The Privy Council also reiterated that the principles to be applied by an appellate court to findings of fact or evaluative assessments of a lower court are restrictive and designed to be so.

The petition of the Appellant, Trina Solar, was heard by the Grand Court in May and June 2019. The Judge’s carefully and thoroughly reasoned judgment comprised 353 paragraphs over 249 pages. The Judge heard extensive expert evidence over sixteen days and determined the values per ADS reached by applying three valuation measures, after a minority discount, to be Merger Price US$11.37; Market Price US$7.26; and Discounted Cash Flow (DCF) Value US$17.81. The Judge then applied a weighting of 45 per cent to the Merger Price, 30 per cent to the Market Price and 25 per cent to the DCF Value in reaching his decision that a fair value was US$11.75 per ADS.

In an equally thorough judgment, the Cayman Islands Court of Appeal (CICA) correctly identified the appropriate legal principles which would allow an appellate court to interfere with findings of fact or evaluative assessments. In short, it would need to satisfy itself that the Judge’s conclusions were plainly wrong; therefore one which no reasonable judge could have reached on the evidence. The CICA concluded that: “On the facts of this case … I do not see that any reliance can safely be placed on the Merger Price. The whole point of the protections and processes which have been developed in the Delaware jurisprudence and adopted in this jurisdiction is to give the court comfort that the merger price can be probative of fair value. …” The CICA concluded that the Judge’s assessment of Merger Price was indeed plainly wrong and decided it should interfere by giving it no weight, was not persuaded that the Judge’s assessment of Market Price was ultimately in error and, in effect, redistributed the relative weighting of the three methodologies so that fair value would be comprised 30 per cent Market Price and 70 per cent DCF (almost three times that attributed by the Judge).

The JCPC restored the Judge’s original decision. It concluded that the reasoning adopted by the CICA for interfering with the Judge’s assessment of the weight to be accorded to the Merger Price was flawed. Instead, the JCPC held the Judge’s nuanced assessment based on a sea of evidence, which acknowledged deficiencies in the sales process, was within the reasonable bounds of evaluation and that while the CICA had “correctly identified the limits on its entitlement to interfere … it seems to the Board that it impermissibly strayed into the realm of substituting its own evaluation for that of the Judge.” The JCPC criticised the CICA’s approach to reliability in this context, explaining that it is a comparative concept which allows the court to attribute weight even where it concludes that there are weaknesses or uncertainties.

The JCPC also concluded that the CICA was not justified in treating the Judge’s conclusions on Management Projections as plainly wrong. It disapproved of the CICA approach characterising it as a “calculation exercise” as opposed to an exercise in estimation which could produce a range of reasonable results. The CICA’s alternative figures were arbitrary and unsupported by evidence – the figures were “plucked out of the air” and had “no greater claim to validity” than Trina Solar’s projections. The Judge was ultimately better placed to make an assessment of the relevant inputs and the reliability of the Management Projections.

In the highly valued and complex area of appraisal litigation in the Cayman Islands, the JCPC’s decision to restore the Grand Court’s assessment of fair value is a seismic one. The CICA’s repeated and unjustified interventions were “called out” in three important ways: first, the CICA wrongly treated the legal principles from Delaware as a rigid “checklist”; second, it erred by treating reliability as a binary concept rather than a sliding scale where a valuation measure can still be useful, even if imperfect; and third this culminated in a failure to conduct the necessary comparative analysis which led to the illogical outcome of vastly increasing the weighing of the DCF valuation measure.

The JCPC’s reinstatement of the Judge’s fair value determination of US$11.75 per ADS represented a significant victory for Trina Solar.

Harneys represented Trina Solar in the Grand Court, CICA, and JCPC.