Firstel, NetOne in $8m payment dispute

FIRSTEL Cellular (Private) Limited is embroiled in a payment dispute with NetOne Cellular (Private) Limited after the former failed to remit $8 million it had allegedly collected from the latter's subscribers in breach of their contract.

The dispute arose from a service provider agreement which mandated Firstel to find clients for NetOne contract lines.

According to the agreement, the clients would use the contract lines and make payments to Firstel, which in turn would remit the payments to NetOne, less its commission.

However, between January and March 2009, when the country introduced the multi-currency system, most clients who bought contract lines through Firstel failed to settle their bills because of the change-over from the local currency to the United States dollars.

This resulted in Firstel failing to pay NetOne its dues. Through its lawyers, Coghlan, Welsh and Guest; NetOne successfully obtained an order against Firstel at the High Court. The High Court ruled that Firstel was liable to pay the mobile phone services provider the entire amount it had failed to collect from the defaulting clients.

The dispute spilled into the Supreme Court with Firstel appealing against the High Court decision recently and judgment was reserved to a later date.

Firstel argued on appeal that it would be patently against public policy to expect it as an agent to pay NetOne when it had not recovered any payments from its customers.

"It is clear that while the appellant (Firstel) was the agent of the respondent (NetOne), it was a condition precedent for the liability of the appellant to arise for payments to be made by the customers first," argued Firstel.

"The appellant was paid by way of discounts and commissions. How could the appellant be held liable for payments where it has not earned any commission? It could only earn a commission if it had been paid by the customers."

NetOne strenuously opposed the appeal, arguing that Firstel incurred certain debts to the mobile phone operator and has to settle them.

Firstel's anticipated recoveries from its customers, argued NetOne, might have been a source from which the appellant expected to pay its dues, but that as it may, neither by terms of the contract nor in law could its mere commercial expectation be the same thing as legally binding agreement that such recoveries would be the only source of payment.

"The acknowledged existence of appellant's customers does no more than provide a source from which the appellant might have funded its obligations and does not limit the respondent's recourse to the source," argued Net-One. In this case, NetOne urged the apex court of appeal not to interfere with the lower court decision, arguing it was sound and proper.

Advocate Thembinkosi Magwaliba, instructed by Mr Johannes Muchada of Dube, Manikai and Hwacha, is representing Firstel while Adv David Ochieng, instructed by Ms Nokuthula Moyo of Coghlan Welsh and Guest, is acting for NetOne.