KUCHING: The saga of the series of litigation between the feuding shareholders in the See Hua Group may finally be coming to an end.
On April 30, the High Court here delivered its judgment on the suit brought by See Hua Realty Berhad (SHR) against KTS News Sdn Bhd (KTSN) and its directors for alleged breach of fiduciary duties, fraud and conspiracy to defraud.
The High Court dismissed all the claims by SHR and awarded costs of RM200,000 in favour of KTSN and the other defendants.
SHR, which is controlled by the family of the late Datuk Lau Hui Siong, was the former owner of the See Hua Group which publishes the See Hua Daily News, The Borneo Post and Utusan Borneo in Sabah and Sarawak.
According to the court records, the See Hua Group ran into financial difficulties in the 1990’s and by year 2000 the audited accounts of SHR revealed that the See Hua Group had liabilities of RM54.65 million with accumulated losses of RM35.5 million.
In those desperate financial circumstances, the KTS Group entered into the picture as a white knight to try to rescue the See Hua Group from financial collapse.
In November 2000, an agreement was entered into between SHR and KTSN for SHR to inject its newspaper assets into a joint venture vehicle See Hua News Holding Sdn Bhd (SHNH) in exchange for 40 per cent of SHNH’s shareholding whilst KTSN would inject cash of RM30 million for 60 per cent shareholding.
Shortly after the start of the joint business venture, disputes started surfacing between the two groups of shareholders with disagreement over the management of the business, the value of the assets injected by SHR as well as the bad debts in the books of the See Hua Group which could not be recovered.
In the meantime, between November 2000 and December 2003, KTSN had injected cash of more than RM59 million into the See Hua Group through the joint venture vehicle, SHNH.
In all this time, the See Hua Group continued to suffer losses which forced KTSN to inject more funds into SHNH to cover the group’s losses.
According to documentary evidence filed in court, in late 2003, SHR wrote to KTSN demanding that KTSN buy out its 40 per cent shareholding in SHNH for RM37.7 million.
KTSN did not accede to SHR’s demand.
As a consequence, in November 2003, SHR asked the court for an order that KTSN buy them out, or alternatively that SHNH be wound up, claiming that KTSN had oppressed SHR.
Numerous allegations were made by SHR in that case, ranging from poor management, denial of access to accounts, to allegations that KTSN breached the terms of the agreement.
In response, KTSN took the view that the relationship between the two parties was over and that it could no longer continue to inject further money into the See Hua Group through SHNH.
This plunged the group into a financial cash-flow crisis and in April 2004, KTSN filed a petition in the court to wind up SHNH on just and equitable grounds under the Companies Act 1965.
The cases were vigorously contested on both sides and the outcome was that SHR’s case was eventually dismissed in the Federal Court.
KTSN’s case was successful in the Court of Appeal where the court ordered SHNH to be wound up.
SHR was dissatisfied with that decision and took the matter to the Federal Court.
SHR was again unsuccessful.
In the meantime, in 2007, SHR had filed another claim against KTSN and its directors in court.
SHR in this case, as in the earlier 2003 case, attacked the management of KTSN and accused its directors of fraud, conspiracy to commit fraud and breach of fiduciary duties.
The trial of this suit commenced in July 2010 and was finally completed in December last year.
According to court records, the notes of proceedings in the trial exceeded 1,000 pages.
KTS was represented by George Lo while SHR was represented by Bong Ah Loi.
With the dismissal of this 2007 suit filed by SHR, as well as the dismissal of SHR’s suit filed in 2003, the court has finally decided it was right that SHNH be wound up and that the allegations made by SHR against KTSN and its directors were unfounded.
Representatives of SHR could not be reached for comment.