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13 September 2018
In In the matter of Qunar Cayman Islands Limited (FSD 2017/76 – RPJ) the Grand Court handed down written reasons for its further directions for dissenters' discovery in a Section 238 appraisal action, following the recent Court of Appeal decision in Qunar (for further details please see "Court of Appeal rules on dissenters' discovery").
Justice Parker began by acknowledging that the Grand Court's approach to discovery has changed as a result of the Court of Appeal decision, such that a "general requirement for automatic mutual disclosure" now applies. Although the exact approach in a given case will be fact-specific, in general both the company and the dissenters must give mutual disclosure of all material relevant to the issue of fair value. The judge then considered the three issues on which the parties were in disagreement as to what further directions should be ordered in relation to dissenters' discovery.
The first issue was whether the directions for dissenters' discovery should contain special protections for alleged proprietary rights asserted by the dissenters over certain documents. However, the dissenters had filed no evidence, which undermined their position. In refusing the dissenters' request, Parker cited the implied undertaking of every litigant not to use discovered material for an ulterior or collateral purpose, as well as the court's inherent jurisdiction to protect litigants by, among other things, requiring undertakings. Nevertheless, the judge left open the possibility of a future application for additional protection supported by evidence.
The second issue related to the dissenters' trading history in Qunar's shares, which the Court of Appeal ordered to be provided by way of a schedule that would be confirmed by documents if challenged. The dissenters argued that any challenge to a schedule must be on bona fide grounds. The judge rejected the dissenters' proposed precondition but noted that, if necessary, the court could deal with an alleged unreasonable or bad-faith request in due course based on evidence.
Finally, the dissenters sought to limit their discovery to documents produced after the announcement of the merger, as opposed to during the longer, five-year period that applied to the company. Parker rejected this request also, holding that there was "no good reason advanced as to why the [dissenters] should not give discovery in the same way and over the same period as the [company]".
The decision could be relevant for other ongoing Section 238 appraisal actions, in which directions for discovery by the dissenters are yet to be ordered. It also underlines the extent of recent changes to discovery in Section 238 proceedings.
For further information on this topic please contact Ian Mann, James Granby or Vicky Lord at Harneys' Hong Kong office by telephone (+852 5806 7800) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). Alternatively, contact Nick Hoffman at Harney Westwood & Riegels' Grand Cayman office by telephone (+1 345 949 8599) or email (email@example.com). The Harneys website can be accessed at www.harneys.com.
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