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Shanda Games Limited: Court of Appeal lands further knock out to Dissenting Shareholders

On 30 October 2018 the Cayman Islands Court of Appeal (CICA) ordered the Dissenting Shareholders to pay 75% of the Company’s costs of the substantive appeals to the CICA, noting the Company was the “overall victor”  and, in monetary terms, “success on the minority discount point gained the Company nearly US $17 million.”

On 9 March 2018 the CICA granted the Company’s appeal on minority discount – holding that a minority discount should be applied when determining fair value of shares pursuant to section 238 of the Companies Law. The CICA dismissed the Company’s appeal on the fair rate of interest and dismissed the Dissenting Shareholders’ appeal relating to aspects of methodologies. The Company withdrew other grounds of its appeal prior to the hearing. Both the Company and Dissenting Shareholders have appealed aspects of the CICA decision to the Privy Council – scheduled to be heard in March 2019.

In September 2018, the Company and Dissenting Shareholders applied for orders as to costs arising out of their substantive appeals to the CICA.

  • The Company sought a proportionate costs order to reflect the fact that it was the overall successful party relying on the decision of Mears Ltd v Leeds City Council [2011] EWHC 694 (TCC).
  • The Dissenting Shareholders accepted they should pay the Company’s costs of the methodologies issues, but contended (inconsistently) that the costs of the minority discount point should be costs in their appeal to the Privy Council while the costs of the interest issue should be paid now. They also sought costs on the indemnity basis of the Company’s withdrawn appeals.

The CICA rejected the approach suggested by the Dissenting Shareholders and agreed with the Company. A proportionate costs order is appropriate in favour of the Company – all issues arose out of the same dispute and were treated as facets of the same problem. The CICA applied a discount to reflect the interest point and the points withdrawn by the Company.

The CICA also noted that both Parties are appealing aspects of the CICA decision, and it was “surprising” that the Dissenting Shareholders did not accept the same regime should apply to the interest point as they suggest should apply to the minority discount point.

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