Corporate News

PCSO loses appeal over P310-M award to DFNN

Posted on November 29, 2016

THE COURT of Appeals (CA) affirmed the award of over P310 million to DFNN, Inc. for the premature termination of an equipment lease agreement with the Philippine Charity Sweepstakes Office (PCSO).

People fill-up lotto tickets at a PCSO outlet in Manila. -- BW FILE PHOTO
In a decision issued on Nov. 17, the appellate court dismissed the petition of PCSO assailing the monetary award determined by the Branch 66 of the Regional Trial Court in Makati City.

DFNN President and Chief Executive Officer Ramon C. Garcia, Jr., in a disclosure to the Philippine Stock Exchange on Monday, reiterated the company’s openness to enter into a settlement agreement with PCSO.

“While we are happy with the favorable ruling by the Court of Appeals, we would also like to express our willingness to forge a mutually acceptable settlement agreement with the present PCSO management.”

The award covers damages suffered by DFNN when PCSO rescinded the lease agreement for systems design development and an upgrade for lotto betting through personal communications devices. It also includes a penalty charge provided in the contract.

In May 2015, an ad hoc arbitration panel ruled that PCSO erred when it terminated the lease agreement and, thus, ordered the state corporation to pay P27 million in liquidated damages to DFNN.

The listed company, however, asked the Regional Trial Court (RTC) in Makati City to correct the monetary award to take into account a penalty charge of 2% per month on the amount due, computed from the date of termination or cancellation of the agreement to the actual date of payment.

The trial court granted the petition and junked the subsequent motion of PCSO to reconsider the amount of the arbitral award. The state corporation later elevated the case to the CA.

“The Makati RTC correctly granted DFNN’s Petition for Correction, which petition correctly observed the proper procedure for the correction of an evident miscalculation of figures in the arbitral award,” the listed company quoted the appellate court’s decision in the disclosure.

In a separate disclosure, DFNN deemed the latest ruling as “further validation” of the claim of DFNN that its contract with PCSO was improperly terminated.

“The recent court ruling granting the Petition for Correction of the arbitral award is a step forward in seeking maximum restitution for the benefit of the shareholders. There is no effect on the business at this time until DFNN collects from PCSO,” the disclosure read.

In the first nine months, the company swung to a net income of P771,098 from a net loss of P18.98 million, after cutting its costs and expenses by 17.4% to P147.6 million amid a 38% drop in revenues to P118.5 million.

The operating results of DFNN already include a nonrecurring gain of P47.6 million from the deconsolidation of Hatchasia, Inc. following the issuance of primary shares in the latter to a strategic partner.

Shares in DFNN closed a centavo or 0.15% higher at P6.67 apiece on Monday. -- Keith Richard D. Mariano