Section 238 of the Companies Act (2022 Revision) and New Frontier Health Corporation
| Jurisdiction | Cayman Islands |
| Judge | Justice David Doyle |
| Judgment Date | 04 April 2023 |
| Docket Number | FSD CAUSE NO. 72 & 74 OF 2022 (DDJ) |
| Court | Grand Court (Cayman Islands) |
The Hon. Justice David Doyle
FSD CAUSE NO. 72 & 74 OF 2022 (DDJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Determination of application for extension of time for Company to provide discovery—need to comply with Orders — need for a fair trial within a reasonable time
Camilla Bingham KC for the Company instructed by Gráinne King, Catie Wang and Moesha Ramsay-Howell of Harney Westwood & Riegels
Jeremy Goldring KC for the Dissenters, instructed by (i) Katie Logan of Campbells, (ii) Nigel Smith of Carey Olsen, and (iii) Rocco Cecere and Natascha Steiner-Smith of Collas Crill
These proceedings were commenced, over a year ago now, by way of petitions dated 28 March 2022 both seeking, pursuant to section 238 of the Companies Act (2022 Revision), this court's determination of the fair value of shares held in New Frontier Health Corporation (the “Company”) together with a fair rate of interest, if any, on the amount payable by the Company to certain dissenters (the “Dissenters”). The present Dissenters are defined in Appendix 1 to the Company's document entitled “Amended Summons”.
The Company at paragraph 11 of its skeleton argument dated 23 March 2023 wrongly stated that:
“On 20 March 2023 the Court gave the Company leave to amend its summons pursuant to GCR Order 32 rule 2 (3) [HB/31].”
At HB/31 there is an email from my Personal Assistant dated 20 March 2023 which reads:
“Justice Doyle is minded to list the Amended Summons for 31 March 2023.”
By no reasonable stretch of the imagination can that email be referred to as the Court granting leave to amend and it was misleading of the Company to suggest otherwise. I raised the point at the hearing and having heard from counsel granted leave to amend the summons. It can now accurately be stated that the Court gave the Company leave to amend its summons.
I must also make another point in respect of the language used by the Company in its skeleton arguments. Included in the hearing bundle is the Company's skeleton argument dated 16 February 2023 which at paragraph 19 states that the Company did not formally seek “a determination on the papers (but only informally reminded the Judge of his discretion in that respect)”. I regard that wording as unfortunate also. Without first obtaining the agreement of the Dissenters, the Company had on page 2 of the formal summons dated 19 December 2022 included the following wording: “It is respectfully suggested that it be determined on the papers”. In my mind the wording that the Company had seen fit to include in its formal summons was not an “informal reminder” but was a formal request for the summons to be determined on the papers and it was wrong for the Company, in its skeleton argument, to suggest otherwise. The Company needs to take care to avoid loose language in its skeleton arguments in the future.
On, as long ago, as 12 August 2022 after a two day hearing I made an order (filed on 17 August 2022) that the Company should provide its discovery of certain categories of documents specified in Appendix 3 of the Order within 120 days from the date of the Order (the “August Order”). According to the Dissenters, the Company's discovery should have been completed by 19 December 2022. Appendix 6 to the August Order contained a very detailed protocol regarding documents required to be redacted in order to comply with the laws of the People's Republic of China (the “PRC”).
At the hearing in August 2022 before the court for determination were 18 disputed issues of which the period of time within which the Company was to provide discovery was one.
The Company has failed to comply with the August Order.
Mr Carl Wu, the Chief Executive Officer and a director of the Company, in his first affirmation dated 21 July 2022 referred at paragraph 8.1 to the timeframe for the Company to provide discovery. He stated that the Dissenters initially sought an order specifying 70 days subsequently increased to 120 days. The Company's initial counter proposal was 240 days subsequently reduced to 180 days.
At Part B of his affirmation Mr Wu gave further details of the timeframe for the Company to give discovery under the following subheadings:
B1 Steps taken to date
— preservation of documents
— identification of data sources
— identification of custodians communications with custodians
— third parties
B2 Complicating factors in the discovery exercise
— Covid-19 pandemic and associated restrictions
— PRC Data Protection Law.
