High Court punishes oil prospectors for breach of injunction

Background

In Pan Petroleum AJE Limited v Winka Folawiyo Petroleum Co Limited & others, the parties were subject to a joint operating agreement formed in 2007 concerning oil exploration and drilling off the southern coast of Nigeria. This particular case concerns the granting of Oil Mining Lease No. 113, where wells 4 and 5 are currently operational, and wells 6 and 7 are ready for development.  The dispute centres on wells 6 and 7, and whether their development has been properly approved.

Pan Petroleum successfully obtained an injunction which prevented the defendants from exercising their rights under the lease, in respect of wells 6 and 7, to exclude Pan Petroleum from participating in, or voting at, meetings.

On 23 January 2017, the defendants held a meeting and gave Pan Petroleum a mere three minutes’ notice, and thus effectively excluding Pan Petroleum from attending or voting.  Pan Petroleum therefore argued that the conduct of the defendants amounted to a breach of the injunction, and brought an application that the defendants be held in contempt of court.

High Court

At the High Court, Justice Knowles was clear that the defendants’ actions would fall within the definition of the injunction in terms of Pan Petroleum being excluded from the meeting, but he had to consider whether this actually related specifically to wells 6 and 7, and thus would constitute a breach of the injunction.

The defendants argued that because in respect of had a narrower meaning in the lease, this same narrow meaning must be applied to the alleged breaching of the injunction.  The court however disagreed, stating that “it is the terms of the injunction which matter”.  If the injunction is wider than the defendants feels Pan Petroleum is entitled to, then the defendants should apply to vary it.  This was not the case here.

Outcome

The court stated that the resolutions passed at the meeting related to approval of budgets for the wells, rather than approving the actual planned work on the well.  However, on a ‘natural meaning’ of the words, excluding Pan Petroleum from a meeting relating to the budget of a well is exercising rights ‘in respect of’ that well (which was also prohibited under the injunction).

The court held that the meeting was therefore a breach of the injunction, and that the defendants were in contempt of court.  The judge invited further submissions as to the consequences of that contempt.

For more information please contact Tim Berg.