Govt in K2.4bn 2017 contract mess
Taxpayers could pay Foundation for Irrigation and Sustainable Development (Fisd) Limited K2.4 billion in legal fees and interest charges for the Malawi Government’s poor handling of a 2017 botched contract.
The dispute follows termination of a November 2017 contract Ministry of Agriculture, Irrigation and Water Development granted Fisd Limited to rehabilitate and expand gravity-fed water supply systems in Ntcheu District. The contract value was K2.4 billion.
But on May 29 2019, government terminated the contract on the fol lowing grounds : Departure from specifications, defective works, failure to pay wages on time, and delayed service to communities. Fisd Limited disputed the termination and the parties agreed to go for arbitration.
On February 17 2020, a new arbitrator was appointed by both parties and endorsed by the court. And on April 7 2020, the High Court Commercial Division granted Fisd Limited exparte leave to
enforce the award as a judgement of the court.
But in an affidavit dated August 4 2020, Secretary to the Treasury Chauncy Simwaka said government would only effect payment after engaging the office of the Attorney General (AG) which is challenging the award.
Reads the affidavit in part: “Once we engage the office of the Attorney General on their position as regards the order or ruling, and once the main budget is passed, my office will facilitate the payment of the judgement debt herein; hence, my failure to facilitate payment debt is not deliberate as the claimant wants the court to believe.”
Court records show that on August 13 2020, nine days after Simwaka’s affidavit, Treasury paid Fisd Limited K627 million amid the unresolved challenge from the AG. This payment was made four months after the court order.
In a written response yesterday, Fisd Limited company secretary Gift Nankhuni said the firm will file for contempt of court since government has not paid the remaining balance.
He said: “Our lawyer will go ahead with the contempt of court proceedings until the balance is paid. He will also go ahead to assess the interest and legal costs before the assistant registrar.”
Fisd Limited lawyers, according to an application dated September 11 2020 to the registrar of the High Court Commercial Division, are demanding about K245 million in legal costs.
The AG’s office , according to court records, has been challenging the award since March this year on grounds that
the appointment of the arbitrator, who gave Fisd the award, was outside the provision of the contract and that the lawyer who represented the AG during a court hearing on the appointment of the new arbitrator had no authority from the AG to do so.
In his affidavit, principal State advocate Nevas Chisiza said the contract between government and Fisd required that an arbitrator should be appointed through the National Construction Industry Council (NCIC) which is not the case in the award given to Fisd Limited.
Court documents show that initially, through NCIC, Engineer William Chirwa was appointed to arbitrate and he had ruled in favour of Department of Water and Irrigation then under Ministry of Agriculture. Fisd was ordered to pay a sum of about K281 million.
But Fisd challenged the award in court and the High Court ordered the appointment of a new arbitrator, a private practice lawyer.
Ministry of Justice and Const i tut ion a l Affairs spokesperson Pirirani Masanjala was yet to respond to our questionnaire as we went to press.
Fi s d Limited is demanding about K912 million for work they did before termination of contract in 2019. But the amount may go up to K1.2 billion as the company is also demanding interest of about K300 million which the court is yet to rule on. Further, the company’s lawyers are seeking about K200 million in legal fees.
