. As a result, the judge dismissed Sahara’s claims.

12. Sahara appeals on three grounds that challenge each of the judge’s conclusions as described above. Sonara resists the appeal. It also relies on a respondent’s notice to the effect that if any of the claims were not agreed in the Joint Report and were not statute barred by limitation, then Sahara would not in any event be entitled to recover unliquidated damages in respect of them, because that possibility was excluded by the express contractual provision in the 2013 Contract for interest for late payment.

13. For the reasons that follow, I would allow the appeal on the first ground. In my view, the binding agreement that the judge found had been reached in relation to 2013 Outstanding on Principal and Reconciled Claims also extended to the claims for Incremental Interest and FX Differential that were included in the table of Undisputed Claims in the Joint Report.

14. That means that it is unnecessary to determine the second ground of appeal, and that the third ground only has any significance in relation to the unagreed claim for Penal Charges. In that respect, I would agree with the judge and dismiss the appeal: Clause 26 does not apply to the claim for Penal Charges. It is therefore unnecessary to determine the respondent’s notice. The 2013 Contract.

15. The three relevant terms of the 2013 Contract were Clause 8: Payment (“Clause 8”); Clause 18: Liability (“Clause 18”); and Clause 26: Events of Default/Termination Clause (“Clause 26”).

16. Clause 8 provided as follows, (the spelling mistakes and formatting are as in the original) “8. PAYMENT PAYMENT SHALL BE MADE IN EURO FREE OF BUYER’S BANK CHARGES WITHOUT DISCOUNT, DEDUCTION, SET-OFF OR COUNTERCLAIM WHATSOEVER BY TELEGRAPHIC TRANSFER OF IMMEDIATELY AVAILABLE FUNDS (“SAME DAY FUNDS”) NOT LATER THAN ONE HUNDERED AND TWENTY (120) DAYS AFTER THE BILL OF LADING DATE (B/L DATE COUNTING AS DAY ZERO) TO THE BANK AND ACCOUNT SPECIFIED BY SELLER AGAINST PRESENTATION TO BUYER OF COMMERCIAL INVOICE IN FIVE COPIES AND FULL SET (OR SETS IF MORE THAN ONE SET IS ISSUED) OF 3/3 ORIGINAL BILLS OF LADING AND USUAL SHIPPING DOCUMENTS AS PROVIDED BY THE LOADING TERMINAL AT THE TIME OF LOADING. PAYMENT IN EURO : NINETY (90) DAYS WILL BEAR INTEREST AT A RATE EQUIVALENT TO EURIBOR THREE MONTHS AS PUBLISHED BY THOMSONS REUTERS ON THE 31 ST DAY AFTER B/L DATE (B/L DATE = DAY 0) + 2.60 PERCENT AND THE ACTUAL PAYMENT DUE DATE IF ACTUAL PAYMENT DATE IS BEFORE OR ON THE 120 TH DAY AFTER B/L DATE (B/L DATE = DAY 0). ANY LATE PAYMENT FROM THE 121 ST DAY TO THE 150 TH AFTER BILL OF LADING DATE SHALL ATTRACT INTEREST AT AN APPLICABLE RATE OF EURIBOR 1 MONTH + 3.40 PERCENT. ANY LATE PAYMENT FROM THE 151 ST DAY AFTER THE BILL OF LADING DATE ONWARDS SHALL ATTRACT AT AN APPLICABLE RATE OF EURIBOR 1 MONTH + 4.00 PERCENT. AN EXCHANGE COMMISSION RATE OF MAXIMUM USD 10’000 SHALL AND SUCH EXCHANGE COMMISSION VALUE SHALL BE BORNE BY THE BUYER. ALTHOUGH THE PRICE IS TO BE CALCULATED IN U.S. DOLLARS, THE CALCULATED PRICE STIPULATED IN THE COMMERCIAL INVOICE SHALL BE CONVERTED AND PAYABLE IN EURO BY USING THE FOLLOWING MECHANISM: THE RATE OF EXCHANGE SHALL BE THE AVERAGE OF EURO/USD PLATTS RATE OF THE PRICING PERIOD.”

17. Clause 18 provided, “18. LIABILITY NEITHER SELLER NOR BUYER SHALL IN ANY EVENT BE LIABLE, WHETHER IN TORT OR CONTRACT, FOR ANY MORE THAN THE NORMAL MEASURE OF DAMAGES PROVIDED FOR BY THE SALE OF GOODS ACT 1979 TOGETHER WITH ANY PROVEN ADDITIONAL DIRECTLY CONSEQUENTIAL LOSSES. NEITHER PARTY SHALL BE LIABLE FOR INDIRECT, UNFORESEEN OR SPECIAL LOSSES OF ANY KIND.”

