In Eastern Platinum Limited v. Ren, 2024 BCCA 109, the BC Court of Appeal confirmed that where one activist shareholder’s proxy fight and subsequent derivative action fails, another shareholder represented by the same legal counsel can successfully obtain leave to bring a very similar derivative action.


The Company, Eastern Platinum Limited (EPL), owns a platinum and chrome mine in South Africa. The Mine ceased operations in 2013 and activities at the Mine had been limited to care and maintenance.

In 2016, Rong Kai Hong, through his company 2538520 Ontario Limited (253), attempted to control EPL through a proxy battle. Mr. Hong’s faction lost the proxy battle to another shareholder, Ka An Development Co. Ltd. (Ka), whose slate of directors was appointed. Diana Hu was appointed CEO.

In 2017, EPL obtained a feasibility study which projected that chrome could be extracted from tailings using existing retreatment equipment. Rather than acting on the study, the Company entered into a contract with Union Goal to construct a new plant and purchase new equipment. Under the contract, Union Goal could buy any recovered chrome. The new plant was built, equipment was purchased, and the extraction of chrome began in 2019.

The First Derivative Action

In 2018, 253 asked the Company to commence proceedings against the directors and officers involved in approving the Union Goal contract. The Company formed a special committee to consider the allegations.

Before the committee completed its deliberations, 253 sought leave to commence a derivative action. 253 alleged that Diana Hu and six other directors negligently failed to conduct sufficient due diligence and breached their fiduciary duties by entering into the Union Goal contract. The special committee later found it would not be in the Company’s best interests to commence proceedings against the proposed defendants.

In 2019, the BCSC heard and dismissed 253’s petition. 253 had failed to establish that it was acting in good faith because Mr. Hong had already attempted and failed to take control of the Company in 2016.

After the BCSC dismissed 253’s petition for a derivative action, 253 issued a press release inviting other shareholders to contact the law firm retained in the First Derivative Action to “assist in pursuing leave to commence a similar derivative action”.

The Second Derivative Action

The press release came to the attention of Xiaoling Ren (the Applicant), another shareholder of EPL, who retained the same law firm as 253. The Applicant asked the Company to commence an action against its directors. In response, EPL formed a second special committee comprised of a single director who had been a member of the first special committee. The director concluded that no new information had come to light which would alter the first special committee’s conclusion and the Company declined to commence an action against its directors.

The Applicant then filed a petition naming Ms. Hu and six other directors of EPL as defendants. The Applicant alleged that the Union Goal contract would result in a loss of $2 to $50 million dollars, potentially leading to the Company’s insolvency or a takeover by Union Goal. Further, the Applicant alleged that the defendants failed to conduct appropriate due diligence and breached their fiduciary duty. The action was “very similar” to the First Derivative Action and included identical claims of negligence.

New Evidence

Just two weeks after filing the petition, the Applicant’s law firm received an unsolicited email from Anton Lubbe, a senior officer of EPL’s subsidiary responsible for the Mine, with a copy of his resignation letter (the Lubbe Letter). The Lubbe Letter alleged that Ms. Hu was in a conflict of interest and that negotiations with Union Goal under Ms. Hu were not in EPL’s best interest. The Lubbe Letter identified numerous examples of misconduct, including that Ms. Hu directed Mr. Lubbe to manipulate models. Mr. Lubbe stated he felt “obligated to resign” to avoid any further conflict with his fiduciary, safety and health responsibilities.

The BCSC Decision

The BCSC found that the Applicant brought her application in good faith and that her motives were not tainted by the fact that she was represented by the same firm who acted for 253 or that her pursuit of the claim was informed by 253’s earlier derivative action. The judge rejected the Company’s abuse of process argument because on the evidence, the second shareholder had different personal circumstances and the Second Derivative Action included a claim for breach of fiduciary duty based upon the allegations set out in the Lubbe letter that was not advanced in the First Derivative Action.

The Court granted leave to the Applicant to bring a derivative action. EPL appealed this decision.

The BCCA Decision

The BCCA dismissed the Company’s appeal, holding that deference is owed to the BCSC’s discretionary decision to grant leave to bring a derivative action. The lower court had appropriately weighed the potential benefits of the claim against the cost and inconvenience of EPL pursuing the action.

The Company argued that the judge erred in failing to apply the business judgment rule and defer to the special committee’s recommendation against proceeding with the proposed action. Rejecting the Company’s argument, the BCCA found it was reasonable for the lower court to conclude that the Company had failed to advance sufficient evidence about the specific information that was considered by the special committee. Without that evidence, he could not defer to the judgment of the special committee. While full disclosure is neither necessary nor appropriate on a leave application, the Company is still obliged to provide sufficient evidence to enable the court to assess the “rigour and reasonableness of the committee’s process and conclusions.” By failing to adduce the documents that the special committee relied upon, the Court was unable to assess whether the special committee meaningfully considered the Lubbe Letter, so it was reasonable for the Court to grant leave.

Key Takeaways

The EPL decision demonstrates that a separate shareholder may be granted leave to pursue a similar derivative action to that of another shareholder that had been denied leave, and can even use the same legal counsel, as long as (a) the legal requirements for leave are met; (b) the personal circumstances of the second shareholder are sufficiently different than those of the first shareholder; and (c) the claim advances sufficiently different allegations. Companies resisting an application for leave to bring a derivative action should strongly consider producing all relevant documents considered by the Company and any special committee (subject to privilege) in arriving at a decision not to pursue an action against its directors, to ensure that the Court has sufficient evidence to apply the business judgment rule and accord the appropriate deference to the Company’s decision.