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A warning for dissenters claiming privilege in share appraisal litigation

The obligation for dissenting shareholders to give discovery in section 238 share appraisal litigation in the Cayman Islands was confirmed in the Court of Appeal’s landmark 2018 decision in Re Qunar [see blog here].

A recent decision of the Cayman Grand Court in In the Matter of Nord Anglia Education demonstrates that, in addition to their overriding obligation to provide discovery, dissenting shareholders will also be unable to claim privilege over certain documents (either legal advice privilege or litigation privilege) unless the rationale for such a claim is clearly particularized and the particularisation withstands the close scrutiny of the Court.

The lawyers from both the Company and the dissenting shareholders (who were split into a number of distinct groups) had engaged in lengthy correspondence regarding the dissenters’ compliance with a Consent Order which compelled them to provide discovery. In particular, a dispute arose over the dissenters’ failure to provide certain documents to the Company’s valuation expert with the dissenters claiming privilege over the documents. However, the dispute escalated due to the somewhat “obtuse” behavior of the dissenters’ lawyers and the matter came before the Grand Court.   

The governing legal principles on how a disputed claim for privilege should be judicially assessed were not in dispute between the parties, i.e. where the validity of a privilege claim is challenged, the privilege claimant must demonstrate by reference to a sufficiently particularized List of Documents or by way of correspondence, that there is an objectively ascertainable credible basis for the privilege which is claimed.

While the Grand Court in Nord Anglia stressed that it had not conducted a full inquiry into the merits of the privilege claim, it ruled that certain dissenting shareholders had provided “deficient discovery” which had prevented the Court from being able to properly conduct such an inquiry. In particular, the Court took aim at the dissenting shareholders’ failure to give adequate particulars in support of the relevant privilege claims -  a failure which was exacerbated by the compliance shown by other dissenters who were subject to the same obligations.

The Grand Court made an Order compelling the relevant dissenters to provide a list of documents in their possession over which they claimed privilege together with a detailed account of why privilege was being claimed in each instance. The tenor of the judgment and the Order made serves as a warning to dissenting shareholders and their compliance with their discovery obligations.

A warning for dissenters claiming privilege in share appraisal litigation

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