18. Clause 26 was as follows, (the spelling mistakes and formatting are as in the original), “26. EVENTS OF DEFAULT / TERMINATION CLAUSE AN EVENT OF DEFAULT (‘EVENT OF DEFAULT’) SHALL MEAN ANY OF THE FOLLOWING : A/ THE FAILURE OF THE BUYER TO MAKE ANY PAYMENT UNDER THE AGREEMENT IN FULL BY THE DUE DATE WITHOUT OFFSET OR TO TAKE FULL DELIVERY IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT; B/ THE FAILURE OF THE BUYER TO PROVIDE ANY PAYMENT UNDERTAKING, LETTER OF CREDIT, STANDBY LETTER OF CREDIT, PARENT GUARANTEE OR CREDIT SUPPORT INSTRUMENT IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT; C/ THE FAILURE OF THE BUYER TO PCOMPLY WITH ITS OTHER OBLIGATIONS UNDER THE AGREEMENT; D/ ANY REPRESENTATION OR WARRANTY MADE BY THE BUYER UNDER THE CONTRACT SHALL PROVE TO BE UNTRUE WHEN MADE IN ANY MATERIAL RESPECT; E/ THE BUYER (A) MAKES AN ASSIGNMENT OR ANY GENERAL ARRANGEMENT FOR THE BENEFIT OF CREDITORS, (B) FILES A PETITION OR OTHERWISE COMMENCES, AUTHORISES OR ACQUIESCES IN THE COMMENCEMENT OF A PROCEEDING OR CAUSE OF ACTION UNDER ANY BANKRUPTCY OR SIMILAR LAW FOR THE PROTECTION OF CREDITORS, OR HAS SUCH A PETITION FILED AGAINST IT AND SUCH PETITION IS NOT WITHDRAWN OR DISMISSED FOR 30 DAYS AFTER SUCH FILING, (C) OTHERSE BECOMES BANKRUPT OR INSOLVENT (HOWEVER EVIDENCED), (D) IS UNABLE TO PAY ITS DEBTS AS THEY FALL DUE, MAKES A COMPOSITION WITH ITS CREDITORS, COMMITS ANY ACT OF BANKRUPTCY, BECOMES SUBJECT TO AN ORDER FOR WINDING UP OR DISSOLUTION OR TO THE APPOINTMENT OF AN ADMINISTRATOR, EXAMINER, RECEIVER, CUSTODIAN, LIQUIDATOR, TRUSTEE OR OTHER SIMILAR OFFICIAL; F/ THE SELLER HAS GOOD REASON TO DOUBT THE CONOTINUING ABILITY OR WILLINGNESS OF THE BUYER TO PERFORM ITS OBLIGATIONS HEREUNDER; G/ THE OCCURRENCE OF A MATERIAL ADVERSE CHANGE IN THE FINANCIAL STANDING OR CREDITWORTHINESS OF THE BUYER WHEN COMPARED TO THE BUYER’S FINANCIAL STANDING AS AT THE DATE OF THE CONTRACT WHICH CHANGE, IN THE OPINION OF THE SELLER, AFFECTS THE BUYER’S ABILITY TO PERFORM ITS MATERIAL OBLIGATIONS (INCLUDING WITHOUT LIMITATION ANY OF THIS PAYMENT OBLIGATIONS) IN RESPECT OF THE AGREEMENT; H/ THE FAILURE BY THE BUYER TO COMPLY WITH ANY OF ITS OBLIGATION TOWARDS THE SELLER PURSUANT TO ANY CONTRACT OTHER THAN THIS AGREEMENT. UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AND AFTER NOTIFICATION TO THE BUYER IN WRING OF THE OCCURRENCE OF SUCH EVENT OF DEFAULT, ANY AND ALL PAYMENTS DUE FROM THE BUYER TO THE SELLER SHALL BE COME IMMEDIATELY DUE AND PAYABLE AND THE SELLER MAY (BUT SHALL NOT BE OBLIGED TO ) IN ITS SOLE DISCRETION; A. NOTIFY THE BUYER OF AN EARLY TERMINATION DATE (WHICH SHALL BE NO EARLIER THANT THE DATE OF SUCH NOTICE) ON WHICH DATE THE AGREEMENT SHALL TERMINATE (TE ‘EARLY TERMINATION DATE’); B. SUSPEND OR POSTPONE PERFORMANCE OF ITS OBLIGATIONS UNDER THE AGREEMENT UNTIL SUCH EVENT OF DEFAULT IS CURED OR UNTIL THE SELLER EXERCISES ITS RIGHT OF TERMINATION HEREUNDER; C. RETAIN DOCUMENTS OR REFUSE TO PERMIT THE DISCHARGE OF ANY PRODUCT TO THE BUYER; AND/OR D. STOP ANY PRODUCT IN TRANSIT OR TAKE ANY OTHER ACTION TO PROTECT THE SELLER’S RIGHTS AS THE SELLER, IN ITS SOLE DISCRETION, DEEMS APPROPRIATE. IF A NOTICE OF AN EARLY TERMINATION DATE IS GIVEN UNDER THIS CLAUSE, THE EARLY TERMINATION WILL OCCUR ON THE DESIGNATED DATE WHETHER OR NOT THE EVENT OF DEFAULT OF THE BUYER IS THEN CONTINUING. IF AN EVENT OF DEFAULT OCCURS AND AN EARLY TERMINATION DATE IS ESTABLISHED, THE SELLER MAY (IN ITS ABSOLUTE DISCRETION) TREAT THIS CONTRACT AS TERMINATED BY REPUDIATION ON TE PART OF THE BUYER. THE SELLER MAY THEN (IN ITS ABSOLUTE DISCRETION ) PROCEED TO SET OFF ANY OR ALL AMOUNTS WHICH THE BUYER OWES TO THE SELLER (WHETHER UNDER THIS AGREEMENT, ANY OTHER CONTRACT AND/OR ON ANY ACCOUNT WHATSOEVER) AGAINST ANY OR ALL AMOUNTS WHICH THE SELLER OWES TO THE BUYER (WHETHER UNDER THIS AGREEMENT, ANY OTHER CONTRACT AND/OR ON ANY ACCOUNT WHATSOEVER). IF TH SELLER SUSPENDS THE PERFORMANCE OF ITS OBLIGATIONS IN ACCORDANCE WITH (B) ABOVE, THE SELLER SHALL BE UNDER NO OBLIGATION TO PERFORM AT A LATER DATE AN OBLIGATION THE TIME FOR THE PERFORMANCE OF WHICH HAS EXPIRED DURING THE SUSPENSION. THE BUYER SHALL INDEMNIFY AND HOLD THE SELLER HARMLESS FROM ALL LOSSES, DAMAGES, COSTS AND EXPENSES INCLUDING LEGAL FEES THAT THE SELLER WOULD NOT HAVE INCURRED BUT FOR THE EVENT OF DEFAULT AND/OR THE EXERCISE BY THE SELLER OF ANY OF ITS REMEDIES HEREUNDER. THE PROVISIONS OF THIS CLAUSE AND THE SELLER’S RIGHTS HEREUNDER SHALL BE WITHOUT PREJUDICE TO, SHALL BE ADDITIONAL TO AND SHALL IN NO WAY LIMIT OR EXCLUDE ANY RIGHT OF TERMINATION, SETOFF, COMBINATION OF ACCOUNTS, LIEN OR OTHER RIGHT TO WHICH THE SELLER IS AT ANY TIME OTHERWISE ENTITLED (WHETHER BY AGREEMENT, OPERATION OF LAW, CONTRACT, OR OTHERWISE).” The background

