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In today's unanimous decision, Justice Md Raus Sharif allowed UEM's appeal. The other judges on the three-member bench were Justice Abdul Hamid Embong and Justice Heliliah Mohd Yusof.
In an immediate response, GIE expressed its disappointment that the Federal Court allowed UEM's appeal against the Court of Appeal's decision handed down by a panel led by Justice Gopal Sri Ram (left).
In a strongly-worded statement, it said the Federal Court's decision to allow the appeal does not resolve the dispute between UEM and Genisys which has now spanned 10 years.
"Instead, it places the two parties squarely back into a dispute that started because of UEM's blatant disregard for its joint-venture shareholders and partners.
"The judgment of the Federal Court today can only be viewed by investors, local and particularly foreign, with significant unease, as it would appear that GLCs can treat their JV (joint-venture) partners with disregard of their interests with impunity," the statement read.
The statement added GIE will now closely scrutinise the efforts of the liquidators of UEG to date in pursuing UEM for payment of debts since 1999 and to date have not been collected.
“GIE will examine today's judgment closely and decide in due course whether to seek a review.”
Background
On Nov 2, 1993 UEM and GIE entered into a joint-venture agreement for them to exploit mechanical and electrical engineering projects in Malaysia and also overseas, resulting in the formation of UEG.
Under the shareholders agreement UEM held a 51 percent share in UEG while the Singapore firm held the remaining 49 percent, with GIE's managing director Seow Boon Cheng appointed UEG's chief executive officer.
The venture started well and they obtained various projects locally and abroad. However, in 1997, UEM decided to dispose of its non-core business with UEG considered one of them.
UEM entered into a sales and purchase agreement to sell its 51 percent stake to Nova Nusantara for RM1.02 million, with an added incentive that listing UEG is to be attempted within three years of the takeover.
GIE knew the deal and wrote a reminder to UEM about the shareholders agreement whereby any member intending to transfer its shares, should offer them to the existing members. GIE also express its willingness to purchase UEM's share in UEG on the same terms, except that if it failed to get UEG listed within three years, the listing exercise would be considered to have expired.
In response, UEM offered to sell its UEG shares to GIE for the sum of RM10.71 million and this resulted in protracted negotiations between UEM and GIE over the sale.
However, it was during this period there was a total breakdown of the relationship, with UEM accusing Seow of being untrustworthy, while GIE's complaint was a result of UEM's sudden withdrawal in the joint-venture.
Both GIE and UEM filed separate commercial suits but these were later consolidated. The High Court dismissed GIE's suit with costs where the trial judge Justice Ramly Ali (now Court of Appeal) ruled it was gravely oppressive to allow the continuance of UEG as a joint-venture, and found the company to be insolvent.
Justice Ramly also ordered the winding-up of UEG as he held the view that the buy-out of its shares was not a viable option.
GIE appealed the decision, and the appellate court ruled with the High Court that GIE's action do not constitute oppression that would grant relief, but it allowed the Singapore firm's appeal to wind-up.
The panel led by Sri Ram unanimously set aside the winding-up order, but it did not stop there as it ordered UEM to buy out the 49 percent stake of GIE in UEG costing RM81 million, and UEM to pay all valuation costs.
Today's decision
UEM appealed the appellate court's decision and Justice Md Raus in his 37-page judgment to set aside the Court of Appeal's decision said obviously a buy-out of UEG's shares is not a viable option as the trial judge had rightly found it to be insolvent.
“We are of the view the decision by the Court of Appeal in wanting to do 'complete justice' was in fact doing the opposite. It has done a complete injustice to UEM. The consequential orders were such that they were not sought and yet astonishingly granted.”
“The total effect of the orders was tantamount to unjust enrichment. This is because the appellate court in giving effect to the buy-out order and adopting the valuation of the valuer which valued UEG at approximately RM81 million, had failed to consider Seow's own evidence which the Court of Appeal indirectly held to be credible,” said Justice Md Raus.
Among the claims made by the former CEO of UEG included the company has no money or cash balance left, it does not have money to pay its creditors or salaries of its 130 employees, and that it does not have funds to pay amenities and do not have projects.
The judge also had strong words on the apparent Court of Appeal intervention when he said a trial judge has the advantage over the appellate court judges in hearing witnesses and observing their demeanour.
“Thus, a finding on a witness's credibility based on his demeanour is a personal opinion of a trial judge who had the audio-visual advantage of the performance of witnesses. It should not, ordinarily be disturbed at the appellate stage.
“This is especially so in the instant case where the trial judge had found Seow, the only witness by GIE, was not a witness of truth. The trial judge had given reasons as to why he found that Seow's evidence bristled with inconsistencies and half-truths. We think in the circumstances of the reasons given by the trial judge, the findings are entitled to great respect,” Justice Md Raus said.
UEM's reaction
Responding to the apex court's decision, UEM group managing director/chief executive officer Izzaddin Idris said this is the most important decision for UEM group.
“Throughout the case, it validates our position. We are extremely satisfied with the manner in which the Federal Court considered our arguments. The ruling showcases that justice was on our side.
“Following the court's decision, we can finally put this case to rest and continue to focus on strengthening the operations and business direction of the group,” said Izzaddin.
Malaysiakini
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