KUALA LUMPUR (Oct 7): Coastal Contracts Bhd's major subsidiary has been slapped with a notice of arbitration from one of its suppliers for an alleged wrongful termination of a shipbuilding contract.
According to the offshore support and marine transportation vessels fabricator's bourse filing today, its subsidiary had in July 2016 terminated a shipbuilding contract with the builders due to the latter's failure to deliver a vessel on time and in accordance with the contract's terms and conditions.
Further to the termination, Coastal Contracts' subsidiary had also written to the builders for a refund of all sums paid to the builders under the shipbuilding contract as well as the payment of liquidated damages in accordance with the terms and conditions of the contract.
"Rather than complying with their obligations under the shipbuilding contract, the builders filed a Notice of Arbitration against the subsidiary alleging that the subsidiary's termination of the Shipbuilding Contract was wrongful," the filing read.
The group said the builders had not quantified their claim under the notice until after the subsidiary had filed its response to the notice and counterclaim.
"The builders' current and provisional quantification of their claim is at US$37.4 million," it said, adding the value will directly reflect its subsidiary's counterclaim against the builders in its response to the notice.
Apart from the amounts claimed and counterclaimed by the subsidiary and the builders respectively against each other, the arbitration proceedings are not expected to have any other potential financial impact on the group, said Coastal Contracts.
According to the group, the subsidiary has engaged external legal counsel to represent and assist it in the arbitration proceedings, and is strenuously resisting the builders' meritless claim while at the same time strenuously pursuing its counterclaim.
"Coastal Contracts will announce any further developments on the arbitration proceedings at the appropriate time," it added.
Shares in Coastal Contracts closed up two sen or 1.33% at RM1.52, for a market value of RM806.38 million.