B3 Anticipated timing of next steps in the Company's discovery exercise.
At paragraph 22 Mr Wu said that the Company was taking advice on relevant requirements of the PRC Data Protection Laws so that it may address any issues arising “without undue delay to these proceedings.”
At paragraph 23 Mr Wu referred to the need “for an extra level of review.”
Mr Wu at paragraph 25 referred to restrictions in relation to COVID-19 and the Data Protection Laws of the PRC and stated:
“… based on discussions with its advisers, the Company anticipates being able to provide the Discovery Documents within 180 days of the Court's directions order, but not earlier than that.”
At paragraph 24 Mr Wu had admitted that “the Company is yet to begin the process of collecting documents from custodians.”
At no stage did Mr Wu even hint that governmental approval was required in the PRC before documents could be released for discovery purposes.
In my judgment delivered on 12 August 2022 I stated:
“ Issue 4 (Company's Issues Document Issue 1)
(1) Whether the Company should be ordered to provide the bulk of its discovery within 180 days (as contended for by the Company) or within 120 days (as contended for by the Dissenters).
Ruling
My ruling is that a period of 120 days should be allowed. This should be specified at paragraph 11a of the draft Order.
Reasons
I am not persuaded that the impact of the COVID 19 pandemic and the PRC Data Protection Laws mean that a longer period than 120 days should be allowed. 120 days should be adequate and realistic. The discovery process cannot be permitted to unduly delay the determination of the issues in this case within a reasonable time. The Dissenters have referred to authorities where a “customary” 70 days has been ordered in the past. The evidence before the Court goes nowhere near justifying 180 days. I noted with concern Mr. Wu's statement at paragraph 24 that “the company is yet to begin the process of collecting documents from custodians.” The Company seems to have dragged its feet in starting the discovery process earlier than it did and must now get on with the process and devote sufficient resource to it. The Company has already had significant time to progress discovery. The Company must now focus on complying with its discovery obligations.”
Paragraph 11a of the draft Order became paragraph 10a of the finalised August Order.
I have considered the further evidence now filed (and contained in the hearing bundle) in respect of the Company's application for an extension of time to comply with its discovery obligations. I do not set it all out in this judgment. It forms part of the court record and I have full regard to it.
I have also considered the skeleton arguments and the oral submissions placed before the court. I am most grateful to both counsel for their eloquent and well focused oral submissions.
In summary the position of the Company is as follows:
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(1) it initially applied for an extension to 28 April 2023 but now seeks an extension to 29 September 2023;
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(2) “scant evidence” was put before the court on behalf of the Company in August 2022;
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(3) there have been additional difficulties created by COVID-19 over and above those referred to in the evidence before the Court in August 2022;
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(4) screening for confidential patient data “has retarded the discovery process significantly”;
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(5) “… the release of the balance of the Company's data such as was located in mainland China and had at that stage [19 December 2022] been tagged as relevant was not released to the Dissenters. The Company's understanding was (and remains) that by reason of data security and protection regulations recently introduced in the PRC in c. late 2021, their release must await the grant of governmental approval”. “On 17 December 2022 a first tranche of documents was sent to the Judicial Assistance Exchange Centre in Beijing for approval to make a cross-border transfer to the Cayman Islands”;
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(6) although avoidance of undue delay is an important facet of the overriding objective and (consistently with the constitutional requirement that proceedings be determined “within a reasonable time” — section 7 of the Bill of Rights scheduled to the Cayman Islands Constitution) the Court's duty of active case management can include the giving of directions to ensure that the trial proceeds quickly, the Court's priority is always to see to it that substantive justice is done;
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(7) it is in no-one's interests for the discovery process to be conducted otherwise than with considerable care and professionalism;
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(8) the court should not refuse reasonable extensions which neither imperil hearing dates nor otherwise disrupt the proceedings ( Jalla v Shell International Trading and Shipping Co Ltd [2021] EWCA Civ 1559 Coulson LJ at [29]);
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(9) when competing interests collide — (a) the Court's interest in promoting the expeditious dispatch of litigation and (b) a party's desire for more time in...
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