Re Qihoo 360 Technology Company Ltd
| Jurisdiction | Cayman Islands |
| Judge | Ingrid Mangatal |
| Judgment Date | 27 July 2017 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | Cause No.: FSD 129 of 2016 (IMJ) |
| Date | 27 July 2017 |
The Hon. Justice Ingrid Mangatal
Cause No.: FSD 129 of 2016 (IMJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Section 238 of the Companies Law (2016 Revision) — Discovery application by Dissenting shareholders — Specific Discovery — Application for appointment of forensic expert to conduct forensic audit — Order 24 of the Grand Court Rules (1995 Revision)
Mr. R Levy QC, instructed by Mr. R Bell and Mr. P McConvey of Walkers on behalf of the Dissenters/Applicants
Mr. R Millett QC, instructed by Mr. P Madden and Mr. D Vekaria of Harneys on behalf of the Company/Respondent
1. This is an application by Maso Capital Investments Limited (“Maso”); Blackwell Partners LLC — Series A (“Blackwell”); and Crown Managed Accounts SPC acting for and on behalf of Crown/Maso Segregated Portfolio (“Crown”), together referred to as “the Dissenters”.
2. The Dissenters make an application by way of summons dated 3 March 2017 (the “Summons”) seeking an order against Qihoo 360 Technology Ltd (“the Company”), as follows:
-
“1. The Company shall forthwith take all steps necessary to preserve all computers, servers, network systems, cloud storage, laptops, back-up tapes, archives, handheld electronic devices or other means of transmitting or receiving or storing data (“Electronic Devices”) and all or any data in the Company's possession, custody or power which may be relevant to these proceedings which is held or stored on or by Electronic Devices or similar means in any jurisdiction whatsoever until the conclusion of the cause or further Order of the Court,
-
2. The Company do, in the manner hereinafter appearing, give specific discovery pursuant to Order 24, rule 7 of the Grand Court Rules, paragraphs 4, 5 and 8 of the Order for Directions dated 25 October 2016 (the “First Directions Order”) and paragraph 1 of the Order for Directions dated 21 December 2016 of the documents listed in Schedule A (“Discovery Schedule”) to this Order.
-
3. The Company shall prepare and serve a list of documents by …, such list to identify all relevant documents including of any electronic file type (and for the avoidance of doubt such documents must include inter alia (whether hard copy or electronic form on an Electronic Device wherever they may be) memoranda, graphic files, office based documents, drafts, notes of meetings and discussions, including telephone conversations and emails (including attachments) or other data sent to or from any email address used by any of the beneficial owners, directors, officers or employees or anyone else on its behalf, which relate in any way to the determination of the fair value of the shares in the Company as at the Valuation Date (as defined in the First Directions Order) (“Documents”) which are or have been in the possession, custody or power of the Company (the “List”)).
-
4. The List shall be verified by an affidavit sworn by a director of the Company and such director shall attend in person at the trial of the cause to be cross-examined unless the director's attendance is not required by the written agreement of the Dissenters or further Order of the Court.
-
5. Within 7 days following the provision of the List, the Dissenters and the Company shall designate specific key words to be used to search all Electronic Devices used by or available to the Company and its beneficial owners, directors, officers or employees or anyone else on the Company's behalf for the Documents (the “Keywords”),
-
6. Subject to the provision of appropriate undertakings (which, in the event that there is no agreement, the Court shall determine such terms), the Company and the Dissenters shall jointly appoint an independent forensic technology expert (the “Forensic Expert”) to conduct an audit of the Company's information technology systems and all Electronic Devices used by or available to the Company and its beneficial owners, directors, officers or employees or anyone else on the Company's behalf for documents containing the Keywords (the “Forensic Audit”).
-
7. The Forensic Expert shall be a person with considerable experience of conducting forensic examination of electronic sources and the appointment shall be approved in advance by agreement of the parties, failing which the Court shall determine the identity of the Forensic Expert on the application of any of the parties.
-
8. The Company shall provide all such assistance and access as requested by the Forensic Expert, including but not limited to providing access to the Company's information technology systems and all Electronic Devices referred to in paragraph 6 above and to allow the Forensic Expert to take forensic copies and/or image any emails (including attachments) and/or other electronic Documents.
