Former Port Klang Authority (PKA) chairperson Lee Hwa Beng maintained that former general manager OC Phang failed to discharge her contractual duties with regard to the Port Klang Free Zone (PKFZ) project.

This is despite Phang - in her defence to the suit filed by PKA - stating that she had fully discharged her contractual duties as a PKA board member and that she was answerable to not only PKA but also the Transport Ministry (MOT) and Finance Ministry (MOF).

“I disagree with this. I state she has failed to discharge her duties as PKA GM. As she was PKA GM, either being loaned from the MOT or appointed by way of contract, she was answerable to PKA including PKA board members, and not only to the chairperson, MOT and MOF.

“She was required to act in PKA's interests at all material time,” he told the Shah Alam High Court this morning.

Lee, who was PKA chairperson from 2008 to 2011, said Phang should have adhered to provisions under the Statutory Bodies (Discipline and Surcharge Act) 2000.

To back his claim, the former Subang Jaya assemblyperson, who is the first witness called by PKA in its suit against Phang, cited the Public Accounts Committee report dated Oct 27, 2009 on the surging cost of the PKFZ project from RM1.957 billion to RM4.947 billion.

The PAC, Lee said, found that Phang failed to abide by the directives of the government and the MOF in the land acquisition, where the government agreed to give an opportunity to Kuala Dimensi Sdn Bhd to build basic infrastructure and reclaim land through design and built concept.

However, he said, PKA was required to negotiate the costs of the work.

“The report states the action by Phang as GM to sign the sales and purchase of the land including infrastructure at the cost of RM1.088 billion is against the government's finance regulation as she did not obtain approval from the MOF and also the PKA board of directors,” he said in reading a portion of the report.

Actions not consistent with Port Authority Act 

Replying to questions from PKA lawyer Lim Chee Wee, Lee further cited that Phang's actions of signing RM2.246 billion in development is against the government's financial practices, which requires approval from the MOF, and also inconsistent with the Port Authority Act, that requires her to gain approval from the PKA board of directors.

Lee, 63, also said that PAC found that PKA could have reduced the cost of the project if it had agreed with the MOF's mode of financing the project by utilising bonds guaranteed by the government, where interest is at four per cent compared to deferred payment to KDSB, where it was 7.5 percent. 

“While the government had suggested that PKA self-finance the project, Phang failed to inform the cabinet that PKA does not have the capacity to self-finance the project and this was raised in the Auditor-General's report in 2003, 2004, 2005, 2006 and 2007,” he said.

“Phang also failed to report back on the decision by the cabinet, the MOF, and MOT or other agencies regarding the PKFZ project to the PKA board of directors for deliberation and decision before committing it,” he added.

Lee had at the last session, testified that Phang had gone straight to the Transport Minister, who went to get then Prime Minister Abdullah Ahmad Badawi's approval to increase the interest charged by KDSB from five per cent to 7.5 per cent in 2006.

PKA who is suing Phang for breach of fiduciary duty.

Today's hearing also saw lawyers representing 26 former PKA board members who had been directed by Court of Appeal to become third party defendants in the suit.

This follows the appellate court's listing of four grounds to include a tycoon and two former cabinet ministers, when it ruled the High Court had erroneously ruled that holding Phang's liability to PKA was of a personal nature.

Lee also testified that Bintulu MP Tiong King Sing was a majority shareholder in Wijaya Baru Global Bhd, which is related to Wijaya Holdings Group that is listed in the Kuala Lumpur Stock exchange, and among the subsidiary company under Wijaya Holdings, is KDSB, the developer of the PKFZ project.

The hearing continues before Justice M Gunalan on May 5.