(1) Maso Capital Investments Ltd v Qunar Cayman Islands Ltd
| Jurisdiction | Cayman Islands |
| Judge | Ingrid Mangatal |
| Judgment Date | 08 August 2017 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | FSD 76 of 2017 (RPJ) |
| Date | 08 August 2017 |
In the Matter of the Companies Law (2016 Revision)
In the Matter of Qunar Cayman Islands Limited
The Hon. Justice Ingrid Mangatal
FSD 76 of 2017 (RPJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Fair value proceedings under section 238 of the Companies Law (2016 Revision) — Application for interim payment under O. 29, r.10 and 12(c) of the Grand Court Rules — Jurisdiction-Discretion
Previous decision of Court of concurrent jurisdiction — Second Court not bound by first decision, but should follow decision of first Court unless convinced that it is wrongly decided — Judicial Comity
Mr. Robert Levy QC instructed by Mr. Rocco Cecere of Mourant Ozannes on behalf of the Dissenters/ Applicants
Mr. Terry Mowschenson QC instructed by Mr. Paul Madden and Mr. Lachlan Greig of Harneys on behalf of the Respondent Company
By agreement, two Petitions, FSD 73 and FSD 76 of 2017 have been consolidated and bear the consolidated title of FSD 76 of 2017.
Both Petitions were filed on the same day. FSD 76 of 2017 was filed by Qunar Cayman Islands Limited (“the Company”) and seeks the Court's determination of the fair value of the shares of a number of shareholders (the “Dissenting Shareholders”) who have all dissented to the merger of Ocean Management Merger Sub Limited (“Merger Sub”) with and into the Company. The Dissenting Shareholders include Maso Capital Investments Limited (“MCIL”) and Blackwell Partners LLC — Series A (“Blackwell”) (together “the Applicants”). FSD 73 OF 2017 was filed by the Applicants and also seeks that the Court determine the fair value of the shares.
The Petitions are filed pursuant to section 238(9) of the Companies Law (2016 Revision) (“the Law”).
By a summons for interim payment dated 27 April 2017, filed in FSD 73 of 2017, the Applicants apply pursuant to Order 29, rules 10 and 12(c) of the Grand Court Rules (1995 Revision) (“the GCR”) for the Company to be ordered to make interim payments of US$4,102,650.00 to MCIL, and US$5,897,361.84 to Blackwell. In the alternative, the Applicants ask that the Company be ordered to pay, by way of interim payment, such sums as the Court considers just.
The Applicants also seek their costs of and incidental to the application, on an indemnity basis, to be taxed if not agreed.
The application is supported by the Second Affidavit of Manoj Jain (“Jain 2”), the Co-Chief Investment Officer of Maso Capital Partners Limited (“ Maso”), the Investment Adviser for MCIL and the Investment Manager for Blackwell. There is also the affidavit of Jessica McKenzie Bush, an associate at Mourant Ozannes, Attorneys for the Applicants, whose affidavit simply exhibits correspondence.
An affidavit has been filed by the Company in response, being that of Xiaolu Zhu, the Company's Chief Financial Officer. This affidavit speaks to costs incurred by the Company to date, and an estimate of costs up to and including trial.
The Company is a Cayman Islands exempted limited company whose operations and business have largely been conducted in the People's Republic of China (“the PRC”). The Company describes itself as “one of the leading mobile and online commerce platforms for travel in China.”
Until the completion of the merger transaction described in Jain 2, the Company's American Depository Shares (“ ADS”) were listed on the NASDAQ Global Market Exchange. Each ADS represented three Class B ordinary shares in the Company.
MCIL held 405,000 Class B ordinary shares, and Blackwell held 582,168 Class B ordinary shares.
All the relevant steps required under section 238 of the Law have been taken, allowing the proceedings to reach the Court for appraisal of the fair value of the Dissenting Shareholders' shares.
Order 29, rule 18 makes it plain that Order 29 refers to proceedings begun otherwise than by Writ, even though rule 10 refers to applications being made in a Writ action. Order 29, rules 10 (1)–(3) of the GCR provide as follows:
“ Application for interim payment (O. 29, r.10)
10. (1) The plaintiff may, at any time after the writ has been served on a defendant and the time limited for him to acknowledge service has expired, apply to the Court for an order requiring the defendant to make an interim payment.
