Sahara Energy Resource Ltd v Société Nationale De Raffinage S.A. (Sonara)

Hearing dates: 2,3,7,8,14 October 2024

Approved Judgment

This judgment was handed down remotely and in private by the judge and circulated to the parties' representatives by email. The date and time for hand-down is deemed to be Monday 9 December 2024 at 09:30am.

INTRODUCTION

Sahara's claim and the issues in the case

The central claims made by Sahara against Sonara are simple. They are for breach of (i) a contract dated 14 January 2013 (“the 2013 Contract”) for the purchase of crude oil, (ii) various further crude oil contracts concluded in 2014, 2015 and 2016. This apparently simple case has however given rise to a raft of legal and factual issues.

The first complication is that the claims are not pursued simply, or even primarily, as claims for breach of those contracts. They are ultimately substantially based on a “Joint Report” dated 5 September 2019 following a “reconciliation meeting” between the parties. This Joint Report is said by Sahara to encapsulate an agreement settling disputes as to the various elements of the claims.

The second complication is that the claims have layers. Sahara originally claimed both principal sums and interest (including both contractual interest and what is referred to as Incremental Interest) as well as default changes and foreign exchange differential in relation to four cargoes. What remains in issue now are only the elements other than principal and contractual interest (which have been paid). There are three disputed heads of claim:

i) Incremental Interest: i.e. the difference between the contractual interest rate and the rate from time to time payable to Sahara's Banks where cargoes were financed by loans;

ii) Excess Interest and Penal Charges i.e. charges raised by the Banks for failure to make prompt payment under letters of credit, where the relevant cargoes were financed by letters of credit;

iii) FX losses arising from cargoes charged in Euros, which equate to the difference between the figure produced by a conversion to Euros at invoice date and the ultimate payment date (the Euro having fallen against the US dollar in the relevant period).

The reason why all these different elements arise is this: Sonara did not pay for one cargo until 2016, and the other three outstanding cargoes until 2019. Therefore, whilst Sonara was contractually obliged to pay for the cargoes in under 4 months, it in fact paid for them only after 5–6 years. Sahara's claims are therefore ones which they make to make themselves good for this extremely long delay – in essence Sahara says that because of the delay its own banks hit it with raised and ultimately penal interest charges and it lost money on the $/€ conversion.

The fact of the delay is not in issue. Nor, really, is the contention that Sahara has suffered many of the losses it claims to have done – though the exact amount of proved quantum is in issue. What is the main issue is whether these losses are recoverable under the terms of the contracts or the Joint Report and whether it is now too late for Sahara to claim them.

Sonara does not dispute that there were breaches of contract but says that those were compensated as agreed under the Contract. It says it never owed to Sahara the Incremental interest on 2013 cargoes and/or 2013 Default charges and/or or 2013 FX differential. The claim is disputed by Sonara on the basis that:

i) There was no settlement of the claims in the Joint Report;

ii) There is no entitlement to compensation for losses arising from a failure to make payment on time other than the contractual interest agreed which comprises the liquidated damages for such a breach;

iii) Each of the claims are time barred under s.5 of the Limitation Act 1980, this action not having been brought until 2021;

iv) The claims are irrecoverable either:

a) as “INDIRECT, UNFORESEEN OR SPECIAL LOSSES” under clause 18 of the Contract;

b) or on the basis that they are too remote to be recoverable as damages for breach of contract;

v) The quantum of the claims is not established.

It is fair to say that the parties approach the issues from opposite ends. Sahara looks to the Joint Report as cutting through the issues. Sonara prefers to commence with the contractual claims.

Whichever way one proceeds, a fairly detailed factual outline is necessary.

FACTUAL BACKGROUND

The Contracts

Sahara and Sonara entered into the “ Term Contract for the Supply of Crude Oil During 2013” (“the 2013 Contract”) dated 14 January 2013. Sonara is a substantially government-owned company in Cameroon.

