Re Fortuna Dev Corporation

JurisdictionCayman Islands
Judge(Chadwick, P., Forte and Mottley, JJ.A.)
Judgment Date17 August 2010
CourtCourt of Appeal (Cayman Islands)
Date17 August 2010
Court of Appeal

(Chadwick, P., Forte and Mottley, JJ.A.)

IN THE MATTER OF FORTUNA DEVELOPMENT CORPORATION LIMITED
TEMPO GROUP LIMITED
and
WYNNER GROUP LIMITED and NEW FRONTIER DEVELOPMENT CORPORATION

S. Phillips, Q.C., G.A. Locke and M.J. Makridakis for the petitioner;

R. Hacker, Q.C. and G. Halkerston for the respondents.

Cases cited:

(1) CVC/Opportunity Equity Partners Ltd. v. Demarco Almeida, 2002 CILR 77; [2002] 5 LRC 632; [2002] 2 BCLC 108; [2002] BCC 684; [2002] UKPC 16, dicta of Lord Millett applied.

(2) Campbell v. Edwards, [1976] 1 W.L.R. 403; [1976] 1 All E.R. 785; [1976] 1 Lloyd”s Rep. 522, referred to.

(3) Company (No. 003843 of 1986), Re a, [1987] BCLC 562; (1987), 3 BCC 624, referred to.

(4) O”Neill v. PhillipsWLR, [1999] 1 W.L.R. 1092; sub nom. Re a Company (No. 00709 of 1992), O”Neill v. Phillips, [1999] 2 All E.R. 961; [1999] 2 BCLC 1; (1999), 143 Sol. Jo. (L.B.) 155, referred to.

Companies-compulsory winding up-restraining winding up-minority shareholder”s petition to be struck out if majority makes plainly fair and reasonable offer to purchase minority shareholding-usually reasonable if in accordance with agreed procedure for valuation and offer-court to consider whether procedure appropriate in circumstances but may not take into account events after agreed valuation date

Companies-minority shareholders-valuation of minority”s shares for sale to majority-purpose of valuation to determine value of reasonable offer for minority”s shares-may be reasonable despite long delay between date of valuation and its delivery attributable to offeree, e.g. because challenged independence of valuer-valuation procedure need not require majority shareholder to make offer

The petitioner sought to wind up a Cayman company on the just and equitable ground.

The petitioner was a minority shareholder in a Cayman company. It petitioned for the company to be wound up, alleging that the respondents-the majority shareholders-had made improper transactions and engaged in unfair and oppressive behaviour. The petitioner and the respondents agreed on a procedure by which their relationship might be brought to an end. They would appoint an independent valuer, who would value the company as at the agreed valuation date-December 2005-and the valuation was required to be both ‘final’ and as at ‘a date as close to the date of sale as [was] reasonably possible.’ The respondents could then make an offer to purchase the petitioner”s shares at the valuation price, although they were under no obligation to do so. The petitioner subsequently sought to challenge the independence of the valuer, and sought directions as to the conduct of the valuation pending the outcome of this challenge.

The Grand Court (Henderson, J.) directed that the parties” advocates instruct the valuer to complete the valuation process and deliver the

valuation to the court, but to withhold it from the parties until further joint instructions to deliver it to them. The parties” advocates would not instruct the valuer to do so until after the resolution of the petitioner”s challenge to the valuer”s independence. The Grand Court (Henderson, J.) subsequently dismissed the petitioner”s application (in proceedings reported at 2007 CILR 349) and held that the valuer was independent within the meaning of the agreement. The petitioner appealed to the Court of Appeal (Zacca, P., Taylor and Mottley, JJ.A.), which affirmed the Grand Court”s decision (in proceedings reported at 2008 CILR 67).

On the joint instructions of the parties” advocates, the valuation was delivered to the parties in October 2007. It gave an opinion as to the value of the company, but also identified a ‘limiting factor’ in that there remained a dispute relating to dividends, the court”s determination of which would affect the amount owed to the petitioner. The respondents then made an offer to purchase the petitioner”s shares at the valuation price, which the petitioner rejected. There was evidence to suggest that the value of the company”s land had increased considerably after the valuation date, and the petitioner made an offer to purchase the respondents” majority shareholding at a price almost double its valuation. The petitioner applied for a declaration that the valuation should not be relied upon. The respondents cross-applied to strike out the winding-up petition on the ground that they had made a reasonable offer to purchase the minority shareholding.

The Grand Court (Henderson, J.) struck out the petition on the basis that the respondents had made a reasonable offer for the petitioner”s shares, holding that (a) the petitioner”s failure to accept the offer was not unreasonable ‘by definition,’ rather, the court needed to consider the circumstances and whether the agreed procedure had been fulfilled; (b) in the circumstances, the agreed procedure for the valuation and offer was appropriate; (c) the recognition of the ‘limiting factor’ did not qualify the valuation in a material way such that it was not ‘final,’ but was simply a reminder of an outstanding issue; (d) although there had been delay between the valuation date and delivery, the valuation was as timely as was ‘reasonably possible’; and (e) in light of the agreement, it was impermissible to examine the valuer”s methods or take into account any increase in land values.

