ADDAX PETROLEUM DEVELOPMENT (NIG) LTD. v. EMEF INTERNATIONAL OPERATIONS & ORS. (2010)

ADDAX PETROLEUM DEVELOPMENT (NIG) LTD. v. EMEF INTERNATIONAL OPERATIONS & ORS.

(2010)LCN/3964(CA)

In The Court of Appeal of Nigeria

On Monday, the 12th day of July, 2010

CA/C/88/2008

RATIO

INTERPRETATION OF STATUTE: INTERPRETATION OF SECTION 22 OF THE FEDERAL HIGH COURT ACT AS IT RELATES TO THE POWER OF A JUDGE OF THE FEDERAL HIGH COURT TO TRANSFER A SUIT FROM HIS COURT TO ANOTHER JUDGE EITHER OF THE FEDERAL HIGH COURT, FEDERAL CAPITAL TERRITORY HIGH COURT OR A STATE HIGH COURT

JURISDICTION OF THE FEDERAL HIGH COURT: WHETHER THE FEDERAL HIGH COURT EXERCISES CO-ORDINATE JURISDICTION WITH THE FEDERAL CAPITAL TERRITORY HIGH COURT AND THE HIGH COURT OF THE VARIOUS STATES IN THE COUNTRY

The Federal High Court exercises co-ordinate jurisdiction with the Federal Capital Territory High Court and the High Court of the various States in the country. See Sections 251, 257 and 272 of the 1999 Constitution respectively. PER KUMAI BAYANG AKAAHS J.C.A.

INTERPRETATION OF STATUTE: INTERPRETATION OF PART III OF THE PETROLEUM PROFITS TAX ACT

Part III of the Petroleum Profits Tax Act deals with imposition of tax and ascertainment of chargeable profits. Section 10(1)(a)(c)(d) and (1) states. “10.(1) In computing the adjusted profit of any company of any accounting period from its oil explorations, there shall be deducted all outgoings and expenses wholly, exclusively and necessarily incurred, whether within or without Nigeria, during that period by such company for the purposes of those operations, including but without otherwise expanding or limiting the generality of the foregoing- (a) rents incurred by the company for that period in respect of land or buildings occupied under an oil prospecting license or an oil mining lease for disturbance of surface rights or for any other like disturbance. (c) all royalties, the liability for which was incurred by the company during that period of natural gas sold and actually delivered to the Nigerian National Petroleum Corporation, or sold to any other buyer or customer or disposed of in any other commercial manner; (d) all royalties the liability for which was incurred by the company during that period in respect of crude oil or of, casing head petroleum spirit won in Nigeria, (1) all sums, the liability of which was incurred by the company during that period to the Federal Government or to any State or Local Government Council in Nigeria by way of duty, customs and excise duties, stamp duties, education tax, tax (other than the tax imposed by this Act) or any other rate, fee or other like charges.” The Personal Income Tax Act Cap. P8 Laws of the Federation of Nigeria 2004 Vol. 13 deals with Personal Income Tax. PER KUMAI BAYANG AKAAHS J.C.A.

INTERPRETATION OF STATUTE: INTERPRETATION OF SECTION 2(1)(A) OF THE PETROLEUM PROFITS TAX ACT

JUSTICES:

KUMAI B. AKAAH Justice of The Court of Appeal of Nigeria

JAAFARU MIKAILU Justice of The Court of Appeal of Nigeria

NWALI SYLVESTER NGWUTA Justice of The Court of Appeal of Nigeria

Between

ADDAX PETROLEUM DEVELOPMENT (NIG) LTD – Appellant(s)

AND

1. EMEF INTERNATIONAL OPERATIONS
2. CROSS RIVER STATE INTERNAL REVENUE SERVICE
3. ATTORNEY-GENERAL, CROSS RIVER STATE – Respondent(s)

