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 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.