Nord Anglia Education Incorporated

• Jurisdiction: Cayman Islands
• Judge: (Kawaley, J.)
• Judgment Date: 05 November 2019
• Date: 05 November 2019
• Court: Grand Court (Cayman Islands)

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 — highly sensitive documents referenced in expert’s report prima facie material to valuation issues at trial to be disclosed to dissenting shareholders unless exceptional circumstances

Held, ruling as follows:

(1) Section 7 of the Bill of Rights provided general support for the broad proposition that, while the public’s right to participate in a hearing could be restricted, such exceptions did not apply to a litigant. A fair hearing ordinarily required a litigant and their legal representative (if any) to participate fully in the hearing. It was well recognized that fair hearing rights were not absolute and might in certain circumstances be waived or lost. In civil proceedings in particular, both a claimant and a respondent had potentially conflicting fair hearing rights which must always be carefully balanced by the court. Nonetheless, the Bill of Rights supported at least a strong starting assumption in favour of a litigant enjoying a right to participate fully in a trial both in terms of being present even for private hearings from which the public was excluded, and being afforded full access to any documents referred to at trial and upon which the court might base its ultimate decision. The court accepted that the dissenters must be entitled to see any documents deployed at trial, subject to an important qualification that the law could not be that a party could use fair hearings as an artifice to gain access to highly sensitive material which was not genuinely relevant to the issues at trial. The fair hearing concept was grounded in substantial rather than purely abstract notions of justice. The court must possess the jurisdictional competence to assess whether the relevance of the HSD material (in this and any similar case where relevance was in dispute) was sufficiently cogent to justify loosening theprotections initially imposed at the trial stage. In a case which would depend primarily on expert evidence, it would not be enough to say that the relevance requirement had been met by the fact that the documents had been disclosed. A secondary relevance test fell to be carried out by reference primarily, if not solely, to the expert reports. Although access to the HSDs would be conditional on signing strongly worded non-disclosure agreements, the court should not dismiss concerns out of hand that such legal protections alone were not enough. A real-world view of the circumstances required the court to take judicial notice of the fact that respect for traditional notions of privacy was not what it used to be, the standards of commercial morality were not as consistent as they used to be, particularly where large sums were at stake, and the potential for accidental leaks of confidential material was greater than it was in the pre-digital era (paras. 19–26).

(2) In respect of HSDs mentioned in the expert reports, the governing legal principles were that exceptional circumstances had to be made out by the company to justify withholding access to the dissenters’ key representatives to any HSDs which were referred to at trial. It was common ground that the HSD restrictions should be lifted as regarded key client representatives in relation to substantive references to redacted material in the dissenters’ expert report. No principled objection to extending similar access to US lawyers engaged in the case had been articulated. It was self-evident that the express references in the report to any HSDs were highly material and the company had sensibly agreed that these portions of the report should be unredacted while maintaining the existing safeguards for the public at large. In terms of expanded access to key dissenter representatives and (where applicable) US attorneys, only unredacted versions of the reports would be considered at trial. As far as the HSDs referenced in the dissenters’ expert’s reports were concerned, they were prima facie material to the issues to be determined at trial. The court accepted that the text of the reports was at the top of the materiality scale, but the court should err in favour of permitting unredacted versions of these documents to be shared with the wider group because it would be fundamentally unfair for the court to constrain the way the dissenters presented their case by effectively prohibiting them from exploring the underlying material referenced in their expert’s reports (paras. 33–34; para. 37).

(3) In respect of documents to which the dissenters’ expert’s reports referred which the company was not willing to provide to the dissenters on a partially redacted basis, the court provided provisional views, adopting a default position in favour of granting access to the underlying documents when in doubt. In relation to the first report, the court accepted the company’s position in respect of certain documents but in respect of others, which appeared likely to be material to the valuation question, the court considered that unredacted copies should be provided (paras. 41–44).

