STATOIL (NIG) LTD. V. INDUCON (NIG) LTD.: On whether acceptance of proposal for negotiation of contract is enforceable .An insight into the decision of the Supreme Court therein

STATOIL (NIG) LTD. V. INDUCON (NIG) LTD.: On whether acceptance of proposal for negotiation of contract is enforceable. An insight into the decision of the Supreme Court therein. Citation: (2021) 7 NWLR PT. 1774 AT 1.

PARTIES IN FULL:
STATOIL NIGERIA LIMITED
V.
INDUCON NIGERIA LIMITED
DR. JOHN ABEBE

Courtesy: Moruff O. Balogun Esq.

Summary of fact:
The respondents commenced a suit in 2010 against the appellant at the Federal High Court. The respondents averred that the appellant had an alliance with another company (BP); that they helped both companies to secure license or lease of oil fields in Nigeria; that the grant of the concession to the appellant at that time was in line with the Federal Government of Nigeria policy to encourage indigenous participation in the upstream sector of the Nigerian oil and gas industry; and that by an agreement between the parties, the respondents were entitled to 1.5% share of the net profit accruing to the appellant from the oil produced from oil fields licensed to the appellant by the Federal Government of Nigeria with the respondents’ assistance.

The respondents pleaded that BP agreed to pay the respondents 1.5% net profit interest and negotiated with the respondents on the understanding that the appellant would automatically endorse and accept any agreement reached including the agreement to pay net profit interest of the leasehold. The respondents averred that after the appellant started producing oil, the appellant refused to pay the respondents 1.5% of the net profit made from the oil produced.
Therefore, the respondents claimed:
(a) A declaration of entitlement to a 1.5% net profit interest in all the appellant’s oil and gas interests including those in Agbami Oil Field.
(b) Specific performance of the net profit interest sharing agreement between the respondents and the appellant.
(c) Other reliefs that appear to flow from (a) and (b) above.
In its statement of defence, the appellant admitted that by several agreements, the respondents assisted the appellant to secure some business patronage in the Nigerian oil industry, but insisted that the respondents had been duly compensated for their services.

The appellant emphatically pleaded the non-existence of any agreement between the parties, oral or otherwise, to assign or enter into any agreement assigning a net profit interest to the respondents.
The appellant further denied making any representation to the respondents, the regulatory authorities, or the world at large that the net profit interest issue between the parties had been settled. It maintained that the respondents’ demand for the execution of the net profit interest agreement had on each occasion been rejected and denied.

The appellant also pleaded that the respondents’ suit was statute-barred under section 8(1)(a) of the Limitation Law of Lagos State on ground that it is a claim based on simple contract, but was commenced more than six years after the respondents cause of action accrued in 1992.
In response, the respondents filed a reply in which they asserted that their cause of action accrued in 2009, and not in 1992 as pleaded by the appellant.
At trial, the respondents presented oral and documentary evidence. The respondents PWI testified in his examination-in-chief and under cross examination, that he agreed right from the beginning with BP and the appellant on payment of net profit interest to the respondents. To prove that the appellant indicated its interest to accept the net profit interest agreement, the respondent tendered in evidence, a letter by the appellant stating its willingness to agree or accept the respondents proposal for a service contract and a long term net profit/royalty agreement with the respondents to be negotiated at a later date.

Another witness called by the respondents testified that there was a government policy described as the “Indigenous Participation Exploration Policy of the Federal Government”, but documentary evidence of it was not tendered.
The appellant’s officials and witnesses testified that the appellant had from the beginning maintained that it could not enter into a profit sharing agreement with the respondents and could not pay the respondents net profit interest. They also tendered documentary evidence from BP and the 2nd respondent, which corroborated their oral testimony.

An agreement signed by BP when it was withdrawing from Nigeria was presented at trial as exhibit D18. As a party to that agreement, the 2nd respondent confirmed that neither he nor any company, partnership or entity in which he had an interest was entitled to any outstanding payment or remuneration by reason of services provided to the appellant or its affiliate or to BP in relation to their activities in Nigeria except for: (a) payments expressly provided for by the service agreement as amended by the agreement; and (b) payments expressly provided for by the net profit interest agreement between BP and the respondents.

