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24. OpERATING lEASES Leases as lessee operating lease rentals are repayable as follows: Masterskill Education Group Berhad / Annual Report 2012 105 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) Group 31.12.2012 31.12.2011 1.1.2011 Rm’000 Rm’000 Rm’000 Less than one year 667 1,144 2,148 Between one and five years 29 486 431 696 1,630 2,579 The Group leases computer equipment and advertisement board under operating leases. The leases run for a period of 1 to 3 years with an option to renew the lease after that date. Lease payments are increased every 3 years to reflect market rentals. None of the lease includes contingent rentals. 25. COmmITmENTS 31.12.2012 Group 31.12.2011 1.1.2011 Rm’000 Rm’000 Rm’000 Capital commitments: Property, plant and equipment Contracted but not provided for 11,534 54,091 56,622 26. CONTINGENCIES The Directors are of the opinion that provisions are not required in respect of the following matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement. In October 2006, a subsidiary, Masterskill (M) Sdn. Bhd. (“Masterskill”) entered into a sale and purchase agreement (the “SPA”) with Kemacahaya Development Sdn. Bhd. (“KDSB”) and Syarikat Kemacahaya Sdn. Bhd. (“SKSB”), pursuant to which SKSB and KDSB agreed to sell six (6) property units at Jalan Kemacahaya 11, Taman Kemacahaya, Batu 9, 43200 Cheras, Selangor (the “Six Properties”) to Masterskill for RM2,000,000. The Six Properties are part of Masterskill’s current Cheras university college campus and KDSB and SKSB were the original developer and proprietor of the Six Properties. Upon the advice of Masterskill’s lawyers, Masterskill withheld payment of the balance purchase price for the Six Properties under the SPA due to a dispute with KDSB and SKSB. In November 2006, after Masterskill had lodged a caveat over the Six Properties, KDSB sought to terminate the SPA and repossess the Six Properties. They subsequently entered into a sale and purchase agreement to sell the Six Properties to Pasupathy a/l Kanagasaby (“K. Pasupathy”), who then sought possession of the Six Properties. At the same time, two individuals, Chin Yam Meng (“CYM”) and Leng Kok Onn (“LKO”), attempted to enter the premises of the Masterskill’s Cheras university college campus, claiming to be the lawful owners of the Six Properties due to arrangements that they had made with Megatalent Sdn. Bhd. (“Megatalent”) in 2004, pursuant to which Megatalent had purportedly assigned its rights to the Six Properties to CYM and LKO. By way of background, prior to the execution of the SPA, Megatalent had been KDSB’s and SKSB’s marketing agent for a number of properties, including the Six Properties. In connection with this marketing relationship and to facilitate the marketing of these properties, KDSB and SKSB had assigned or sold the properties, including the Six Properties, to Megatalent. However, the agreements pursuant to which these properties were assigned or sold to Megatalent were subsequently rescinded and the caveats which CYM and LKO had lodged over the Six Properties were removed in July 2006 prior to Masterskill entering the SPA.
Masterskill Education Group Berhad / Annual Report 2012 106 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) 26. CONTINGENCIES (Cont’d) In January 2007, Masterskill filed an application to the Kuala Lumpur High Court against KDSB, SKSB, K. Pasupathy, CYM and LKO seeking, among other things, a declaration that the SPA is still valid and subsisting, an interlocutory injunction to restrain KDSB and SKSB from terminating the SPA, and an injunction against CYM and LKO from entering the premises of Masterskill’s Cheras university college campus. With respect to the proceedings against CYM and LKO, on 6 August 2008, Masterskill withdrew the injunction application against them upon receipt of an undertaking by them not to enter the premises of Masterskill’s Cheras university college campus until the resolution of the proceedings. After the commencement of proceedings, Masterskill engaged in out of court discussions with KDSB and SKSB and in May 2008, KDSB, SKSB and Masterskill agreed to settle the claims. Pursuant to Masterskill’s settlement agreement, Masterskill would pay RM2,800,000 for the Six Properties. The sale under this settlement agreement is currently pending completion and Masterskill is expected to become the registered owner of the title to the Six Properties sometime in 2013. With respect to Masterskill’s proceedings against KDSB and SKSB, consent judgement was recorded on 14 July 2009 wherein KDSB and SKSB confirmed that Masterskill was the beneficial and legal owner of the Six Properties. In August 2009, K. Pasupathy filed an application to set aside the aforesaid consent judgement. His application was dismissed with costs in February 2011. With respect to the proceedings against K. Pasupathy, after Masterskill filed the original application, K. Pasupathy filed a counterclaim against Masterskill seeking vacant possession of the Six Properties. On 25 June 2008, Masterskill filed an application to strike out this counter-claim, which was rejected by the High Court in May 2009. At the same time, the High Court allowed an application made by K. Pasupathy to strike out Masterskill’s reply to K. Pasupathy’s defence. Masterskill have since appealed against both of these decisions. The High Court has on 13 September 2010 dismissed Masterskill’s application to set aside K. Pasupathy’s Judgement in Default dated 13 May 2009 with costs of RM5,000. The Court of Appeal had on 13 August 2009 stayed the effects of the Order which was obtained by K. Pasupathy to strike out Masterskill’s defence. The Court of Appeal’s decision is still in effect. The Court of Appeal fixed this matter for hearing of the intervener’s appeal on 21 June 2013 and further Case Management on 27 June 2013. The matter is further fixed for Case Management on 23 June 2013 pending the outcome of all the Appeals at the Court of Appeal. 27. RElATED pARTIES Identity of related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control. Related parties may be individuals or other entities. Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. Key management personnel includes all the Directors of the Group, and certain members of senior management of the Group. The Group has related party relationships with its significant investors, subsidiaries and key management personnel.
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