(2) An application under this rule shall be made by summons but may be included in a summons for summary judgment under Order 14 or Order 86.
(3) An application under this rule shall be supported by an affidavit which shall—
(a) verify the amount of the damages, debt or other sum the application relates to and the grounds of the application; and
(b) exhibit any documentary evidence relied on by the plaintiff in support of the application.
……”
Order 29, rule 18 provides as follows:
“Counterclaims and other proceedings (O. 29, r. 18)
18. The preceding rules in this Part of this Order shall apply with the necessary modifications, to any counterclaim or other proceeding otherwise than by writ, where one party seeks an order for an interim payment to be made by another.”
Order 29, rule 12(c) provides as follows:
“Order for interim payment in respect of sums other than damages (O. 29, r. 12)
12. If on the hearing of an application under rule 10, the Court is satisfied—
…
(c) that if the action proceeded to trial the plaintiff would obtain judgment against the defendant for a substantial sum of money apart from any damages or costs,
the Court may, if it thinks fit, and without prejudice to any contentions of the parties as to the nature or character of the sum to be paid by the defendant, order the defendant to make an interim payment of such amount as it thinks just, after taking into account any set-off, cross-claim or counterclaim on which the Defendant may be entitled to rely.”
Order 29, rule 9 provides the meaning of “interim payments” as follows:
“II. INTERIM PAYMENTS
Interpretation of Part II (O. 29, r.9)
9. In this Part of this order—
“interim payments,” in relation to a defendant, means a payment on account of any damages, debt or other sum (excluding costs) which he may be held liable to pay to or for the benefit of the plaintiff …”
The main issues on this application, as fleshed out in the arguments advanced on both sides, are as follows:
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(1) Does the Court have jurisdiction to award an interim payment in section 238 proceedings?
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(2) If the Court does have that jurisdiction, should it exercise its discretion to do so?
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(3) Is there an evidential basis, or sufficient evidential basis, upon which the Court can decide what is a “just” sum?
At the hearing, I referred both sides to section 20 of the Grand Court Law in its current Revision, the 2015 Revision. That section embodies the primary legislation which allows for interim payments to be made. Section 19 of the Grand Court Law empowers the Rules Committee to make rules of court and this included the power to make the interim payment Rules embodied in Order 29. Section 20 provides as follows:
“Orders for interim payments
20 (1) The power to make Rules under section 19 shall include power to make provision for enabling the Court, in such circumstances as may be specified in such Rules, to make an order requiring a party to any proceedings pending before it make an interim payment of such amount as may be specified in the order, either by payment into Court or (if the order so provides) by paying it to another party to the proceedings. (2) Rules made under subsection (1) may include—
(a) provision for enabling the party who, in pursuance of such order, has made an interim payment to recover the whole or part of the amount thereof in such circumstances as may be determined in accordance with the Rules; and
(b) such incidental, supplementary and consequential provisions as the Rules Committee may consider necessary or expedient.
…….
(4) In this section—
(a) “interim payment” means a payment on account of any damages, debt or other sum (excluding any costs) which a party to any proceedings may be held liable to pay to or for the benefit of another party to the proceedings if a final judgment or order of the Court in the proceedings is given or made in favour of that other party;
……”
Mr. Levy QC, who represents the Applicants, submits that Order 29 of the GCR provides the Court with jurisdiction. He relies upon the recent decision of Quin J in In the Matter of Qihoo 360 Technology Company Limited FSD 129 of 2016 (IMJ), unreported, delivered 26 January 2017. Mr. Levy QC also appeared for the dissenting shareholders in Qihoo who, incidentally, are the same dissenting shareholders, the Applicants, in respect of the instant application.
The Applicants rely upon the fact that the Company has on numerous occasions, expressly stated that, so far as it is concerned, the merger price is the fair value of the shares for the purposes of the proceedings under section 238 of the Law. In particular, the Applicants refer to the following:
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(a) S. 2.07 of the Agreement and Plan of Merger where it is stated “Agreement of Fair Value. Parent, Merger Sub and the Company respectively agree that the Per Share Consideration represents the fair value of each of the Shares for the purposes of Section 238(8) of the CICL [Cayman Islands Companies Law].”
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(b) The Proxy Statement, that provided “In addition, in any proceedings for determination of the fair value of the Shares covered by any Notice of Dissent, the Company and the Buyer Group intend to...
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