Another document (exhibit D24) presented at trial was a letter written by the 2nd respondent which he stated that he had accepted the appellant’s inability to have a long term profit share agreement with the respondents because of some unique reasons even though BP had agreed to a l.5% profit share with him. He also asked for alternative compensation for services provided to the appellant.

The trial court found that though the appellant initially indicated an intention or willingness to enter a long term net profit/royalty agreement with the respondents to be negotiated at a later date, the parties never signed an agreement paper and that the appellant later actively resisted such an arrangement or agreement with the respondents. In effect, the trial court found that the agreement alleged by the respondents did not exist.

The trial court, however, held that BP transferred its obligation to pay the respondents 1.5% of its net profit from its own oil holdings to the appellant under the contract between BP and the appellant when BP left Nigeria hence the respondents were entitled to enforce that agreement against the appellant. The trial court also relied on the government policy averred by the respondents.

Consequently, the trial court ordered the specific performance of the 1.5% net profit or leasehold interest agreement as claimed by the respondents in respect of all the appellant’s oil and gas interests in Nigeria by relevant government ministries and regulatory bodies. But the trial court did not determine whether or not the respondents claim was statute-barred though parties had joined issue on that matter.

The appellant appealed to the Court of Appeal, but did not appeal against the trial court’s finding that there was no agreement between the parties for the appellant to pay the respondents 1.5% net proceed interest.

In its judgment, the Court of Appeal found that the agreement alleged by the respondents was made in oral form when oil was not being produced from any of the oil fields and that the written agreement was therefore contingent on production of oil, which had commenced. The Court of Appeal also found that the trial court found the respondents’ interest was contained or embedded in the production proceeds of the assets of the appellant, and that the alliance comprising BP and the appellant made certain representations to the respondents by which they were both bound. The Court of Appeal considered whether the respondents’ suit was statute-barred on the basis of the facts pleaded in the respondents statement of claim, and held it was not. In the end, the Court of Appeal upheld the trial court’s judgment and dismissed the appeal.

The appellant appealed to the Supreme Court. The appellant argued that the main or principal reliefs the respondents sought were contractual in nature, and that the other reliefs were ancillary and dependent on the grant of the main reliefs. The appellant further argued that the trial court lacked the competence or jurisdiction to determine the respondents’ claims, which were based on simple contract, and that only the State High Court could grant an order for specific performance of a contract as the trial court.

The appellant also challenged the finding of the Court of Appeal that there was an agreement between the parties. It argued that the finding was not supported by evidence and was contrary to the trial court’s finding, which was not challenged by either party before the Court of Appeal.

Responding, the respondents argued that the facts they pleaded and the reliefs they sought, which were concurrently granted by the trial court and the Court of Appeal, pertain to interests in oil fields and were within the jurisdiction of the trial court, as the trial court had jurisdiction over matters relating to mines, minerals, oil field, and oil mining. In addition, the respondents argued that the
finding by the Court of Appeal that there was an agreement between the parties as alleged by the respondents was not at variance with the evidence on record and the finding of the trial court.

In determining the appeal, the Supreme Court considered the following constitutional and statutory provisions:
Sections 44(1)(a) and 251(1)(n)(s) of the Constitution of the Federal
Republic of Nigeria, 1999 (as amended) –
“44(1) No movable property or any interest in an immovable property shall be taken possession of compulsorily and no right over or interest in any such property shall be acquired compulsorily in any part of Nigeria except in the manner and for the purposes prescribed by a law that, among other things-
(a) Requires the prompt payment of compensation therefore; and
(b) Gives, to any person claiming such compensation right of access for the determination of his interest in the property and the amount of compensation to a court of law or tribunal or body having jurisdiction in that part of Nigeria.”

