In doing so, he refused the application of a Cayman-Islands incorporated company for an open-ended extension of time to comply with its disclosure obligations in dissent proceedings notwithstanding the Company's argument that such documents could not be disclosed without certain regulatory approval from the People's Republic of China ("
PRC").
Background
The substantive proceedings in this matter, brought by certain minority shareholders ("
Dissenting Shareholders") of New Frontier Health Corporation (the "
Company"), centre around an appraisal action brought under section 238 of the Cayman Companies Act. As part of those proceedings, the Company was required to disclose a vast number of documents to the Dissenting Shareholders in compliance with its discovery obligations.
Notwithstanding prior extensions of time afforded to the Company, the Company had failed to disclose its remaining 444,000 documents to the Dissenting Shareholders. In a rather novel application seeking an open-ended extension of time to produce the remaining documents, the Company argued that certain restrictive PRC laws, namely the PRC Data Security Law and the Personal Information Protection Law ("
PRC Laws") meant that regulatory approval was required from the PRC governmental authorities before it could comply with its obligations. If the Company were to disseminate documents without such authorisation, there was a legitimate risk of recrimination and prosecution.
Decision
The Court undertook a balancing exercise taking into account factors such as the overriding objective and the Court's duty to manage proceedings, the actual risk of prosecution under the PRC Laws, the need for and the importance of the documents, the location of the documents and the parties, comity considerations, the availability of an alternative means of securing the documents, the conduct of the party seeking the extension, the prejudice caused by the delay, the impact of non-compliance, whether there was an acceptable explanation and good excuse for the delay and what the justice of the case required. After weighing up these factors, the Court ultimately exercised its discretion in favour of the Dissenting Shareholders.
In reviewing all of the evidence placed before him, including the expert evidence adduced on behalf of the Company on actual risk of prosecution, Doyle J accepted that the disclosure of data and/or personal information held within the PRC could infringe PRC law. He also accepted that the Company had properly demonstrated an "
actual risk of prosecution" as required under the
Bank Mellat test
[1] , although the risk of prosecution, he determined, was "
low to moderate."
Doyle J further accepted that the PRC had a legitimate interest in protecting data and security, but found that such interest was overridden by the Cayman Court's "
constitutional obligation to secure a fair trial within a reasonable time, the overriding objective, and the importance of Cayman companies complying with orders of Cayman courts…"
Accordingly, on balance, the just and fair conclusion to be reached was that the remaining 444,000 documents, which had been reviewed by PRC counsel and were ready for production, should be disclosed without any further delay.
Comment
This case provides helpful guidance as to the Cayman Court's approach to extension of time applications in a discovery context. The Cayman Court did not refuse the further extension of time lightly and recognised the PRC's legitimate interest in data protection and security. However, having considered the degree and extent of the risk of prosecution and the need for and importance of the outstanding documents to ensure the fair
determination of the Section 238 proceedings within a reasonable time, the Court found in favour of the Dissenting Shareholders in the interests of justice and demonstrates the importance of Cayman companies complying with orders of Cayman courts in its jurisdiction.
[1] Bank Mellat v Her Majesty’s Treasury [2019] EWCA Civ 449
