Lotto service provider to press PCSO for award of P310-M damages

The Supreme Court (SC) has put an end to all civil cases related to the dispute between DFNN Inc. and state-controlled Philippine Charity Sweepstakes Office (PCSO) over the “illegal” termination of a lotto equipment leasing deal.

This gives DFNN more legal muscle to press for the collection of P310 million in arbitral award from the PCSO.

In a resolution dated Feb. 20, 2017, the high court granted the PCSO’s move to withdraw a counter petition. The high court also ordered an entry of judgment, rendering the cases closed and terminated.

“The resolution of the instant case puts to rest all civil cases involving DFNN and PCSO in connection with the Equipment Lease Agreement (ELA) between them, all of which were decided in favor of DFNN,” the lotto service provider said in a disclosure to the Philippine Stock Exchange.

The disclosure pointed out, however, the SC resolution had no immediate effect until DFNN would be able to collect from PCSO.

The case stemmed from PCSO’s rescission of its ELA with DFNN, which was executed by the parties during the Arroyo administration in 2003. The ELA provided that PCSO would lease from DFNN all the hardware, software, and know-how to design and develop a system that would allow the processing of bets from personal communication device users nationwide.

In 2005, prior to the commercial operation of the system, DFNN was informed of the PCSO’s decision to terminate the deal. The PCSO then 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 only P27 million. Finding the award insufficient, DFNN filed a petition to correct the computation of damages, asking for an award 11 times more to over P310 million.

On February 17, 2016, a trial court granted DFNN’s petition and ordered the correction of the arbitral award to P310,095,149.70, including a 6-percent interest from the date of finality of the decision until the award has been fully satisfied.

In its petition, DFNN argued the computation of liquidated damages was governed by a section in the agreement which stated that, “[the] 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.”