The High Court of the Federal Capital Territory (FCT) has ruled in favour of Halkin Exploration and Production Limited (Halkin E and P) in its dispute with Eunisell Limited over a contractual default-fee provision.
In a judgment delivered on October 22 this year Justice S. B. Belgore declared Clause 10.4 of the service agreement between the parties unenforceable.
The judge described it as a penalty clause designed to ‘terrorise’ Halkin E and P.
The clause required Halkin E and P to pay a late-payment charge of 0.5 per cent daily on outstanding sums equivalent to 177 per cent yearly on compound-interest.
Eunisell had relied on the provision to claim accumulated charges running into millions of dollars reportedly exceeding 10 times the underlying debt.
The court held: ‘Clause 10.4 of the Service Agreement between Halkin Exploration and Production Limited and Eunisell Limited dated January 20 2022 which imposes an annual default fee of 177 per cent (equivalent of 0.5 per cent per day) is null void and of no legal effect whatsoever.’
Justice Belgore also set aside quashed nullified and invalidated all late-payment and default invoices bills and assessments issued by Eunisell against Halkin E and P under the disputed clause. The court further permanently restrained Eunisell from demanding or enforcing late-payment charges based on the provision.
Counsel to Halkin E and P Chikaosolu Ojukwu (SAN) described the judgment as ‘a victory for the rule of law’.
He believes it vindicated the company’s position that the clause was contrary to public policy and unenforceable.
He said Halkin E and P maintained that Eunisell sought to use the clause to obtain an unjustified financial windfall.
Ojukwu also alleged that Eunisell withdrew from an oil well in the middle of the night without notice damaging the wellhead and said Halkin would pursue a $50 million claim against Eunisell through appropriate legal proceedings.
‘This is a classical case of get-rich-quick’ he said.
The judgment does not dispose of Eunisell’s separate debt-recovery action against Halkin E and P in which it seeks $10240679.98 including $7624171.51 in late-payment charges calculated at the disputed rate.