COURT FREEZES ROADS AUTHORITY, RFA’S ACCOUNTS AT SEVEN BANKS 

State agencies National Roads Authority (RA) and Roads Fund Administration (RFA) are in a legal dispute with a Kuwaiti-based contractor for over $1.1 million. But without hearing the government bodies, the High Court freezes a total of seven bank accounts belonging to RA and RFA.

Judge Ken Manda

BY PIJ REPORTER

High Court Judge Ken Manda made the order on December 1, 2022, following an application by lawyers for Al-Abdulhadi Engineering consultancy which was contracted by the RA to provide consultancy services including designing and reviewing pre-bid documentation and construction supervision of the Lirangwe-Chingale-Machinga for USD 1 191 000-00 (K1.2 billion).

Lawyers for National Roads Authority (RA) and Roads Fund Administration (RFA) confirmed to PIJ that they were not served with any documents on the matter prior to the order, hence were unable to challenge the application. The two public bodies only learnt about the freezing orders after some cheques the bodies wrote for other service providers bounced at the bank.

Documents show that National Bank of Malawi, Standard Bank, FDH Bank, CDH Investment Bank Limited, NBS Bank, Ecobank, MyBucks Banking Limited are all restricted from allowing withdrawals to ensure the equivalent of $1.5 million remains in the bank. 

The development means the Roads Authority and Roads Fund Administration are prohibited at the moment from accessing an equivalent of $1.1 million until there is a judgment on the case by the High Court.

In an interview, lawyer for RA and RFA, Pempho Likongwe confirmed the freezing of both RA and RFA accounts but said the Freezing Injunction was obtained without Roads Authority and Roads Fund Administration being heard.

“Both the Roads Authority and Roads Fund Administration have very good defences to the claim. I have applied to set aside the Freezing Injunction because I think it is not justified to freeze accounts of statutory corporations before any judgment. I will present my arguments in court,” said Likongwe.

He said the application was made ex-parte with the Roads Authority and Roads Fund Administration, not serving any court documents.

“They just realized their bank accounts had frozen when they issued cheques. They asked the banks and the banks then informed them that their bank accounts were frozen due to the Court order,” said Likongwe.

But a lawyer for Al-Abdulhadi Engineering consultancy, Lusungu Gondwe, said in a separate interview there was nothing unusual about the freeze order, saying the order was an interim order.

He said the road’s financing of the contract was partly by the World Bank and government but after the Malawi government failed to meet its obligation, it obtained financing from the Kuwait fund.

“Our client won the tender for consultancy of the road construction. They offered services but were paid for just a little. The Road Fund Administration just paid a little about two to three years ago. There is a risk that if the case might go in our favour, our client might find it difficult to get our money. There is that money from the Kuwait fund, whether the Roads Authority used it for that purpose or not, but there is that money,” said Gondwe.

According to court documents PIJ has seen, on June 30, 2017, the Claimant— Al-Abdulhadi Engineering consultancy—was contracted by the RA to provide RA consultancy services including designing and reviewing pre-bid documentation and construction supervision of the Lirangwe-Chingale-Machinga for USD 1 191 000-00.

The contractor did part of the work but wants the Roads Authority to pay for the full amount plus interest.

Lawyers for the contractor argue that in part (c) of the preamble to the Contract, the parties acknowledged that the Contract was to be wholly funded by part a loan from Roads Authority through Malawi government obtained from Kuwait Fund for Development (KF).

Among others, the Contract provided for both General Conditions of Contract [GCC] and Special Conditions of Contract [SCCs) including that the contractor would undertake the contract within 56 months from contract signing.

The contractor argues that for over four years now, RA has “failed, neglected or otherwise refused to settle” the Claimant’s invoices due under the Contract.

The documents further indicate that the Kuwaiti firm is seeking damages for breach of contract, payment for the outstanding balance on the contract price, interest for delayed payment as provided for under the Contract, reimbursement for erroneous tax deductions and interest and statutory legal collection costs at 15% of the all the sums claimed and costs of the court action.

The firm argues that Roads Authority and Roads Fund Administration delayed paying two invoices thereby depriving the firm of a return on investment, and they finally paid one of the invoices, they erroneously made tax deductions in violation of the Contract when they paid only about USD79 908-00 and were short by USD 39 092-00 and have refused to pay the amount since.

Curiously, court documents indicate that the case was supposed to be heard by Justice Msungama, but the ruling was made by Justice Manda. But when quizzed for an explanation on the matter, Likongwe said only the court could explain the judge’s situation.

“Yes, the Initial Directions issued by the Court indicated that the case would be handled by Justice Msungama, but it is Justice Manda who issued the Freezing Injunction. Maybe it is the Court that can explain the change,” he said.