In the recent decision of In the matter of Kongzhong Corporation – FSD 112 of 2017, Justice Parker held that legal protections should apply to meetings held between the court appointed valuation experts and Cayman Islands companies that are the subject to a section 238 “fair value” law suit.
These meetings are known as “management meetings” and are used to obtain further and/or better information to allow the valuation experts to prepare their evidence with which to assist the Court and usually involve a transcript being taken. It is a procedure that has been developed by the Cayman Court as a matter of case management and for now, they are compulsory. There are no prescribed rules – statutory or otherwise – to regulate these meetings. The authors of this blog have long campaigned for change, contributing to the development of the jurisprudence which brought protection to Cayman Islands companies in the cases of Trina Solar Limited, Xiaodu Life Technology and Nord Anglia.
Management meetings do not provide a formal right for a company’s management team or legal team to object to questions that are put by experts who are not attorneys, and are therefore not trained in cross-examination. The risk of unfairness arising from unfair, ambiguous or loaded questions is high. Harneys successfully argued that protections for the company should be in place to avoid transcripts of management meetings being used as litigation tools to advance points at trial in the manner of a deposition process.
The issue in Kongzhong was whether a transcript was admissible in evidence without more, or whether there should be some protection governing its admissibility. The experts should of course be free to rely on explanations, clarifications and the like made by the company’s management at the meetings to the extent that they facilitate the preparation of their reports. For this they can also use the transcript. However, Justice Parker held that the admissibility of the transcript of such a meeting should be a matter for agreement between the parties and ultimately a matter for the trial judge. Arguments over precisely what was said, the context in which it was said, the room for interpretation and the emphasis which may be placed on a verbatim written transcript is not helpful to the overriding objective or to the court and it was held that “(t)here is a real risk of more heat than light being generated”. In finding that it is also not right to treat transcripts of these meetings as documents upon which points may be advanced at trial in the manner of a deposition process, Justice Parker cited with approval Justice Kawaley’s reasoning at paragraph 41 of his decision in Nord Anglia (unreported 19 March 2018) where he found that it was wrong as a matter of legal principle for a transcript of a management meeting to be used as a form of deposition in the absence of legal protections and that allowing a transcript to be used in such a way would undermine the informality of the procedure and potentially stem the free flow of information from management.