On appeal, the petitioner submitted that the Grand Court should not have struck out the petition, since (a) given the valuation”s recognition of a dispute in relation to dividends, the valuation was not ‘final’ as required by the terms of the parties” agreement; (b) since there had been a delay of nearly two years between the date of the valuation and its delivery to the parties, the valuation was not as at ‘a date as close to the date of sale as [was] reasonably possible’ as required by the terms of the parties” agreement; (c) even if it was within the terms of the parties” agreement, the court had to determine separately the question of whether the offer was plainly fair and reasonable; (d) in the light of events occurring after the valuation date, including the long delay before delivery, the increase in

land values and the petitioner”s offer to purchase the majority shareholding at a price almost double its valuation, the offer was not plainly fair and reasonable; and (e) the valuation procedure was not fair and reasonable since, as it did not oblige the respondents to make an offer, the risk of any delay fell on the petitioner

The respondents submitted that the Grand Court was right to strike out the petition, since (a) the valuation was ‘final’ within the terms of the agreement, the recognition of the dispute merely amounting to a reminder that the dividend issue was still to be resolved; (b) the valuation was as at ‘a date as close to the date of sale as [was] reasonably possible,’ given that it was delivered to the parties on the instructions of their advocates in accordance with the Grand Court”s order, and any delay could be attributed to the petitioner; (c) the offer, having been made in accordance with a procedure designed to determine what would constitute a fair and reasonable offer, should be characterized as plainly fair and reasonable; (d) a valuation date having been agreed, it was not open to the petitioner to argue that subsequent events should be taken into account in assessing what would be a fair and reasonable offer; and (e) it was irrelevant that the respondents were not obliged by the terms of the agreed procedure to make an offer.

Held, dismissing the appeal:

(1) The Grand Court”s striking out of the petition to wind up Fortuna would be upheld, since the respondents had made a plainly fair and reasonable offer to purchase the petitioner”s minority shareholding in accordance with their agreed valuation procedure. The requirement in the terms of the parties” agreement that the valuation be ‘final’ had been fulfilled. The recognition of a dispute in relation to dividends, the court”s determination of which would affect the amount owed to the petitioner, had not qualified the valuation in such a way that it was insufficiently ‘final.’ Rather, taken as a whole, the valuation was an expert opinion on the value of the company, coupled with a reminder that the dividend issue was still to be resolved. Further, the terms of the agreement reflected the fact that the issues raised by the dividend claim were not for the valuer to determine. The valuation was therefore ‘final’ within the terms of the parties” agreement (paras. 68–70).

(2) Moreover, the valuation was as at ‘a date as close to the date of sale as [was] reasonably possible,’ as required by the terms of the agreement. Since the length of the period between the delivery of the valuation letter and any contract for sale was not within the valuer”s control, the question was whether the valuation date-December 2005-was as close to the delivery of the valuation letter as reasonably possible. In the circumstances, the delivery of the valuation letter in October 2007 was reasonable. No complaints had been raised as to the time taken to complete the valuation itself, and the Grand Court”s order that the valuation only be delivered to the parties on the joint instructions of their advocates-which

were not to be given until after the resolution of the challenge to the valuer”s independence-implied that the valuation would still meet the requirements of the agreed procedure despite not being delivered until that point. The fact that the petitioner had sought this order (albeit as a secondary contention) and did not appeal it suggested that the petitioner too accepted that the valuation would still be valid. Furthermore, since subsequent delays to proceedings could be attributed to the petitioner”s appealing against the dismissal of the challenge to the valuer”s independence, it would be difficult for the petitioner to contend that the...

To continue reading

Request your trial
4 cases
  • Re Fortuna Dev Corporation
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 6 December 2010
    ...to the Court of Appeal (Chadwick, P., Forte and Mottley, JJ.A.), which affirmed the Grand Court”s decision (in proceedings reported at 2010 (2) CILR 85). The parties submitted a joint application to redact certain passages of the Grand Court judgments of September 2007 and January 2009 summ......
  • Tempo Group v Fortuna Dev
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 28 September 2011
    ...67), culminating in the dismissal of the plaintiff”s appeal against the striking out of its petition for a winding-up order (reported at 2010 (2) CILR 85). During the litigation, the defendant had twice requested that the stay continue. The directors of the defendant company had, by that ti......
  • Tempo Group Ltd Chen Ching Chih Maxima Resources Corporation Plaintiffs/Respondents v Fortuna Development Corporation New Frontier Development Corporation Wynner Group Ltd Defendants/Appellants
    • Cayman Islands
    • Court of Appeal (Cayman Islands)
    • 5 November 2015
    ...Henderson's order of 30 April 2009 was upheld in this Court on 17 August 2010, for the reasons set out in its judgments reported at 2010 (2) CILR 85. 6 These proceedings were commenced by the issue of a writ of summons on 21 June 2010. Tempo, Dr Chen and Maxima sought a declaration against ......
  • Section 15(4) of the Exempted Ltd Partnership Law (2012 Revision) and Cybernaut Growth Fund, L.P.
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 10 September 2013
    ...reason not to do so. The decision of Henderson J inRe Fortuna Development Corporation which was upheld by the Court of Appeal ( 2010(2) CILR 85) is said to provide support for this approach, albeit in the context of an agreement about valuation methodology. 19 I think that there is a compel......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT