(In Statutory Management)
Report to Equiticorp Holdings Ltd debenture stockholders
Dated 22 June 2020
At the time of our last letter, the Malaysian Federal Court had ordered the Singaporean bank to repay the funds it had received from the liquidator of the property company, pending the hearing of the bank's appeal that it was entitled to the funds as the registered shareholder of the company. The bank complied and repaid the funds in July 2019, however it did not pay any interest on the funds that it had held for over a year.
The liquidator of the property company sued the bank for interest. In March 2020, the Court awarded a nominal interest amount, which the bank paid a month later.
Meanwhile, the bank's appeal was declined by the Federal Court in October 2019.
The bank had made a loan to the parent company of the property company, secured by a debenture over the parent company's assets, including its 100% shareholding in the property company. For security purposes, the shareholding was put into the bank's name. The loan and security arrangements have been challenged by the liquidator of the parent company in legal proceedings that were issued in the Malaysian High Court in December 2019. The proceedings also seek to quantify the bank's claim under the loan, if the loan is upheld. The amount is in dispute, with arguments over penalty interest rates and the conversion of the original US$ loan into Malaysian ringgits.
In May 2020, the Singaporean bank issued its own proceedings in the Singapore High Court against the liquidator of the parent company and applied for the Malaysian proceedings to be stayed. The jurisdiction issue has arisen because the loan agreement states the loan is governed by Singaporean law but the parent company is registered in Malaysia and its liquidation is ruled by the Malaysian Companies Act. The Malaysian High Court has set a hearing date for early September to deal with the stay application, which should determine the jurisdiction question.
There have been significant delays in the Malaysian legal system due to a Control of Movement Order issued by the Malaysian Government as a result of the Covid-19 coronavirus. The Courts are now operating again but cases are backlogged. The Statutory Managers are of the view that it is still worth pursuing the Cheah matter for a potential return to debenture stockholders.
In our previous letters, we have reported on the criminal charges for alleged misappropriation against Mr Cheah's brother. The case was completed and called up for decision in February 2020, however the Court was informed that Mr Cheah's brother had recently died. His lawyer asked for all charges to be dismissed but the prosecution lawyer requested the case be discharged without an acquittal. The Court adjourned its decision and it has not been rescheduled since the resumption of the Courts post the Covid-19 closure.
2. Next report
We will write again in 12 months time, around 30 June 2021, or sooner should there be any significant developments. In the meantime, we will post any updates on our website.
B G Stowell
Statutory Manager
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