19. In her judgment between [30] and [61], the judge outlined the various events which led up to the meeting between the parties at which the Joint Report was signed on 5 September 2019.

20. In outline, after Sonara failed to pay for consignments of crude oil supplied to it under the 2013 Contract between 2013 and 2016, the parties held a meeting in Dubai in February 2017 at which Sahara presented its claims. These included claims for outstanding principal and contractual interest, the Incremental Interest, Penal Charges and FX Differential. In relation to the claims for Incremental Interest, Penal Charges and FX Differential, Sahara relied on the indemnity in Clause 26. These claims were all rejected by Sonara, which disputed that Clause 26 applied, and contended that Sahara’s only remedy for late payment was the contractual interest provided for in Clause 8.

21. At that stage, in addition to not being in agreement as to the underlying legal justification for the claims for Incremental Interest, Penal Charges and FX Differential, the parties were not in agreement as to the quantum of the claims. In particular, Sonara indicated that it wished to analyse the documents upon which Sahara relied to justify those claims.

22. Further meetings took place and the parties exchanged correspondence without any resolution being reached during the remainder of 2017 and 2018. In particular, a meeting proposed for January 2019 was postponed to permit the attendance of Sonara’s general manager, Mr. Ibrahim Talba Malla. This was a point which Sahara contended showed that the Reconciliation Meeting that did eventually take place in September 2019 was intended to be more than simply an exercise in checking the figures, but was aimed at reaching a commercial settlement.

23. Ahead of that rescheduled meeting, on 1 May 2019 Sahara wrote to Sonara setting out the basis for its claims in some detail and providing substantial supporting documentation.

24. At the end of May 2019, there was an explosion and a fire at Sonara’s refinery in Cameroon. This had the result that a cargo of Bonny light crude oil, which Sonara had purchased from Sahara, could not be unloaded at the refinery. Sonara then declared that it would be relying on a contractual force majeure clause in relation to the cargo. To resolve the position, the parties entered into a swap agreement (the “Swap Agreement”) under which Sahara agreed to buy back and swap the Bonny light crude oil for refined products which it would deliver to Sonara. However, Sahara did not deliver all of the refined products, with the result that there was a further dispute between the parties in relation to the Swap Agreement.

25. It was common ground that as a consequence (among other things) of the refinery explosion and fire, by the time of the Reconciliation Meeting, Sonara was in financial difficulty and would be reliant upon the Government of Cameroon providing the funds to make any payments to Sahara. The genesis of the Joint Report

26. The judge recorded in her judgment that at trial there had been a debate as to the admissibility of evidence as to the negotiations at the Reconciliation Meeting and the drafting of the Joint Report, but that the debate had not been entered into very wholeheartedly, because both parties wished to rely on material from the negotiations. As a consequence, the judge went on to make some findings in her judgment at [69] et seq. of how events unfolded at the Reconciliation Meeting, how the draft of the Joint Report had developed during the meeting, and as to some events thereafter.

27. In outline, the judge found that the Joint Report started life as a document circulated by Sahara on the morning of 4 September 2019 as a framework for discussion and agreement (the “First Draft”). The First Draft contained an Agenda in broadly similar terms to the Joint Report, but without the item related to the Swap Agreement. It then contained a number of tables containing line items relating to the claims that had been made. The individual line items were similar to the items in the Joint Report, but each also included a final column in which Sahara had made its comments on the item.

28. As in the Joint Report, the first table in the First Draft was headed “2013 Outstanding on Principal”. The amount was very slightly different to that eventually included in the Joint Report, but Sahara’s comment was that the figure had been agreed and the amount was to be deducted from the Swap Agreement.

29. The second table appeared under the heading “Undisputed and Reconciled” and included line items both for contractual interest and late payment interest, together with “Incremental Interest” and “FX Differential”. Sahara’s comments on the former group of items were that they had been reconciled and agreed. Its comments on the Incremental Interest and FX Differential were that the figures had been presented by Sahara, backed by supporting documents; and that after extensive deliberations, Sonara had communicated its understanding of Sahara’s position (which was to be paid in full). In each case the comment was, “Parties would thereafter meet on a date to be agreed to discuss flexible payment terms to facilitate Sonara’s payment of the [Incremental Interest/FX Differential].”

