Sahara Energy Resource Limited v Societe Nationale de Raffinage SA: binding agreement on undisputed claims

The Court of Appeal has allowed an appeal concerning the binding effect of a joint reconciliation report, holding that claims categorised as "undisputed" constituted a legally enforceable agreement for payment rather than merely a statement of negotiating position.

Sahara Energy Resource Limited supplied crude oil to Société Nationale de Raffinage SA under a 2013 contract. Following Sonara's failure to pay for consignments delivered between 2013 and 2016, the principal sums and contractual interest were eventually settled. However, three additional categories of claims remained contested: Incremental Interest (the differential between contractual rates and Sahara's actual borrowing costs), Penal Charges (excess interest and penalties imposed by Sahara's banks), and FX Differential (foreign exchange losses from Euro depreciation during payment delays).

In September 2019, the parties held a reconciliation meeting at Sonara's Cameroon refinery, producing a joint report signed by attendees and subsequently by Sonara's director-general. The report categorised various claims under different headings, including "2013 Outstanding on Principal", "Reconciled Claims", "Undisputed Claims" and "Disputed Claims".

At first instance, Mrs Justice Cockerill held the joint report created binding obligations regarding the 2013 Outstanding on Principal and Reconciled Claims, but found no enforceable agreement concerning the Incremental Interest and FX Differential listed under "Undisputed Claims". The judge concluded these claims were either undisputed only as to quantum or liability (but not both), or that any agreement was conditional upon approval from the Government of Cameroon.

Lord Justice Snowden, delivering the leading judgement with which Lord Justice Phillips and Lord Justice Popplewell agreed, allowed the appeal on this principal ground. Once established that the joint report constituted a binding legal agreement for some claims, whether it extended to the Undisputed Claims became a matter of contractual interpretation.

The ordinary meaning of "Undisputed Claims" indicated no dispute existed regarding those items. The format and wording drew no distinction between the binding status of the 2013 Outstanding on Principal and Reconciled Claims and the position concerning Incremental Interest and FX Differential. Critically, the Undisputed Claims table contained no "Comments" column indicating unresolved matters, unlike the Disputed Claims table relating to Penal Charges.

The Court rejected the interpretation that "Undisputed Claims" meant only one element was undisputed. The reference in Resolution 4 to "further negotiations on the undisputed claims" properly related to flexible payment terms and schedules rather than liability or quantum.

Regarding the alleged condition precedent of governmental approval, the Court found nothing in the joint report's language supporting the implication that the Government of Cameroon's consent was necessary before obligations became binding. Whilst the Government would provide funds enabling payment, no finding established that its consent was required for Sonara to agree liability. The requirement for submitting supporting documents could be understood as enabling pragmatic governmental decisions about financial support levels, not creating a veto over Sonora's autonomy.

Although inadmissible for interpretation purposes, earlier negotiation evidence actually supported the conclusion. The claims had been moved from "Disputed Claims" in earlier drafts to "Undisputed Claims" in the final version—a fundamental status change. Additionally, conditional language was deleted and replaced with unconditional requirements for proposing payment terms.

The appeal regarding Penal Charges was dismissed. The Court agreed with the first instance judge that Clause 26's indemnity provision, positioned late in the clause without cross-references and following definitions of "Event of Default", applied only after formal notice when the seller took specific listed actions. The indemnity covered losses incurred in acting under Clause 26 itself, not general external bank charges arising merely because an Event of Default had occurred.

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