(In Statutory Management)
Report to Equiticorp Holdings Ltd debenture stockholders
Dated 24 June 2021
Progress in the legal proceedings in Malaysia and Singapore has been severely hampered in the past 12 months by frequent shutdowns and delays in the Courts arising from the Covid-19 pandemic.
At the time of our last letter, the legal proceedings issued in Malaysia by the liquidator of the parent company of the property-owing group (United Securities Sdn Bhd) were being challenged as to jurisdiction. The Singaporean bank we are competing with for the proceeds of the property sale contended that the arguments over its loan and security should be heard in the Singapore Courts. The bank lodged a Stay Application to halt the Malaysian proceedings and issued its own legal action in Singapore to seek a declaration that its loan and security were valid.
The Stay Application was heard in late 2020 in the Malaysian High Court. It was declined. At the same hearing, we applied to be joined as a party to the legal proceedings in support of the liquidator. That was allowed.
The bank appealed both decisions. The appeal hearing took place in April 2021. The Court of Appeal ruled that the Malaysian proceedings should be put on hold while certain arguments relating to the loan and security were dealt with by the Courts in Singapore, and then the application of the ruling from Singapore in the liquidation of the company would be determined back in the Malaysian Courts. The Court of Appeal also ruled that it was not necessary for Equiticorp to be a party to the Malaysian proceedings.
The liquidator and ourselves have both applied for leave to appeal those decisions to the Malaysian Federal Court, the highest court in the Malaysian legal system. The leave hearing is scheduled for September 2021.
Earlier this year, the Malaysian Inland Revenue re-opened its assessment of the property sale. The original assessment in 2017 was that the profit on sale was a capital profit. The Inland Revenue has withdrawn that assessment and issued a new notice assessing the profit for corporate income tax. The liquidator of the subsidiary company which owned the property (City Centre Sdn Bhd) is seeking a review of the new assessment and has obtained a stay from paying the income tax, which was payable one month after the new assessment was issued.
The above matters have a potentially negative impact on the possible financial recovery we might make for debenture stockholders. The Statutory Managers are closely monitoring the on-going situation. At this point we are of the view that it is still worth pursuing this Cheah loan recovery exercise.
2. Next report
We will write to you when there are significant developments and will be doing so again in a year’s time with our annual report to debenture stockholders. We will also post relevant updates on our website.
B G Stowell & K T Stotter
Statutory Managers
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