30. The third table appeared under the heading “Disputed” and contained the Penal Charges. Sahara’s comment was that although Sonara had communicated its understanding of Sahara’s position, it had rejected the claims in relation to Penal Charges, and that the parties agreed to jointly contest those charges with Sahara’s banks.

31. At the end of the first day, Sonara’s commercial manager, Ms. Erica Nsoh, produced a redline version of the First Draft (the “Redline Draft”). No changes were made to the agenda or tables for the Outstanding Principal or any of the items in in relation to contractual interest and late payment interest. However, Ms. Nsoh moved the line items for the Incremental Interest and FX Differential from the second table (headed “Undisputed and Reconciled”) so that they appeared as a separate table under the heading “Disputed Claims”, together with the table in relation to the Penal Charges.

32. Ms. Nsoh also edited the comments in relation to both the Incremental Interest and FX Differential line items so that they each included the following, “After extensive deliberations, Sonara agreed to deliberate on the claim internally. Parties would thereafter meet on a date to be agreed to continue with the negotiations and possible flexible payment terms if an agreement is arrived at.”

33. There was then a second day of negotiations, 5 September 2019. At the end of the negotiations on that day, the Joint Report was produced collectively and signed by most of the attendees. Sonara’s director general, Mr. Njonou, was not available at the end of the day, but he signed the document and imprinted his personal stamp some days later.

34. The final Joint Report made a number of changes to the Redline Draft. The main changes were as follows: i) In the first table, the amount of the 2013 Outstanding on Principal was very slightly reduced, as was the total contractual interest and late payment interest in the second table. The second table was retitled “Reconciled Claims”, and the “Comments” column was deleted for each table. ii) The boxes and line items for Incremental Interest and FX Differential were moved from being under the heading “Disputed Claims” to appear under a new heading of “Undisputed Claims”. As with the tables for the 2013 Outstanding on Principal and the Reconciled Claims, the Comments column was deleted. iii) The table for Penal Charges remained under the heading “Disputed Claims” (albeit that this was now renumbered as table 4). Slight edits were made to the redline comments but the position was maintained that Sonara rejected the claims. iv) After table 4 (Disputed Claims), a new unnumbered heading was added, followed by four bullet points as follows, “ RESOLUTION ∙ All relevant supporting documents for the claims have been submitted by Sahara and duly acknowledged by Sonara. ∙ Sonara would review and collate the documents for submission to the Government of Cameroon. ∙ Sonara completely rejects all Penal charges and requests for a waiver of same. ∙ Sonara will communicate a date within two (2) weeks to [sic] for parties to reconvene, Sonara to propose potential flexible payment terms, schedule and further negotiations on the undisputed claims.” I shall refer to these four bullet points by number as “Resolutions [1-4]”.

35. After a further table 5, and some bullet points dealing with the balances arising out of the Swap Agreement, and just before the signature page, the Joint Report concluded with a further bullet point and the statement, in bold and capitals, “∙ THIS AGREEMENT WILL BE SUBMITTED TO SAHARA’S BANKING AND LEGAL PARTNERS FOR VALIDATION ” The judgment

36. Sahara’s position at trial was that the Joint Report was a binding agreement for the payment of the 2013 Outstanding on Principal, the Reconciled Claims and the Undisputed Claims as identified in the respective tables under those headings.

37. Sonara’s pleaded position was that the Joint Report recorded agreements reached between the parties on 5 September 2019 that Sonara would pay to Sahara the sums of principal, contractual interest and late payment interest identified in the tables headed 2013 Outstanding on Principal and Reconciled Claims. However, it denied that the Joint Report was itself a contract or agreement.

38. Sonara’s Defence also advanced an interpretation of the headings Undisputed Claims and Disputed Claims. It contended that the former was a phrase used by Sahara to signify that it accepted that it owed its bank the relevant items; whereas the latter phrase signified that Sahara did not accept any liability to the banks for those amounts. That argument was also supported in her evidence by Ms Nsoh. It was, however, flatly rejected by the judge at [134] of her judgment, and was not sought to be revived on appeal.

39. In her judgment, the judge held that the Joint Report was a legally binding agreement by Sonara to pay the amounts indicated in relation to the 2013 Outstanding on Principal and the Reconciled Claims.

40. However, as I have indicated, the judge rejected Sahara’s contention that there was also a binding agreement by Sonara to pay the Incremental Interest and FX Differential claims in the amounts recorded in the third table under the heading Undisputed Claims. The judge reached that conclusion for a number of interlinked reasons.

41. The judge’s analysis commenced with the identification, at [127]-[130] of a number of reasons why it might be thought, from its terms, that the Joint Report encapsulated an agreement having legal effect in respect of liability and quantum for everything except the Penal Charges. Those included the grid of signatures; the reference in the final bullet point to the Joint Report as an “agreement” which was to be submitted to Sahara’s banking and legal partners for validation; the titles given to the tables (i.e. Reconciled and Undisputed); and the lack of any comments indicating any outstanding points of disagreement in the tables containing those items.

42. However, starting at [131], the judge then made a number of points, leading to the opposite conclusion in respect of the Undisputed Claims. In essence, the judge reasoned, at [133] and [136]-[137] that the parties had used the word “Reconciled” to mean agreed as to both liability and quantum, but “Undisputed” to mean undisputed as to quantum but disputed as to liability, or undisputed as to liability, but disputed as to quantum. The main basis for that view was a reference to the wording of Resolution 4, “136. What matters in terms of objective construction is the ambivalence created by the categories, the logical possibilities as to “undisputed” and the word “negotiations” in used in relation to “undisputed” in Resolution 4. While Sahara’s case on this was extremely well put both in writing and orally in my judgment it gave too much weight to the simple word “undisputed” and insufficient weight to the natural meaning of “negotiations”. While the natural meaning of “negotiations” could conceivably be read down if “undisputed” could really have only one meaning, where that is not the case, “negotiations” has to be given its natural meaning if that is possible. As Sonara contended, the clear resolution that “ the Parties will reconvene for … further negotiations on the Undisputed Claims ” is at least extremely difficult for Sahara’s case. On an objective reading of the whole document the use of the word “undisputed claims” does not comprise an acceptance that Sonara agrees to pay the Incremental Interest or FX Losses in the sums claimed or in any sums.

