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9 February 20214 minute read

DLA Piper helps CAPE win High Court claim for seller misrepresentation

DLA Piper has advised China Agri–Products Exchange Ltd (CAPE), a company listed on the Hong Kong Stock Exchange, on a complex cross border litigation heard in the High Court of Hong Kong. In January 2021, the court granted a judgment in the client’s favour with a damage award totaling more than RMB510 million in addition to legal costs.

The claim on behalf of CAPE, which commenced 10 years ago, concerned a M&A project in relation to a PRC company called Wuhan Baishazhou Agricultural By-Product Grand Market Co Ltd (BSZ) which took place in 2007, in which CAPE was the buyer who acquired a 90% interest in BSZ from the sellers, Madam Wang Xiu Qun and Wuhan Tianjiu Industrial Trade Company Limited. After CAPE obtained control over BSZ, the company discovered that, amongst other things, the assets and income of BSZ as stated in the management accounts provided by the sellers had been falsely inflated by firstly, the incorporation of inflated and fictitious construction costs and secondly, the inclusion of income which was not genuine. The extent of falsification was substantial. CAPE was of the view that it had paid considerably more for the 90% interest in BSZ than it was actually worth. CAPE’s claim against the sellers was for, amongst other things, damages arising from misrepresentation and breach of warranties.

DLA Piper also advised CAPE in defending a counterclaim brought by the sellers for a reversal of the M&A project and balance of purchase price under two promissory notes of HKD376 million in total together with interest.

The DLA Piper team was led by Hong Kong based Litigation and Regulatory partner Harris Chan, supported by KC Tai (Of Counsel), Rita Chow (Associate) and Yolanda Wong (Trainee solicitor).

Harris Chan commented: “We commenced our claim on behalf of CAPE 10 years ago and we are delighted to have achieved this outstanding outcome for the company. The international team has worked tirelessly and often against tight deadlines, culminating in a 30 day trial. This really has brought out the best that DLA Piper has to offer.”