WASA: Judge's order to pay $140m debt will cause financial ruin

AN Appeal Court judge has ruled that there were no special circumstances to warrant a stay of a judge’s order that the WASA pay TT Security Services Ltd over $140 million arising out of debt owed from contracts dating back to 2010.

In a recent decision, Justice of Appeal Mark Mohammed refused WASA’s application for a stay of execution of a judge’s 2019 judgment, pending the hearing and determination of an appeal it filed.

In affidavits filed in support of its application, WASA said the payment of the judgment debt would cause severe and irreversible hardship and/or the financial ruin of WASA, which would have catastrophic effects on WASA’s service to the public.

WASA’s attorney John Jeremie, SC, also submitted that if the stay was not granted, WASA would suffer financial ruin.

The authority’s acting director of finance also said the payment of the judgment debt would put the financial viability of WASA in jeopardy.

The evidence supplied to the court said WASA was already cash- and credit-strapped and is operating at significant losses. Its monthly operating losses for November 30, 2019 amounted to $162.7 million; the accumulating loss/deficit as at November 2019 was $3,056.4 million and this trend had worsened in 2020.

It was said WASA was heavily dependent on collection from rates and charges, government subventions and an overdraft facility to maintain operations, but “those sources of income are already exceeded and there is no realistic prospect in the current and foreseeable economic climate that it would be able to pay the judgment debt.”

If forced to pay, WASA would have to seek a government subvention to pay it and because of current and foreseeable economic uncertainties, help from the State was unlikely and, even if it were obtained, it would lead to even more government borrowing which would negatively affect national borrowing and debt-servicing.

“This would have a nationwide effect, including a decline in the country’s credit rating, which would be a deterrent for much needed foreign investment, and would also impact the country's ability to borrow money on the global market,” WASA submitted.

The security firm’s attorney, Fyard Hosein, SC, said WASA’s evidence was insufficient to establish it would face financial ruin or suffer irreversible severe financial hardship if the judge’s orders were not stayed.

Mohammed said the court could not place any weight on the matters raised by WASA.

He agreed with counsel for TTSSL that WASA had offered little evidence to demonstrate it would face ruin if its application for a stay were refused.”

In his ruling on the application, Mohammed said WASA had failed to produce cogent and sufficient evidence of TTSSL’s financial weaknesses and or to show that if it was successful in the appeal, the security firm would not be in a position to repay the judgment debt.

“In any event, even if it had been shown that TTSSL is currently unprofitable and at risk of insolvency, that factor in isolation would not have weighed heavily in the balance since any inability to repay the judgment debt would be due, either wholly, or in significant part, to WASA’s failure to pay the considerable sums due to TTSSL” Mohammed said.

He said in the event WASA chose to challenge his ruling before a three-member panel, a stay of execution would be granted pending the hearing and determination of that application.

TSSL, which provides specialised security services, entered into two written contracts with WASA on separate occasions, in 2010 and 2014.

The security firm complained of unpaid invoices and oral contracts and initiated legal proceedings against WASA, claiming $157.7 million owed to it for unpaid contracts and damages.

The utility resisted the claim, arguing that TTSSL performed services not provided for in a way which amounted to a breach of the terms of the services which it was to provide, and charged WASA rates which were not provided for.

It said the oral contracts were agreed to by WASA agents who did not have the authority to do so and were not enforceable until put in writing.

It said services provided and hours of work had to be verified, and WASA breached no contract. On the invoices for mobile patrol services, it said those invoices were unable to be reconciled.

The High Court ruled that because the services were provided to a state agency, TTSL exercised some degree of contractual and relationship patience, as opposed to waiving the terms of the contracts.

The court also held WASA was contractually bound by the provisions of the contracts to pay promptly or within 60 and 30 days respectively and no claim for verification, as defined by WASA, could or did alter the clear and unambiguous terms of the 2010 and 2014 contracts.

WASA was ordered to pay $140.8 million for debt due and damages, as well as interest at two per cent on the sums.

Mohammed, in his decision, said an application for a stay required the court to examine the terms of the contract, the evidence of the parties and the trial judge’s decision and findings, and was of the view that WASA’s appeal had no good prospects of success.

WASA was also represented by Kerwin A Garcia and Analisa Murphy. Simon de la Bastide and Theresa Hadad appeared on behalf of TTSSL.