Former Port Klang Authority (PKA) general manager OC Phang committed 15 breaches of his fiduciary duties when helming the Port Klang Free Zone (PKFZ) project, claims the lawyer for PKA, Lim Chee Wee.

In his opening statement in the High Court in Shah Alam today on the suit PKA filed against Phang for criminal breach of trust and breach of fiduciary duties, Lim said the PKFZ project was the government's strategic plan to transform Port Klang into a national load centre and regional transhipment hub.

A sale and purchase agreement was signed on Nov 12, 2002, to purchase a land from Kuala Dimensi Sdn Bhd (KDSB) on the condition that KDSB carries out the infrastructure works on the land.

“The initial cost for the PKFZ project was RM1 billion, but it escalated to RM2.9 billion in 2003 and to RM4.63 billion in 2006.

“The cost for the PKFZ project further ballooned when PKA was forced to secure a 20-year soft loan of RM4.632 billion from the Ministry of Finance to finance the PKFZ project, with an additional interest cost of RM2.508 billion imposed on PKA.

“This in turn resulted in the total PKFZ project outlay of RM7.453 billion. These facts will be dealt with in detail by PKA's witnessess,” Lim said in his opening statement of case.

The focal point in this case, he added, is who is responsible for causing PKA to incur RM7.453 billion in costs in the PKFZ project, instead of the initial cost of RM1 billion.

In this trial, Lim said, the plaintiff would adduce material evidence to prove how Phang committed egregious breaches of duty and grossly mishandled these transactions at PKA's detriment.

“Ultimately, someone has to account for the RM7.453 billion in costs and that responsibility internally rests on none other than Phang,” he said.

Lim said eight key agreements were signed between PKA and KDSB, for which Phang was responsible.

“However, she failed to refer any of the key agreements to the PKA Board members for their deliberation and approval, prior to their execution,” he said.

“In her defence, she says she has the approval of the PM,” the lawyer said in referring to Phang's defence statement.

Lim said Phang, as the PKA general manager from September 1997 to June 2008, was bound by the Statutory Bodies Act (Discipline and Surcharge) 2000 and the Financial Rules of PKA, as well as guidelines and circulars issued by the Treasury where, among others, she must act honestly, in good faith and exercise her powers for PKA's benefit and interest.

She should not put herself in any conflict of interest situation, nor act for her own benefit or for the benefit of a third party. She should also obey the lawful orders of PKA and not place herself in a position of conflict of interests, the lawyer added.

The list of breaches

Lim then listed the purported breaches committed by Phang:

  • Non-compliance with Treasury Guidelines;
     
  • Failure to ensure material terms included in the eight key agreements to safeguard PKA's interest;
     
  • Failure to ensure the independent appointment of a quantity surveyor for the PKFZ project and a delayed appointment and limited roles of the quantity surveyor;
     
  • Failure to refer key agreements to the PKA board members for deliberation and approval;
     
  • Failure to adhere to the condition of self-financing;
     
  • Failure to act in PKA's interest on the issue of deferred payments vs government guaranteed bonds, resulting in loss of RM532 million;
     
  • Failure to act in PKA’s interest on the issue of special value of RM25psf plus interest;
     
  • Failure to ensure PKA is not overcharged in interest by KDSB (simple interests vs compound interests);
     
  • Failure to act in PKA’s interest on the issue of single phase vs mixed development;
     
  • Failure to conduct open and competitive tenders;
     
  • Entering a contract of no commercial value and consequently incurring an additional liability of RM49.367 million;
     
  • Letters of undertakings and consents issued without prior approval of the PKA Board members;
     
  • Failure to act in PKA’s interests to claims by KDSB for monsoon drain and water supply works;
     
  • Payments made for additional development works that were not carried out; and
     
  • Agreement on the final cost in the absence of proper or a complete set of the building drawings.

Lim further said that for all the breaches involved, PKA wants the court to assess the damages.

Former PKA chairperson Lee Hwa Beng, who is said to play a pivotal role in uncovering the evidence, is expected to take the stand tomorrow.

Despite this, the prosecution last month dropped the CBT charges filed against Phang.

Phang is represented by lawyer Matthew Thomas Philip.