Thursday 20 Jun 2024
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KUALA LUMPUR (Feb 8): The High Court here has struck out a lawsuit brought by subcontractors of the littoral combat ship (LCS) project, Contraves Advanced Devices Sdn Bhd (CAD) and its wholly owned unit Contraves Electrodynamics Sdn Bhd (CED), against Boustead Heavy Industries Corp Bhd (BHIC) and its directors, over the termination of their contracts.

The Kuala Lumpur High Court has allowed BHIC and its wholly-owned unit BHIC Defence Technologies Sdn Bhd’s (BHIC DT) applications to strike out the suit.

Likewise, the court also allowed BHIC directors Salihin Abang and Vice Admiral Datuk Syed Zahiruddin Putra Syed Osman’s bid to strike out CAD and CED’s claims against them.

The court also ordered Sylvia Sinniah, who, based on CAD’s website, is its CEO, to personally pay BHIC and BHIC DT RM15,000 costs, and another RM15,000 in costs to Salihin and Syed Zahiruddin.

CAD is a 51:49 JV between BHIC DT and RD Investment AG, a unit of German defence firm Rheinmetall AG, while CED is a wholly owned subsidiary of CAD.

A month ago, CAD and CED filed a notice of discontinuance to drop BHIC’s 20.77%-owned unit Boustead Naval Shipyard Sdn Bhd (BNS, now known as Lumut Naval Shipyard Sdn Bhd or LNS) from the suit.

No reason was provided for the notice of discontinuance. 

However, The Edge Malaysia weekly reported in April 2023 that BNS had reached a settlement agreement with both CAD and CED, citing a term sheet it saw.

According to The Edge Malaysia weekly, BNS was to pay CAD roughly RM479.72 million, based on the current exchange rate, as settlement to resolve commercial issues between them in regards to the LCS project.

Meanwhile, it is also worth noting that the government has made good progress in its move to take over LNS and in turn the RM11.22 billion LCS project, with Minister of Finance Inc-owned Ocean Sunshine Bhd having a 79.23% stake in the company and is to acquire the rest from BHIC for a nominal RM1.

This planned acquisition was announced back in August last year but has yet to materialise as parties have yet to fulfil conditions precedent.

While it remains unknown which specific conditions precedent is causing the RM1 deal’s completion to lag, the conditions precedent include the execution of a conditional intercompany trade receivables reorganisation agreement between BHIC and BNS to settle the repayment of RM383.94 million or any other amount owed by BNS to BHIC.

Other prerequisites involve obtaining the necessary written consent from BNS' lenders and BHIC's financiers or creditors.

RM470.8 mil in outstanding amounts, allegations of fiduciary breaches

To recap, CAD and its unit initiated the suit against BNS, BHIC, BHIC DT, Salihin, and Syed Zahiruddin back in September 2022 after BNS terminated 12 letters of awards (LOAs) issued to them for the procurement, engineering, integration and supply of equipment and weaponry to build six LCS.

It is understood that BNS terminated CAD and CED as intermediaries of the project to allow BNS to negotiate directly with the relevant original equipment manufacturers. This came amid allegations of misconduct, illegality and fraudulent dealings concerning the LOAs issued to the subcontractors, in the wake of a Public Accounts Committee report on LCS project delays and cost overruns.

Under its responding legal action, CAD and CED sought a court declaration that the LOAs were still valid as well as BNS to pay the pair RM470.8 million in alleged outstanding amounts.

Meanwhile, the pair sought a declaration that Salihin and Syed Zahiruddin — who sat on their boards — allegedly breached their fiduciary duties owed to CAD and CED, and that BHIC and BHIC DT dishonestly assisted, aided or abetted the directors’ alleged breach. 

Other claims sought included a declaration that BHIC, BHIC DT, Salihin and Syed Zahiruddin allegedly wrongfully procured and/or induced CAD and CED’s original equipment manufacturers (OEMs) under the LCS project to breach their respective LOAs with CAD and CED, and an injunction order to restrain the defendants from communicating with the OEMs for any purpose of the scope of work under the 12 LOAs for the LCS project.

Shares in BHIC were untraded on Thursday. The group’s share last traded on Feb 6, when it closed at 49.5 sen.
 

Edited ByKamarul Azhar Azmi
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