Judiciary / Socio-economy

UEM vs GIE – What is the final verdict?

A case that is quite oblivious to most people right now is the court battle between our own UEM Group Berhad and Singaporean Genisys Integrated Engineers Pte. Ltd (“GIE”).

The case that started in 2000 will get it’s finality when judgment will be meted out by the Federal Court tomorrow. Initially, the decision was to be made on January 11th 2010, but the Federal Court had postponed the verdict pending for a few documents.

Okay let us examine what had happened between these two companies.

In 1993, UEM and GIE incorporated a joint veture company called UEM Genisys Sdn Bhd (“UEG”) where UEM held 51% of the shares and GIE held 49%. However, the Executive Director and shareholder of GIE, Seow Boon Cheng was elected as the CEO of the JV company although clearly UEM held the majority of the shares.

UEG was quite successful and in 1998, recorded their highest profit. But things went downhill from thereon.

Due to many internal crises, Seow Boon Cheng managed to takeover the UEG completely by 2000. In the same year itself, GIE dragged UEM to court with a petition under Section 181 of the Company’s Act. Under this section, the court can decide to:

● direct or prohibit any act, or cancel or vary any transaction or resolution;

● regulate the conduct of the company’s affairs in future;

● provide for the purchase of the company’s shares by other shareholders or by the company itself;

● in the case of a purchase of shares by the company, provide for a reduction accordingly of the company’s capital; or

● provide that the company be wound up.

But this could only happened if GIE can provide proof that the company (UEG), has been run in a way that is oppressive or prejudicial to the shareholder.

Since GIE had filed the petition to the court, UEM decided to file the same petition to the court as well because they also felt that there were oppressive elements in the management of UEG that was prejudicial to them as a shareholder.

And so, in 2001, UEM filed the petition to the court under the same section 181 of the Company’s Act.

When evidence were brought to court, it was discovered that the management of UEG  (headed by Seow Boon Cheng) had mismanaged the company and acted to the detriment of the main shareholder of the company’s interests.

Among other facts that was accepted by the Court were:

1. UEG had a loss of RM43.28 million in 1999

2. UEM was denied access to the company’s accounts for year ended 1999.

3. Abuse of USD13.8 million of funds

4. Illegal transfer of RM1 million by Seow Boon Cheng into UEG’s accounts

5. No transparency in financial records

6. Non disclosure of important information for the Board of Directors of UEG.

The High Court judge was satisfied with the arguments and proof brought forth by UEM and after a 50 day trial, dismissed GIE’s petition and granted UEM’s petition. The court also ordered that UEG should be wound up.

GIE made an appeal to the Court of Appeal after the High Court decision of 2005 and won the appeal when  in  July 2008, the Court of Appeal made the decision to reverse the earlier judgment  by the High Court.

The decision baffled some analysts as it did not make any sense.

The judgment by the Court of Appeal had absolved any wrong doing by UEG management, meaning the Court of Appeal had summarily dismissed all the evidence of any oppressive elements towards the UEM shareholder. At the same time, it also dismissed GIE’s petition that UEM was oppressive towards them. It also overturned the decision by the High Court to wind up UEG.

However, the Court of Appeal had ordered UEM to buy UEG’s shares owned by the Singaporean GIE amounting to RM87 million!

How could this be when the Court had dismissed both petition which technically renders both sides as innocent of oppressing the other party?

Not only that, if UEM wanted to obtain a stay of execution against the Court of Appeal’s decision, UEM had to deposit RM43.7 million, which they sorely did in May 2009!

Surely, this is a lose-lose situation for UEM although they were declared innocent by both the High Court and the Court of Appeal. How come they had to pay RM87 million when they did not commit any crime? Something is amiss with the judgment made by the judges of the Court of Appeal and the public may want to know what was the basis of the decision to make UEM the sole party to undertake such massive cash outflow.

Is the Court of Appeal trying to tell us to seriously ‘prosper thy neighbour’ at the expense of our own GLC?

Jokes aside, both parties are now waiting the final judgment by Federal Court tomorrow.

It will be a momentous judgment to make by the Federal Court judges. In my non-professional opinion, based on the facts presented, the Court of Appeal had made a decision ultra vires to the appeal made by GIE following the High Court verdict. Common sense dictates that the JV company should have just been wound up and this chapter could have been closed long time ago.

Now, notwithstanding the decision pending by the Federal Court, UEM will be saddled with a JV company that has all this while been managed by the management team comprised of GIE people who can be seen as washing their hands off from a business deal gone awry.

12 thoughts on “UEM vs GIE – What is the final verdict?

  1. Dear JMD,

    I believe this quote ‘proper thy neighbour’ needs a correction.

    Have not followed the case but the 1st comment seem to point towards political influence. Perhaps the commentator could provide some connection between the companies and the personalities abbreviated.

    PS polling has closed in HS. I anticipating a handsome win for BN.

    Regards
    Freddie

    JMD : Thank you Freddie!

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  2. Hi JMD,

    As an ex-UEM employee, I must thank you for providing the proper coverage this news needs. My other portal for UEM related news, anotherbrickinwall.blogspot.com, has been quite inactive lately – the last UEM debacle that is posted was about the UEM loss in Qatar.

    I’m not pointing out that any GLC is mismanaged, but I do hope that there is a GLC watch website – ala Sime Darby watch.I hope some reader would see my comment and take action. We do need nice gossips about GLCs🙂

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  3. sorry this is offtopic. But i have difficulty to access 13 mei article,

    BTW u dont mind if i upload it to share to others?

    JMD : I do not mind at all. Thank you.

