Re Shanda Games Ltd

• Jurisdiction: Cayman Islands
• Court: Grand Court (Cayman Islands)
• Judge: Segal
• Judgment Date: 27 July 2017
• Docket Number: CAUSE NO. FSD 14 OF 2016 (NSJ)
• Date: 27 July 2017

In the Matter of the Companies Law (2016 Revision)

And in the Matter of Shanda Games Limited

Before:

The Hon. Justice Segal

CAUSE NO. FSD 14 OF 2016 (NSJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Summons for order to re-open the trial of the Petitioner's petition under section 238 of the Companies Law (2016 Revision) and to introduce additional expert evidence

Appearances:

Mr. Richard Millett QC and Paul Madden and Dhan Vekaria of Harney Westwood & Riegels for the Petitioner.

Mr. Robert Levy QC and Mac Imrie, James Eldridge and Gemma Freeman of Maples & Calder for the Dissenting Shareholders.

IN OPEN COURT

Introduction

1 This is an application by Shanda Games Limited (the Petitioner), by summons (the Summons) issued on 20 March, following the trial of its fair value petition (the Petition) under section 238 of the Companies Law (2016 Revision), for liberty to reopen its case and to introduce additional expert evidence.

2 Following a hearing of the Summons on 6 April and the filing of further post-hearing written submissions, on 25 April I informed the parties that I had concluded that the Petitioner was not entitled to the relief sought in the Summons, and in particular that I should not direct that the trial be re-opened so as to allow the Petitioner to adduce further evidence. Since I was on vacation at that time, I explained that my written reasons would need to be prepared and handed down in due course following my return from vacation. These are those written reasons.

3 The shareholders who dissented from the Petitioner's merger and who were parties to the Petition were (1) Blackwell Partners LLC-Series A ( Blackwell) (2) Crown Managed Accounts SPC ( Crown) and (3) Maso Capital Investments Limited ( Maso) (together the Dissenting Shareholders). The Dissenting Shareholders opposed the Summons.

4 The Petitioner says that, following the conclusion of the trial in November 2016, apparently as a result of concerns regarding the competence and performance at trial of the expert nominated by the Petitioner, Professor Gregg Jarrell ( Professor Jarrell), it instructed new attorneys who recommended that the Petitioner instruct a new valuation expert to review the trial transcripts and the reports and evidence of Professor Jarrell and the expert nominated by the Dissenting Shareholders, William Inglis ( Mr Inglis). The Petitioner followed this recommendation and obtained a fresh expert opinion which concluded that the expert evidence from Professor Jarrell was so inadequate in attacking Mr Inglis' work and conclusions, that the Court had been misled at trial. Accordingly, the Petitioner considered that it was necessary, in order to ensure that the Court was making a decision as to fair value on the basis of proper evidence and could dispose of the proceedings in a just manner, that the Petitioner be permitted to introduce further expert evidence, in particular that orders be made for the Petitioner's new expert to give evidence and for consequential relief to be granted to allow the Court to consider his evidence. The Petitioner went ahead and issued the Summons seeking that relief. The Summons, as it turned out, was issued on the same morning that my judgment was handed down in draft (subject to the usual arrangements for counsel to have the opportunity to provide corrections to the Court before the judgment is formally handed down and published).

5 In my judgment I concluded that the fair value of the Dissenting Shareholders' shares in the Petitioner as at 18 November 2015 (the Valuation Date) was US$16.68 per ADS (this is the amount that was calculated in accordance with the rulings I made in, and determined by me to be the correct figure based on, the judgment). In my judgment, I reviewed and analysed the evidence and opinions of Professor Jarrell and Mr Inglis on the nine key valuation issues that remained in dispute at the end of the trial and set out my ruling in relation to each issue.

The circumstances surrounding the issuing of the Summons

6 The trial of the Petition concluded on 17 November 2016. Before and during the trial the Petitioner was represented by Conyers, Dill & Pearman ( Conyers). However, on or around 20 December 2016, the Petitioner engaged another firm of attorneys, Harney Westwood & Riegels ( Harneys), to represent it. Harneys filed a notice of change of attorney with the Court on 20 January 2017. The sealed notice was also served on the Dissenting Shareholders' attorneys (Maples and Calder — Maples) and on Conyers on that day. By email dated 3 February 2017, Harneys provided the Court Registry with the email addresses of the relevant attorneys at Harneys to contact in relation to the proceedings. A further copy of the Notice was attached to that email.

