Litasco SA v Der Mond Oil and Gas Africa SA & Anor

For an accrued debt, a force majeure clause covering hindrance may excuse performance only where the contractual obligation itself is materially difficult, not merely the debtor’s preferred payment route. A significant difficulty, approaching impossibility, is required. Lack of funds or foreign currency, reduced trading income, or banking obstacles that do not prevent other payment routes are insufficient. A contractual sanctions clause permitting suspension for sanctions changes applies only to changes after the relevant obligation was assumed. Existing sanctions risk is allocated by the contract, particularly where a warranty addresses the position at that date. The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2019 do not bar a money judgment, and control under regulation 7(4) requires existing influence over relevant company affairs, not merely potential power to impose control.

Litasco sought summary judgment for sums due under an Addendum rescheduling Der Mond’s existing crude-oil debt. Locafrique guaranteed Der Mond’s obligations.

The Defendants alleged that the Addendum formed part of a proposed joint venture and relied on misrepresentation, implied-term and collateral-warranty arguments. They also relied on incorporated force majeure and sanctions clauses, illegality under the Russia (Sanctions) (EU Exit) (Amendment) Regulations 2019, and frustration.

The central issues were whether the Defendants had a realistic prospect of establishing any defence and whether there was a compelling reason for a trial.

Summary judgment was granted for Litasco. The Defendants had no realistic prospect of defending the claim and identified no compelling reason for a trial.

1. Misrepresentation and contractual defences. The evidence did not support an implied representation that Litasco presently intended to enter a joint venture. Litasco had repeatedly reserved its rights, the proposed terms remained unsettled, and the unsigned MOU was non-binding and terminable. The Addendum contained an irrevocable and unconditional promise to pay. The alleged implied term and collateral warranty were inconsistent with those express provisions and had no realistic prospect of success.
2. Force majeure. A clause referring to hindrance has a wider operation than one limited to prevention. However, it is the contractual obligation, rather than a preferred method of performance, that must be hindered. Peter Dixon & Sons Ltd v Henderson Craig & Co Ltd [1919] 2 KB 778 supported that distinction, while Toprak v Finagrain [1979] 2 Lloyd’s Rep 98 supported the observation that a payee is rarely concerned with the payment method. For an accrued debt, a significant degree of difficulty, approaching impossibility, would be required. Lack of foreign currency and reduced trading income did not meet that threshold and were too remote.
3. Accrued obligations. Without full argument, the judge considered it strongly arguable that clause 14.8 prevented suspension of payment obligations which had accrued before any force majeure event. The structure of clause 14.3 also supported preservation of accrued obligations after termination.
4. Sanctions. Construing clause 15 with the Deed of Payment and Addendum, a Sanctions Change required an amendment or new sanction after the relevant obligation was assumed, here 7 November 2022. No such change was identified. Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd’s Rep 323 supported construction by reference to the position at contracting. The Defendants also gave no arguable basis for applying the 2019 Regulations to the parties or transaction, or for establishing that Litasco was controlled by a designated person.
5. Control and money judgment. Regulation 7(4) concerns existing influence over the relevant affairs of a company. It does not extend to a power which a designated person could theoretically exercise in the future. The control discussion in Mints v PJSC National Bank Trust & Anr [2023] EWCA Civ 1132 was obiter and context-specific. The court also applied that decision’s holding that the Regulations did not prevent entry of a money judgment in favour of a sanctioned party.
6. Frustration and trial. An accrued payment obligation under a wholly executed contract was not realistically capable of frustration by the later events relied upon. The proposed sanctions-control issue had no arguable evidential foundation and did not justify a trial merely to create a test case.

High Court (Commercial Court). Proceedings to enforce the Deed of Payment were stayed during negotiations and reinstated by consent on 10 March 2023. Litasco filed Amended Particulars of Claim and applied for summary judgment on 5 June 2023. No earlier judgment or appeal is identified.