Pender v GGH (Jersey) Limited and Ors [2022] JRC 028 (03 February 2022)

judgment the master: 1. This judgment contains the reasons for my decision concerning whether or not supplemental expert reports on the value of the first defendant should be exchanged sequentially or simultaneously and the date by which such reports should be produced.

2. I am familiar with the general background to this dispute which was set out in two previous judgments I have issued dated 26 th November 2019 Pender v GHH (Jersey) and Ors [2019] JRC 228 and 8 th January 2020 Pender v GGH (Jersey) and Ors [2020] JRC 109 . I adopt without repeating the same the background to the present dispute set out in those judgments for ease of reference.

3. The directions issued on 8 th June 2020, following directions dealing with discovery, gave the plaintiff and the second and third defendants permission to call one expert each in the field of share valuation. In the case of the second and third defendants, their permission was limited to one expert acting jointly for them.

4. I further directed that such reports should be exchanged sequentially following the approach in Aukland v Minister for Health & Social Services & Anor [2017] JRC 136 . To be fair to both parties, at the directions hearing on 8 th June 2020 it was agreed by them that the exchange of experts' reports should be sequential and there was no discussion on the issue.

5. In relation to the present application the parties now wish to fix trial dates. The plaintiff also wished to produce updated valuation evidence. The principal reason for this request by the plaintiff was that the first defendant was doing much better than expected and had exceeded its own internal cashflow forecasts. Advocate Christie did however fairly indicate there were also other publicly available comparables that were becoming available which his expert might rely on which might form part of a supplementary report. This was not a wholesale change of approach but rather a clarification of the approach adopted by his expert.

6. The other reason for wanting an updated valuation put forward was that at the time of any trial the expert evidence provided would be almost a year out of date, whereas the usual starting point for the valuation of a company in an unfair prejudice dispute is the last day of trial, or possibly the date of the court giving its decision. The parties therefore wanted the court at trial to have a much more up to date figure than the valuations produced in June and July 2021 as any trial would not take place before the autumn of 2022.

7. The plaintiff also wanted to leave production of supplemental reports until after a pre-trial review so that it could explore before the trial judge the timing of how close to trial updated valuation evidence should be provided.

8. The problem with this approach was that the focus of any pre-trial review is on preparations for trial. The issue of whether or not updated expert reports should be permitted and if so when is however a case management decision which needs to be addressed before any pre-trial review. By the time of the pre-trial review generally all relevant evidence should have been produced with the focus of the parties and the court at that stage being on the mechanics of conducting the trial itself. I therefore concluded that, even though there would be an interval between the date of updated reports and the trial court's final decision, that it was preferable for any further evidence to have been produced prior to the pre-trial review. If the court, having been through a trial, felt that additional evidence was required on quantum then that was a matter the court could deal with at the stage of making its decision.

9. The other relevant factor which led me to reach this conclusion is that liability is very much in issue in this case. I did not want the parties to become distracted by relatively last-minute preparation of expert evidence when there will be a number of other significant tasks to focus on including preparing opening submissions, preparing first drafts of closing submissions and cross-examination of factual witnesses and experts.

10. Advocate Christie however argued that exchange of updated valuation reports should be sequential. He suggested this was for three main reasons.

11. Firstly, the proposed reports were by way of update only and primarily focused on the actual financial performance of the first defendant which had exceeded any cash flow forecasts and which was likely to become profitable in 2022 some three years earlier than anticipated when the original experts' reports were produced.

12. The second reason was the wish to refer to any relevant comparators that had become publicly available as noted above.

13. His third objection to a sequential exchange of supplemental reports was that the second and third defendants wanted sequential exchange so they could in their report in response insert criticism of any supplementary report provided by the plaintiff. In support of this submission, Advocate Christie drew to my attention to the second and third defendants' valuation report filed in July 2021, which contained some 14 pages of criticism of the plaintiff's expert. He further relied on a schedule produced by the second and third defendants in relation to costs incurred and estimated costs in support of a future application for security for costs. The relevant part of the estimated costs dealing with production of further expert evidence and joint reports listed an expert fee of £150,000 plus £173,000 of legal costs. This led to the submission that these costs were excessive for the production of further expert evidence and therefore could only be being proposed because the second and third defendants wished to attack any supplementary report provided by the plaintiff in its expert evidence filed in response. Advocate Christie argued this was not the appropriate way to proceed. He suggested that areas of difference should be addressed at the joint meetings of experts and in any subsequent joint statement where the experts would set out brief areas of agreement and disagreement and the reasons for the latter.

