DEC OIL & GAS LIMITED v SHELL NIGERIA LIMITED

Case: DEC OIL & GAS LIMITED v SHELL NIGERIA LIMITED

Decided by the Supreme Court of Nigeria on Friday, 12^th July, 2019

Official Citation: DEC Oil & Gas Ltd v Shell Nig. Ltd [2019] 14 NWLR (Pt 1692) 273

Introduction

 The appellant is a company incorporated in Nigeria ad carries on the business of Design Engineering and construction in the Hydrocarbon Oil and Gas sector in Nigeria. The respondent is a company incorporated in Nigeria with limited liability and carries on the business of Natural Hydrocarbon Gas exploitation, transmission, management, distribution and sales.

The case is a contract case and is currently and reached the Supreme Court of Nigeria at the time of its final decision. At the trial court (Federal High Court), judgement was given in favour of the appellant, to which the decision was appealed by the respondent to the Court of Appeal. The Court of Appeal held for the respondent and referred the case to the State High Court. The appellant dissatisfied with the ruling of the Court of Appeal brought this appeal to the Supreme Court.

Facts

The appellant is a company incorporated in Nigeria ad carries on the business of Design Engineering and construction in the Hydrocarbon Oil and Gas sector I Nigeria. The respondent is a company incorporated in Nigeria with limited liability and carries on the business of Natural Hydrocarbon Gas exploitation, transmission, management, distribution and sales.

Sometime in March 1999, the appellant and the respondent entered into a written contract for the design and construction of subsurface and Submarine Natural Gas Pipelines for transmission and distribution of natural gas to Agbara, Ota which contract had an effective date of commencement of March 15,2000 and a scheduled completion date of October 20,2000.

During the execution of the contract, the appellant claimed that he incurred additional expenditures with the knowledge of the respondent. Even though the respondent made substantial payment to the appellant, misunderstanding ensued between the parties which led to the issuing of a letter of termination of the contract on December 4,2001 by the respondent. The appellant felt aggrieved by the termination of the contract by the respondent and instituted at action at the Federal High Court.

The High Court granted all of the appellant’s claim and dismissed the respondent’s counter claim. The respondent on appeal to the Court of Appeal raised the issue of jurisdiction, that the Federal High Court lacked same to entertain matters of simple contract on which the appellant’s claims were based on. The Court of Appeal held for the respondent and referred the case to the State High Court. The appellant dissatisfied with the ruling of the Court of Appeal brought this appeal to the Supreme Court. The respondent was also not happy with certain aspect of the judgement, particularly, the order to transfer the case to the Lagos State High Court.

Legal Issue

Whether the learned Justices of the Court of Appeal erred in law when they held thus:

“The plaintiff/respondent’s action was for the recovery of monies for works allegedly done by the plaintiff/respondent under the contract, which works plaintiff/respondent claimed were not paid by the defendant/appellant. By the nature of the claim, I am of the view that Section 251(1)(n) of the 1999 Constitution cannot be invoked to confer jurisdiction of the Federal High Court. The present case is simply an action for damages for alleged breach of contract. It is settled in law that the Federal High Court has no jurisdiction in simple contract.”

Decision

Per Galumje, JSC (Delivering the Lead Judgement):  In delivering the lead judgment, Galumje, JSC noted that the appellant had, in its statement of claim, admitted to entering into a contract of service with the respondent, evidenced by a written agreement. He observed that the appellant resorted to court action after the respondent unilaterally terminated the contract. The appellant had itemized its special claims in seven paragraphs, including claims for unpaid work under the original contract, completed additional work verified jointly on site, and standby charges for personnel and equipment as per the contract. His Lordship emphasized that none of these claims related to mines and minerals as envisaged under Section 251(1)(n) of the 1999 Constitution.

Galumje, JSC reiterated the distinction between the State High Court, which has unlimited jurisdiction, and the Federal High Court, which is a special court with limited but exclusive jurisdiction strictly as prescribed by the Constitution. He concurred with the lower court’s finding that the claims arose from a simple contract of service, particularly when considered alongside the respondent’s letter of termination produced below thus:

“Termination of Contract The above contract refers We hereby notify you of our intention to exercise our rights of terminate under the contract. Accordingly, this contract is hereby terminated pursuant to Article 21.1 of the contract with effect from 05.12.2001.

We hereby propose a meeting at our office at Freeman House,21/22 marina, Lagos on 06.12.2001. by 10.00 hours to agree on a schedule for a joint assessment of the work done including materials reconciliation and outstanding payments (if any). We intent to close out this activity by 07.12.2001”.

His Lordship quoted the letter and found that the nature and scope of the activities involved—though relating to gas pipeline construction—did not convert the contract into one involving “mines and minerals” under the constitutional provision. From the claims of the appellant and the letter of termination as produced herein above, his Lordship held that he had no doubt that the lower court was perfectly right when it held that the claims of the appellant were based on simple contract. The nature and scope of activities to be undertaken in a contract document does not change the complexity of the contract. Even though the contract was for the construction of gas distribution pipelines it does not translate into mines and minerals as envisaged by Section 251(1)(n) of the Constitution. He concluded that since the appellant’s claim was purely contractual in nature, the Federal High Court lacked jurisdiction Having come to the conclusion that the appellant’s claim was based on simple contract, the question which was raised thus: ‘was the lower court right when it held that the Federal High Court has no jurisdiction?’.  The court answered this in the affirmative. The sole issue which was adopted for the consideration of this appeal was resolved against the appellant.

Significance

The case reaffirms the law in Nigeria on the jurisdiction of the Federal High Court in cases of simple contract, the Federal High Court in Nigeria lacks jurisdiction to entertain matters on simple contract.

Conclusion

In DEC Oil & Gas Ltd v. Shell Nigeria Ltd, the Supreme Court reaffirmed the principle that the Federal High Court lacks jurisdiction over matters founded purely on simple contracts, as such claims do not fall under the exclusive jurisdictional scope provided in Section 251(1) of the 1999 Constitution. Despite the technical nature of the subject matter—natural gas pipeline construction—the Court emphasized that the complexity of a project does not alter the legal character of the claim, which, in this case, was rooted in breach of contract and unpaid entitlements.

This decision highlights the clear boundary between contractual disputes and matters involving mines and minerals under constitutional jurisdiction. It also serves as a caution to litigants and legal practitioners to carefully assess the nature of claims before choosing the appropriate forum. In my view, the ruling is sound in law and consistent with precedents. It ensures jurisdictional clarity while reinforcing the importance of substance over form in determining the proper court to adjudicate a matter.