137. Nor is it right to say that the sentence of Resolution 4 presumes agreement on Sonara’s liability, on the basis that there would otherwise be no point in flexible payment terms; Resolution 4 perfectly sensibly covers both the fully agreed elements (principal and “reconciled”) and the “undisputed” elements. In context it makes perfect sense for it to be read thus: “for parties to reconvene, Sonara to propose potential flexible payment terms, schedule [agreed:principal/reconciled] and further negotiations on the undisputed claims [undisputed].”

43. At [138]-[139] the judge then found support for this conclusion from what she described as the further admissible background, “138. This then dovetails with the further admissible background including the position of the Government of Cameroon. It is agreed that there had been a long outstanding issue which the parties had been trying to resolve – by now for years. There had been a number of reconciliation meetings in which Sahara had pressed for payment and where Sonara had made clear that they were not persuaded that the claims fell within the boundaries of their contractual liability. There is the unlikelihood of Sonara, in the financial position it was in, agreeing any liability that was not clearly established.

139. At the same time there were a number of “bigger picture” issues. First, the parties had co-operated and wanted to put themselves in a position where the relationship could continue. Secondly Sahara had made clear that the issue was very pressing and that it wanted to reach a position where it could expect payment – and it had something to give to its by now fractious banks. Then there is the fact that the parties knew that Cameroon Government agreement would be needed for anything not demonstrably due from Sonara, particularly in light of the financial crisis at Sonara caused by the refinery fire in 2019. Sonara was dependent on the Government of Cameroon for support.”

44. To that admissible background, the judge added a number of other factors. These included (at [141]) a pointer that “Undisputed” might apply to quantum only, because the evidence was that the Reconciliation Meeting primarily discussed the numbers, and that no-one seemed to recall a debate at the meeting over the Clause 26 issue. The judge reasoned that this told against the possibility that Sonara had conceded its long-held position on liability under Clause 26 at the meeting.

45. The judge then added commentary on a number of further issues in [145], “145. There is also the re-working of the spreadsheet by Ms Nsoh, which involved moving the Incremental Interest and FX charges from the section called “Undisputed and Reconciled” into a “Disputed Claims” section – a section which was then relabelled but remained in the final presentation separate both from “Reconciled” (i.e. agreed) claims and the plainly disputed “Disputed Claims” of the Penal Charges and Excess Interest. There is the fact that the document was never drafted or signed off on as a Settlement Agreement; nor was there any internal report at Sahara of agreement. There is the emphasis on continued trade and approval of the Government of Cameroon with Sonara’s GM saying at the beginning of the meeting that he wanted a “…quick resolution in a bid to allow Sahara to resume petroleum product supplies to Sonara” combined with the wording for onward submission. There is the fact that after the Joint Report had been signed off Sonara reverted to the approach they had taken before – and were not met with shouts of outrage, on the basis that they had agreed liability for Incremental Interest and FX.”

46. A related or alternative basis for the judge’s conclusion appears to have been that any legally binding agreement between Sahara and Sonara in respect of the claims for Incremental Interest and the FX Differential was conditional upon the agreement of the Government of Cameroon. This seems to be the thrust of the judge’s comments at the end of [139] (supra) and in her concluding paragraph on this issue in [146]. “146. The narrow and wider approaches both point in the same direction: that there was a limited agreement on principal and contractual interest. There was agreement to disagree on penal charges. And there was an “agreement” that Sahara had become liable for Incremental Interest and FX in amounts which looked right, to put the matter before the Government of Cameroon (which might take a pragmatic view) and then to come back to negotiate if there was no agreement by the Government to pay or to support payment. On that basis the “agreement” as to the “Undisputed Claims” was no contractual agreement; it was at best an agreement to agree.” Analysis Ground 1: Was there a binding agreement in respect of the Undisputed Claims?

47. Any analysis of Ground 1 must start from the fact that the Joint Report was a binding legal agreement between Sahara and Sonara, both in relation to the 2013 Outstanding on Principal and the Reconciled Claims. Once it is established that the Joint Report was a binding legal agreement, the question of whether it extended to the claims for Incremental Interest and the FX Differential is a question of interpretation of the agreement.

48. In that regard, as explained in Wood v Capita Insurance [2017] AC 1173 , the court’s task when interpreting an agreement is to ascertain objectively, with the benefit of the admissible background, the meaning of the words that the parties have used. The court’s approach is neither a purely literalist nor an entirely contextual one. The court will consider the words used in the context of the agreement as a whole; it will have regard to the nature, formality and quality of drafting of the agreement; and it will have regard to the wider context. However, and notwithstanding the approach taken by the parties in this case, evidence of the negotiations and earlier drafts is not admissible as an aid to interpretation of the final agreement: see e.g. Investors Compensation Scheme v West Bromwich BS [1998] 1 WLR 896 .