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  4. Dear JMD,
    I am all for fairness and do not believe that we should either prosper or beggar thy neighbour. However, it is a pity that you have not presented the full facts. What you had written isn’t quite what it appears to be. Let your readers decide for themselves from the facts in Bernama’s report on http://www.bernama.com/bernama/v5/newsbusiness.php?id=492535

    As Freddie says, there are signs of political influence. This should not be the case for a commercial dispute, irrespective whether the company involved is a GLC or a foreign company that we can ride rough shod over. Can’t we learn to go by the law for a change?

    JMD : The Bernama article itself is a one sided story when it only quoted the lawyer that is representing GIE. The article did not quote anything from the lawyers of UEM. I guess the readers should also read the links I provided within my article itself and together with this Bernama article (though without the comments from UEM’s lawyers), the readers can make up their own opinion. Yes we should go by the law. No dispute in that. Thank you.

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  5. those people who manage the GLc’s care a hoot about the fate fo their companies.
    take for example, state SEDC’ s and DBKL giving away their landbanks for 30% share of the JV for development. They could have developed the land bank themselves if they had the will, but they have decided to take short cuts by giving away vital state land resources for personal financial gains.
    same with PUNB, UEM, MAS, maybank, tabung haji.
    The amount Maybank paid for BII in indonesia to temasick makes the amount lost by UEM with gensys seems like peanuts.
    During mahathir’s tenure, he had malay graduates from yale, MIT and harvard to manage penang bridge at one time under insas or something and they failed miserably and government had to bail them out, with UEM given the task to do this.
    there is no short cut and magic in success stories. No need for very highly trained experts. Even Tom peters got it wrong when he said HONDA will never be a succesful motocar producer.
    The guy in charge must have the guts and will power, even if he is not highly educated, to run a marathon, in managment terms, using nothing more than logic.
    I can go on and on about PUNB and their failed investments.
    Oh! did I mention about judges being science stream rejects?
    Coastal, the shipbuilders from sandakan are made up of three brothers who are presently listed on the klse and none of them getting past the lce level. They scrounge an scrimp, flying third class, if available, and staying at friend’s house’ if they had to travel to KL, initially. Even today, their low cost of management is not truly appreciated.
    compare this to GLC executives who fly biz class and stay at 5 star hotels, with degrees/masters in business, but not much in terms of common sense.
    Today, coastal builds offshore ships for the oil and gas industries. Initially they build tug and barges for the timber trade. What sort of govenrment aid did they receive? probably nothing.

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    • Can U provide detail and proof of PUNB failed investment? Dont simply say out something which you think you know but in reality you dont know!

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      • Tempawan, your statement that the amount that UEM has to pay to genisys is money ‘lost’ by UEM needs correction. If my reading of the facts are correct, the amount is value of the of the shares of the JV company (which UEM group of companies owe a humongous amount to the JV company anyway) has been ordered by the CA to buy. If UEM owe money, bayar lah. Surely Khazanah’s GLCs are not expected to make their money by cheating their JV partners, are they?

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  6. JMD.

    I read both your blog and Bernama’s report. I have to agree with glc watching that you did not present the full facts and would say that Bernama did not only report what GIE’s lawyer said.

    I have also read other blog postings on this issue and would agree that there are serious questions whether this case will be treated fairly. The lawyer for UEM during the High Court trial is now none other than the Chief Justice. Doesn’t the Chief Justice decide on the composition of the FC panel of judges that hears the case?

    You say the CA judgment is baffling. What is even more baffling to many court observers and lawyers was the composition the FC panel of judges which sat on 24th and 26th April 2010. It comprised 3 judges who had only been elevated to the FC in October 2009 on the recommendation of this Chief Justice. On 24 April 2010, there was at least one other panel of the FC sitting, with more senior FC judges. Wouldn’t you agree that a case of this nature, which is of sufficient significance to have attracted your attention and piqued your interest and concern, would be heard by a panel with a normal composition and chaired by the Chief Judge of Malaya or the Chief Judge of Sabah and Sarawak or the President of the Court of Appeal, as it the usual case? The panel that sat was the most unusual – even unheard of. And I wonder why…..

    Oh, from what I can gather, you may have also forgotten to mention that both the Court appointed valuer and the then liquidator nominated by UEM had reported that the UEM group of companies is the largest single debtor of the JV company, owing a humongous amount. Do you think this is common sense or just?

    JMD : Thank you for the comment. I reread the Bernama report and still could not find any explanation from UEM’s lawyers in it. That is why I said earlier, the Bernama report is not balanced (and furthermore, it is not comprehensive enough according to you).

    If you had read the links from The Star I provided in the article, you will notice other peculiarities and mismanagement conducted bu UEG management. Audit findings etc became court evidence. The High Court then dismissed GIE’s petition and ruled that UEG should be wind up.

    The Court of Appeal meanwhile, threw away both petitions which means that both parties are not in the wrong. But it also directed UEM to buy over all the share in UEG belonging to the GIE. Why is that? Why not the other way around? Why not just wind up the company?

    I am not talking about UEM owing GIE money. If indeed they do, then they must pay back. But the Court of Appeal judges specifically ordered UEM to buy back the shares. On what grounds? Clearly, through the dismissal of both petitions, no parties were in the wrong. Right? No mention about the debts owned by the way. Will UEM have to settle the debts even after the buying back shares?

    If Bernama made the extra effort to interview UEM’s lawyers, it could shed more light in this matter. And by the way, why would the composition of judges in Federal Court be an issue to you? Does the CJ decides who sits in a particular case? Since the CJ is not the one sitting on this case, would there be any element of arm twisting or undue influence from him towards the sitting judges?

    If yes, are you saying that all the Federal Court rulings made by Federal Court judges in this country since 5 decades ago could have been influenced by the Chief Justice?

    As you can see, the CJ’s existence in this case at this particular time is inconsequential to the trial. Thank you Zai.

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