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Shell Petroleum Development Company Ltd v Councillor F.B. Farah and others

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Court/Judicial body: Court of Appeal, Port Harcourt Division

Citation: [1995] 3 N.W.L.R
Date: 7 December 1995
Instrument(s) cited: Petroleum Act 1990 Section 57 of the High Court Law Cap 61 Law of Eastern Nigeria 1963 Section 20(3) Oil Pipelines Act, Cap 338 Laws of the Federation 1990

Case summary

Background: Five families who lived near an oil well in Nigeria operated by Shell brought sued the company seeking compensation for their damaged land. An oil blowout in 1970, meaning the uncontrolled release of oil following pressure control systems failure, caused extensive damage and prevented the claimants from using the land for farming, hunting and other farming activities similar in nature. Shell accepted responsibility and paid compensation for the crops and trees damaged, but not the land. Shell also “took over” the impacted land in order to rehabilitate it and the five families could not use the heavily polluted land whilst it was being rehabilitated by Shell. The claimant five families then brought the current case to court as they argued that the land had not been rehabilitated, and that Shell had not yet complied with its duty to pay fair compensation. Shell rejected this argument and also asked the court to dismiss the case because too much time had passed before the second case was filed and their claim was barred by statute.

Issue and resolution: Compensation for damage to land relating to oil extraction. The two issues were whether the claim was brought in time and whether the company had paid full compensation. The court accepted the claim and decided that Shall had not paid fair and adequate compensation compensation.

Court reasoning: The claimants relied on the Petroleum Act 1990. Paragraph 36, Schedule 1 of the Petroleum Act states that: “a holder of an oil exploration licence, oil prospecting licence or oil mining lease shall, in addition to any liability for compensation to which he may be subject under any other provision of this Act, be liable to pay fair and adequate compensation for the disturbance of surface or other rights to any person who owns or is in lawful occupation of the licenced or leased lands”. Firstly, the court found in favour of the claimants and argued that “fair and adequate compensation” had not been paid and that they were end to compensation for the loss of value to the land (normal measure), compensation for loss of profits (consequential losses) and compensation for future or prospective damages reasonably anticipated as a result of the defendant’s activity (prospective loss). The court applied the principles guiding the award of damages for injury of land. The underlying principle for the award of damages to a person who suffers loss is to restore the person, as far as money can do so, to the position they would have been if the loss had not taken place. The court accepted evidence provided by experts which demonstrated that the land had not been fully rehabilitated and thus calculated the damages based on that principle. Secondly, the court found that the case was not statute-barred because the limitation period to bring the case started to run from the date when the claimants became aware of Shell’s position that it would not rehabilitate the land fully, and not from the date on which the oil blowout occurred.

Link to full judgement: Available on request.

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