49. In this case, the ordinary and natural meaning of the words “Undisputed Claims” in the heading of the table containing the claims for Incremental Interest and the FX Differential, was that there was no dispute about those claims. There was also no difference in the format and express wording of the Joint Report to distinguish between the unqualified and binding agreement that the judge found to have been reached in respect of the 2013 Outstanding on Principal and the Reconciled Claims, and the position in relation to the claims for Incremental Interest and the FX Differential. In particular, in common with the tables for the 2013 Outstanding on Principal and the Reconciled Claims, and in contrast to the table for Disputed Claims, there was no “Comments” column in the relevant table to indicate that there was any unresolved issue in respect of the Undisputed Claims.

50. Nor was there anything in the language of the Joint Report which expressly indicated that any agreement between Sahara and Sonara on liability or quantum was conditional upon the approval of the Government of Cameroon, such that the agreement would not be legally binding unless such approval was given. There was certainly no suggestion that this was the case in relation to the 2013 Outstanding on Principal and the Reconciled Claims and neither was there any wording in the Joint Report to indicate any such conditionality in relation to agreement of the Undisputed Claims. In marked contrast to the express provision for the “Agreement” (as the Joint Report described itself) to be submitted to Sahara’s banks and lawyers for “validation”, there was no indication in the document that any similar process was envisaged on Sonara’s side.

51. Those points have obvious force, as the judge acknowledged at [127]-[130]. However, the judge essentially found them to be outweighed by two propositions.

52. The first is that, as a matter of interpretation of the document, the words “Undisputed Claims” did not carry their ordinary and natural meaning, but had a particular (limited) meaning such that only one element of the claim was undisputed – either liability or quantum. The judge thought that this reading was required to give full weight to the reference in Resolution 4 that there would be “… further negotiations on the undisputed claims”.

53. However, when Resolution 4 is read as a whole, the reference to “further negotiations on the undisputed claims” can perfectly well be understood as a reference to further negotiations that might be required in relation to the proposals that Sonara was to make for flexible payment terms and a schedule for payment of the Undisputed Amounts. It was not necessary to adopt a strained interpretation of “Undisputed Claims” in order to give meaning to “negotiations” in Resolution 4.

54. The second basis for the judge’s decision was that a conclusion that Sonara was not accepting liability for the Undisputed Claims was consistent with the requirement in Resolution 2 for submission of supporting documents to the Government of Cameroon. The judge linked that submission of documents with the fact that Sonara was known to be dependent on the Government for financial support. I do not agree with that reasoning.

55. The starting point is to observe that although (on this hypothesis) the Government of Cameroon would be providing the funds to enable Sonara to pay the 2013 Outstanding on Principal and the Reconciled Claims, the judge did not find that the Government’s consent was also necessary for Sonara’s agreement of liability and quantum for those amounts, and the judgment contains no obvious explanation of why the position should have been any different in respect of the Undisputed Claims.

56. It was also not suggested that this condition could be the meaning of any particular words in the Joint Report. As such, if that were to be the meaning of the Joint Report, it could only have been by way of implication of a term to that effect. But I do not see how such a term could satisfy the tests for implication of a term as described in Marks & Spencer v BNP Paribas [2016] AC 742 .

57. The argument for a distinction between the Undisputed Claims and the claims for 2013 Outstanding on Principal and the Reconciled Claims appears to have been based upon an assertion that the supporting documents related to the Undisputed Claims, because liability for the others could readily be computed from the 2013 Contract itself. But that was not common ground and the judge made no finding to that effect.

58. Moreover, even assuming, for the purposes of argument, that the supporting documents to be provided related solely to the Undisputed Claims and the Disputed Claims as Sonara contended, it is still perfectly possible that the documents were being provided to enable the Government of Cameroon to take a pragmatic view of those claims and to decide how much money it might be willing to make available as a contribution to assist Sonara to pay its liabilities. It is far from obvious, still less necessary to give business efficacy to the agreement between the contracting parties, that the submission of documents was also intended to give a third party a right of veto over Sonara’s autonomy to agree its liability for such claims.

59. The high water mark of Sonara’s case in this respect is the judge’s statement at [139], that, “Then there is the fact that the parties knew that Cameroon Government agreement would be needed for anything not demonstrably due from Sonara, particularly in light of the financial crisis at Sonara caused by the refinery fire in 2019. Sonara was dependent on the Government of Cameroon for support.”

60. However, the reference to things being “not demonstrably due” is unclear and the judgment contained no reference to any specific evidence to support such a conclusion. Although some of Sahara’s witnesses were asked in broad terms about their understanding of the purpose of Resolution 2 and the involvement of the Government of Cameroon, their answers simply disclosed in very general terms an understanding that Sonara’s financial position meant that the “intervention” of the Government was required, and that it was “important to see what the Government had to say about the claims”.

61. Moreover, the statement that the parties knew that “Cameroon Government agreement would be needed for anything not demonstrably due from Sonara”, is ambiguous as to whether the agreement of the Government was needed before there could be any binding agreement between the parties, or whether such agreement would be needed before funds would be provided to assist payment. If anything, the latter meaning is the more likely given that the judge immediately went on to identify that Sonara was dependent on the Government for support.

62. As such, applying the conventional principles of contractual interpretation does not support the judge’s conclusion. In my view the meaning of the Joint Report was that liability for the Undisputed Claims was agreed in the same way as it was for the 2013 Outstanding on Principal and the Reconciled Claims.

63. The judge thought that her interpretation of the Joint Report was supported by reference to the inadmissible evidence of the terms of the First Draft and the Redline Draft. She also referenced the fact that those who gave evidence about the Reconciliation Meeting thought that it dealt mainly with the numbers, and that no-one recalled a debate over whether Clause 26 applied to the claims for Incremental Interest and FX Differential.

