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Liquidated money demand has been explained by the Court of Appeal in Johnny v Edoja (2007) ALL FWLR (Pt. 365) 527 at 544 Paras. A – C (CA) to mean:

”A liquidated money demand is defined as a sum of money previously agreed by the parties to a contract in case of breach. It is also a claim for an amount previously agreed on by the parties or that can be precisely determined by operation of law or by the terms of the parties’ agreement. In the instant case, the sum of N575, 000 is undoubtedly a liquidated demand and since the contract has failed, the respondent is entitled to the full refund of that sum. See Nortex (Nig.) Ltd. v Franc Tools Co. Ltd. (1997) 4 NWLR (Pt. 501) 603; Black’s Law Dictionary, 7th edition, page 240.” Per Alagoa, JCA.

In clear terms, liquidated money demand can be said to be a debt or other specific sum of money usually due and payable, which amount must have already been ascertained or capable of being ascertained without any other further investigation. Therefore, whenever the amount being claimed by a party can be ascertained by calculation or fixed by any scale of charges or other positive data, it is said to be liquidated.

As it is clearer now what liquidated money demand means, it is rather imperative that we examine options available to a business owner or an entrepreneur when he/she is being owed a calculable sum of money and wants to recover the debt. During contractual disputes especially as it relates to repayment of debts or breach of contract, it is important that a business owner/entrepreneur knows the best route to take for the quick resolution of the contractual dispute, in this case being the recovery of a liquidated debt.

An average business person in Nigeria avoids the courts like a plague. The reasons are not far-fetched: 1) Litigation in Nigeria is mostly an expensive and time-consuming process; 2) Arbitration, contrary to popular mantra is also as, if not more expensive than litigation, though faster; and 3) Mediation, though the least expensive of the bunch suffers the disadvantage of being highly concession-driven. Imagine as an entrepreneur you are owed N10 million, and at the end of the mediation session, you are being offered 5 to 7 million naira as a final settlement of the debt: that’s the kind of outcome one can expect from mediation.  And this is where the small claims option may be most appealing and best of all the options for an entrepreneur.

The small claims court

The small claims court was created under the administration of the former Chief Judge (O.O. Oke) of Lagos State in 2018.  Its objective is to provide easy access to an informal, inexpensive and speedy resolution of debt recovery disputes in the Magistrates’ Court. However, a claim must first and foremost qualify as a small claims action.

The conditions are straightforward and they are as follows:

  • You must be resident in Lagos State or your business must be in Lagos;
  • Your debtor must be a resident of Lagos or carries on business in Lagos State;
  • The business dispute or debt arose wholly or partly in Lagos State; and
  • The liquidated money demand must not exceed the sum of N5 million.

Why you should consider the small claims court when next you have a business dispute or want to recover a debt quickly

As with every mediation process or every other alternative dispute procedures, the main objective of the magistrate presiding over the small claims court is to promote, encourage and facilitate an amicable settlement of the parties’ dispute by providing and promoting settlement options for the parties. If this fails, the dispute will then be properly subjected to the small claims court processes, and these are some of the features of that process that makes it a viable option worth considering:

  • Parties are allowed to conduct this process themselves according to Article 10 of the Practice Direction on Small Claims, 2018; that is, individual representation is encouraged by the court. (However, this isn’t advisable as there is some paperwork as well as procedure to consider during the proceedings, and hiring a lawyer versed in this process will be best.)
  •  The process is simple, cheap, efficient, and easy to understand as the procedure encourages the use of prescribed and self-explanatory standard forms.
  • Unlike in other proceedings, adjournments are rare and are only allowed as a last resort by the court.
  • The proceedings at the small claims court is expected to be concluded in 60 days from the time of filing, up to the day that judgment is delivered. Isn’t this good news to the MSMEs?
  • The decision of the small claims court is appealable within 14 days of the delivery of the judgment by any aggrieved party.
  • The whole process of the appeal from the assignment of the appeal to judgment must not exceed 30 days under paragraph 7 of Article 9 of the Practice Direction on Small Claims, 2018.

It is obvious that though the process of recovering debt could be tedious and time consuming, it is now clearer that recovery of debts of not more than N5 million in Lagos State just got easier since the introduction of the small claims court in 2018. It is advised that the MSMEs should seriously consider using the small claims court option instead of  the regular Magistrates’ Court, or even mediation once the claim or debt is not above N5 million.

If you happen to be interested in using the small claims court to recover your debts, you can contact us for further discussions.

Ebuka Ibenegbu Esq.


Partner & Head, Corporate and MSMEs

Insignes Attorneys