Legality of Contract with Foreign Company Registered in Nigeria with Business Name
Sometime in 1999, the Appellants entered into an agreement with the Respondent through its subsidiary (National Petroleum Investment Management Services – NAPIMS), for the provision of consultancy services to NNPC-NAPIMS for a certain SNEPCO BONGA Field Development Project under Oil Prospecting Licence 212 (OPL 212). The agreement was to terminate after 44 months. In pursuance of the agreement, the Appellants mobilised their personnel and materials, and expended substantial sums of money in performance of the agreement. Upon change in the leadership of the country, a Presidential Panel was constituted to review contracts, appointments and licences that had been made or issued by the Federal Government. Without any notice to the Appellants or summons to them to make any representation in respect of any complaint, and without any allegation as to the validity of the consulting service agreement, the Respondent cancelled the agreement on the order of the Federal Government.
Aggrieved, the Appellants filed an action against the Respondent by an Originating Summons at the Federal High Court, seeking inter alia, certain declarations that the Respondent unlawfully terminated the said consultancy agreement, and outstanding claims on invoices submitted by the 1st Appellant or damages in the alternative. It also filed an application, seeking an interlocutory injunction restraining the Respondent from acting on the letter cancelling the agreement. The 1st Appellant obtained an
ex-parte order, granting it leave to serve the Originating Summons and other processes on the Respondent at NAPIMS.
The Respondent filed an application for stay of proceedings pending arbitration, but same was dismissed. It later filed an application seeking to strike out the suit for being incompetent, on the ground inter alia that, the 1st Appellant is not a juristic person, contrary to Section 54 of the Companies and Allied Matters Act (CAMA). It also sought in the same application, an order rescinding the ex-parte order of substituted service on the Respondent. After the Respondent’s application was argued and adjourned for ruling, the 1st Appellant filed an application seeking to produce its certificates of registration as part of the documentary evidence being relied on, in opposition to the Respondent’s application to strike out the suit, but this application was dismissed. The Respondent’s application seeking to strike out the suit was also dismissed, and the Respondent filed a Notice of Appeal against this dismissal at the Court of Appeal.
The Respondent opposed the Originating Summons, on the ground that the consultancy service agreement was ultra vires the approval power of the person who approved same on behalf of the Respondent; the 1st Appellant did not provide any service for the invoices raised, and the 1st Appellant is not a juristic person. The trial court in its judgement, awarded the sum of US$22,630,000.00 as damages and costs of N10, 000.00 in favour of the 1st Appellant. The Respondent appealed to the Court of Appeal, where the 1st Appellant sought and obtained an order of court joining the 2nd Appellant to the appeal. The Court of Appeal delivered its judgement in favour of the Respondent, and the Appellants further appealed to the Supreme Court, while the Respondent filed a Preliminary Objection in the appeal and cross-appealed. Both the Preliminary objection and Cross-Appeal were dismissed by court, for lacking in merit.
Issues for Determination In resolving the appeal, the Supreme Court considered the following issues:
1. Whether the Court of Appeal was right, when it held that the trial court lacked the requisite jurisdiction to entertain the suit filed by the 1st Appellant.
2. Whether the Court of Appeal was right, when it held that the contract entered into by the 1st Appellant, a foreign company without incorporation in Nigeria, was illegal and unenforceable.
Arguments
In arguing the first issue, the Appellants’ counsel contended that, it is the claim of the Plaintiff that determines the jurisdiction of the court. He argued that, where a suit is commenced by originating summons, it is the facts contained in the supporting affidavit that would stand in place of the pleading of the Plaintiff, and he relied on Financial Merchant Bank Ltd v Nigeria
Deposit Insurance Corporation (1995) 5 NWLR (Pt. 400) 226 at 240. He contended that, from the facts contained in the Appellants’ affidavit and the claims in the Originating Summons, the cause of action at the trial court was the decision of the Respondent to cancel the consultancy services agreement for the Bonga OPL 212 Field Development Project, purportedly on the orders of the Federal Government in a manner that violates the Appellant’s rights of fair hearing, as the Appellants were not given the opportunity to make any representation before the cancellation. He further contended that, the Court of Appeal was wrong to have held that the matter before the trial court pertained to a simple contract, over which the Federal High Court had no jurisdiction. Rather, the scope of the services to be rendered by the Appellants as agreed by the parties, were inseparably interwoven with the Bonga Oil Field Development Project which is within the jurisdiction of the Federal High Court, as provided in Section 251 (1) (n) of the Constitution of the Federal Republic of Nigeria, 1999.