KUMAI BAYANG AKAAHS J.C.A. (Delivering the Leading Judgment): By a Demand Notice dated 5/1/2005, the Respondents (as defendants) imposed a tax of N60 million (Sixty Million Naira) on the Appellant/Plaintiff for what they called “surface disturbance right levies, community development levies and royalties”. This led the plaintiff instituting an action first in the High Court of Cross River State on 25/2/2005 but was struck out on 14/7/2005 for lack of jurisdiction. On 26/9/2005 the Plaintiff too out an Originating Summons in the Federal High Court in Suit No. HC/CA/CS/60/2005 against the defendants seeking a determination of the following question:
1. Whether the 1st and 2nd defendants are entitled to demand from the plaintiff payment of royalties, surface disturbance rights levies, community development Rules and operational fees under the following laws;
a) Taxes and Levies Act (Approved List for Collection 1998.
b) Petroleum Profits Tax LFN 1990
c) Personal Income Tax Act 1993 and
d) Constitution of the Federal Republic of Nigeria 1999.
The Plaintiff then claimed the following reliefs against the defendants jointly and severally to wit:
1. A declaration that the 1st and 2nd defendants are not empowered by any law whatsoever to distain the plaintiff of her goods, chattels, land or premises for non-payment of royalties surface disturbance right levies, community development levies and operational levies.
2. A declaration that the defendant of the 1st defendant, purportedly acting on 2nd defendant’s behalf, on the plaintiff is in violation of the provisions of the Personal Income Tax Act 1993, Petroleum Profits Tax Act LFN 1990 and Taxes and Levies Act Approved List for Collection) 1998 and thus null, void and of no effect whatsoever.
3. An Order of Injunction restraining the defendants or their agents, servants, privies from both harassing the staff of the plaintiff and threatening to disrupt the services of the plaintiff from non payment of royalties’ surface disturbance rights levies and operational fees.
On being served with the summons the 1st defendant filed notice of Preliminary Objection on 14th November, 2005 on two grounds namely:
(1) That the suit is incompetent and cannot be maintained against the 1st defendant because it acted as an agent and on behalf of a disclosed principal, the 2nd defendant, and
(2) It was no longer a proper party in the suit as its appointment as an agent had been withdrawn by the 2nd defendant since 10/3/2005.
On 25/4/2006, the 2nd and 3rd defendants also filed a Notice of Preliminary Objection on the ground that the action is, statute barred having been instituted against the prevision of Section 2(a) of the Public Officers Protection Act, Laws of the Federation of Nigeria 2094. Both written and oral arguments on the objection, filed by 2nd and 3rd defendants were taken between 26/10/2006 and 15/112006 and Ruling was reserved to 25/1/2007. The learned trial Judge upheld the objection and dismissed the action; hence thus appeal which was filed on 16/2/2007 containing three grounds of appeal. (See pages 37 – 39 of the records). The Appellant submitted two issues for determination which read thus:
1. Whether a striking out order is one in which the claim in a cause is kept alive.
2. Whether Section 2(a) of the Public Officer- Protection Act protects public officers who at all material times did not act within the confines of their public authority.
The 1st Respondent adopted the issues formulated by the Appellant. The 2nd and 3rd Respondents raised a preliminary objection on Issue 1 arguing that it does not arise from the decision appealed against and proceeded to formulate the following lone issue for determination:
Whether Section 2(a) of the Public Officers Protection Law protects public officers who at ail materiel times acted within the confines of their authority.
The Appellant filed a Reply Brief in response to the objection raised on issue 1.
It is contended by learned counsel for the 2nd and 3rd Respondents that issue 1 does not arise from the decision appeared against as the issue of filing an earlier suit at the Cross River State High Court before the one in the Federal High Court was never canvassed before the trial court and no finding or ruling was made thereon. He submitted that even if Suit No. HC/75/2005 was filed on the 25/2/2005, it was still not filed within time as it was filed in a court which lacked jurisdiction to entertain the suit. Since the suit was filed in a wrong court which rightly struck out the suit on 14/7/2005, the date of commencement or the suit (24/2/2005) will not be reckoned with in computing whether the suit was statute barred and submitted that the case of IDOKO v OGBEIKU (2003) 7 NWLR (Pt. 819) 275 at 292 cited by leaned counsel for the appellant is irrelevant and inapplicable and urged this court to strike out issue 1 as being incompetent.
Learned counsel for 1st Respondent dealing with Issue 1 argued that although in appropriate cases, a cause of action may be kept alive upon striking out of a suit, such cause of action is subject to limitation of action law as a legal right cannot exist ad infinitum placing reliance on ONADEKO v UBN PLC (2006) All FWLR (Pt. 301) 1872. He contended that when appellant’s Suit No. HC/75/2005 was struck out on 14/7/05 in the High Court of Cross River State the suit became the property of forgotten history except or until refilled timeously in the appropriate court which appellant failed to do within the time allowed by Section 2(a) of the Public Officers Protection Act Laws of the Federation of Nigeria, 2004. He furthered that Suit No. FHC/CA/CS/60/2005 was filed by the Appellant after a period of three months from the date on which the cause of action arose and the court rightly struck out the suit for lack of jurisdiction since “it was filed outside the time allowed by Section 2(a) of the Public Officers Protection Act and submitted that the striking out order terminated the suit.
In reply to the preliminary objection, learned counsel for the appellant argued that leave of this Honourable Court was sought to argue the first ground of appeal and it was granted. Since the respondents did not object to the new ground of appeal at the proper time, the law allows this court to take argument on the new point or ground and cited SHONEKAN v SMITH (1964) 1 ALL NLR 168 at 173 in support. His contention is that where a court lacks an adjudicatory jurisdiction over a case, it simply strikes out the case because it is not a determination on the merit and submitted by relying on IDOKO v OGBEIKWU supra that a striking out order is one in which the claim is kept alive leaving the plaintiff at liberty to begin de novo either in the same or subsequent suit. He submitted that since he filed his action on 25/2/2005 and notwithstanding the fact that it was struck out on 14/7/2005 and he had to commence a fresh action in the Federal High Court on 26/9/2005, he filed the action within time since the law allows for a transfer of any cause of matter from a State High Court to the Federal High Court and vice versa. Reliance was placed on Section 22(2) & 22(3) Federal High Court Act and the case of IWUAGOLU v AZYKA (2007) 5 NWLR (Pt.1028) 613.