251(1) Notwithstanding anything to the contrary contained in this Constitution and in addition to such other jurisdiction as may be conferred upon it by an Act of the National Assembly, the Federal High Court shall have and exercise jurisdiction to the exclusion of any other court in civil cases and matters-
(n) Mines and minerals (including oil fields, oil mining, geological surveys and natural gas).
(s) Such other jurisdiction civil or criminal and whether to the exclusion of any other court or not as may be conferred upon it by an Act of the National Assembly.”

Section 7(1)(n) and (3) of the Federal High Court Act (as amended) –
[1]The court shall to the exclusion of any other court have and exercise jurisdiction in civil causes and matters-
(n) mines and minerals (including oil fields, oil mining, geological surveys
and natural gas)
[3] Where jurisdiction is conferred upon the court under subsections (1) and (2) of this section, such jurisdiction shall be construed to include jurisdiction to hear and determine all issues relating to, arising from or ancillary to such subject matter.”
Section 25(1)(b) of the National Investment Promotion Commission Act-
“25(1) Subject to subsections (2) and (3) of this section-
[b]no person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other person”

Held: Unanimously allowing the appeal, AGIM, J.S.C. dissenting
on issue whether the trial Federal High Court lacked jurisdiction over the suit):
The following issues were raised and determined by the Supreme Court.
On whether acceptance of proposal for negotiation of contract is enforceable –
The acceptance of a proposal for the negotiation of an agreement does not bring into existence the agreement yet to be negotiated. It is only after the conclusion of negotiations and the acceptance of the terms agreed upon by both parties that an agreement or a contract comes into existence. It is during negotiation that offer and acceptance is made. The acceptance of a proposal for the negotiation of a contract is not legally enforceable. In this case, the appellant’s letter stating its willingness to agree or accept the respondents’ proposal for a service contract and a long term net profit/royalty agreement with the respondents to be negotiated at a later date did not create a legally binding agreement. This letter rather further shows that the appellant did not enter into any agreement with the respondents to pay net profit interest.

On duty on court not to make contract for parties –
A court has no power to make contract for parties.
The duty of the court is to enforce the terms of the contract as agreed upon by the parties. The court has no power to introduce into the contract, terms that the parties did not agree on.
The trial court having found that there was no agreement between the respondents and appellant for the payment of net profit interest by the appellant to the respondents, should have dismissed the respondents’ claim that was founded on the existence of that agreement and nothing else, and not order Ministry of Petroleum Resources to impose such obligation on the appellant from its oil blocks on the basis of public or government policy. The decision of the trial court is rather against the public policy that courts should not make contracts for parties or compel them to enter into agreements, must enforce the terms of the contract as made by the parties and should not introduce a term not agreed upon by the parties to the contract. Since the respondents’ claim was predicated on the existence of the agreement found to be absent by the trial court, the claim ought to have been dismissed.

On whether freedom of contract can be overridden by government policy-
A government policy is not law and cannot override the autonomy and freedom of contract. The freedom and autonomy of contract is the fundamental principle of contract law. Parties to a contract have the freedom to determine the terms of their contract. No other person, not even the court can determine the terms of the contract between the parties thereto. The duty of the court is to enforce the terms of the agreement.

On whether government policy vests contractual rights in parties to a contract-
A government policy cannot create contract between parties. Unless parties to a contract make it part of the terms of their contract by incorporation, it cannot create legal rights or obligations in that contract. So neither party to a contract can rely on a government policy to assert or claim a legal right or enforce a legal obligation that the parties did not expressly create in their contract. In this case, there is nothing in the award letters or the production sharing contract (PSC) that show the alleged government policy was incorporated therein as part of the contract of award to the appellant.

