The High Court of the Federal Capital Territory, Abuja, has permanently restrained Eunisell Limited from demanding or enforcing late-payment charges against Halkin Exploration and Production Limited under a contractual clause imposing what the court described as an annual default fee of 177 per cent.
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Justice S.B. Belgore, in a judgment delivered on October 22, 2026, declared Clause 10.4 of the service agreement between the two companies an unconscionable penalty clause that was unenforceable and contrary to public policy.
The disputed provision imposed a default charge of 0.5 per cent daily on outstanding payments.
The court consequently nullified all late-payment invoices, bills and assessments issued by Eunisell against Halkin on the basis of the clause.
The dispute arose from a service agreement executed by the companies on January 20, 2022, under which Eunisell was engaged to provide specialised engineering services and operate a modular Early Production Facility for Halkin’s operations at the Atala Marginal Oilfield, also known as Oil Mining Lease 46.
Under the agreement, Halkin was required to pay a fixed daily service fee of $9,900, while Clause 10.4 provided that payments made after the contractual deadline would attract a default charge of 0.5 per cent daily.
Halkin subsequently approached the court challenging the provision, contending that the rate was excessive, oppressive and designed to punish it for delayed payments rather than compensate Eunisell for any actual loss arising from the delay.
In determining the dispute, Justice Belgore acknowledged the freedom of commercial parties to negotiate and enter contractual arrangements but held that the principle of freedom of contract did not compel a court to enforce an unconscionable penalty.
The judge relied on judicial authorities including the Supreme Court decision in Oyeneyin v. Akinkugbe and decisions of the Court of Appeal in Awutolo v. Okolo and Chevron Nigeria Limited v. Titan Energy Limited.
The court held that a contractual provision would amount to an unenforceable penalty where its primary purpose was to frighten or compel a contracting party into performing an obligation rather than represent a genuine pre-estimate of the loss likely to result from a breach.
Applying that principle to the agreement between Halkin and Eunisell, Justice Belgore found that the default provision imposed an excessive financial burden on Halkin.
The court also took into consideration the fact that the agreement was denominated in United States dollars, observing that the use of the dollar already afforded some protection against local inflation and fluctuations in the value of the naira.
The judgment has implications for a separate debt-recovery action previously instituted by Eunisell against Halkin.
In that action, Eunisell is seeking $10,240,679.98 in outstanding contractual fees, comprising, among other sums, $7,624,171.51 in late-payment charges calculated on the basis of the disputed default provision.
However, Justice Belgore’s judgment did not dismiss the entire $10.24 million claim.
The separate debt-recovery suit remains distinct from the present action, which centred on the validity and enforceability of Clause 10.4 and the invoices generated from it.
The court also considered the procedural conduct of the parties in the suit.
Justice Belgore observed that Eunisell failed to file a response to Halkin’s amended originating summons within the period prescribed by the applicable rules.
The court consequently held that the material averments contained in Halkin’s affidavit evidence remained unchallenged.
Relying on authorities dealing with uncontroverted affidavit evidence, the judge held that the relevant evidence presented by Halkin was deemed admitted and could be acted upon by the court.
Eunisell had also raised a preliminary objection challenging the competence of the suit.
The company argued, among other things, that the action constituted an abuse of court process because the parties were already involved in the separate debt-recovery action marked FCT/HC/CV/5599/2024.
It further contended that the dispute involved contested facts that ought to have been determined through an action commenced by writ of summons rather than originating summons.
Justice Belgore rejected both arguments.
The court distinguished between the earlier debt-recovery proceedings and Halkin’s action challenging the contractual clause, holding that the two cases sought different substantive remedies.
While the earlier action concerned the recovery of outstanding contractual sums, the instant case required the court to interpret and determine the legal effect of a specific provision contained in a written agreement.
Justice Belgore consequently held that originating summons was an appropriate procedure for determining the issue because the central question involved the construction of a written contract.
The judge also rejected Eunisell’s contention that the existence of the earlier debt-recovery action automatically rendered Halkin’s suit an abuse of court process.
In another aspect of the proceedings, the court dismissed an application by Eunisell challenging the accuracy of the court’s record of proceedings for May 18, 2026.
Eunisell had alleged that the court failed to properly capture its opposition to Halkin’s application to amend the originating summons and incorrectly recorded its counsel as having no objection to the amendment.
Justice Belgore, however, recalled that Eunisell’s counsel, P.L. Osakwe, had initially indicated opposition to the amendment but later stated that he was not objecting after the court sought clarification regarding the grounds of the objection.
The judge explained that the court had informed counsel that issues contained in Eunisell’s preliminary objection could still be considered after the amendment was allowed.
Justice Belgore maintained that the court’s record accurately reflected counsel’s eventual position.
The court further held that Eunisell did not follow the prescribed legal procedure for challenging the accuracy of a court record.
Relying on the Supreme Court’s decision in Andrew v. INEC, the judge held that a party disputing a court’s record is required to first place an affidavit before the court contesting its accuracy and thereafter file the appropriate formal application, supported by a separate affidavit, seeking its amendment.
The judge consequently dismissed Eunisell’s application as incompetent and also rejected it on the merits.
Justice Belgore ordered Eunisell to pay ₦1 million in costs to Halkin in respect of the unsuccessful application, which the court found had delayed delivery of the substantive judgment.
The court, however, made no order as to costs in the substantive action.
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