Section 22 of the Federal High Court Act grants power to a Judge of the Federal High Court to transfer a suit from his court to another Judge either of the Federal High Court, Federal Capital Territory High Court or a State High Court. Subsections 22 (2) and (3) provide:
“Section 22(2) No cause or matter shall be struck out by the court merely on the ground that such cause or matter was taken in the court instead of the High Court of a -State or of the Federal Capital Territory, Abuja in which it ought to have been brought and the Judge of the court before whom such cause or matter is brought may cause such cause or matter to be transferred to the appropriate High Court of a State or of the Federal Capital Territory, Abuja in accordance with Rules of Court to be made under Section 44 of this Act.
(3) Notwithstanding anything to the contrary in any law to cause or matter shall be struck out by the High Court of a State or of the Federal Capital Territory, Abuja on the ground that such cause or matter was taken in the High Court instead of the Court, and the Judge before whom such cause or matte is brought may cause such cause or matter to be transferred to the appropriate Judicial Division of the court in accordance with such rules of court generally which enactment or law shall by virtue of this subsection be deemed also to include power to make rules of court for the purposes of this subsection.”
The Federal High Court exercises co-ordinate jurisdiction with the Federal Capital Territory High Court and the High Court of the various States in the country. See Sections 251, 257 and 272 of the 1999 Constitution respectively. The question that arises is, is there a similar provision in the High Court Law of Cross River Sate is contained in Section 22(2) of the Federal High Court Act? I doubt if such a provision exists; otherwise the Cross River State High Court would have transferred the matter to the Federal High Court when objection was taken on its jurisdiction to entertain Suit No. HC/75/2005. I am of the considered view that the provision regarding the transfer of a matter from the Federal High Court and FCT High Court to the State High Court and vice-versa should be a Constitutional provision if we are to avoid internal conflict of laws. The crucial issue to be resolved however is the effect of the striking out of the suit by the State High Court and the subsequent re-filling or the action in Federal High Court. Learned counsel for the Appellant has argued that the suit earlier filed in the High Court of Cross River State was only revived when it was re-filed in the Federal High Court since the refilling took effect from the date the action was first filed in the High Court but learned counsel for tie Respondents are submitting to the contrary i.e. that since the case of action arose on 5/1/2005 and the suit was filed on 25/2/05 by he time it was struck out on 14/7/05, the action had become statute barred at the time it was filed in the Federal High Court on 14/7/05. If the matter had been transferred from the State High Court to the Federal High Court, it would have created no problem instead the suit was struck out and a fresh action had to be filed in the Federal High Court. Computation of time therefore started on 14/7/05 and not 25/2/05 when it was filed in the High Court. I agree with the submission made by learned counsel for the Appellant that since the appellant had sought leave to file and argue a fresh ground of appeal and the leave was granted leading to the amendment of the Notice which incorporated the fresh ground it is too late in the day for the Respondents to object to the arguments based on the fresh” ground of appeal raised or the issue arising from the said ground of appeal.
The objection is therefore overruled. The answer to issue 1 in the appellant’s brief is that the life of suit FCA/CA/CS/60/2005 commenced on 14/7/2005 and not on 28/2/2005 when Suit No. HC/75/2005 was filed.