On unconstitutionality and illegality of any government policy on compulsory acquisition and transfer of foreign investor’s business profit from oil fields to Nigerian who brokered allocation of such oil fields-
A government policy, which involves the compulsory acquisition and takeover of part of a foreigner’s business profits from oil fields licensed or leased to it and the transfer of same to another person merely because the latter is a Nigerian that facilitated the former’s investment in Nigeria would be contrary to section 44(1) of the Constitution of the Federal Republic of Nigeria 1999 and section 25(1)(b) of the National Investment Promotion Commission Act. In this case, if a government policy on indigenous participation in an oil prospecting and producing venture under which the appellant was bound to pay the respondents net profit interests from oil produced from the oil blocks licensed or leased to the appellant, as alleged by the respondents was proven to exist, the policy would be unconstitutional, illegal, and void. In the circumstances, the concurrent findings and holdings of the trial court and the Court of Appeal that such government policy existed to the benefit of the respondents was set aside.

On meaning of “public policy” and “government policy” difference between both and how respectively proved-
“Public policy” and “government policy” have different meanings and requirements of proof. A public policy is a principle that is generally accepted by members of society as the accepted value for the general wellbeing of the society. Its existence as a fact does not require proof because it is common knowledge in that society and the knowledge is not reasonably open to question. This is so by virtue of section 124(1) of the Evidence Act 2011. A government policy is the official principle or plan of official action of government in any given area. It does not arise and exist by virtue of its general acceptance by the community as a value for the general wellbeing of the community. It is made or issued by government in administrative circulars, gazettes of public notices and executive orders. Its existence must be proved by the production of the original copy or the certified true copy of the circular, gazette of the public notice or executive order. In this case, there is no public policy in Nigeria for the compulsory acquisition and transfer of part of the proceeds of the oil and gas investment of a foreign owned company to a Nigerian that facilitated the investment in Nigeria. On the other hand, the government policy described by the respondents’ witness as the “Indigenous Participation Exploration Policy of the Federal Government” and which was enforced by the trial court and the Court of Appeal was not proven to be in existence.

On Proof of government policy –
Government policies are usually contained in the official administrative documents of the government as the official principle or plan of official action of government in any given area. The fact that record of acts and decisions of government are usually in documentary form, is common knowledge, is not open to question and does not require proof by virtue of section 124(1) of the
Evidence Act 2011. Their existence can be proven only by the production of the official document of the government containing them and not by oral evidence of government officials, because by virtue of sections 89(e) and 90(1)(c) of the Evidence Act 2011 oral evidence of a public document is legally inadmissible. Oral evidence of the existence of a government decision or practice or fact of a public nature is legally inadmissible evidence, especially in view of section 54 of the Evidence Act 2011. In this case, there was no evidence of the existence of a Federal Government policy that foreign oil companies must pay a percentage of their net profit interest accruing from oil produced from oil blocks allocated them to indigenous facilitators or brokers of such allocation.

On burden of proof on plaintiff and effect of failure to discharge same –
A plaintiff has the primary legal burden to prove his claim, and in doing so must rely on the strength of his case and not on the weakness or absence of the defence. Should the plaintiff fail to discharge this burden, fair and legitimate adjudication requires that the claim be dismissed. In this case, the respondents failed to prove their case of the existence of an agreement between them and the appellant. So the trial court should have dismissed respondents’ case instead of proceeding to assume the existence of a public or government policy and to invoke the public or government policy to make a case for the respondents and on that basis granted them reliefs. The Court of Appeal also erred when it concurred with the decision of the trial court instead of setting it aside.