7 On the final day of the hearing I had been asked by Mr Levy QC, counsel for the Dissenting Shareholders, whether I was able to provide any indication of when I was likely to be able to deliver my judgment. I explained that while I was anxious to deliver a judgment as soon as I could. I did not wish to raise expectations unduly, and indicated that realistically the parties should have in mind the early part of the New Year, perhaps the first couple of weeks of January. I was seeking to take into account both the upcoming Christmas vacation and the pressures of other judicial business.

8 In the event, because of other urgent applications with which I had to deal both immediately before and after the Christmas vacation, I was unable to complete my judgment until later. However, I wished to ensure that the parties were updated on my progress and therefore provided, via my personal assistant in the Financial Services Division, regular updates on when the written judgment was likely to be handed down. The final updates were sent on Tuesday, 14 March and then Friday, 17 March. In my email of Tuesday, 14 March I indicated that I planned to complete and distribute in draft my judgment by Friday, 17 March. On 17 March I explained that while the judgment had been written and completed I did not wish to release it that evening before I had been able to complete the proof-reading process and so the judgment would be provided to the parties during the morning of Monday, 20 March.

9 I had been informed that all counsel had been provided with my updates. Unfortunately, due to an administrative oversight, my updates had only been sent by the Court to Maples and Conyers and not to Harneys. I only became aware of this when Harneys filed their first set of written submissions in support of the Summons, in the circumstances I describe below.

10 I sent the written judgment to my personal assistant at 14.04 London time (09.04 Cayman time I believe) on Monday, 20 March for immediate distribution in draft (on the usual basis) to the parties (I was in Sydney at the time attending a conference). At 14.25 London time (09.25 Cayman time) I received an email from my personal assistant which forwarded to me a copy of an email from Maples of the same date, which itself forwarded a copy of an email to the Court of the same date from Harneys (which attached a copy of the Summons and an affidavit in support sworn by Fleur O'Driscoll, which affidavit referred to a new expert report which had been prepared at the request of the Petitioner by Mr Jaime d'Almeida of Duff & Phelps — Mr (d'Almeida). The email from Maples was timed at “7.17 AM” (Cayman time I assume even though the sender from Maples was in Hong Kong). The email from Harneys was timed at 18.02 on 20 March (which I assume was Hong Kong time, and 05.02 Cayman time).

11 The Harneys email stated that:

“We act for Shanda Games Limited ( Shanda) in the above entitled proceedings. To be clear, Conyers Dill & Pearman acted for Shanda at the hearing of this matter before Mr Justice A Segal Since that hearing, we filed a Notice of Change of Attorneys dated 20 January 2017 (copy attached).

We are instructed to contact the Court Registry on an urgent basis. It is extremely likely that the Judge's ruling in these proceedings will be delivered shortly. Our client desires to make an application before that Judgment is delivered. Please see attached:—

• 1. Summons; and

• 2. Supporting Affidavit of Flew O'Driscoll.

On this basis, could you please bring this email and Summons to the Judge's immediate attention and before the Judgment is delivered.

Maples and Calder act for the Respondents in this matter. To be clear, we have not contacted Maples and Calder prior to sending this email. Given the urgency of this matter, we are instructed to issue the Summons and simultaneously request that Maples and Calder provide their dates to avoid. We appreciate this is unusual, however, the present circumstances and the nature of our instructions require us to deal with the Summons in this manner.”

12 The Maples email said as follows:

“We represent the Dissenting Shareholders. Having just received the email below, we are astonished by its contents, and the contents of the documents attached to it. We would respectfully make the following points:

1. The hearing concluded at the end of November and the Company's new attorneys were appointed on 20 January 2017. According to Ms O'Driscoll's affidavit, Mr D'Almeida was appointed over one month ago on 16 February 2017. Despite this, we were not given any prior notice of the proposed summons, which has been circulated after Mr Justice Segal has completed his judgment and while it is in the final stages of proofing. This is quite incredible not only due to the lateness with which notice has been given to us and the Court but also because the attorneys involved in the case are in regular communication. Specifically, all of the attorneys have been attending the same conference in Sydney, Australia, in the last few days at which the Judge is also present and Harneys' representatives who...