Learned counsel for the appellant proceeded to deal with issue 2 and having read Section 1(1) of the Taxes and Levies (Approved List for Collection) Act No. 21 of 1998 and listing the taxes and levies which a State Government can impose and collect submitted that the Act does not provide for royalties, surface disturbance rights levies and community development levies which he said were illegally imposed on the appellant. He argued that for the Respondents to enjoy the protection provided by Section 2(a) of the Public Officers Protection Act, they must act within the confine; of their public duty. Once they step outside the bounds of their public authority and act outside the colour of their office or employment or outside their statutory or constitutional duty, they automatically lose protection of that law. He cited the dictum of Iguh J.S.C in IBRAHIM v JUDICIAL SERVICE COMMISSION STATE (1998) 14 NWLR (Pt.584) 1 at 32 where he said:
“… a public officer can be sued outside the limitation period of three months if at all times material to the commission of the act complained of, he was acting outside the colour of his office or outside his statutory or constitutional duty.”
He therefore urged this court to allow the appeal, set aside the judgment of the Federal High Court, Calabar, and enter judgment in favour of the appellant.
It was submitted on behalf of 1st & 2nd and 3rd Respondents that they have not acted outside their constitutional duty by demanding for taxes and levies accruing and payable to individuals and companies operating within the territory of the Cross River State. This is because the Petroleum Profit Tax Act gives the State the power to levy taxes and levies within its domain Learned counsel argued that the respondents are not demanding for petroleum tax and permit on petroleum but rather they are demanding for taxes and levies that accrued to the State and payable by individuals and companies operating within the territory of the Cross River State and Section 10(1)(a) of the Petroleum Profit Tax Act gives the State and Local Government Councils the power to levy such taxes and levies within its domain. Learned Counsel also argued; that Section 2(1)(a) of the Personal Income Tax Act Cap. P8 Laws of the Federation of Nigeria, 2004 empowers the State Government to collect taxes from individuals and corporations resident within its area of authority. The only way the plaintiff can prove that it is not entitled to remit such taxes to the State is to show that it fails within the provision of Section 2(1)(b) of the same Act.
The resolution of issue 2 in favour of the appellant will revolve around the legitimacy of the taxes. In other words if it is found that the State had no power to collect the taxes, the plea by the Respondents that the action is statute barred will be of no moment. And this will depend on whether the tax, the subject matter of the suit fall within the exclusive legislative list or comes within the preview of the concurrent or residual legislative list. Learned counsel for the appellant anchored his argument on the Taxes and Levies (Approved List for Collection) Act No. 21 of 1998 which lists the taxes and levies which a State Government can impose and collect.
It has been argued that the taxes, levies (Approved List for Collection) Act Cap T2 No. 21 Laws of the Federation of Nigeria 1998 was passed when the powers of the States to legislate and impose tax under the Constitution had been suspended and there was no intention to interfere with the powers of the States in the Constitution under a democratic setting. The other view is that imposition of tax is a purely statutory matter and the 1999 Constitution distributed taxing powers between the Federal and State Governments as evidenced in the Second Schedule to the Constitution item 59 in the Exclusive Legislative List and item D in the Concurrent Legislative List. See the unreported decision of this court in ATTORNEY-GENERAL OF CROSS RIVER STATE v MATTHEW OJUA in Appeal No. CA/C/03/2009 delivered on 18/3/2010.
It was observed in ATTORNEY-GENERAL OF CROSS RIVER STATE v OJUA supra at page 13 that:
“The constitutionality or otherwise of the Urban Development Tax Law should not be hinged on the Taxes and Levies (Approved List for Collection) Act Cap T2 Laws of the Federatio of Nigeria 2004. That Act was made during the period of Military inter regime when the 1979 Constitution was suspended and only such amendments that were introduced by the Military, was the groundnorm. However since the Act was not repealed after the coming into existence of the 1999 Constitution it became an existing law which was deemed to have been made by the National Assembly. Unlike the time it was first promulgated in 1996 when the Military held sway and Decrees took precedence over the unsuspended sections of the 1999 Constitution. With the coming into being of the 1999 Constitution, any existing Acts of the National Assembly would be valid subject to their being consistent with the Constitution.”
