By Elvis Evbaruovbokhanre Asia
Case: Mr. Chukwuemeka Obioha Ukabam V. West African Ventures Limited [1]
Judge: Justice M.N. Esowe
Date: 22/10/2024
Main Issues of Law
- Sanctity of Employment Contracts
- Validity of the Guidelines for the Release of Staff in the Nigerian Oil & Gas Industry, issued by the Department of Petroleum Resources (DPR)
- Appropriateness of a claim for the subsistence of employment where termination is claimed to be wrongful
- Calculation of Terminal Benefits
Summary of Facts:
The Claimant instituted the action, claiming that the termination of his employment without notice was wrongful and contrary to the terms of his employment and the Retention Package Contract between the parties. He further argued that the termination violated the 2015 Guidelines for the termination of oil staff appointments issued by the DPR, as the required consent of the Minister was not obtained.
The facts reveal that the terms of employment required one month’s notice of termination or salary in lieu. However, the employment was terminated with immediate effect on 29th November 2017, the same date on which the termination letter was issued. The Retention Package Contract provided that the Claimant would remain employed for the next five years (ending 30th April 2019) and be entitled to a benefit of $120,000, forfeitable if the employment was terminated before the five-year period. Payments under the package were to be made periodically, and the Claimant had received part of the payment at the time of termination, having spent 3 years and 7 months in employment. The Claimant, therefore, claimed the balance of $86,000 due under the Retention Package.
Court’s Decision:
The Court held that the termination of the Claimant’s employment was wrongful for failing to provide one month’s notice as stipulated in the contract. However, it found that the termination did not breach the Retention Package Contract, as the document did not prohibit termination before the expiration of the five-year term.
Regarding the Guidelines, the Court determined that the 2015 Guidelines for terminating oil staff appointments lacked the force of law, as they were issued by the Director of DPR and not the Minister of Petroleum Resources, who could not delegate such regulatory powers. Moreover, the Guidelines were not incorporated into the terms of the employment contract.
The Court awarded the Claimant salary in lieu of notice and N1,000,000 as general damages for wrongful termination. It dismissed the claims for salaries and emoluments until proper termination, as well as terminal benefits, for lack of proof. Finally, the Court held that the Claimant was entitled to $48,000 from the Retention Package, as calculated based on the termination date.
Legal Principles Relied On:
Sanctity of Employment Contracts:
Courts uphold the terms of freely entered agreements and respect the autonomy of contracts. They must interpret the intentions of the parties based on the agreement’s terms without rewriting them.
Validity of the Guidelines for the Release of Staff in the Nigerian Oil & Gas Industry:
The 2015 Guidelines were issued pursuant to Regulation 15A of the Petroleum (Drilling and Production) Regulations, which derive authority from Section 9 of the Petroleum Act. However, since the Guidelines were signed by the Director of DPR and not the Minister, they lacked the force of law. Section 12(1) of the Petroleum Act prohibits the delegation of the Minister’s powers to issue regulations, rendering ultra vires guidelines invalid.
Appropriateness of Claims for Subsistence of Employment:
An employee dismissed in breach of contract cannot treat the contract as subsisting and claim future benefits such as salary and allowances for the period beyond the termination date. Such claims are speculative and unsustainable.
Calculation of Terminal Benefits:
Terminal benefits must be derived from the explicit terms of the employment contract or relevant statutes. Courts will rely on written agreements to ascertain rights and obligations, rejecting claims unsupported by documentary evidence.
Commentary:
Two aspects of the decision merit further examination:
Validity of the 2015 Guidelines
The decision reignites the debate over the legality of the Guidelines for the Release of Staff in the Nigerian Oil & Gas Industry. The Court ruled that the 2015 Guidelines lacked legal force because they were signed by the DPR Director rather than the Minister. Furthermore, the Court noted that the Guidelines could only be enforceable if incorporated into the employment contract.
This decision aligns with the NICN ruling in PENGASSAN v. Chevron Nigeria Limited (2021) [2], which held that the 2019 Guidelines also lacked legal force on similar grounds. However, in Shell Petroleum Development Company of Nigeria Ltd v. Minister of Petroleum Resources & Ors (2022) [3], the same Court held that the Petroleum Industry Act (PIA) validated such regulations or Guidelines. It must be noted, however, that considerable doubt exists as to whether the 2022 judgment would withstand appellate scrutiny. For an existing regulation to be deemed valid under the PIA, it must have been valid under the law in effect at the time it was made.
This inconsistency creates legal uncertainty and raises questions about the enforceability of the Guidelines under the PIA. Additionally, the Court’s earlier characterization of the Guidelines as subsidiary legislation subject to judicial notice, yet later declaring them invalid, reflects an apparent contradiction. This underscores the need for an urgent review of the regulation-making process to ensure clarity and compliance with the law.
Award of $48,000 Under the Retention Package
The Court’s decision to award $48,000 from the Retention Package appears inconsistent with the terms of the agreement, which explicitly stipulated forfeiture of the package if employment ended before five years. The agreement also required any amounts already drawn from the package to be refunded to the company in such circumstances.
While the Court attempted to justify its decision on grounds of fairness, the ruling appears to contradict the clear terms of the agreement, especially against the backdrop of the Court’s earlier finding that the termination was not wrongful under the retention agreement.
This decision highlights the challenges in balancing fairness with strict contractual interpretation. It also underscores the need for clarity in the legal frameworks governing employment termination in the oil and gas sector.
[1] SUIT NO: NICN/LA/632/2017. Available online at https://nicnadr.gov.ng/judgement/judgement.php?id=9485
[2] https://nicnadr.gov.ng/judgement/details.php?id=5748
[3] https://www.nicnadr.gov.ng/judgement/details.php?id=7221