The Federal Court has ordered the Pahang state government today to pay a whopping RM60 million to a company for breach of contract over a controversial logging concession in the state.

According to Bernama , the decision came after a three-member bench dismissed the state government and its forestry department director’s bid to seek to reverse a lower court ruling .

nenasi umno logging location The panel, headed by Chief Judge of Sabah and Sarawak Richard Malanjum and comprising justices Nik Hashim Nik Ab Rahman and Abdul Aziz Mohamed, unanimously dismissed their application for leave to appeal.

The two applicants were seeking permission to appeal the Kuantan High Court decision on May 25, which ordered them to pay RM37,127,471.60, with eight percent interest dating from April 5, 2000, to logging firm Seruan Gemilang Makmur Sdn Bhd (SGM) for breach of contract.

Rejecting the application for leave today, Malanjum in his judgment said the question of law submitted by the Pahang government was not a “noble question” and had been raised previously.

The rare decision came as a second blow to the ruling Barisan Nasional government in recent court battles.

Last month, BN’s biggest component party, Umno, was also ordered by court to pay RM218 million to a poll merchandise firm after failing to pay the firm over the supply of election campaign materials for the 2004 general election.

‘Hidden agreement’ in deal?

The decision by the country’s highest court today involved a logging scam highlighted by Malaysiakini in a series of reports on a 10,000-acre plot of land - about 40sq km in size - near Pekan which was awarded to Umno Pahang in 1998.

The land was given to the party by the state government helmed by then Pahang menteri besar and Umno state chief Khalid Yaacob ostensibly for oil palm plantation.

To make the deal aboveboard, the party was required to pay a RM4.8 million land premium in order for them to start logging activities but Pahang Umno did not make the payment.

Despite that the land being still technically owned by the state government, the state Umno had gone ahead to clear the plot.

In 2000, Pahang Umno conferred the company SGM with the exclusive right to cut, extract and sell the logs in the area. In return, the company paid the party a mere RM50,000 for the deal, which is believed to be worth millions.

Industry experts that Malaysiakini interviewed at the time had said they were puzzled by the extremely low transfer rate and questioned if there was any ‘hidden agreement’ between the two parties.

Logging scam: Tip of the iceberg

nenasi umno logging before and after Malaysiakini , in one of its reports five years ago, show satellite photos of the huge plot in the forest reserve being stripped completely bare ( right ).

The concession was believed to be the tip of the iceberg of lucrative logging concessions granted by the state to Pahang Umno as a means to raise funds for the ruling party.

However, the Pahang Umno-SGM relationship soured later when the state forestry department refused to renew the company’s logging licence.

In 2002, SGM filed a suit against the Pahang government and the state forestry director seeking RM31 million in damages for breaching the logging concession.

In its statement of claim, SGM has argued that the state forestry had only allowed the company to log an area of 7,000 acres - out of the 10,000 acres which was approved - and the remaining area was given to several third parties to log.

Responding on that, the state government and its forestry department had said that SGM was only given a licence to log 7,000 acres because they found that the company was not interested in logging the remaining 3,000 acres.

The Kuantan High Court subsequently made the ruling in favour of SGM, ordering the defendants to pay the company RM37 million after it found that the state forestry director was negligent in refusing to let the company to log.