This article first appeared in The Edge Financial Daily on September 26, 2019

KUALA LUMPUR: Prestariang Bhd, which said three months ago it had to sue the government to ensure it gets back what it deemed was due compensation over the latter’s termination of the RM3.5 billion National Immigration Control System (SKIN) project, is now seeking mediation to settle the matter out of court instead.

The decision was announced by the company’s lead counsel, Datuk Lim Chee Wee, during the case’s proceedings at the High Court here yesterday before Justice Datuk Mohd Sofian Abdul Razak.

Lim said he would file an application to the court today on the possibility that a mediation will take place.

In the suit it filed in April, Prestariang is seeking RM732.86 million in damages from the government for unilaterally terminating the SKIN contract that was awarded to its unit, Prestariang Skin Sdn Bhd in 2017, earlier this year.

Asked why Prestariang was suing the government in an interview with The Edge in June, Prestariang’s president and group chief executive officer Dr Abu Hasan Ismail (pic) said: “We were as big as RM1.3 billion to RM1.4 billion, and now we are at RM200 million (market capitalisation). The shareholders are losing a lot. You have to think of the value that is being destroyed. To me, [it was] something that could have been easily resolved, given a chance. Now, we have no choice because we have shareholders, it is our fiduciary duty to take the government to court.”

Abu Hasan, who is also the company’s founder, added that when the home ministry was said to be reviewing the SKIN project last year as it felt the project was expensive, the company had repeatedly tried but failed to get a meeting with the ministry to see if there was a scope for lowering costs.

But following the government’s termination, he said it was no longer about negotiations to revise the price but to ensure the company gets its due compensation.

On Bursa Malaysia, Prestariang shares closed unchanged at 46 sen yesterday, which gave it a market capitalisation of RM221.86 million.

The stock has lost over 50% from  98 sen a year ago.

The government has since reopened the tender for the SKIN project, which is said had attracted bids ranging from RM1 billion to RM1.8 billion from some 30 bidders.

Meanwhile, the court was told yesterday the government had applied to have Prestariang’s suit converted from an originating summons to a writ of action as there were disputed facts on the contractual formula used by Prestariang in computing the damages it is seeking.

The conversion would allow the defence to cross-examine the witnesses, while the originating summons does not necessitate the calling of witnesses, while the answers to questions would be provided via affidavits or documents submitted to the court.

“We are not denying the company’s entitlement to damages but the contractual formula that is used to derive the amount.

“The government is disputing the method of calculation as it felt the project, which has yet to take off, should only be at the 2% [completion] level but the company is claiming it is at 9%. This is a dispute, which the government’s witnesses — of whom there would be three or four — would be called in testify to dispute their [Prestariang’s] expert witnesses,” said senior federal counsel Ahmad Hanir Hambali, who is appearing for the government.

Ahmad Hanir added that the project that was awarded and signed on Aug 9, 2017, comprises two main stages — the development and the maintenance of the system.

He said the development period only began on April 25 last year and went on till Oct 18 — a period of six months.

The project was terminated by the home ministry on Jan 22, 2019.

“It is not disputed that the development [cost] of the system would be borne by the plaintiff (Prestariang). But again as this is the initial stage [of the project], we are questioning the quantum [of the damage claimed]. Going by their claim of allegedly 9% [completion] with let’s say the project costing RM800 million [to develop], the losses or damages should not amount to over RM700 million,” Ahmad Hanir said.

In his reply, Lim said the issue concerns contractual law and that the terms of the contract had been agreed on by both parties and documented.

He further argued that the contract was not broken by his client but the government decided to terminate it which it is entitled to do so.

"However with the Government exercising its contractual right to terminate contract, it should result in contractual payment due from the Government to Prestariang," he said.

Lim added that the company would file its expert witness report on the matter next month, and that his client does not mind if the government wants to cross-examine the witness then.

His client, he said, is not disputing the court’s jurisdiction in determining whether the matter should be converted to a writ, but rather they want to point out that the facts of the case are in the documents and cannot be disputed.

Justice Mohd Sofian said he would decide on the government’s application on Oct 30, which was originally the scheduled start of the trial. The judge has vacated that day for case management.

The concession contract involves a three-year build and deployment phase, followed by a 12-year maintenance and technical operation phase.

The government was to start paying Prestariang’s unit upon the full commissioning of the system, at an annual average rate of RM294.7 million.