Negligence; Breach of Statutory Duty
Conso Electronics (Far East) Limited v. G.R. Dias-Azedo and K.W. Page
The Supreme Court of Hong Kong, High Court Action No. A422 of 1995
Counsels for Plaintiff: Horvath & Giles; Milbank, Tweed, Hadley & McCloy
Expert for Plaintiff: Marc S. Margulis, C.F.A., A.S.A., M.B.A.
Counsel for Defendants: Barlow Lyde & Gilbert
Expert for Defendants: Deloitte & Touche
Plaintiff was a company incorporated in Hong Kong. Liquidation of the company was to be accomplished by the first and second defendants as Special Managers and liquidators appointed by the Official Receiver. Prior to commencement of the liquidation, two associated U.S. companies were indebted to the plaintiff, which indebtedness was subsequently settled by the issuance to plaintiff of 600,000 shares of Viral Testing Systems Corporation (“VTS”) common stock, a Delaware corporation traded on the AMEX. The 600,000 shares of VTS common, representing 10.6% of the public float, were unregistered and, therefore, restricted from sale to the public pursuant to Rule 144 of the Securities Act of 1933. The shares were further restricted by contract with the issuer.
At the time of the defendants’ appointments, the subject VTS shares had not yet been conveyed to the plaintiff. Defendants did not gain custody of the VTS shares until approximately one year had elapsed during which time the company’s unrestricted shares ranged in price from a high of $2-5/16 to a low, at the time that the defendants gained custody, of $5/8. Approximately 45 days thereafter, the AMEX suspended trading of VTS shares, ultimately delisting it. Subsequently, VTS filed for bankruptcy protection.
Mr. Margulis was engaged by plaintiff to express opinions as to (i) the procedures available to the defendants to liquidate the VTS shares, and (ii) the fair market value of the VTS shares on two specific dates with consideration of the size of the block of stock, the contractual restrictions and the relative illiquidity associated with unregistered, restricted stock of an otherwise publicly traded company. Furthermore, he was asked to express its opinion of the fair market value of the VTS shares if sold by the defendants in a private placement to a qualified foreign buyer pursuant to Rule 904 and thereby freely resalable in the United States by such foreign buyer.
This matter was settled for an undisclosed amount paid by defendants to plaintiff.