A close scrutiny of the disputed taxes and relating them to the Second Schedule will reveal whether a particular tax should go to the Federal, State or Local Government. Item 39 of Part 1 to the Second Schedule deals with mines and minerals, including oil fields, oil mining, geological surveys and natural gas. It is an item in the Exclusive Legislative List, so also item 59 which deals with taxation of incomes, profits and capital gains, except as otherwise prescribed by the Constitution. Items 7, 8, 9 and 10 Part II of the Second Schedule to the Constitution otherwise referred to as item “D” specify those taxes which can be collected at both Federal and State levels. These are the items on the Concurrent Legislative 1st and the provisions stipulate as follows:-
“7. In the exercise of its powers to impose- any tax or duty on
(a) capital gains, incomes or profits of persons other than companies;, and
(b) documents or transaction by way of same duties,
the National Assembly may, subject to such conditions as it may prescribe, provide that the collection of any such tax or duty of the administration of the law imposing it shall be carried out by the Governor of a State or other authority of a State.
8. Where an Act of the National Assembly provides for the collection of tax or duty on capital gains, incomes or profit or that administration of any law by an authority of a State in accordance, with paragraph 7 hereof, it shall regulate the liability of persons to such tax or duty in such manner as to ensure that such tax or duty is not levied on the same person by more than one State.
9. A House of Assembly may subject to such conditions as it may prescribe, make provisions for the collection of levy, tax, fee or rate or for the administration of the law providing for such collection by a local government council.
10. Where a law of a House of Assembly provide for the collection or tax, fee or rate or for the administration of such law by a local government council in accordance with the provisions hereof it shall regulate the liability of persons to the, tax, fee or rate in such manner as to ensure that such tax, fee or rate is not levied on the same person in respect of the same liability by more than one local government council.”
The Appellants have argued strenuously that the taxes and levies which the State Government are responsible for collecting as enumerated under Section 1(1) of the Taxes and Duties (Approved List for Collection) Act No. 21 of 1998 do not provide for royalties, surface disturbance rights levies and community development levies. But the 1st and 2nd Respondents relying on Section 10(1) of the Petroleum Profits Tax Act and Section 2(1) of the Personal Income Tax Act argued that the State Government is empowered to collect taxes from individuals and corporations resident within its area of authority.
Part III of the Petroleum Profits Tax Act deals with imposition of tax and ascertainment of chargeable profits. Section 10(1)(a)(c)(d) and (1) states.
“10.(1) In computing the adjusted profit of any company of any accounting period from its oil explorations, there shall be deducted all outgoings and expenses wholly, exclusively and necessarily incurred, whether within or without Nigeria, during that period by such company for the purposes of those operations, including but without otherwise expanding or limiting the generality of the foregoing-
(a) rents incurred by the company for that period in respect of land or buildings occupied under an oil prospecting license or an oil mining lease for disturbance of surface rights or for any other like disturbance.
(c) all royalties, the liability for which was incurred by the company during that period of natural gas sold and actually delivered to the Nigerian National Petroleum Corporation, or sold to any other buyer or customer or disposed of in any other commercial manner;
(d) all royalties the liability for which was incurred by the company during that period in respect of crude oil or of, casing head petroleum spirit won in Nigeria,
(1) all sums, the liability of which was incurred by the company during that period to the Federal Government or to any State or Local Government Council in Nigeria by way of duty, customs and excise duties, stamp duties, education tax, tax (other than the tax imposed by this Act) or any other rate, fee or other like charges.”

