Nord Anglia Education, Incorporated

• Jurisdiction: Cayman Islands
• Judge: (Kawaley, J.)
• Judgment Date: 15 August 2018
• Court: Grand Court (Cayman Islands)
• Date: 15 August 2018

IN THE MATTER OF NORD ANGLIA EDUCATION, INCORPORATED

(Kawaley, J.)

Grand Court, Financial Services Division (Cayman Islands)

Companies — arrangements and reconstructions — dissenting shareholders — fair value of shares — replacement of expert — court may permit party to appoint replacement expert but not “expert shopping” — dissenting shareholders permitted to appoint replacement valuation expert if perceived conflict of interest because previous expert linked to same firm as company’s expert — any previous report by expert to be disclosed

Held, granting leave to instruct the replacement expert:

The principles governing the grant of leave to replace an existing expert were not in dispute and were derived from English case law. Expert witnesses, though retained by parties, owed their primary duties to the court and the opinions they advanced were supposed to be independent and non-partisan. To ensure that a litigant who wished to replace an expert initially retained was not simply seeking another expert who would provide a more favourable opinion, the court, when exercising its discretion to grant leave, might require the applicant to disclose any previous opinion given by the first expert. Any privilege which existed in a prior report would fall away once the court decided to grant leave to adduce fresh expert evidence. The court might also impose other necessary conditions designed to allay concerns about “expert shopping.” On the grant of leave to instruct a replacement witness, an order would usually be made requiring the disclosure of any report prepared by the former expert. Further more intrusive disclosure would not be justified unless there was a strong appearance of “expert shopping.” In the present case, viewed objectively, there was not even a faint appearance of “expert shopping.” The court was satisfied that the decision to replace the previous expert was prompted by concerns about a perceived conflict of interest. The conditions proposed by the company went beyond merely requiring disclosure of draft or final reports of the previous expert and could not be justified. The company had reasonably had concerns because the previous expert had not been jointly instructed and the Campbells dissenters initially opposed his replacement, but these concerns should now have been allayed. The court accepted that no formal or informal report had been communicated to the dissenters by the previous expert. There was therefore no basis for ordering the dissenters to disclose any such reports or the more intrusive enquiries into the reasons for the dissenters’ decision tochange experts which the company sought. There was no harm in requiring the Appleby dissenters to file a further affidavit confirming that their clients had no US attorneys who had spoken to the previous expert regarding fair value nor seen any work produced by him since his engagement, as they had offered to do (paras. 8–15; paras. 17–18; paras. 21–26).

Cases cited:

(1)Allen Tod Architecture Ltd. v. Capita Property & Infrastructure Ltd., [2016] EWHC 2171 (TCC); (2016), 168 Con. L.R. 201; [2016] B.L.R. 592, followed.

(2)BMG (Mansfield) Ltd. v. Galliford Try Constr. Ltd., [2013] EWHC 3183 (TCC), followed.

(3)Beck v. Defence Min., [2003] EWCA Civ 1043; [2005] 1 W.L.R. 2206; [2003] C.P. Rep. 62, considered.

(4)Edwards-Tubb v. J.D. Wetherspoon plc, [2011] EWCA Civ 136; [2011] 1 W.L.R. 1373; [2011] C.P. Rep. 27, considered.

(5)Vasiliou v. Hajigeorgiou, [2005] EWCA Civ 236; [2005] 1 W.L.R. 2195; [2005] 3 All E.R. 17; [2005] C.P. Rep. 27, considered.

A company applied to determine the fair value of dissenting shareholders’ shares pursuant to s.238 of the Companies Law (2016 Revision).

The court ordered that the company and the dissenting shareholders had leave to instruct one expert valuation witness each. The dissenters’ expert, who had not in fact been jointly instructed by all dissenting shareholders, and the company’s expert both had links to the same firm. One group of dissenters, “the Appleby dissenters,” informed the company that it had terminated the expert’s retainer. The expert himself felt that he was “not wholly uncompromised” and informed another group of dissenters, “the Mourant dissenters,” that he was withdrawing. The third group of dissenters, “the Campbells dissenters,” appeared to have been left out. It wrote to the company expressing its significant concerns about the conduct of the Mourant and Appleby dissenters, including the fact that they had purported to name a replacement expert prior to a choice being made by all of the dissenters. The Campbells dissenters subsequently consented to the appointment of the replacement expert.

The company issued a summons for directions seeking the identity of the dissenters’ joint expert. By the time the summons was heard, it was in substance an application by the dissenters to replace the expert they had previously notified as their joint expert with another expert. The company submitted that the court should grant leave subject to the following conditions designed to ensure that the dissenters were not engaged in “expert shopping”: (a) within seven days of the order, the dissenters should provide affidavits setting out (i) a full explanation as to the means by which the previous expert’s engagement had been terminated; (ii) confirmation that no US attorney advising the Campbells or Appleby dissenters had spoken to the previous expert about any views or conclusions as to the fair value of the dissenters’ shares, or seen any workproduct produced by him since his engagement; (iii) an explanation of the significant concerns referred to by the Campbells dissenters, and the responses by the Appleby and Mourant dissenters to those concerns; and (iv) confirmation that no work product or related documents from the previous expert or the firm would be received by the dissenters; and (b) the affidavits should exhibit the terms of engagement between the dissenters and the previous expert and the firm, and the means by which that engagement had been terminated, to include any written communications about the termination, etc.

An affidavit was sworn on behalf of the Mourant dissenters that neither the law firm, the clients, nor the clients’ US attorneys had received any work product from the previous expert nor discussed with him the fair value of the company’s shares. It was sworn on behalf of the Appleby dissenters that neither the firm nor the clients had received any work product from the previous expert nor discussed the fair value of the company’s shares. They had no US lawyers involved in the matter, and offered to file a further affidavit confirming the position.

M. Imrie, M. Sweetman and J. Eldridge for the company;

J. Adkin, Q.C. and A. Jackson for the Appleby dissenters;

B. Isaacs, Q.C. and H. Khanbhai for the Campbells dissenters;

C. Harlowe, R. Cecere, Z. Hoskin and J. Bush for the Mourant dissenters.

REASONS FOR RULING ON APPLICATION FOR LEAVE TO REPLACE INITIAL EXPERT WITNESS

1 KAWALEY, J.:

Introductory

On March 6th, 2018, directions were ordered on the company’s November 9th, 2017 summons for directions. The order provided, so far as is material for present purposes, as follows:

“3. The Company and the Dissenters shall have leave to instruct one expert witness each (the Dissenters to jointly and severally instruct one expert between them) in the field of valuation in order to opine upon the fair value of the Dissenters’ shares in the Company valued as a going concern as at 21 August 2017 (‘Valuation Date’) (together, the ‘Experts’).

4. The...