Born Under A Bad Sign, Part II

SHAH ALAM: In my earlier post Born Under A Bad Sign I stated that both Teguh Samudera and Gagah Samudera – the RMN training ships, are caught in a legal imbroglio.

I have now discovered that there is no legal imbroglio however apart from a PR perspective. Yes it is embarrasing if word came out that two ships built for the navy is now owned by a financial institution.

Yes, Maybank is the beneficial owner of the Teguh and Gagah. Beneficial as on paper the owner of the two ships are NGV Tech Sdn Bhd, which is run by a receivership company appointed by Maybank after it wound up the original company in 2013.

The Defence Ministry in 2015 had gained the ownership of the two vessels after the Kuala Lumpur High Court ruled in favour of its case. However, Maybank and NGV Tech asked for a revision at the Appeals Court and it decided that the two ships belong to them instead of the ministry.

It must noted in the Appeals Court decision dated Dec. 7, 2016, available on its website, Maybank stated the facts as follows:

Maybank financed the business of NGV Tech including the construction of the vessels to be sold to the Respondent to the extent of RM884,330,000-00 between September 2004 to May 2012, in the form of various credit facilities. To secure these facilities NGV Tech had created fixed and floating charges over all of its assets in favour of Maybank pursuant to several debentures.
[8] In February 2012, NGV Tech and the Respondent entered into a contract for the sale and fitting out of the two vessels for the Royal Malaysian Navy in the sum of RM294 million. Subsequently there was a supplemental agreement entered into by the parties where there was a revision made to the progress payment schedule.
[9] The construction of the ship commenced and instalments were made as building progressed, all of which was closely supervised by the Respondent. However sale and delivery of the vessels to the Respondent was not completed and construction was delayed.
[10] On 14 March 2013 a winding up petition was presented against NGV Tech. On 20 March 2013 a notice of crystallization of the floating charge was issued to NGV Tech by Maybank. As a consequence, the floating charge over the assets of NGV Tech, including the vessels, became a fixed charge as of 20 March 2013, in favour of Maybank.
[11] On 3 April 2013 due inter alia to the default in payments under the credit facilities Maybank appointed a receiver and manager of NGV Tech, pursuant to the rights and powers available to it under the debentures.
[12] Notwithstanding the appointment of a receiver and manager, Maybank continued to provide funding to NGV Tech to complete the vessels. This was undertaken pursuant to a meeting with MINDEF. Such funding was undertaken with a view to recovering all monies granted for such construction from the payment of the purchase price by the respondent for the vessels in due course.
[13] On 14 May 2013, NGV Tech was wound up. Maybank wrote to the Respondent advising of new delivery dates and seeking confirmation that the Respondent would waive all liquidated damages arising as a consequence of the delay in delivery of the vessels. However the Respondent did not respond. This resulted in Maybank confirming as of October 2013 that it would no longer fund the completion of the vessels and all sub-contracting work on the vessels would cease until receipt of confirmation from the respondent. There was some further correspondence but no confirmation was received from the Respondent. As such all work ceased on the vessels with effect from 1 November 2013.
[14] The Respondent terminated the shipbuilding contract on 27 January 2014 pursuant to clause 22, on the basis of the winding up of NGV Tech and the appointment of the R & M over NGV Tech. As at the termination date, the Respondent had paid a sum of RM249.9 million towards the building of the vessels. Under the terms of the contract, NGV Tech was further liable to pay LAD in the sum of RM46.6 million resulting from the delay in delivery of the vessels.
[15] The dispute as to the ownership of the vessels arose when in June 2014, the Respondent sought to have the vessel Teguh Samudera transferred from the NGV’s Tech shipyard to Lumut for safekeeping and to prevent further deterioration. Maybank objected to such a transfer, maintaining that NGV Tech retained title and ownership of the vessels, which in turn was subject to the fixed charge granted to Maybank by NGV Tech.
[16] Despite attempts to resolve this matter amicably, no resolution was reached whereupon the Appellants filed the originating summons seeking the court’s assistance in relation to the relief sought.

It must be noted that on paragraph 12, Maybank says that it was continue funding the construction and finishing of both ships. It further stated that it will complete the project though it will not want to be saddled for the late delivery payment.

The Defence Ministry however did not respond to the proposals and Maybank cease all work on both ships in October, 2013.

With hindsight, the current situation with the training ships would not have happened if the Defence Ministry had worked together with Maybank back in 2013. In the end RM46 million (the amount of late delivery payment) does not look that big compared to the RM249 million already paid to NGV Tech (old company) when both ships were launched (2013 and 2012).

As of now, I was told that the ministry is leaving the matter to the Attorney General’s Chamber to sort out. An appeal to the Federal Court is likely. As it is, its PR imbroglio alright, a really embarassing one.

— Malaysian Defence

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