Vitol E&P Ltd v New Age (African Global Energy) Ltd

Contractual wording must be construed as a whole, balancing the language used against the commercial consequences of competing interpretations. Punctuation is relevant, but it is not necessarily conclusive where the clause’s natural meaning and structure show that punctuation may have been misplaced. A construction which makes a payment obligation operate at an indeterminate time, or leaves part of the wording without a sensible function, may be rejected as unnatural or unworkable. Rectification for mutual mistake requires a continuing common intention, objectively established, which existed when the instrument was executed and which the instrument failed to reflect. Convincing proof is required.

The claimant sought recovery of the balance of a financing fee and a declaration concerning the fee payable under a side letter connected with a secured facility. The side letter provided for a fee of US$2 per barrel, subject to reduction to US$1 if an intercreditor agreement was not executed and the facility was prepaid from specified refinancing proceeds. The parties disputed whether repayment had to occur within 10 business days after expiry of the negotiation period, or whether the fee reduced during that period irrespective of when repayment occurred.

The claimant also advanced claims in estoppel and rectification. The court therefore had to construe the proviso, and, if necessary, determine whether the instrument failed to record a continuing common intention.

1. Construction. The court adopted the claimant’s construction of clause 3.1. The fee was reduced only where the intercreditor agreement had not been executed, the facility was prepaid from the relevant refinancing proceeds, and prepayment with final discharge occurred within 10 business days after expiry of the Intercreditor Negotiation Period.
2. The clause had to be read as a whole, including its words, syntax and punctuation. Applying Wood v Capita Insurance Services Ltd [2017] UKSC 24, the court balanced the language against the implications and commercial consequences of the rival constructions. The comma was relevant but not conclusive. The claimant’s construction required the conclusion that the comma had been misplaced, not the insertion or deletion of substantive words.
3. The defendant’s construction would make the fee reduction occur at an uncertain time within a 10-business-day period, without any mechanism for identifying that date. It also made the period appear superfluous and could reduce the fee while the claimant remained exposed under the facility. That result was odd, unnatural and potentially unworkable. The claimant’s construction was the natural meaning and accorded with business common sense.
4. Rectification. Although unnecessary to the result, the court would have granted rectification for mutual mistake. The parties had objectively reached a continuing common intention that prepayment had to occur within the 10-business-day period. The later deletion of the comma did not objectively evidence a material change of intention. The necessary elements were a continuing common intention at execution, objectively established, and an instrument which by mistake failed to reflect it. Convincing proof was required.
5. The issues of unilateral mistake and estoppel were not decided. Judgment was given accordingly.