-
9. The Forensic Expert shall report to the Court and the Dissenters' Cayman Islands attorneys (“Walkers”) on a weekly basis, such report to contain details of the progress of the Forensic Audit, including but not limited to what has been searched, the Keywords used, the results of the Forensic Audit, the assistance and access provided by the Company pursuant to paragraph 8 above and any impediments to the Forensic Audit.
-
10. The Forensic Expert shall provide all results of the Forensic Audit to the Company's Cayman Islands attorneys (“Harneys”) on a rolling basis.
-
11. Harneys shall review the documents obtained from the Search for privilege and shall cause all non-privileged documents to be uploaded to the Data Room (as defined in the First Directions Order) within 3 days of receipt from the Forensic Expert.
-
12. The Forensic Expert shall give notice to the Court, Walkers and Harneys when the Search has been completed.
-
13. The Company take steps to compel J.P. Morgan Securities (Asia Pacific) Limited to produce all documents in the Company's possession, custody or power held by it which are relevant to the determination of the fair value of the shares in the Company as at the Valuation Date (as defined in the First Directions Order).
-
14. The time for exchange of experts' reports in accordance with paragraph 11 of the First Directions Order be extended to the date falling four weeks after either the final document has been uploaded to the Data Room pursuant to paragraph 11 above or the Forensic Expert has given notice pursuant to paragraph 12 above, whichever is later.
-
15. The Company pay the costs of the Summons on an indemnity basis, to be taxed if not agreed.
……”
3. The background to this application is that proceedings were commenced by way of Petition filed on 22nd August 2016 by the Company, whose registered office is Codan Trust Company (Cayman) Limited, Boundary Hall, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, Cayman Islands.
4. The Company is a Cayman Islands exempted limited company whose operations and business have largely been conducted in the People's Republic of China (the “PRC”). Its 2015 Annual Report described it as “a leading internet company in China”.
5. The Petition is brought pursuant to section 238(9) of the Companies Law (2016 Revision) (the “Law”) for the Court to determine the fair value of the Dissenters' shares in the Company, together with a fair rate of interest, if any.
6. The Petition avers that at all material times Blackwell was the registered owner of 165,105 Class A ordinary shares, Crown was the registered owner of 36,219 Class A ordinary shares, and Maso the registered owner of 127,773 Class A ordinary shares.
7. On 15 July 2016, (the “Effective Date”) a merger was effected between the Petitioner and New Summit Limited (“New Summit”), an exempted limited company under the laws of the Cayman Islands, pursuant to which New Summit merged with and into the Petitioner (the “Merger”).
8. Pursuant to the Merger, and on the Effective Date, each Class A ordinary share of the Petitioner issued and outstanding immediately prior to the Effective Date was cancelled in exchange for the right to receive US$51.33 in cash per share without interest, (“the Merger Price”) save that the shares of the Dissenters (the “Dissenting Shares”), having each given written notice of objection to the Merger on 24 March 2016 pursuant to section 238(2) of the Law, were instead exchanged for the right to receive the fair value of the Dissenting Shares determined in accordance with the provisions of section 238 of the Law, the Dissenters having maintained their objection.
9. On 19 April 2016, the Petitioner gave written notice of the authorisation of the Merger to each of the Dissenters pursuant to section 238(4) of the Law.
10. On 5 May 2016, the Dissenters each gave written notice of their decision to dissent from the Merger pursuant to section 238(5) of the Law.
11. On 22 July 2016, pursuant to section 238(8) of the Law, the Petitioner made a written offer to each of the Dissenters to purchase their shares at a price that it determined to be their fair value. The price offered was US$51.33 per share, which was the same as the Merger Price.
12. The Company and the Dissenters were unable to agree a fair value for the Dissenting Shares within the time provided for in section 238(8) of the Law.
13. On 25 October 2016, an Order was made by consent (the “Consent Order”), giving Directions to the parties in preparation for the final hearing. At that time the Company had different legal representation than it does now. The Consent Order directed as follows:-
“It is Ordered that:
(1) The Petitioner shall, by 4.00 pm on 1 November 2016 (Cayman Islands time), open an electronic data room (the “Data Room”).
(2) The Data Room shall be accessible to each of the parties and the parties' respective advisors, consultants and experts for inspection of the documents contained therein each...
To continue reading
Request your trial