Pringle & Ors v Callard

Interim relief on an unfair-prejudice petition remains governed by the ordinary American Cyanamid approach. The court must identify a serious issue and consider whether financial relief at the final hearing would be adequate.

A strong reason to preserve the status quo arises only where an interim change may impair the remedy available on the petition. Where the likely final relief is a share buyout, alleged prejudice from interim transactions can ordinarily be reflected in the valuation and financial adjustment of the shares.

A disputed contention that a respondent’s buyout offer makes the petition abusive need not be resolved summarily at an urgent interim hearing. Interim protection must be proportionate and must allow the company to continue its business.

Mr Callard, holder of one third of the shares in Trailer Care Ltd, presented a petition under section 459 of the Companies Act 1985. He alleged that the other shareholders had unfairly excluded him from a quasi-partnership company. The underlying allegations, including the asserted justification for his exclusion, remained untried.

Mann J stayed the petition for eight weeks to permit valuation, mediation and settlement. He also made interim orders keeping Mrs Callard as a director, requiring advance notice of company financial documents, and maintaining payments to Mr Callard on an equal basis with the other shareholders.

The Pringle brothers appealed. They contended that their buyout offers meant that there was no serious issue to try and that the interim relief was unjustified. The central issue was whether the interim orders were warranted pending resolution of the section 459 petition.

1. Permission was granted and the appeal allowed. Subject to the appellants undertaking to give Mrs Callard and the petitioner’s solicitors at least two clear business days’ written notice of transactions exceeding £10,000, the orders requiring Mrs Callard to remain a director, requiring the specified 24-hour notices, and maintaining the weekly payments were discharged. The stay and the document-access arrangements were not challenged on the appeal.

2. The ordinary principles in American Cyanamid governed interim remedies on a section 459 petition. The court must consider whether there is a serious issue to be tried and whether the petitioner will have an adequate remedy at the final hearing. In this statutory context, financial compensation or a buyout valuation may perform the function ordinarily performed by damages.

3. The judge was entitled, as a matter of case management, to proceed on the basis that there was a serious issue. Whether the appellants’ offers met the criteria in O’Neill v Phillips, and therefore made continued pursuit of the petition abusive, was contested. It required evidence, submissions and a proper opportunity for the petitioner to respond. No strike-out application was then before the judge.

4. Re a Company did not make preservation of the status quo a generally decisive consideration. Its force was confined to circumstances in which an interim alteration could affect the remedy available at trial. Here, the assumed final remedy was a buyout. The financial effect of the challenged conduct could be addressed in the valuation, as illustrated by Re Posgate and Denby (Agencies) Ltd.

5. The purpose of retaining Mrs Callard as director was principally to obtain advance information. The notice undertaking adequately protected that interest while allowing the company to operate. The court did not decide whether interim relief could restrain the company’s statutory power to remove a director. Arden LJ nevertheless observed that a court should be extraordinarily cautious before imposing a director on a company as interim relief.

6. The £100 weekly employment payment was remuneration in Mr Callard’s executive capacity and was enforceable, if at all, through his contract of service. The balance described as dividend payments should not be preserved by mandatory order: its legality raised issues under section 151 of the Companies Act 1985, and any outstanding balance could be allowed for as a credit or debit in a successful buyout valuation.

• Court of Appeal (Civil Division) — In [2007] EWCA Civ 1075, granted permission and allowed the appeal. It discharged the contested interim orders subject to a notice undertaking.

• High Court, Chancery Division (Mann J) — Stayed the section 459 petition for mediation and made interim orders concerning Mrs Callard’s directorship, notice of financial transactions, payments, and access to company documents. No citation was stated in the judgment.