14. Advocate Thomas argued there was no reason to depart from the normal rule of sequential exchange. He denied that any adverse inference could be drawn from the security for costs schedule. This was a complex dispute and of high value where there was going to be significant interaction between the expert and the legal team.

15. The decision I reached was that updated reports should be exchanged simultaneously. This was to ensure that the primary focus of those reports was to provide updated valuations based on the first defendant's actual performance as distinct from previous forecasts of anticipated performance and estimates of cashflow. In this case, both experts would have access to the same information and therefore I concluded were able to provide an update on their existing opinion as to the value of the first defendant.

16. To the extent that the plaintiff was going to rely on any other material in support of an updated valuation, I concluded this was acceptable provided that such material was disclosed four weeks before the production of updated reports so that the second and third defendants' expert could take such material into account.

17. Although experts' reports are normally exchanged sequentially in relation to issues of quantum, in this case the main reports have already been exchanged in accordance with the principles set out in Aukland . The need for the present reports is therefore really to provide an update as to what each expert considers the first defendant is now worth. By contrast the first report was for the plaintiff to set out its expert case on quantum as there are many ways to value a company and because the second and third defendants were saying that the first defendant had no value. They were therefore entitled to know how much was being claimed by the plaintiff and the case they have to meet. However now that each expert has set out its primary position and each side understands the other's overall approach, the importance of sequential exchange does not arise in the same way in this case.

18. In reaching my decision, I was also concerned about the amount of costs proposed to produce a supplemental report. The proposed schedule of loss appears to involve seven lawyers apart from legal assistants and trainees. That cost does not appear to me be justified in relation to the production of an updated report. In expressing this conclusion, I accept that work will need to be carried out by the second and third defendants' legal team with their expert in order to prepare for cross-examination of the plaintiff's expert. However that task should be kept separate from the production of an updated report whose primary focus should be to set out the second and third defendants' current position on the value of the first defendant.

19. Insofar as there remain differences of approach between the plaintiff and the second and third defendants, these are best addressed at a joint meeting of experts, where the experts themselves can discuss any differences in their respective approaches and explore to what extent they agree or disagree and the reasons why. It is not necessary however to set out in advance in a supplemental report an expert's position in anticipation of a joint meeting.

20. I am conscious in reaching this conclusion that the plaintiff's expert in his supplemental report may take the opportunity to respond to the criticisms of the defendants. However, that is not why I have permitted updated reports. Supplemental reports are required so that updated valuations can be provided by both experts. Unless necessary to explain any updated opinion as to value, any criticisms the plaintiff's expert might have of the approach of second and third defendants' expert including of the plaintiff's first expert report are therefore best dealt with in the joint meeting just as any criticisms of the approach of the plaintiff's expert by the expert for the second and third defendants are dealt with in that same meeting.

21. To the extent that there is disagreement between the experts at any such meeting (which I accept may be significant) any difference of approach will of course be explored at trial in cross-examination. In that regard I remind both experts and the advisers that ultimately, they both owe the same duties to the Royal Court which are paramount. The experts are not there to argue a case for a party but rather are permitted to give evidence by means of an independent opinion to assist the court reach a conclusion on an informed basis. Too often sight of this can be lost; simultaneous exchange of supplemental reports in this case was ordered to try to avoid the experts falling into this error.

22. For all these reasons I concluded as a matter of discretion that the supplemental expert evidence to update the valuations of the first defendant by the plaintiff and the second and third defendants should be exchanged simultaneously. Authorities Pender v GHH (Jersey) and Ors [2019] JRC 228 . Aukland v Minister for Health & Social Services & Anor [2017] JRC 136 Pender v GGH (Jersey) and Ors [2020] JRC 109 . Aukland v Minister for Health & Social Services & Anor [2017] JRC 136 . Page Last Updated: 01 Mar 2022 BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII