Shareholders drop suit against China Resources Power directors but may launch a wider one
Shareholders withdraw claim of breach of fiduciary dutiesafter judge refuses to add new allegations to the original complaint
Six minority shareholders of China Resources Power have withdrawn their claim of a breach of fiduciary duties by the firm's directors after the High Court judge rejected an application to add new allegations to the original complaint.
Mr Justice Jeremy Poon Shiu-chor said the six could bring a new case with fresh allegations, but one of the shareholders said the group would find it hard to fund a new court action.
The shareholders wanted the court to consider in the original action, launched in July last year, various new allegations, including that CRP's directors had lied about the firm's control over a coal joint venture it entered into in 2010.
"There is absolutely no reason for the court not to accept that [new information]," said Edward Chan, counsel for the shareholders, adding the original court action had been unable to include allegations that CRP directors had lied because they had only obtained two letters contradicting the directors' claims last month. He said because the new information was highly relevant to the original action, the case would not receive a fair hearing if it was excluded.
The directors had said the company had a 25 per cent interest in the venture, while the two letters showed it had 52 per cent.
Sources close to CRP said in October that it had no such letter on file, adding it could not be ruled out that the letter purportedly from the firm was fabricated or had been written by employees without authorisation.
"We are still investigating the matter [about the leaked letters]," a CRP source said at the time. "In any case, the general manager of China Resources Coal ultimately responsible for obtaining permits had been suspended."
Benjamin Yu, counsel for CRP, argued in October that since the company did not have control over the venture, its directors should not be directly held responsible for its operation.
Sze Ching-lok, one of the shareholders, said after the ruling that he would discuss initiating another case with the other five.
"This is possible, but we are facing some financial challenges to continue litigating," he said, adding that the court action had cost them more than HK$2 million so far.
The venture was formed in April 2010 to acquire an 80 per cent stake in a basket of coal mining and processing assets from Shanxi Jinye for 7.9 billion yuan (HK$10 billion).
The shareholders alleged the directors should have sought to cancel the deal and recover 3.9 billion yuan that had been paid as the exploration permits of two of the mines had expired. They claimed to have suffered losses as a result.
The permits were reissued by the Shanxi government on July 25 last year. Poon ruled that the shareholders would be responsible for court costs incurred after July 25, while CRP would bear costs up to that day.
Allegations that were expunged by Poon yesterday include improper pre-payments to Shanxi Jinye, failure by the venture to pay 1 billion yuan on behalf of Shanxi Jinye, which owed the sum to Datong Coal Mining, losses suffered by CRP due to the production delay in the coal mines and irregularities in the permit renewal process.