KUALA LUMPUR (July 21): Cahya Mata Sarawak Bhd (CMS) is suing its former executive director Datuk Syed Ahmad Alwee Alsree and five others for alleged breaches of fiduciary duties in respect of the construction of an integrated phosphate additives plant in Samalaju, Sarawak.

In a bourse filing, CMS said the suit was filed in the High Court in Kuching by the group and its wholly-owned subsidiary Samalaju Industries Sdn Bhd.
 
Samalaju Industries had in 2013 formed a joint venture company — Malaysian Phosphate Additives (Sarawak) Sdn Bhd (MPAS) — with Malaysian Phosphate Additives Sdn Bhd on a 70:30 basis for the purpose of building the plant in Samalaju.

However, due to a lack of due diligence undertaken, CMS incurred RM67.57 million in losses (as at Sept 26, 2021), according to a special review report by appointed consultant KPMG Management & Risk Consulting Sdn Bhd.

Besides Syed Ahmad, those being sued are CMS' former chief financial officer Syed Hizam Alsagoff, former chief executive officer Goh Chii Bing, former non-executive director Datuk Isaac Lugun and former group general counsel Ling Koah Wi, as well as Samalaju Industries' former senior general manager Goh Chii Yew.
 

CMS said the six defendants had allegedly breached the fiduciary duties owed to the group and Samalaju Industries in respect of the development of the plant.

“The defendants were regarded as the trustee and are expected to protect the interest of CMS and Samalaju Industries and not to place themselves in the position of conflict. CMS and Samalaju Industries contend that the defendants have either jointly or severally committed various breaches of the fiduciary duties owed to CMS and Samalaju Industries,” the group added.

According to the filing, CMS is seeking a court declaration that the defendants are jointly and severally liable to the group for their breaches in fiduciary and statutory duties.

In addition, the group is claiming special damages of RM52.685 million, general damages, and any other relief the court deems fit.

Meanwhile, CMS said it has also filed a suit against MPAS' former managing director Lim Lee Wan for alleged breaches of fiduciary duties owed to the development of the phosphate additives plant.

The group said Lim failed to “act diligently and honestly” in the best interest of MPAS and therefore, breached the fiduciary duties he owed the company.

“As a result, MPAS suffered losses and was put to loss and damage,” it added.

Last year, following an allegation of possible financial mismanagement in relation to the company’s investments and operations ― which led to then CFO Syed Hizam’s suspension in May 2021 ― CMS appointed KPMG to conduct a special review on certain projects in associates, subsidiaries and joint ventures from 2011 to 2020.

The consultant found that there was a lack of due diligence and stakeholder management on the joint venture partner’s risk of the integrated phosphate additives plant project, and the reporting structures by management to the board were not adhered to and compiled within the project.

In addition, it said there were gaps in the contract management and bidding processes, which contributed to the project’s losses.

KPMG added that there was a lack of monitoring on hedging transactions by the board of an associate company for a certain project, which led to losses owing to adverse currency exchange movements.

CMS said the realised losses incurred had been accounted for in the past financial results of the group.

Shares in CMS finished one sen or 1.11% higher at 91 sen on Thursday (July 21), giving the group a market capitalisation of RM977.68 million.