64. Putting aside that it was inadmissible, I consider that the evidence in these respects in fact supports the conclusion that there was a binding agreement as to the claims for Incremental Interest and FX Differential, rather than supporting the judge’s view. There are two particularly telling points in this respect.

65. The first is that although the claims for Incremental Interest and FX Differential appeared in the Redline Draft in a separate box under the heading “Disputed Claims”, they were both then moved out from under that heading and inserted under a new heading of “Undisputed Claims” in the final agreed version of the Joint Report. That change in the place and description of the claims could not be a clearer indication that Sonara had accepted that their status had fundamentally changed by the end of the Reconciliation Meeting from being “Disputed” to “Undisputed”. In that regard I consider that the judge’s description in [143] of the differences between the two documents significantly underplayed the importance of this change.

66. Secondly, the specific comment that was attached to the claims for Incremental Interest and FX Differential in the Redline draft was, “Parties would thereafter meet on a date to be agreed to continue with the negotiations and possible flexible payment terms if an agreement is arrived at .” (my emphasis) In the final Joint Report, that comment was deleted and Resolution 4 inserted in the following terms, “Sonara will communicate a date within two (2) weeks to [sic] for parties to reconvene, Sonara to propose potential flexible payment terms, schedule and further negotiations on the undisputed claims.”

67. The reference in the Redline Draft to possible flexible payment terms being negotiated “ if an agreement is arrived at ” plainly signified that the parties had not, at that stage, reached any agreement in relation to Incremental Interest and FX Differential. However, it is highly significant that this condition was deleted in the Joint Report and replaced with an unconditional requirement that Sonara was to propose flexible payment terms. That strongly supports the conclusion that between the Redline Draft and the signing of the Joint Report, Sonara had changed its position and that an agreement had been arrived at, so that it was then for Sonara to make its proposals for flexible payment terms.

68. Against those very specific changes to the documentation, the lack of recollection of the witnesses as to whether there was any specific debate on Clause 26 at the Reconciliation Meeting is, even if it had been admissible, a very weak factor in favour of the judge’s conclusion.

69. There was, moreover, no clear background evidence to support the judge’s conclusion that the parties intended that any agreement as to the Undisputed Claims required the approval of the Cameroon Government. If this had been so, it is inevitable that there would have been some evidence of communications between Sonara and the Government in which such condition was requested or discussed. Moreover, such requirement would have to have been made known to Sahara by Sonara’s representatives prior to, or at, the Reconciliation Meeting. But there was no evidence or finding that there were any such communications.

70. For these reasons I would allow the appeal on Ground 1. Ground 2: Section 29(5) of the Limitation Act 1980

71. My conclusion on Ground 1 makes it unnecessary to express any view on Ground 2 – the question of whether the references to “Undisputed Claims” in the Joint Report was an acknowledgement of those claims for the purposes of section 29(5) of the Limitation Act 1980 . That is because no limitation defence can apply if the claims for the Incremental Interest and FX Differential are claims in debt under the Joint Report entered into on 5 September 2019. The conclusion also renders Ground 3 otiose, except in relation to the unagreed claim for Penal Charges. Ground 3: The Scope of Clause 26

72. Logically, the first issue in relation to Ground 3 is whether the claim for Penal Charges were covered by the paragraph towards the end of Clause 26, namely “THE BUYER SHALL INDEMNIFY AND HOLD THE SELLER HARMLESS FROM ALL LOSSES, DAMAGES, COSTS AND EXPENSES INCLUDING LEGAL FEES THAT THE SELLER WOULD NOT HAVE INCURRED BUT FOR THE EVENT OF DEFAULT AND/OR THE EXERCISE BY THE SELLER OF ANY OF ITS REMEDIES HEREUNDER.” I shall refer to this as “the Indemnity Clause”.

73. Sahara’s argument is simple. On the ordinary meaning of the Indemnity Clause, the non-payment of invoices by Sonara was an Event of Default (as defined at the start of Clause 26), but for that non-payment it would not have incurred the Penal Charges, and hence it was entitled to be indemnified for those amounts.

74. The judge held, however, that such Penal Charges were not covered by the Indemnity Clause. The core of her reasoning was at [187]-[190], “187. … The first issue is really to ask what this indemnity clause is doing as part of the overall contractual scheme. This is a point more nearly approached in Sonara’s Responsive Note, where it is submitted that the relevant paragraph within Clause 26 is aimed at the “ loss, damage, costs and expenses including legal fees ” that would arise from the exercise of remedies under Clause 26 (which include of course suspension and termination). Sonara also urges caution about a conclusion which would have Clause 26 as an overriding provision which takes out both Clause 8 and Clause 18.

188. There is force in this argument. This is not a case where Clause 26 stands alone as a scheme for recoupment of damage or loss caused by breach. The parties have agreed three clauses: a contractual interest clause, a damages clause and a (part) of a default clause. Simply structurally the Clause 26 indemnity does not look like an overriding provision: it is buried within Clause 26, with no signposting to it, and no cross references to the other clauses which it might affect.

189. Sahara is right that the wording of the clause is wide and that it is on its face apt to cover the matters claimed, even if they are not recoverable via the other clauses. However at the same time not only is the wording of the indemnity wide, but the gateway to it is at least equally wide. This is not a case of a generous remedy being available in limited circumstances. Events of default on the wording of the Contract cover not just material misrepresentations or insolvency but also (i) all failures to pay (however small the delay is) (ii) every other breach of contract (however minor) and even (iii) “ the seller has good reason to doubt the continuing ability or willingness of the buyer to perform its obligations hereunder ”. In other words, in this contract there can be an event of default even where there is no breach at all.