The Personal Income Tax Act Cap. P8 Laws of the Federation of Nigeria 2004 Vol. 13 deals with Personal Income Tax. Section 2(1)(a) of the Act provides as follows:
“2(1) Tax of an amount to be determined from the Table set out in the Sixth Schedule (in this Act referred to as “income tax”) shall be payable for each year of assessment on the total income of – (a) every individual other than persons covered under paragraph
(b) of this subsection or corporation sale or body of individuals deemed to be resident for that year in the relevant State under the provisions of this Act; ….”
According to the Appellant the taxes and levies to be collected by the State Government do not include the disputed taxes, I am of the considered view that rents incurred by a company for that period in respect of land or building occupied under an oil prospecting licence or an oil mining lease for disturbance of surface rights or any other like disturbance as contained in “Section 10(1)(a) of the Petroleum Profits Tax Act and royalties are payable to the Federal Government since it is an incidence of oil mining and is covered by item 39. Part 1 of the Second Schedule of the Constitution and Section (2) of the Petroleum Act which vests all land where petroleum exploration is carried out on the Federal Government and this accounts in part for the justification by States in demanding payment of certain percentage of oil revenue as derivation. Only individuals are liable to development levy; so also the Personal Income Tax, withholding tax and capital gains tax. All the taxes and levies which the State Government can collect are all spelt out in Part II to the Schedule of the Taxes and Levies (Approved List for Collection) Act No. 21 of 1998. It does appear to me that the 1st and 2nd Respondents acted outside their statutory or constitutional duty when they served the appellant with the tax demand notice. S.2(a) of the Public Officers Protection Act cannot be invoked to terminate the action of the appellant to challenge the Demand Notice for payment of the N60 million being royalties, surface disturbance rights levies and community development levies for 2005.
The appeal has merit and I hereby allow it. The judgment of the Federal High Court dismissing the action as not maintainable is hereby set aside. The action can be prosecuted outside the 3 months from the date the cause of action arose.
I make no order as to costs.

JAAFARU MIKA’ILU, J.C.A.: I have read in draft the lead judgment of my learned brother Kumai Bayang Akaahs, JCA. I agree with the reasons in it and the conclusion reached. The appeal has merit and it is hereby allow. The judgment of the Federal High Court dismissing the action is hereby set aside.
I make no order as to costs.

NWALI SYLVESTER NGWUTA J.C.A.: I read in draft the lead judgment delivered by my learned brother Akaahs, JCA and I agree with the reasoning and conclusion therein.
Under the law as illustrated in the lead judgment the 1st and 2nd Respondents had no right or duty to collect “surface disturbance right levies, community development levies and royalties” and any attempt to do so, including the demand notice served on the appellant was an act outside their statutory functions, and ipso facto they are not protected by the Public Officers Protection Act.
For the above and the fuller reasons in the lead judgment I also allow the appeal and set aside the judgment of the Court below.
Parties to bear their costs.

Appearances

Charles E. Duke For Appellant

AND

I. N. Echendu for the 1st Respondent
I. E. Ikona, DDCL, Cross River State with
O.J. Ajagu for the 2nd & 3rd Respondents For Respondent