The Companies Act (2016 Revision) Trina Solar Ltd
| Jurisdiction | Cayman Islands |
| Judge | Mr Justice Segal |
| Judgment Date | 08 December 2021 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE No: FSD 92 of 2017 (NSJ) |
The Hon. Mr Justice Segal
CAUSE No: FSD 92 of 2017 (NSJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Section 238 Companies Law (2016 Revision) — fair rate of interest — basis on which the fair rate is to be determined — the determination of the fair rate in this case in light of the disputed expert evidence — interest periods — costs as between the parties — application to disapply the limits on the recovery of foreign lawyers' fees and travel and hotel expenses, on the recovery of witnesses' hotel expenses and for preparing the Company's bill of costs and of the taxation process
Mr Philip Jones QC instructed by Katie Pearson and Mark Burrows of Harney Westwood & Riegels for the Company
Mr Simon Salzedo QC instructed by Rupert Bell, Niall Hanna and Patrick McConvey of Walkers on behalf of the Dissenting Shareholders
On 23 September 2020, I handed down judgment (the Trial Judgment) following the trial of the petition of Trina Solar Limited (the Company) pursuant to section 238 of the Companies Act (2016 Revision) (the Companies Act) seeking the Court's determination of the fair value of the Company's shares held by Maso Capital Investments Limited (Maso) and Blackwell Partners LLC — Series A ( Blackwell and together with Maso, the Dissenting Shareholders), who had dissented from the Company's merger and were respondents to the petition. On 18 December 2020, I handed down a further judgment dealing with various issues which arose in connection with the Trial Judgment. This judgment deals with various consequential matters.
The issues for determination are:
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(a). the fair rate of interest pursuant to section 238(11) of the Companies Act.
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(b). the periods for which interest has accrued.
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(c). various costs issues, including (i) what overall order for costs should be made, (ii) interest on costs, (iii) whether there should be a payment on account of costs, and (iv) if it arises, aspects of the quantum of the Company's costs including its application to disapply the limitations on recovery of foreign lawyers' fees and expenses.
In relation to the fair rate of interest, the parties exchanged expert reports and supplemental reports. The Company's expert was Ms Susan Glass of KPMG while the Dissenting Shareholders' expert was Mr Braden Billiet of FTI Consulting. Both experts gave live evidence remotely and were cross-examined by Leading Counsel. Mr Jones QC appeared for the Company and Mr Salzedo QC appeared for the Dissenting Shareholders (as they had both done at trial).
In relation to costs, affidavits were filed by Mr Manoj Jain for the Dissenting Shareholders and Mr Mark Burrows for the Company. Mr Jain is the Co-Chief Investment Officer of Maso, and Mr Burrows is an associate attorney with Harney Westwood & Riegels (Harneys), the Company's attorneys. The parties agreed that cross-examination of these witnesses was not required.
The hearing was held on 29 July 2021 by video link.
I have concluded as follows:
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(a). that the fair rate of interest in this case is the rate at the midpoint between the Company Borrowing Rate and the Prudent Investor Rate, as those terms are explained below. The rate is a simple rate (as to which there was no dispute).
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(b). that the Company Borrowing Rate shall be 4.7%. It is to be based on the short-term rates as determined by Ms Glass. This rate is to apply both to the interim payments for the period (which I refer to below as the First Period) from the date of the Company's written offer to the Dissenting Shareholders (20 March 2017) until the date on which the Company made the interim payments to the Dissenting Shareholders (25 July 2017) and to the balance of the fair value held to be owing to the Dissenting Shareholders above the interim payments for the period (which I refer to below as the Second Period) from 20 March 2017 to the date of payment of the balance (being 5 February 2021 for Maso and 9 February 2021 for Blackwell).
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(c). the Prudent Investor Rate shall be the rate as calculated by Mr Billiet. The Prudent Investor Rate will therefore be 9.67% for the First Period for both Maso and Blackwell (so that the fair rate of interest on the interim payments for the First Period shall be 7.19%) and 8.71% for Maso and 8.87% for Blackwell for the Second Period (so that the fair rate of interest on the balance of the fair value held to be owing to the Dissenting Shareholders above the interim payments for the Second Period shall be 6.7% for Maso and 6.79% for Blackwell respectively).