On whether Federal High Court has jurisdiction over simple contract cases-
The exclusive jurisdiction vested in the Federal High Court by virtue of section 251(1) of the 1999 Constitution (as amended) and section 7(1) of the Federal High Court Act does not extend to disputes bothering on simple contracts. Contract matters are only actionable in the State High Court or the High Court of the Federal Capital Territory. In this case, by the respondents’ pleadings and the
reliefs sought, the respondents action was based on an alleged contract. Therefore, it is outside the jurisdiction vested in the trial court under section
251(1)(n) of the 1999 Constitution (as amended) and section 7(1)(n) of the Federal High Court Act.
Per ABOKI, J.S.C. at pages 75-76, paras. E-A:
“What is in issue here, is whether the respondents’ claim fall under the section 251 (1) (n) of the CFRN 1999 (as amended)?
It is obvious from the clear terms of the amended statement of claim that this is a contractual dispute. The respondents, as plaintiffs, assert therein that there exists an agreement between them that the appellants are to pay them 1.5% of the net profit interest from the oil produced from the oil fields licensed or leased to it, due to the brokerage efforts of the respondents; that the cause of this action is that after they had helped the appellant secure the licence or lease of some oil blocks and it had started producing oil therefrom, it has refused to fulfill its contractual obligation to pay them the 1.5% of the net profit made from
oil produced. They therefore claimed reliefs in their amended statement of claim, on the basis of their above assertions.

Looking at the respondents claims already reproduced above, it is obvious that
the main reliefs in the respondents’ claim is the breach of the contractual obligations between the parties, for which the respondents sought redress at the trial court.
It follows therefore, that the claims of the respondents do not come within the scope of section 7(1)(p) of the Federal High Court Act.”

On process court looks at in determining issue of jurisdiction-
A plaintiff’s claim as pleaded determines the jurisdiction of the court that hears and determines the action. That is, it is the claim before the court that has to be looked at to ascertain whether it comes within the jurisdiction conferred on the court. In this case, to ascertain whether the action was within the jurisdiction conferred on the trial court by section 251(1)(n) of the 1999 Constitution (as amended) and section 7(1)(n) of the Federal High Court Act, the claim before the court must be examined. Such examination of the respondents’ amended
statement of claim shows that the respondents claim was for the enforcement of an agreement, contract, between the parties.

On proper order appellate court should make when trial court lacked jurisdiction-
Where an appellate court finds that the trial court lacked jurisdiction over a case on appeal before it, the matter must be struck out. In this case, the trial court lacked jurisdiction over the respondents’ action. So, the action and the whole proceedings at the trial court was a nullity ab initio, and struck out.

On whether issue of Statute bar not raised at the Court of Appeal can be raised at the Supreme Court-
Issue of whether an action is statute barred or not goes to the jurisdiction of court, to entertain the matter and as such can be raised at the Supreme Court even when not raised at the Court of Appeal.

On determination of whether action is Statute-barred-
Where parties have joined issues on when a plaintiff’s cause of action arose, the resolution of the issue cannot be limited to the consideration of the plaintiff’s statement of claim alone. The issue must be proved on the basis of evidence from parties.

On when time begins to run for purpose of period of limitation-

In determining whether or not a suit is statute barred, it is important to ascertain when time started running against the claimant. And time begins to run when there is in existence a person who can sue and another who can be sued and all facts material to be proved to entitle the plaintiff to succeed have occurred.

Duty on party relying on plea of limitation of action to prove when cause of action accrued-
The defendant who pleads that a plaintiff’s action is statute-barred has the burden to prove by credible evidence when the plaintiff’s cause of action accrued. It is not enough for the defendant to merely plead a particular date except if the plaintiff admits the date in a reply to the statement of defence, otherwise there would be absolutely nothing on which to base the computation of when the plaintiff’s cause of action arose. Thus where the defendant pleads statutory limitation of action and same is not admitted in the plaintiff’s reply, the
court, of necessity, will resolve the objection on the basis of proffered evidence.

On limitation period for action based on contract-
By section 8(1)(a) of the Limitation Law of Lagos State, an action based on simple contract should be filed within six years from the date of the accrual of the cause of action. In this case, based on the documentary evidence tendered at trial, the respondents’ cause of action accrued on 10 July 1992 when the appellant repudiated the agreement the respondent asserted existed between them on payment of net profit interest was based on. The respondents, however, commenced its action 18 years after the appellant’s repudiation of the said agreement. In the circumstance, the respondents’ action had become statue-barred at the time it was commended.

Courtesy:
Moruff O. Balogun Esq.
Ijebu Ode, Ogun State.
08052871414.