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Sunday, 14 August 2011

Lawsuits with Tajudin Ramli, Is it time to settle?

Is it time to settle?


IT was only this week that most of us found out about the efforts to settle all lawsuits between Tan Sri Tajudin Ramli and several government-linked companies (GLCs), including a few listed entities. According to Minister in the Prime Minister's Department Datuk Seri Nazri Abdul Aziz the Government had been mulling over the out-of-court settlement for the past six months. It was reported that Nazri sent a letter to the GLCs this month, informing them that the Government and the Finance Ministry had agreed to settle all civil claims against Tajudin.

However, it appears that the possibility of a “global settlement” of the suits have been floating around for longer than half a year.

Last December, the now delisted DFZ Capital Bhd uploaded on the Bursa Malaysia website a circular by Singapore-listed Esmart Holdings Ltd, which was acquiring a 75% stake in DFZ. In discussing the material litigation of Atlan Holdings Bhd (the vendor in this transaction), Esmart touched on the developments in a particular case and said: “In view of the global settlement in respect of all suits concerning Tan Sri Dato' Tajudin Ramli (TSDTR), the said matter is now fixed for mention on Jan 12, 2011.”

A similar reference “the global settlement in respect of all suits involving TSDTR” popped up in the notes to Atlan's quarterly report for the period ended November last year.

Atlan's legal entanglement with Tajudin is a legacy issue arising from its 2004 purchase of a 32% block of shares in Naluri Corp Bhd from Pengurusan Danaharta Nasional Bhd. Tajudin lost control of Naluri following the Asian financial crisis.

A more interesting bit of information surfaced in Axiata Group Bhd's quarterly report for the period ended Dec 31 last year. In providing an update on its material litigation, the company said: “The Court has requested the parties to mediate and TSTDR has proposed a global settlement for all the cases involving TSTDR. The parties have since agreed to mediate the pending disputes.”

Axiata appears to be one of the GLCs whose lawsuits with Tajudin are likely to be withdrawn following the Government's agreement with Tajudin. Khazanah Nasional Bhd is a 39% shareholder of Axiata, whose subsidiary Celcom Axiata Bhd was once among Tajudin's prime businesses.

Malaysia Airlines (MAS) is another former Tajudin asset that's now a part of the Khazanah stable. Not surprisingly, the national carrier too has legal disputes with him. However, to date, MAS has yet to say anything about the change in status of its suits involving Tajudin.

Neither has Telekom Malaysia Bhd (TM), which (along with subsidiary Telekom Enterprise Sdn Bhd and 22 others, including Danaharta and Celcom) is a defendant in a counterclaim by Tajudin, who is seeking RM13.4bil, among other things.

So why haven't Atlan, Axiata, MAS and TM made any announcements about the global settlement? Atlan and Axiata have disclosed the development in the notes to their financial statements and quarterly reports, but this is still a step away from highlighting the information.

It has been established that these companies' lawsuits involving Tajudin are indeed material litigation, and Bursa Malaysia's listing requirements include “the commencement of or the involvement in litigation and any material development arising from such litigation” among the examples of events that may require immediate disclosure.

Of course, there's room to argue that the global settlement is very much work in progress, with many details yet to be worked out. However, shouldn't the investing public be alerted when there's a proposed global settlement on the table and it may result in the conclusion of several suits with billions of ringgit at stake?

Nazri was quoted as saying there was no special deal between Tajudin, the Government and the GLCs for the parties to agree to the settlement of the suits. He added that it was up to the parties involved to decide what to do next. “It is their right if they want to proceed with their court case,” he said.

As listed companies, they are obliged to take into account the interests of minority shareholders as well. It's impossible to please every shareholder, for sure, but whatever the decision of each company, the board and the management need to be transparent and consistent, and their rationale ought to be persuasive. If a company decides to drop a lawsuit it has filed, particularly one that seeks to address big losses, it owes shareholders an explanation.

For example, an Axiata subsidiary, Rego Multi-Trades Sdn Bhd, commenced proceedings in 2005 against Aras Capital Sdn Bhd and Tajudin for amounts due to Rego pursuant to an investment agreement with Aras Capital and an indemnity letter given by Tajudin. In turn, Tajudin filed his defence and instituted a counterclaim to void and rescind the indemnity letter and claim damages. Said Axiata in annual report 2010: “The board of directors, based on legal advice received, are of the view that it has good prospects of succeeding on the claim and successfully defending the counterclaim if the same were to proceed to trial.”

Similarly, both TM and Axiata have expressed confidence that they can put up a winning defence against Tajudin's RM13.4bil counterclaim.

Perhaps it's good for everybody or at least, for most people if the Tajudin-related suits are settled out of court. If that's so, the listed companies should have no problems presenting that case to their shareholders.

Executive editor Errol Oh has just realised that we often overlook the listed companies' disclosures on material litigation.

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