NSSA loses US$22m in botched deal

Herald Reporter

THE National Social Security Authority (NSSA) has been ordered to pay the US$22 million plus interest to Housing Corporation Zimbabwe (HCZ) following a botched deal after the High Court threw out an attempt by the authority to stop the registration of an arbitration award with the court.

HCZ is a local real estate development company, which won the compensation in arbitration. The High Court found that NSSA had failed to show that the arbitrator, a senior legal practitioner, had erred in fact or law, and had failed to show in a second test that the award was against public policy.

The court also noted that NSSA had sent a relatively junior officer to the arbitration hearing who was unable to comment on several aspects of the deal and was thus forced to make concessions.

The company has been mentioned in the NSSA forensic audit report in a botched housing project involving more than US$300 million.

HCZ was formed in July 2017 by Mr Adam Molai and Mr Stephen Duggan, a few days before it signed a housing contract with NSSA to build 8 000 houses in Caledonia, Harare, with a unit cost of US$8 000, which translates to US$304 million for the whole project.

Former NSSA general manager Elizabeth Chitiga signed the contract on behalf of NSSA, while Mr Duggan signed for HCZ. The agreement provided that the houses were going to be built on land for which HCZ had secured title deeds.

The company was a week old when it was awarded the multi-million-dollar construction project.

Chitiga is now before the courts facing allegations of swindling the NSSA’s pension fund of $31 million in another housing project scam.

HCZ successfully sued NSSA for repudiation of contract before an independent arbitrator, Mr Peter Carnegie Lloyd, who ruled in favour of HCZ.

When HCZ approached the High Court to register the arbitration award, NSSA contested this, arguing that the award was irregular, as it held NSSA liable to damages that were not part of the contract.

It said the arbitrator was re-writing a contract on behalf of HCZ since the deal had deliberately excluded claims for consequential damages or indirect loss; yet the arbitrator in violation of the terms of the agreement awarded damages for loss of profit.

Through its lawyers, NSSA further argued that HCZ’s claim was ill-conceived and the resultant awarding of damages was a gross abrogation of public policy.

But in his response, Adv Daniel Tivadar instructed by Ms Rose Zigomo of Zigomo Legal Practitioners, arguing the matter for HCZ, told the court that the arbitrator correctly found NSSA to have breached the agreement.

He also argued that NSSA conceded during the hearing before the arbitrator when it acknowledged that no documentation complying with certain clauses of the agreement existed.

After hearing submission from both parties’ legal counsel, Justice Paul Musithu dismissed NSSA’s attempt to set aside the award. He allowed the registration of the arbitral award as the order of the (High) court.

“Applicant (NSSA) shall pay to the first respondent (HCZ) the sum of $22 000 000, together with interest thereon at the prescribed rated of 5 percent per annum from 22 February 2019 to date of full payment,” he said.

Justice Musithu found that NSSA had serious challenges in proving its case, as the legal and factual findings by the arbitrator were not demonstrably wrong. This, he said, was because the arbitrator confined himself to the facts, issues and the law as submitted by the parties.

“The record of proceedings betrays serious deficiencies in NSSA’s evidence at the arbitration stage,” said Justice Musithu.

“It is replete with concessions by applicant’s sole witness.

“This was, justifiably so, seeing as the sole witness was constrained from commenting on certain key aspects of the dispute, because such matters were consigned to a junior officer who had his own limitations, is a source of bewilderment and it just serves to illustrate the phlegmatic manner in which the applicant approached the matter.”

In the end, it was the judge’s finding that NSSA failed to demonstrate that the award was against public policy, or let alone show that the reasoning and conclusions of the arbitrator were wrong in fact or in law.

“The complaints relied upon do not meet the threshold for the setting aside of an award on public policy,” said Justice Musithu.