Contaminated capsules made by well-known Chinese medicine manufacturer Li Chung Shing Tong resulted from the unauthorised subcontracting of the refining of ingredients to an unregistered factory on the mainland, according to a court document.
Mr Justice Jonathan Harris, in the Court of First Instance, yesterday allowed younger members of the family that controls the drug maker - which produces the famous Po Chai pills - to sue its directors for breach of duty, including their stepmother Karen Lee, the largest shareholder. The pills were recalled in March last year after phenolphthalein - linked to cancer - and the anti-obesity drug sibutramine, were detected in the pills.
The court granted permission to Stewart Lee Leung-nang, Alfred Lee Cheung-nang and Albert Li Tai-sang - who together hold a 20 per cent stake in the company - to sue Karen Lee, Derek Wong Ping-ching and two companies linked to Li Chung Shing Tong, PCHT Herbal Sciences and Wishland.
Harris wrote: 'In the present case, in my view, there is a strong case that one or other of the putative defendants has breached a duty to the company. On the face of it, one or more people within the company's senior management failed to exercise due diligence to ensure the safety and quality of the manufacturing of the capsules.'
An internal investigation by the company found that the tainted capsules were produced from powder supplied by an unauthorised subcontractor.
The document showed that Thomas Zheng, a friend of Wong, was given the contract to mill the ingredients but Zheng, in an alleged fraud, subcontracted the service to a factory called Guangdong Shijiang Biotechnology.