190. It follows that if a generous reading is given to the application or breadth of the indemnity wording the result would truly cut across the contractual scheme. I am consequently persuaded that the submission of Sonara that the wording in question is not an overriding indemnity provision but rather a specific indemnity aimed at the “ loss, damage, costs and expenses including legal fees” that would arise from the exercise of remedies under Clause 26 is correct. That conclusion arises from looking at the wording in the round, including: (i) the role of Clause 26 overall in the contract, (ii) the structure of Clause 26 (iii) the positioning of this wording in the text, which follows on from the remedies of the seller and is placed subsidiary to a paragraph which deals with the effects of one of those remedies (suspension) and (iv) the specific reference to exercise of remedies. Essentially this wording appears to be designed to mop up losses and costs incurred in the event an event of default is declared and/or if any steps are taken under it. That is further consistent with the reference to legal costs.”

75. In my view, the judge was entirely correct in her analysis, and I would only wish to add some further short comments of my own in support of her conclusion.

76. It is trite law that in construing a particular clause of an agreement, the court does not have regard to the literal meaning of the words in isolation, but places the clause in the context of the agreement as a whole, and iteratively checks the possible rival meanings against the other provisions of the document. That is precisely what the judge did.

77. In that regard, I entirely agree with the judge that the positioning of the Indemnity Clause, buried towards the end of Clause 26, without any cross-referencing to any other clauses of the 2013 Contract that on the face of it would cover the same ground, strongly suggests that it was not meant to have the very wide meaning and effect attributed to it by Sahara. As the judge pointed out, if the Indemnity Clause had the wide meaning for which Sahara contended, then it would potentially cut across the specific provisions of Clauses 8 and 18; and yet the 2013 Contract contained no indication that the parties regarded Clause 26 as having potential application in the same situation as Clauses 8 or 18.

78. In addition, the Indemnity Clause is not merely buried at the end of the 2013 Contract. Even within Clause 26, the Indemnity Clause appears after the definitions of an “Event of Default” in “A/” to “H/”. It also follows the operative parts of the clause that commence with the introductory words “UPON THE OCCURRENCE OF AN EVENT OF DEFAULT…”. That positioning plainly envisages that the Indemnity Clause was only meant to apply after an Event of Default had occurred and if the seller had given formal notice in writing to the buyer of the occurrence, thereby accelerating all payments so that they become immediately payable by the buyer.

79. Clause 26 then goes on to provide that after such notice and acceleration, the seller has the further right (but not the obligation) to take one or more actions identified as “A” to “D” (i.e. to terminate the agreement, suspend or postpone performance of its own obligations, retain documents or stop the discharge of product to the buyer, or stop any product in transit). In that respect it is, in my view, significant that the Indemnity Clause then follows three other sub-paragraphs that are all indented to the same degree in the document. Each one of those sub-paragraphs provides further clarification of the situation that would arise if the seller has taken some action under the introductory words or the specific actions listed. The first and second paragraphs clarify sub-paragraph “A” in relation to the early termination of the agreement; and the third deals specifically with the consequences of the suspension of performance by the seller under sub-paragraph “B”. The Indemnity Clause is then followed by a sub-paragraph that contains a reservation of any other more general rights that the seller might have apart from the exercise of the specific rights (e.g. as to termination) that are given under Clause 26.

80. That immediate context provides the clearest possible indication that the Indemnity Clause is not intended to have any wider effect independently of the situation for which Clause 26 provides, namely that there has been an Event of Default and Sahara has served formal notice to accelerate Sonara’s obligations under Clause 26, and may also have taken one or more of the specific actions identified as “A” to “D” in that clause.

81. As such, the scope of the indemnity against “losses, damages, costs and expenses including legal fees” must be limited to such losses etc that Sahara would incur in acting under Clause 26 (or, to be more precise, that it would not have incurred but for acting under Clause 26). So the indemnity would cover the costs and expenses (including legal fees) of Sahara serving formal notice of default to accelerate Sonara’s liabilities. It would also cover losses resulting from Sahara taking one or more of the specific actions identified in “A” to “D”. But it would not include a general indemnity against external charges that might be imposed upon Sahara by its banks simply because an Event of Default as defined in Clause 26 had occurred (e.g. once Sonara had not paid a sum due).

82. Sahara’s argument to contrary effect is essentially based upon reading the words “and/or” in the Indemnity Clause disjunctively so that the indemnity applies immediately upon the occurrence of an Event of Default and irrespective of whether Sahara had taken any actions under Clause 26. In my view that is far too wide a reading. For my part I consider that the purpose of using the words “and/or” was simply to avoid any doubt that the indemnity would apply both to costs and expenses etc resulting from Sahara serving notice to accelerate Sonara’s liabilities after an Event of Default, as well as to any separate costs of taking any of the further steps specifically identified in “A” to “D”.

83. Accordingly, I would dismiss Sahara’s appeal under Ground 3.

84. That makes it unnecessary to consider the question of whether, if the Indemnity Clause had applied to Sahara’s claims for Penal Charges, such claims would have been barred by limitation. It also makes it unnecessary to consider Sonara’s Respondent’s Notice. Disposal

85. I would give judgment for Sahara in relation to the Undisputed Amounts listed in the Joint Report, but dismiss the remainder of the Appeal and the Respondent’s Notice. Lord Justice Phillips:

86. I agree. Lord Justice Popplewell:

87. I also agree.