Rich Capital's Batam project partner sues for 1.59 trillion rupiah

CATALIST-LISTED property developer Rich Capital Holdings' joint venture (JV) is being sued again, this time by the project partner for the compensation of alleged losses totalling some 1.59 trillion rupiah (S$147.1 million).

Oxley Karya Indo Batam is the equal JV entity formed by Rich Capital subsidiary Oxley Batam (OB) and Karya Indo Batam (KIB) to develop the Oxley Convention City project in Batam's financial district.

KIB on Aug 27 filed a lawsuit in tort against the JV. Rich Capital on Friday said that it and OB did not receive any prior notification of the suit and found out about it only this month.

OB, as a half owner of Oxley Karya, then sent a letter to the JV and KIB demanding information relating to the suit and how the JV intended to defend its interests and assets.

In the latest tort lawsuit, KIB demanded that Oxley Karya compensate it for about 1.24 trillion rupiah in "immaterial losses" as well as some 351.37 billion rupiah in material losses. The alleged material losses include the actual price of KIB's land based on the fair-market price of 210 billion rupiah, the 60 billion rupiah normalisation fee of KIB's land, and the 80 billion rupiah refund to purchasers of units in the project.

Rich Capital said it could not quantify the financial impact of the latest legal claim, as the company had not seen the documents filed.

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It was unable to obtain advice on how the quantum of the claims was quantified, the merits of the underlying allegations, and whether there is a legal recourse to strike out or summarily dismiss these claims.

Meanwhile, Rich Capital and OB on Aug 31 also discovered that they could no longer use their banking tokens to access the JV's accounts with Maybank. All of Oxley Karya's accounts were supposed to be operated jointly, based on the Aug 12, 2016 shareholders' agreement between the two JV partners.

Rich Capital said that to date, it has been unable to ascertain why OB's banking tokens were ceased, due to the lack of response from the JV and KIB. Maybank's reply, received on Sept 9, simply stated that based on bank data, OB was no longer the party authorised for the JV's accounts.

There was also a 417.1 million rupiah debit from another of the JV's bank accounts, with the Bank Central Asia, that occurred on Sept 2. Rich Capital and OB did not authorise this debit, said Rich Capital.

"The group is in discussions with its legal advisers on the next course of action(s) to undertake to safeguard the company's assets and interests," it said on Friday.

The latest tort lawsuit follows a string of legal tussles involving the Batam project JV vehicle. Trouble first surfaced last September, when KIB served two legal letters on Rich Capital, demanding full control of the JV and S$20 million compensation.

KIB's letters alleged conspiracy and breaches of the interested-person transaction mandate and Indonesian criminal laws, with regard to the appointment of a Rich Capital unit as the main contractor of the project.

Subsequently, the main contractor sued the JV last October, demanding that Oxley Karya and KIB not carry out construction works on the project land. The contractor also wanted KIB to pay 268.78 billion rupiah in cash for losses due to non-performance of the JV's payment obligations as well as for business disruption and reputational loss.

This February, KIB sued Rich Capital and its related parties for alleged conspiracy and project mismanagement, among other things. And in March, Rich Capital terminated the structural consultancy services for the project because its terms of demand were not met by the JV entity.

Oxley Karya sent a letter of demand, alleging that it suffered a material loss of S$5.3 million and immaterial losses of S$110 million from mistakes allegedly made in the construction work.

This July, two more civil lawsuits were commenced against the JV and KIB, by the piling contractor and the local design institution. Both plaintiffs alleged that they did not receive full payment for work done on the project.