Messy?? Former Stockholders Sue Wave Energy's Directors
By James Mahony
Former shareholders of a Calgary-based junior are suing its former board members on the grounds that shareholders did not get full value when the company was taken over by Crescent Point Energy Corp. three years ago.
In particular, former shareholders of Wave Energy Ltd. allege that, just before Crescent Point took over the company in late 2009, Wave's directors improperly sold or transferred "significant assets" to a new company, Coral Hill Energy Inc., created by Wave's directors. Wave's former shareholders are claiming $450 million in damages plus legal costs.
Court documents filed in the lawsuit recite a long list of allegations against Wave's former management and directors, including negligence, mismanagement, breach of trust, breach of fiduciary duty and conflict of interest, to name a few. None of the allegations has yet been proven.
Crescent Point is not named in the lawsuit, which targets Wave's former directors, including Don Rae, the company's former president and chief executive, who now occupies the same positions at Coral Hill. Also named in the lawsuit are former Wave directors Hank Swartout, Kyle Kitigawa, Graham Weir and Bryan Clake.
On Aug. 4, 2009, Crescent Point made a formal bid for Wave, which was accepted by Wave's board of directors on Aug. 21, and Crescent Point closed the deal on Oct. 22 by acquiring Wave's shares in a share exchange deal. Yet, between Aug. 4 and Oct. 22, 2009, much is alleged to have happened, including the formation by Wave's directors of the new company, Coral Hill Energy, also named as a defendant in the lawsuit.
The former Wave shareholders allege that Wave's directors used the junior as a tool to build a portfolio of oil resource plays and mineral rights with which to seed Coral Hill. Before the deal with Crescent Point closed, Wave acquired about 1,280 hectares of oil and gas rights over five sections of the Beaverhill Lake play, the former shareholders allege in court documents filed June 11, 2012.
According to Don Rae, 100 per cent of Wave's shareholders voted in favour of the sale to Crescent Point, including former Wave shareholder Edward Robert Fisher, the only plaintiff named in the lawsuit. Lawyers acting for Fisher did not return the Bulletin's calls, and Fisher himself could not be reached.
Although the only named plaintiff, Fisher is also a representative plaintiff, meaning he is suing on his own behalf and on behalf of other shareholders not named in the statement of claim. Fisher held just 10,000 shares in Wave Energy, a relatively small number.
In a brief written statement, Coral Hill Energy's executives dismissed Fisher's lawsuit as "completely baseless and without merit," promising that Wave's former directors would "vigorously defend" themselves against the action.
The number of defendants -- currently, eight -- named in the lawsuit may yet expand, since court documents filed on the shareholders' behalf are drafted so as to allow more defendants to be added later.