A Grand Field of shenanigans - would you invest in this crap?

Grand Field founder sues directors over transactions
Legal action employs rarely used section of company law
Nick Gentle and Peter Brieger
Mar 20, 2009     


In what is believed to be the first action of its kind in Hong Kong, the directors of listed Grand Field Group Holdings are being sued by a shareholder who is acting on behalf of the property developer.

A writ filed in the High Court on Wednesday used a rarely employed section of the Companies Ordinance that allowed company founder Wayland Tsang Wai-lun to launch the action over a series of allegedly improper transactions on behalf of Grand Field.

Tsang had to convince the court that his serious allegations against eight Grand Field directors, including chairman Chu King-fai, would be in the interests of the company before it could proceed, said Phillip Nunn, a lead partner for the case at solicitors Huen Wong & Co.

"Before [laws that allowed this kind of lawsuit] it would have been very difficult for an individual shareholder to bring such an action for misfeasance against the directors of a company," Mr Nunn said.

Tsang and his wife, Nancy Kwok Wai-man, who hold 22 per cent of Grand Field shares, were forced to step down as company directors in July 2007, just two weeks before they were charged with defrauding shareholders by the Independent Commission Against Corruption.

The couple has been engaged in litigation with the board ever since, and needed special permission from the High Court to bring this week's action.

The writ alleges Mr Chu and seven other present and former directors approved the transfer of HK$70 million to an illegally registered Shenzhen company.

Some of that money ended up in the hands of companies indirectly controlled by Grand Field's chairman, it alleged.

Mr Chu, the writ says, gave the directors sums of money, disguised as payments for expenses or overtime, so they would approve the payments.

The named directors were Huang Bing-huang, Vincent Au Kwok-chuen, Hwang Ho-tyan, Zhao Juqun, Yang Biao, Wong Yun-kuen and Mok King-tong.

In December, Grand Field filed a writ against the couple, alleging they defrauded shareholders and company directors.

The Tsangs, who were also accused of lying to stock market regulators, allegedly told the exchange that Grand Field wanted to issue 315 million new shares to finance an investment in a HK$63 million Chongqing gas pipeline project.

But that deal never existed, according to the allegations. The couple also sold Grand Field's Chintex unit at a loss to keep market regulators from probing the pipeline deal, according to the lawsuit.

Also charged in connection with the case was Li Tai-pang, former representative of Sino Richest; Charles Cheng Kai-ming, executive director of locally listed financial services provider Upbest Group; George Li Kwok-cheung, executive director of Upbest; and David Wong Wai-kwong, an independent director at Upbest.