Under the 2013 Contract, Sahara was required to supply crude oil (“ Okwori blend crude or other crude oil grade to be mutually agreed upon”) (clause 2) on a Free on Board (FOB) basis with delivery taking place in Nigeria (clause 6). There were a number of amendments agreed by the parties, including Amendment No. 3 dated 25 June 2013 (applicable to July-September deliveries of Okwori crude oil) and Amendment No. 5 (applicable to December deliveries of Okwori crude oil).

There were also contracts for 2014, 2015 and 2016 (essentially on the same form with amendments).

Various shipments were provided by Sahara, who had purchased the oils from the Nigerian National Petroleum Corporation (“NNPC”) with the benefit of finance provided by three major banks, Access Bank, Ecobank and Credit Suisse.

Clause 7

Clause 7 (in the original version) states:

“7. PRICE

THE FINAL PRICE IN U.S. DOLLARS PER NET U.S. BARRELS SOLD FOR EACH CARGO SHALL BE THE AVERAGE OF THE ‘DATED BRENT’ MEAN QUOTATIONS, AS PUBLISHED IN PLATT'S DAILY CRUDE OIL MARKETWIRE EFFECTIVE FOR THE TEN (10) CONSECUTIVE QUOTATION DAYS AFTER B/L DATE (8/L DATE= 0) PLUS A PREMIUM OR A DISCOUNT TO BE AGREED.

IN THE EVENT THAT PLATT'S SUBSEQUENTLY AMEND ANY OF THE RELEVANT QUOTATIONS, ACCOUNT SHALL BE TAKEN OF THE AMENDMENT AND A REVISED INVOICE ISSUED ACCORDINGLY.

THE PRICE WILL BE ROUNDED OFF TO THREE DECIMAL PLACES WITH THE THIRD DECIMAL TO BE INCREASED TO THE UPPER DIGIT WHENEVER THE FOURTH DECIMAL PLACE IS FIVE OR GREATER THAN FIVE.

INVOICE SHALL BE BASED ON THE NET U.S. BARRELS QUANTITY DETERMINED BY TERMINAL OPERATOR, AS INSERTED IN THE BILL OF LADING OR BILLS OF LADING, IF MORE THAN ONE SET IS ISSUED.

THE ABOVE PRICE IS FIXED AND FLAT IRRESPECTIVE OF ANY HGT/API ESCALATION/DE-ESCALATION.”

Clause 8

Clause 8 of Amendment No.1 of 25 June 2013; Amendment No.3 of 25 June 2013; Clause 8 of Amendment No.4 of 25 June 2013 and Clause 8 of Amendment No.5 of 20 November 2013 each set out that payment shall be made in Euros and further that a contractual rate of interest shall be paid from 120 days after the Bill of Lading Date.

This is expressed as follows taking the version in Amendment No.5:

“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 TOGETHER WITH A COPY OF THE BILL OF LADING TO BE SENT BY MAIL.

PAYMENT IN EURO:

NINETY (90) DAYS WILL BEAR INTEREST AT A RATE EQUIVALENT TO EURIBOR THREE MONTHS AS PUBLISHED BY THOMSONS REUTERS ON THE 31st 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 120TH DAY AFTER B/L DATE (B/L DATE= DAY 0)

ANY LATE PAYMENT FROM THE 121ST DAY TO THE 150TH AFTER BILL OF LADING DATE SHALL ATTRACT INTEREST AT AN APPLICABLE RATE OF EURIBOR 1 MONTH+ 3.40 PERCENT.

ANY LATE PAYMENT FROM THE 151ST 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.”

Clause 18

Clause 18 states that neither Seller nor Buyer shall in any event be liable for indirect, unforeseen or special losses of any kind.

“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”.

Clause 26

Clause 26 is headed “ Event of Default/Termination”;

“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 COMPLY WITH ITS OTHER OBLIGATIONS UNDER THE...