Nam Cheong client cancels vessel contract; legal action being considered

A CLIENT of vessel builder Nam Cheong has just officially cancelled a contract to receive a vessel.

While the main board-listed builder is considering legal recourse, it says the cancellation is expected to impact its earnings for this financial year, though the extent is still undetermined, Nam Cheong said in a filing after the market close on Friday.

Nam Cheong said that Petra Offshore Limited (POL), a wholly owned subsidiary of Perdana Petroleum Berhad, had issued a cancellation notice dated Dec 1, 2016, in relation to the sale of one unit of Accommodation Work Barge, Hull No. 317. This contract was inked on June 23, 2014 between the two parties.

Nam Cheong in return had responded on Friday that despite numerous notices issued to POL that Nam Cheong had completed the vessel in accordance with the contract, POL did not respond or state their position.

Therefore, in its reply on Friday, Nam Cheong noted that POL is in breach of the terms of the contract on some counts.

Said Nam Cheong: "The group's position is that the cancellation is devoid of legal basis, and in fact POL is in breach of the contract. By reason of the wrongful cancellation by POL, and in view of the breach of the terms of the contract by POL, the group treats the contract as terminated and the deposit paid is accordingly forfeited. Further, all rights are reserved to claim damages against POL as may be legally advised."

With regards to the financial impact for the year ending Dec 31, 2016, Nam Cheong said that "the extent of which cannot be conclusively ascertained at this juncture as it will depend on the outcome of any legal action against POL".