The Supreme Court of Nigeria has delivered a landmark judgment on the limits of contractual damages, partially allowing an appeal by GE International Operations (Nig.) Ltd. while striking down a massive $5 million general damages award that the court described as an improper “windfall.”
In a unanimous decision, the apex court clarified that while businesses must be held accountable for breaches of contract, plaintiffs are not entitled to double compensation that leads to “opulence” rather than mere restoration.
The case originated from a Master Services Agreement between GE International (the Appellant) and Q-OilGas Services Ltd. (the Respondent). Q-OilGas sued GE at the High Court of Rivers State after the global giant rejected a contract staff member, Mr Raja Kumar, and refused to let the firm fill the vacancy.
Despite being served with the court papers, GE failed to file a defence. This silence led the trial court to grant a default judgment in favour of Q-OilGas. The original award included $20,000 for recruitment expenses, $500,000 for five years of lost contract earnings, and a staggering $5,000,000 in general damages.
When GE’s initial appeal was struck out by the Court of Appeal on a technicality regarding filing fees, the company elevated the matter to the Supreme Court to challenge both the procedural dismissal and the massive financial penalty.
The core of the Supreme Court’s ruling focused on the $5 million general damages. Justice Ngwuta, JSC, leading the panel, emphasised the principle of restitutio in integrum—the idea that a party should be restored to the position they would have been in had the breach not occurred.
The Court noted that the principle of assessment is not restitutio in opulentium, meaning it is not meant to give a windfall to the plaintiff. The justices held that since Q-OilGas had already been awarded specific sums to cover their actual losses totaling $520,000, adding another $5 million in general damages amounted to double compensation for the same set of facts. Consequently, the multi-million dollar award was set aside.
The Supreme Court also took the opportunity to reprimand the lower court for its “mechanical justice.” The Court of Appeal had previously thrown out GE’s case because there was no visible proof of payment for filing fees on the court processes.
The apex court ruled that a litigant should not be made to suffer for the mistakes or omissions of the court registry. “Justice is not a game of hide and seek,” the court declared, suggesting that the lower court should have verified the payment with the registry or ordered the appellant to satisfy the court of the payment rather than dismissing the appeal outright.
The Court affirmed that in actions for the declaration of a right, a plaintiff must satisfy the court with credible evidence even if the defendant stays silent. However, under the Rivers State High Court Rules, this requirement is satisfied by a witness statement made on oath.
Furthermore, the court clarified that the traditional categorisation of “special” and “general” damages is often not applicable in contract cases, where the goal is simply to place the claimant in the financial position they would have enjoyed if the contract had been performed.
The Supreme Court allowed the appeal in part. While it upheld the findings that GE breached the contract and maintained the award of $520,000 for actual losses, it permanently vacated the $5,000,000 general damages award to prevent an unfair windfall.
Tunde Olowu (with Raymond Ofagbor) appeared for the Appellant. Femi Falana, SAN (with T. O. Waamah and others) appeared for the Respondent.
