SHIELD PETROLEUM COMPANY (NIG.) LTD. v. NIMEX PETROLEUM LIMITED COURT OF APPEAL (LAGOS DIVISION) (GARBA; IKYEGH; ABUBAKAR, JJ.CA)
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FACTS
Shield Petroleum Company (Nig.) Ltd. (the Appellant) instituted an action at the Federal High Court, Lagos, against Nimex Petroleum Limited (the Respondent) seeking to recover the sum of US$2,039,032.90, which it alleged represented an overpayment made to the Respondent in the course of a commercial transaction involving the purchase of 10,000 metric tons of Premium Motor Spirit (PMS), also known as gasoline. The Appellant contended that the transaction was carried out pursuant to a contractual arrangement under which the Respondent was to supply and ship the petroleum product by sea aboard the vessel MT Sea Power. In furtherance of the transaction, the Appellant stated that payment was made through its bankers, First Bank of Nigeria Plc, under a letter of credit issued to facilitate the purchase and shipment of the cargo.
The Appellant maintained that, upon reconciliation of the transaction documents and payments made, it discovered that the Respondent had been overpaid in the sum of US$2,039,032.90. Consequently, the Appellant demanded a refund of the alleged excess payment from the Respondent. In addition to the principal sum claimed as overpayment, the Appellant also sought the sum of US$450,000.00 as solicitor’s fees allegedly incurred in pursuing the recovery of the said amount. Furthermore, the Appellant claimed interest on the principal sum at the rate of 21% per annum, calculated from 24 June 2016 until the final liquidation of the debt. Upon being served with the originating processes, the Respondent entered a conditional appearance and challenged the competence of the action. The Respondent argued that the claim arose purely from a simple contract for the sale and purchase of petroleum products and did not constitute a maritime or admiralty claim within the meaning of the relevant admiralty laws. On that basis, the Respondent contended that the Federal High Court lacked the requisite jurisdiction to entertain the suit.
In a ruling delivered on 2 May 2017, the Federal High Court upheld the Respondent’s objection. The court held that the Appellant’s claim was essentially one for the recovery of money arising from a simple commercial contract and did not qualify as an admiralty action within the jurisdiction of the court. Consequently, the trial court held that it lacked jurisdiction to entertain the matter and accordingly struck out the suit for want of jurisdiction. Dissatisfied with the ruling of the trial court, the Appellant filed a Notice of Appeal dated and filed on 12 May 2017, challenging the decision of the Federal High Court.
One of the issues for determination was: Whether from the writ and the statement of claim of the Appellant before the lower court, the Appellant’s claim is not a maritime claim that the Federal High Court has exclusive jurisdiction over?
ARGUMENTS
Learned counsel for the Appellant referred to the constitutional provision relating to the admiralty jurisdiction of the Federal High Court and submitted that the court possesses exclusive jurisdiction over matters classified as admiralty or maritime claims. Counsel argued that the transaction between the parties involved the carriage of goods by sea and the shipment of petroleum products through a vessel and therefore fell within the category of maritime claims. It was further contended that a claim arising from an agreement for the carriage of goods by sea is intrinsically connected with maritime commerce and navigation, and as such, properly falls within the exclusive jurisdiction of the Federal High Court. On this basis, learned counsel maintained that the trial court erred in declining jurisdiction and striking out the suit.
Why institutional memory matters
In response, learned counsel for the Respondent submitted that the nature of the Appellant’s claim, as disclosed in its pleadings, was clear and undisputed. Counsel argued that the claim was essentially one for the recovery of money allegedly paid in excess under a commercial contract for the supply of petroleum products. According to counsel, the dispute did not relate to the ownership, operation, or management of any vessel, nor did it arise from any maritime activity connected with the navigation of a ship. He contended that the cargo forming the subject of the transaction had already been discharged and delivered to the Appellant at the agreed destination. As such, the contract between the parties had been substantially performed and the present dispute merely concerned an alleged overpayment discovered after the completion of the transaction. In counsel’s view, the claim therefore lacked the essential characteristics of a maritime or admiralty claim.
It was further argued that admiralty action in rem is typically directed against a ship or other maritime property and is usually enforced through the arrest or detention of the vessel or res pending the determination of the suit. He pointed out that in the present case, no vessel was arrested or made the subject of the proceedings, and no maritime property was involved in the dispute. Learned counsel also submitted that the mere fact that goods were transported by sea does not automatically transform a dispute into an admiralty matter. Accordingly, counsel maintained that the trial court was correct in holding that the action was essentially founded on a simple commercial contract and therefore fell outside the admiralty jurisdiction of the Federal High Court.
DECISION OF THE COURT
In resolving this issue, the Court of Appeal held that:
Claims arising from a simple contract between parties for the sale, supply, or purchase of goods which are to be transported or conveyed by sea or air from a foreign country to Nigeria do not automatically confer the character of an admiralty action on such transactions. The law has clearly established that the Federal High Court does not have jurisdiction to entertain claims that arise from simple contracts, including claims for the recovery of money allegedly paid in excess under a contract for the sale of goods to be transported by air or sea.
The Court of Appeal explained that a claim for the recovery of an admitted or alleged debt resulting from the overpayment of the agreed price of goods does not amount to an admiralty action nor does it confer the on the Federal High Court the jurisdiction to hear and determine the claim, as such a claim remains a contractual dispute between the parties and does not become a maritime claim simply because the goods were transported by a vessel.
Issue resolved in favour of the Respondent.
I. Ajadi, Esq., for the Appellant
Osho, Esq., for the Respondent
This summary is fully reported at (2024) 5 CLRN in association with ALP NG & Co.
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