KUALA LUMPUR (Dec 20): Salcon Bhd said it stands to lose RM3 million in the event its appeal to overturn a court judgement favouring its contractor proves unsuccessful.

In a stock exchange filing this evening, Salcon said it’s wholly-owned engineering unit received a judgement from the High Court in Sabah and Sarawak yesterday, which ordered it to pay the contractor Terra Environment Management Sdn Bhd, some RM2.4 million, with costs and an interest of 5% per annum from Jan 1, 2014 to the date of full payment.

The litigation is in relation to legal claims put forward by Terra Environment in November 2015, alleging Salcon Engineering Bhd (SEB) for underpaying completed works for the Higher Power Water Jetting Cleaning and CCTV Inspection and non-dig repair works in various sewer pipes in Kota Kinabalu, Sabah.

The projects were awarded by SEB to Terra Environment, formerly known as UG Management Services Sdn Bhd, back in 2009 and 2011.

In December that year, SEB had counterclaimed it had in fact overpaid Terra Environment — excluding an ex-gratia payment out of goodwill — and there had never been mutual agreement in writing to vary the rates or job scope.

SEB also said Terra had made duplicitous claims for certain areas of the work, where the former has already made payment for. Terra denied the counterclaims, and the case was tried in June this year.

Based on advice of its solicitors, Salcon today said it will proceed to appeal to the Court of Appeal and file an application for stay of execution, pending appeal, in respect of the judgement.

In the mean time, it will set aside RM3 million in its financial statement for its current financial year ending Dec 31, 2017 (FY17), in the event its appeal fails.

“However, in the event that the above litigation is successful in its claims against the plaintiff (Terra Environment), there would be a contributory positive financial impact to the earnings per share and net assets per share of the company for the financial year ending Dec 31, 2018 (FY18),” the filing read.

Shares in Salcon settled unchanged today at 46 sen, valuing the company at RM311.74 million.