In a recent decision of the Grand Court of the Cayman Islands, the Court dismissed an application brought by dissenting shareholders seeking draconian orders. In the ever contentious and litigious environment of shareholder appraisal actions, the Cayman Court was asked to entertain a relatively novel application baring the company from adducing the evidence of its valuation expert.
In these cases, both the company and the dissenters are directed by the Court to appoint a valuation expert and each party relies on this expert evidence to advance their position on the fair value of the company’s shares.
In this matter, the company and dissenters engaged in a lengthy dispute on the disclosure made by the company. The Court ultimately appointed a third party forensic expert to assist with the discovery process. The forensic audit commenced, and both parties were directed to engage with the forensic auditor on a regular basis to ensure the stakeholders were satisfied with progress. At the unilateral direction of the dissenting shareholders, the forensic audit ceased. The dissenters complained, amongst other things, that the company, or certain of its staff, were not properly engaging with the audit. Shortly thereafter, the dissenters brought an application requesting that the Court direct the audit to cease permanently and that the conduct of the company was such that it warranted an order barring the company a right to adduce expert evidence and relying upon any factual evidence.
Considering the evidence relied upon by the dissenters to support their application, the Court held that “the evidence and circumstances of this application does not, in my judgment, reach the level that would be required in order to justify the draconian relief sought”. The Court also held that the dissenters had failed to demonstrate why their application should be allowed. Indeed, the judgment held that in the circumstances i.e. the lack of evidence, it was not necessary therefore to consider the Court’s powers to disallow or disbar evidence.
In dismissing the application, the Court directed the forensic audit to resume.