As the co-founder and a director of MK Land, one of Malaysia’s biggest property developers, Kasi K.L. Palaniappan is used to featuring on lists of his country’s richest people. In 2007, Forbes estimated his net worth at US$127 million. In Australia, however, his fortunes tell a different story: development projects involving Palaniappan in the affluent state of Western Australia have gone belly up, and one of the country’s biggest banks, Westpac, is pursuing him for more than US$12 million.
Federal Court documents obtained by The Edge Review reveal that Westpac issued a bankruptcy notice against him on January 16. Documents from the Supreme Court of Western Australia also show that Palaniappan, a director of real estate company Murray Riverside, owed Westpac more than US$20 million.
This debt relates to a loan on three properties south of Perth of which Palaniappan was guarantor. In a rare downturn, prices in the area of Murray Riverside’s properties fell steeply in the wake of the global financial crisis.
The company defaulted on the loan in 2012 and court action was launched after Palaniappan went another year without making a repayment.
He tried to claim that the three properties had been independently valued at US$36 million. Receivers appointed by Westpac, he said, “may have failed to exercise all reasonable care to sell the property for market value as demonstrated by advertising the land for an amount considerably less than the market value”.
But Palaniappan was ultimately unsuccessful in his bid to stop the properties being sold at a lower price. Court documents show that receivers oversaw the sale for just US$10 million, which left his company still millions of dollars in debt. As of September 2014, US$12.4 million remained outstanding, court documents show. Palaniappan co-founded the MK Land Group and was appointed to the board in 1999. In Malaysia, he sits on the Board of the Credit Guarantee Corporation (CGC) and the Credit Bureau Malaysia (CBM), while in Australia, he is an associate of the Royal Australian Institute of Architects.
Due to its strong, stable property market, Australia has been a popular destination for Malaysian investors. IGB Corporation and SP Setia are among those companies with a presence, while MK Land Pty. Ltd. is registered in Perth. In Malaysia, MK Land recorded an after-tax profit of US$17.8 million in the 2013/14 financial year, according to its latest annual report. Palaniappan was reported as holding 205.8 million shares in MK Land. Its share price is trading at around US$0.12 this week, giving his shares a paper value of more than US$24 million. Palaniappan’s ventures in Australia have run into trouble before. More than a decade ago, he was co-director of Ravenswood Resort Pty Ltd, which had planned to build a mega-resort south of Perth. After Supreme Court action, the company was wound up in 2003 and a liquidator appointed. Murray Riverside was founded in Australia in the same year.
In response to Westpac’s bankruptcy notice in January, he filed a counterclaim, saying the notice was of “no force or effect” and should be “set aside” because he was not a resident of Australia or doing business in the country at the time it was issued.
But when it comes to seeking out its money, Westpac likely won’t let borders prove a barrier. In a statement to the press, it said it was looking overseas to potentially claim money owed by Palaniappan. The bank would not detail its plans. “We are presently involved in litigation with Mr Palaniappan in the Supreme Court of Western Australia, the Federal Court of Australia and in other jurisdictions,” a spokesman said. “As those proceedings are ongoing, we are not in a position to make any further comment at this stage”.
According to the Australian government, the country has reciprocal arrangements in place with Malaysia and Singapore – as well as five non-ASEAN countries – that assure assistance in the event of a bankruptcy or liquidation, meaning Palaniappan may not be safe from financial retribution, even in Malaysia. Palaniappan did not respond to emailed requests for an interview this week, and other representatives of MK Land declined to comment.
