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Ren v. Eastern Platinum Limited, 2023 BCSC 404 and 2023 BCSC 706

Ren v. Eastern Platinum Limited, 2023 BCSC 404 and 2023 BCSC 706

In these decisions, the Supreme Court of British Columbia granted an application for leave to commence a derivative action against the former CEO of Eastern Platinum Limited (EPL) framed in negligence and breach of fiduciary duty.

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EPL, a B.C. public company, owned the right to conduct mining operations at a platinum and chrome mine in South Africa (Mine) through a subsidiary. The petitioner, Ms. Ren, a shareholder of EPL, alleges that the present and former directors of EPL acted negligently and in breach of their fiduciary duties by causing the company to enter into agreements with Union Goal Offshore Limited (Union Goal) for the exploitation of mine tailings at the Mine. Ms. Ren contends that EPL suffered loss as a result of the agreements and sought leave to commence a derivative action under s. 232 of the B.C. Business Corporations Act in EPL’s name against the directors. Ms. Ren’s initial draft claim named seven defendants and was based in negligence (against all directors) and breach of fiduciary duty (against Ms. Hu only). EPL opposed the application on the basis it was simply a different version of the same application that had been dismissed in 2538520 Ontario Ltd. v. Eastern Platinum Limited, 2019 BCSC 1446 (Hong Proceeding) and upheld by a majority of the Court of Appeal in 2020 BCCA 313,[1] and, therefore, it was an abuse of process. In the alternative, EPL argued that Ms. Ren had not satisfied all statutory prerequisites to her application.

The Court held that Ms. Ren’s application was not an abuse of process. First, the application for leave to commence a derivative action in the Hong Proceeding failed on a basis personal to the petitioner in that case. Second, Ms. Ren’s draft claim advances allegations of breach of fiduciary duty that were not included in the Hong Proceeding. These new allegations were added by Ms. Ren after receipt of a copy of a resignation letter from a senior officer of EPL’s subsidiary (Lubbe Letter). The Lubbe Letter alleges that Ms. Hu, the former CEO of EPL, was in a conflict of interest as a result of her relationship with EPL’s controlling shareholder, Ka An Development Co. Ltd. (Ka An), and Union Goal, and that in her role as CEO, she directed the negotiations with Union Goal contrary to EPL’s interests. The letter further alleged that Ka An and Union Goal were related and that benefits to Union Goal would ultimately benefit Ka An by allowing Ka An to increase its ownership interest in EPL. In her draft claim, Ms. Ren alleged that Ms. Hu was acting in the best interest of Union Goal and Ka An in breach of the fiduciary duty Ms. Hu owed to EPL, based on information contained in the letter.

With respect to the test for leave to commence a derivative action, the Court held that it was in the best interests of EPL to pursue a claim against Ms. Hu for negligence and breach of fiduciary duty but to abandon the negligence claim for the other defendants. In this regard, the Court found that the Lubbe Letter provides a reasonable evidentiary foundation against Ms. Hu for breach of fiduciary duty. The Court also found that the proposed claim in negligence has a reasonable prospect of success, although it is substantially weaker than the breach of fiduciary duty claim against Ms. Hu and the business judgment rule “remains a formidable obstacle.” The Court also found that Ms. Ren brought the application for leave in good faith. Ms. Ren amended her draft claim to take into account the Court’s initial ruling, and the Court granted leave to commence a derivative action against Ms. Hu in supplementary reasons.

EPL has appealed, which remains pending before the B.C. Court of Appeal.

[1] Application for leave to appeal to SCC refused: 2021 CanLII 44590 (SCC). We discuss the B.C. Court of Appeal’s decision in Mining in the Courts, Vol. XI.

Mining in the Courts, Vol. XIV

Mining in the Courts, Vol. XIV




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