Former Port Klang Authority chairperson Lee Hwa Beng today testified that PKA former general manager OC Phang went straight to the Transport Minister who went to get then Prime Minister Abdullah Ahmad Badawi's approval to increase the interest charged by Kuala Dimensi Sdn Bhd from five per cent to 7.5 per cent in 2006.

Lee, who was PKA's first witness in the suit against Phang for breach of fiduciary duty, said the increase in interests charged was for additional development work 1, conducted by KDSB that year.

However, the former chairperson told the Shah Alam High Court that Phang did not present this KDSB request to PKA.

“Phang has breached her statutory duty as PKA general manager, resulting in the increase in interest charged from five to 7.5 per cent calculated on a yearly basis which involved additional interest of RM49.367 million, without first presenting the request to PKA members for consideration and approval.

“This resulted in an additional liability of RM49.367 million (borne by PKA),” Lee said, adding that Phang should have acted in PKA's interests, in noting the breach.

Yesterday, PKA lawyer Lim Chee Wee had listed 15 purported breaches of fiduciary duty by Phang.

Elaborating on this, Lee, formerly Subang assemblyperson, said prior to the additional development work 2, on Feb 24, 2006, Phang issued a letter to then transport minister Chan Kong Choy, seeking his instruction over KDSB's request for an increase in interest chargeable from five per cent to 7.5 per cent for the ADW1.

The witness said in her letter to the minister, she wrote that PKA members viewed the KDSB's request was reasonable but in fact they were not consulted with.

“She had unilaterally agreed to KDSB's request that PKA takes additional liability, when she knew PKA was not in the position to self-finance the Port Klang Free Zone (PKFZ) project.

“On March 28, 2006, Chan wrote a letter to Abdullah requesting the PM's approval to increase the interest chargeable by KDSB from five to 7.5 per cent.

“The next day the PM consented to the Transport Minitry's proposal and PKA was informed of the PM's approval to PKA by a letter dated April 13, 2006 from the transport minister to Phang,” Lee said.

ADW1 consisted of work to improve the construction of the PKFZ junction, electrical infrastructure and a hotel with a total cost of RM726.49 million.

Land purchased before Cabinet approval

Lee further went back to 2002, to list Phang's breaches when he claimed that she agreed to purchase the land from KDSB before Cabinet approved it.

He said Phang informed PKA's management on Oct 10, 2002 that it was still awaiting the decision from the Transport Ministry over the purchase of the land owned by KDSB.

However on Nov 6, she issued a letter of offer to KDSB to purchase the whole land from the company.

Whereas, Lee said the Cabinet had only given its approval to purchase the land via a letter from the Transport Ministry dated Nov 20, 2002 after approval was given by former premier Dr Mahathir Mohamad.

Lee further testified that Phang had breached her fiduciary duties with regard to her view that PKA could self finance the PKFZ project

Whereas, he said, the auditor-general in his report on the PKA financial statements from 2003 to 2007 stated that PKA did not have sufficient financial resources to meet its obligations and that PKA needed to look for other financial sources to meet its capital obligation.

This, he said followed the PKFZ project balooning from RM1 billion to RM2.9 billion in 2003 to RM4.63 billion in 2006.

“The Auditor-General in his report dated June 23, 2005 notes that PKA was not in a position to self finance the PKFZ project and needed to source for funds to meet its capital obligations of RM2.9 billion under the PKFZ project,” he said.

Despite this, Lee said Phang failed to take immediate steps, he claimed she continued to compound the problem further by entering into significant and expensive development contracts with KDSB.

“Phang having knowledge of PKA's weak financial position, had breached her duties by causing PKA to enter into eight key agreements without first ensuring that PKA would be in the position to self-finance the PKFZ project,” he said.

The former chairperson further claimed that Phang had also caused payments made to KDSB for ADW1 and new additional development work that were not carried out.

Lee said as a result of Phang's failure to discharge her duties as PKA GM, PKA suffered substantial losses and damages from the purchase of the 1,000 acres of land and the development of land by KDSB.

Following that, he wanted the court to assess the damages to be paid by Phang.

The hearing before Judicial Commissioner M Gunalan continues in March next year.