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(d). that there shall be no order as to costs.
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(e). that had it been necessary to do so, I would have dismissed the Company's applications for the disapplication of the various limits applied to foreign lawyers' fees and travel and hotel expenses, the hotel expenses of witnesses and the costs of preparing the Company's bill of costs and of taxation.
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(f). there is, in view of these decisions, no need for me to adjudicate on the applications for interest on costs and a payment on account of costs.
There are two main issues. First, what approach and methodology should be applied in determining the fair rate of interest? Secondly, how should the proper approach and methodology be applied on the facts of this case?
The Dissenting Shareholders argued that the first issue was decided by the Cayman Islands Court of Appeal (the Court of Appeal) in its judgment in Shanda Games Limited [2018] (1) CILR 352 ( Shanda (CA)) and that the Court of Appeal's judgment was binding in this Court. They submitted that the Court of Appeal approved the midpoint approach, under which the Court will award interest at the midpoint between:
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(a). the interest rate at which the company could have borrowed the amount representing the fair value of the dissenting shareholders' shares (the Company Borrowing Rate); and
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(b). the rate which prudent investors in the position of the Dissenting Shareholders could have obtained on the amount representing the fair value of their shares if they had that money to invest (the Prudent Investor Rate).
The Dissenting Shareholders submitted that the judgment in Shanda (CA) on this point remained binding after the decision of the Judicial Committee of the Privy Council (the Privy Council) in the appeal in that case ( [2020] UKPC 2) ( Shanda (PC)). They said that Shanda (CA) remained binding authority unless and until the Privy Council said otherwise, and that there was nothing in Shanda (PC) which indicated that the Court of Appeal's judgment in Shanda (CA) on this point was wrong. The Dissenting Shareholders submitted that the Privy Council had dismissed Shanda's appeal without dealing with the proper approach and methodology to be applied in determining the fair rate of interest (since Shanda (PC) had held that there was no justification on appeal for disturbing my decision at first instance on the basis of arguments that had not been raised at the hearing before me). The Court of Appeal's decision was therefore unaffected.
The Dissenting Shareholders noted that this issue had been dealt with recently by Mr Justice Parker in ( Qunar Cayman Islands Limited unreported, Grand Court, 29 March 2021, Parker J). Parker J had dealt with the status of Shanda (CA). He said as follows:
“36. The leading authority as to the legal principles that ought to apply under section 238(11) remains that of the Court of Appeal in Shanda. It is strongly arguable that the decision is binding on this court, but even if it is not because the Privy Council has somehow left the point open, and even though the court has a broad evaluative discretion to apply on the facts of each case, the settled practice of two first instance courts as upheld by the Court of Appeal should be followed by this court unless there are good reasons not to do so.
37. This court must therefore be guided by the principles the Court of Appeal has set out as to the approach to be adopted in determining the fair rate of interest, unless it is persuaded on the particular facts that the approach would be clearly wrong.”
38. I am not so persuaded in this case. I am therefore unable to accept the damages approach urged upon the court by Mr Lowe QC, or Ms Glass's market approach which only considers the company's borrowing rate, or to consider only the investor borrowing rate.
39. The court should look at both sides of the equation and adopt the midpoint approach.”
The Dissenting Shareholders acknowledged that Mr Justice Parker had not accepted that Shanda (CA) was binding. However, he had considered that it was strongly arguable that it was binding and had not felt it necessary to decide the point because he was satisfied that even if it was not binding it was clear that there was a settled practice, evidenced by Shanda (CA) and the decisions of this Court in Integra [2016] (1) CILR 192 (Jones J) and ( Shanda Games Limited unreported, 16 May 2017, a decision of mine) ( Shanda (GC Interest)), which he should follow. He therefore decided that the midpoint approach should be used.
The Company, however, argued that the midpoint approach was wrong in principle and based on an erroneous construction of section 238 of the Companies Act. It briefly summarised the arguments and authorities on which it relied in support of its construction of section 238(11) of the Companies Act and submitted that Shanda (CA) was not binding on this Court and that there were reasons why this Court...
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