P310M award to DFNN final

A P310-million arbitral award to technology solutions provider DFNN Inc. – which won a legal dispute with the state-controlled Philippine Charity Sweepstakes Office (PCSO) over “illegal” termination of a lotto equipment leasing deal – has become final and executory.

In a disclosure to the Philippine Stock Exchange on Wednesday, DFNN said it had received a copy of the order dated Dec. 7, 2016 issued by the Regional Trial Court of Makati City in relation to its petition for correction of arbitral award with the PCSO.

“It gratifies me to tell our shareholders that after a long legal battle, our efforts have been successful. We want to thank everyone who has stood by us,” DFNN president and chief executive officer Ramon Garcia Jr. said in a press statement on Wednesday.

In the order, the RTC granted DFNN’s motion for issuance of writ of execution for the decision dated Feb. 17, 2016 and directed the branch clerk of court to issue the appropriate writ of execution.

The granting of a writ of execution is, in general, an order to enforce judgment that has already become final and therefore executory. In its order, the RTC said that the writ was but a badge of the final and executory nature of the court’s decision appropriate for the scrutiny and approval of the Commission on Audit.

The dispute was triggered by the PCSO’s termination of its equipment lease agreement with DFNN.

The disputed equipment lease agreement was executed by the parties during the Arroyo administration in 2003, providing for the exclusive lease from DFNN all the hardware, software, and knowhow to design and develop a system that would allow the processing of bets from personal communication device users nationwide. But in 2005, prior to the commercial operation of the system, DFNN was informed of the PCSO’s decision to terminate the deal, after which the PCSO began negotiating with third parties to carry out the project.

DFNN brought the case to court and obtained a favorable ruling but the arbitral award was at first too meager at only P27 million in liquidated damages. Finding the damage award insufficient, DFNN filed a petition to correct the computation of damages and increase the award by 11 times to over P310 million.

On February 17, 2016 , the RTC granted DFNN’s petition and ordered the correction of the arbitral award to P310,095,149.70 plus 6 percent interest from date of finality of the decision until final satisfaction thereof by the PCSO in accordance with computation for liquidated damages provided under the equipment lease agreement.

In its petition, DFNN had argued that the computation of liquidated damages was governed by a section in the agreement which stated that, “PCSO, if it is the party in default, shall pay DFNN liquidated damages in the amount equal to the market value of the system…inclusive of a penalty charge of 2 percent per month on the amount due computed from the date of termination or cancellation of the agreement to the actual date of payment.” Taking into account such provision, DFNN said the non-inclusion of such penalty charge in the damages awarded to DFNN clearly constituted “an evident miscalculation of figures.”