Homeinns Hotel Group Petitioner v 1. Maso Capital Investments Ltd 2. Blackwell Partners LLC – Series A 3. Crown Managed Accounts SPC Acting for and on Behalf of Crown/Maso Segregated Portfolio Respondents
| Jurisdiction | Cayman Islands |
| Judge | The Hon. Justice Mangatal |
| Judgment Date | 07 February 2017 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO FSD 75 of 2016 (IMJ) |
| Date | 07 February 2017 |
In the Matter of Part XVI of the Companies Law (2013 Revision)
And in the Matter of Homeinns Hotel Group
The Hon. Justice Ingrid Mangatal
Company Law — Section 238 — Court's function to determine fair value of shares of Dissenting Shareholders — Summons for Directions — Discovery — Factual Evidence .
Mr. R Hacker QC instructed by Mr. P Madden of Harneys for the Petitioner.
Mr. R Levy QC instructed by Mr. A Heaver-Wren and Mr. A Jackson for the Respondents
This is an application for directions in proceedings commenced by the Petitioner Homeinns Hotel Group (“the Petitioner”/ “Homeinns”) pursuant to section 238 of the Companies Law (2013 Revision) (“the Companies Law”). The purpose of the proceedings is to seek a determination by the Court of the fair value of the Dissenting Shareholders' (Maso Capital Development Limited, Blackwell Partners LLC — Series A, and Crown Managed Accounts SPC Acting for and on behalf of Crown/Maso Segregated Portfolio (“the Dissenting Shareholders”)) shares in Homeinns and a fair rate of interest (if any) upon the fair value so determined.
The Petitioner filed the Petition on 30 May 2016 as required by section 238(9). According to the written submissions of the Petitioner, the Petitioner did not file a summons for directions at the same time as the Petition as there is no requirement to do so under the GCR or the Companies Law; instead the Petitioner requested that the Court list the Petition for a directions hearing. This hearing was fixed for 5 August 2016. However in the meantime, the Dissenting Shareholders filed a summons for directions on 20 June 2016 and requested an earlier hearing, which has taken place. The Dissenting Shareholders' summons sets out the issues for determination as follows:-
“An application by the Respondents for directions to be given for the hearing of the Petition, including inter alia, the following:-
(1) The manner in which evidence is to be given.
(2) Directions as to discovery and inspection of documents.
(3) Directions as to permission to adduce expert evidence, the service of expert reports, meetings between experts and preparation of a joint expert report.
(4) Such further or other orders and directions as the Court shall think fit.
(5) That the costs of this application be costs in the Petition.”
The relevant sections of the Companies Law are Part XVI — Merger and Consolidation, sections 232 and 238 which read as follows:-
“ Definitions:
232. In this Part –
………………………………………
“constituent company” means a company that is participating in a merger or consolidation with one or more other companies….”
Rights of Dissenters
“238. (1) A member of a constituent company incorporated under this Law shall be entitled to payment of the fair value of his shares upon dissenting from a merger or consolidation.
(2) A member who desires to exercise his entitlement under subsection (1) shall give to the constituent company, before the vote on the merger or consolidation, written objection to the action.
(3) An objection under subsection (2) shall include a statement that the member proposes to demand payment for his shares if the merger or consolidation is authorised by the vote.
(4) Within twenty days immediately following the date on which the vote of members giving authorisation for the merger or consolidation is made, the constituent company shall give written notice of the authorisation to each member who made a written objection.
(5) A member who elects to dissent shall, within twenty days immediately following the date on which the notice referred to in subsection (4) is given, give to the constituent company a written notice of his decision to dissent, stating:-
a. his name and address:
b. the number and classes of shares in respect of which he dissents; and
c. a demand for payment of the fair value of his shares.
(6) A member who dissents shall do so in respect of all shares that he holds in the constituent company.
(7) Upon the giving of a notice of dissent under subsection (5), the member to whom the notice relates shall cease to have any of the rights of a member except the right to be paid the fair value of his shares and the rights referred to in subsections (12) and (16).
(8) Within seven days immediately following the date of the expiration of the period specified in subsection (5), or within seven days immediately following the date on which the plan of merger or consolidation is filed, whichever is later, the constituent company, the surviving company or the consolidated company shall make a written offer to each dissenting member to purchase his shares at a specified price that the company determines to be their fair value; and if, within thirty days immediately following the date on which the offer is made, the company making the offer and the dissenting member agree upon the price to be paid for his shares, the company shall pay to the member the amount in money forthwith.
(9) If the company and a dissenting member fail, within the period specified in subsection (8), to agree on the price to be paid for the shares owned by the member, within twenty days immediately following the date on which the period expires:-
a. the company shall (and any dissenting member may) file a petition with the Court for a determination of the fair value of the shares of all dissenting members; and
b. the petition by the company shall be accompanied by a verified list containing the names and addresses of all members who have filed a notice under subsection (5) and with whom agreements as to the fair value of their shares have not been reached by the company.
(10) A copy of any petition filed under subsection (9)(a) shall be served on the other party; and where a dissenting member has so filed, the company shall within ten days after such service file the verified list referred to in subsection (9)(b).
(11) At the hearing of a petition, the Court shall determine the fair value of the shares of such dissenting members as it finds are involved, together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be the fair value.
(12) Any member whose name appears on the list filed by the company under subsection (9)(b) or (10) and who the Court finds are involved may participate fully in all proceedings until the determination of fair value is reached.
(13) The order of the Court resulting from proceedings on the petition shall be enforceable in such manner as other orders of the Court are enforced, whether the company is incorporated under the laws of the Islands or not.
(14) The costs of the proceedings may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances; and upon application of a member, the Court may order all or a portion of the expenses incurred by any member in connection with the proceeding, including reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares which are the subject of the proceeding.
(15) Shares acquired by the company pursuant to this section shall be cancelled and, if they are shares of a surviving company, they shall be available for re-issue,
(16) The enforcement by a member of his entitlement under this section shall exclude the enforcement by the member of any right to which he might otherwise be entitled by virtue of his holding shares, except that this section shall not exclude the right of the member to institute proceedings to obtain relief on the ground that the merger or consolidation is void or unlawful.”
In In re Charm Communications Inc FSD 149 of 2014(IMJ), (unrep), delivered 26 February 2015, cited by the Petitioner's Counsel, I made directions at a time when there had not yet been any decided local cases in relation to section 238 applications, although there had been directions given in In the Matter of Integra Group FSD 92 OF 2014(AJJ). I opined, in response to submissions in that case, that directions given in any other case are not to be regarded as “precedents”. To my mind, that was stating the obvious. However, quite obviously also, if an order for directions made in a previous case appears appropriate for the case currently before the Court, and appears to achieve the overriding objective of dealing with cases in a just, expeditious and economical way, then the Court will make such directions. Equally plain is that by the nature of these types of cases, there will be some orders that are, or may become, for want of a better term, “standard” (as opposed to being precedents), in what may properly be described as the “usual” type of case. However, the point is that the Court will make directions that accord with the overriding objective of dealing with each particular case in a just, expeditious and economical way.
I think that it is appropriate to also remember that the overriding objective stated in the Preamble to the Grand Court Rules 1995(Revised Edition), at paragraph 3, also imposes a duty on the parties as follows:
“3. Duty of the parties
The parties are obliged to help the Court to further the overriding objective. In applying the Rules to give effect to the overriding objective the Court may take into account a party's failure in this respect.”
I have considered the eleven pages of submissions on the part of the Petitioner, and twenty-two pages of submissions on the part of the Dissenting...
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