Re Fortuna Dev Corporation

• Jurisdiction: Cayman Islands
• Judge: (Henderson, J.)
• Judgment Date: 06 December 2010
• Date: 06 December 2010
• Court: Grand Court (Cayman Islands)

Grand Court, Financial Services Division

(Henderson, J.)

IN THE MATTER OF FORTUNA DEVELOPMENT CORPORATION

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

S. Phillips, Q.C. and Ms. C. Wilkins for the petitioner.

Cases cited:

(1) De Vries v. National Westminster Bank plc, English High Ct., Q.B.D., The Times, August 16th, 1984, referred to.

(2) Forbes v. Smith, [1998] 1 All E.R. 973; [1998] 1 FLR 835; [1998] 2 F.C.R. 342, referred to.

(3) Grosvenor & West End Ry. Terminus Hotel Co. Ltd., ReUNK(1897), 76 L.T. 337, referred to.

(4) Halcon Intl. Inc. v. Shell Transp. & Trading Co. Ltd., [1979] R.P.C. 97, distinguished.

(5) Hodgson v. Imperial Tobacco Ltd., [1998] 1 W.L.R. 1056; [1998] 2 All E.R. 673, applied.

(6) O”Neill v. PhillipsWLR, [1999] 1 W.L.R. 1092; sub nom. Re a Company , XYZZYXYZZY

(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.

(7) Omar v. Omar, [1995] 1 W.L.R. 1428; [1995] 3 All E.R. 571, distinguished.

(8) Prudential Assur. Co. Ltd. v. Fountain Page Ltd., [1991] 1 W.L.R. 756; [1991] 3 All E.R. 878, referred to.

(9) R. (Al-Skeini) v. Defence Secy., [2008] 1 A.C. 153; [2007] 3 W.L.R. 33; [2007] 3 All E.R. 685; [2007] UKHL 26, referred to.

(10) R. (Mohamed) v. Foreign & Commonwealth Affairs Secy., [2011] Q.B. 218; [2010] 3 W.L.R. 554; [2010] 4 All E.R. 91; [2010] EWCA Civ 65, applied.

(11) Riddick v. Thames Board Mills Ltd., [1977] Q.B. 881; [1977] 3 W.L.R. 63; [1977] 3 All E.R. 677, dicta of Lord Denning, M.R. applied.

(12) Savings & Inv. Bank Ltd. v. Gasco Invs. (Netherlands) B.V., [1984] 1 W.L.R. 271; [1984] 1 All E.R. 296, referred to.

(13) Taylor v. Director of Serious Fraud Office, [1999] 2 A.C. 177; [1998] 3 W.L.R. 1040; [1998] 4 All E.R. 801, referred to.

Legislation construed:

Companies Law (2010 Revision), s.64:

‘The Court may appoint one or more than one competent inspectors to examine into the affairs of any company and to report thereon in such manner as the Court may direct . . .’

s.66(2): The relevant terms of this sub-section are set out at para. 14.

s.68: The relevant terms of this section are set out at para. 15.

Civil Procedure-reporting of proceedings-publication of judgment-judgment to be published without redaction if unlikely to mislead readers or cause damage to party”s reputation above that regularly suffered by parties to contested commercial litigation-open justice requires reasoning to be made public in full although exceptional circumstances may justify redaction, e.g. to maintain trade secret

Companies-administrative control of companies-inspectors-inspectors” report-may be used for purposes of any Cayman action pursuant to Companies Law (2010 Revision), s.68, subject to usual rules of evidence, i.e. must be relevant, inspectors must have expertise and be available for cross-examination, must give reasonable notice-whether rules of evidence satisfied matter for judge trying other action

Companies-administrative control of companies-inspectors-inspectors” report-leave not granted to use in foreign action concerning different company with additional parties-report based on compulsorily-disclosed material subject to implied undertaking that only to be used in action for which ordered-may relax undertaking and grant leave if parties and issues same or broadly similar in both actions-by presumption against extra-territorial operation, Companies Law (2010 Revision), s.68 permitting use ‘in any legal proceeding’ not to permit use in foreign action

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 respondents offered to buy the petitioner”s shares and agreed with the petitioner to appoint an independent valuer to establish the value of its minority shareholding. The agreement contemplated that the petition would be dismissed following the sale of the petitioner”s shares. At the request of the petitioner, the Grand Court (Levers, J.) appointed inspectors pursuant to s.64 of the

Companies Law (2010 Revision) with the power to compel disclosure of documents and information. In addition to these proceedings, the petitioner was a party in three further actions in the Cayman Islands which were closely related in subject-matter to these proceedings, as well as an action in the British Virgin Islands against the respondents and three other parties alleging unfairly prejudicial conduct in respect of another company in a manner similar to that alleged in these proceedings.

The petitioner challenged the independence of the valuer. In September 2007, the Grand Court (Henderson, J.) dismissed the petitioner”s application (in proceedings reported at 2007 CILR 349) and held that the valuer was independent within the meaning of the parties” 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). The valuation was subsequently delivered to the parties, and the respondents made an offer to purchase the petitioner”s shares at the valuation price, which the petitioner rejected. The petitioner applied for a declaration that the valuation should not be relied upon; the respondents cross-applied to strike out the petition.

In January 2009, 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. The petitioner appealed 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 summarizing the opinions of the inspectors, which were unfavourable to, and contested by, the respondents. The Grand Court (Henderson, J.) ordered that the judgments not be published or reported, and indicated that it would review this order later.

On review of the order prohibiting publication of the judgments of September 2007 and January 2009, the respondents applied for an order that the judgments not be published or reported, or, alternatively, that certain passages summarizing the inspectors” opinions be redacted, submitting that (a) the judgments did not raise any important or novel issues of law; (b) the opinions might have an adverse effect on the reputation of the company; and (c) readers of the judgments might be misled into thinking the inspectors” opinions in the redacted passages-which had not been tested by cross-examination or adjudicated upon-were tantamount to findings by a court.

The petitioner, having withdrawn its consent to the application for redaction, submitted in reply that the judgments should be released in their original form, since (a) the principle of open justice required that they be treated as public documents; (b) any damage to the company”s reputation as a result of publication would be no greater than that regularly suffered by parties to highly-contested commercial litigation; and (c) readers of the judgments would be unlikely to think that the inspectors” opinions were tantamount to findings by a court, since on a careful reading it would be

obvious that the opinions had not been tested in cross-examination or accepted by the court.

The respondents also applied for an order that the inspectors” report not be used in the actions in the Cayman Islands and the British Virgin Islands, submitting that (a) its use in any proceeding other than that for which it was produced would be oppressive...