The Respondent’s counsel contended that, jurisdiction of courts is derived first from the statute creating the courts. Also, the statement of claim and reliefs sought are taken into account, in the consideration of the exercise of jurisdiction. He cited the case of Izenkwe v Nnadozie (1953) 14 WACA 301. He further contended that the dispute before the trial court, was a dispute over a breach of contract which is not within the jurisdiction of the Federal High Court.
On the second issue, the Appellant argued that Section 54 of CAMA which provides that a foreign company with the intention of carrying on business in Nigeria, shall take steps to be registered as a separate entity in Nigeria does not apply to the instant case, as the situation in the instant case is one in which a firm registered in Nigeria enters into a contract with the Respondent, but, subsequently, incorporates itself as a limited liability company outside Nigeria. It was also contended that, by the extant Order of the Court of Appeal joining the 2nd Appellant to the appeal, the Respondent is estopped from contending at the Supreme Court that the 1st Appellant is different from the 2nd Appellant. The Respondent, on the other hand, argued that the contract was illegal because the 1st Appellant was in violation of Section 54 of CAMA for not being a registered company in Nigeria.
Court’s Judgement and Rationale Determining the first issue, the Apex Court opined that, it is the claim of the Plaintiff that determines the jurisdiction of the court, and in a case initiated by Originating Summons, the facts in the affidavit in support take the place of pleadings, to determine whether or not there is jurisdiction in the court. The Court relied on Adeyemi v Opeyori (1976) 9-10 SC, and other cases. The Court held that, the cause of action before the trial court was the decision of the Respondent to cancel the consultancy services agreement for the Bonga OPL 212 Development Project, allegedly done on the order of the Federal
Government. The Court stated that, the action is for declarative and injunctive reliefs against the executive decision or action of the agency, with respect to a contract the Respondent entered into pursuant to its statutory power, and this is clearly within the
jurisdiction of the Federal High Court. The Court also relied on Section 251 (1) (r) of the Constitution and Section 7 (10) (r) of the Federal High Court Act. It stated that, performance of the agreement is dependent on the existence of the oil field, and the Federal High Court is endowed with jurisdiction. The Court of Appeal was therefore, wrong, to have held otherwise.
On the second issue, the Court held that, Section 54 of CAMA does not apply to the facts of this case, as the circumstance of this case is that a firm registered in Nigeria, has entered into a contract with the Respondent, and subsequently, incorporated itself into a limited liability company outside Nigeria. The Appellants’ certificate of registration shows they were registered in Nigeria as at 6th August, 1988, and the contract was entered into on 20th May, 1999. Also, the Apex Court held that, by an extant Order of the Court of Appeal, the 2nd Appellant was joined as a party to the appeal, and the Respondent is estopped from contending that the 1st Appellant is different from the 2nd Appellant Consequently, the lower court was wrong to have held that the contract was illegal. Appeal Allowed and Cross-Appeal Dismissed.
Representation: Tayo Oyetibo, SAN with Shakirudeen Mosabalaje, Esq. for the Appellants/ Cross-Respondents. O. Akoni, SAN with B.B. Lawal, Esq. and A. O. Utake for the Respondent/Cross- Appellant.
“SECTION 54 OF THE COMPANIES AND ALLIED MATTERS ACT, WHICH PROVIDES THAT A FOREIGN COMPANY WITH THE INTENTION OF CARRYING ON BUSINESS IN NIGERIA SHALL TAKE STEPS TO BE REGISTERED AS A SEPARATE ENTITY IN NIGERIA, DOES NOT APPLY WHERE THE FOREIGN COMPANY IS REGISTERED AS A FIRM WITH A BUSINESS NAME”