(4) It was for the dissenters to establish the relevance at trial of HSDs not mentioned in the expert reports, under the general liberty to apply provisions of the directions order. In a case where the key valuation evidence would be provided by experts, lifting special confidentiality protections required, over and above the generous discovery relevance test, a party seeking to rely on unredacted HSDs to meet a higher materiality test as well. No sufficient case had been made out by the Appleby dissenters at present to justify the requested HSDs which were not referenced in their expert’s reports being made available to their key representatives and the US attorneys. A further application could be made on the papers if the matter could not be agreed (paras. 46–47).

(5) Unless otherwise agreed, the court would sit in private when dealing with HSDs to protect the confidential material from being published to the world at large (para. 48).

Cases cited:

(1)Bombardier Transportation Ltd. v. Merseytravel, [2017] EWHC 575 (TCC); (2017), 171 Con LR 183, considered.

(2)Carphone Warehouse Group plc v. Office of Communications, [2009] CAT 37, considered.

(3)Dyson Ltd. v. Hoover Ltd. (No. 3), [2002] EWHC 500 (Pat); [2002] R.P.C. 42, considered.

(4)McKillen v. Misland (Cyprus) Invs. Ltd., [2012] EWHC 1158 (Ch), dicta of David Richards, J. considered.

(5)Sport Universal SA v. Prozone Holdings Ltd., [2003] EWHC 204 (Ch); [2003] IP & T 560, considered.

Legislation construed:

Cayman Islands (Constitution) Order 2009 (S.I. 2009/1379), Schedule 2, s.7: The relevant terms of this section are set out at para. 19.

The court was to determine the fair value of dissenting shareholders’ shares.

Following the hearing of a summons for directions, the court had imposed a regime to deal with highly sensitive documents (“HSDs”) in proceedings between the company and the dissenting shareholders. That regime provided that the company should be permitted to designate documents as HSDs; the company should not be permitted to decide unilaterally that some HSDs should not be posted in the data room at all; all HSDs were to be placed in the data room in redacted and unredacted form with access to unredacted HSDs limited to experts and counsel in the first instance; each expert should provide the company with a list of his/her team members who would be given access to HSDs; if the dissenters’ expert wished to refer to HSDs or extracts therefrom in a memorandum or draft report to be shared with clients, only the redacted versions of the relevant HSD might be mentioned or referred to and best efforts should be made to protect the confidentiality of information that was not central to the valuation analysis; if the document the dissenters’ expert wished to rely on had been redacted in whole or in part, the dissenters’ counsel should seek to agree the terms of such reliance withthe company’s counsel with liberty to apply to the court. Implicit in the scheme was the notion that the dissenters’ expert was best placed to assess the extent to which factual matters, including redacted material, was relevant to the valuation questions to be determined at trial.

The dissenters submitted that (a) s.7 of the Bill of Rights made clear that a litigant had an unqualified right to fully participate in the hearing of its case; (b) the notion that the court, counsel and experts should be permitted to engage with documentation at trial to which the litigants themselves were not privy was inconsistent with this principle; and (c) all HSDs met the requisite relevance test and any documents which their counsel wished to deploy at trial should be unredacted (for client and US attorney purposes) as otherwise they would face difficulties in preparing for the trial.

The company invited the court to apply the proportionality principle in the overriding objective when considering whether to lift the HSD restrictions as far as the dissenters were concerned at trial. The company challenged the need to further liberalize the regime in light of the concessions the company had made concerning full access to the expert reports themselves. The company submitted that (a) it was for the dissenters to establish reasons for departing from the existing HSD regime; and (b) notwithstanding overarching principles of open justice, exceptions could be made in the interests of protecting commercial confidence.

M. Imrie, Lord Grabiner, Q.C., R. Boulton, Q.C. and L. Schroeter on behalf of Nord Anglia Inc.;

R. Millett, Q.C., J. Vickers and H. Rasmussen on behalf of the Mourant dissenting shareholders;

G. Bompas, Q.C., H. Khanbhai and J. Durston on behalf of the Campbells dissenting shareholders;

J. Adkin, Q.C. and A. Jackson on behalf of the Appleby dissenting...