Pringle v Callard

The Court of Appeal considered interim relief sought in a petition under section 459 of the Companies Act 1985 where a minority shareholder alleged exclusion from a quasi‑partnership and sought a buyout. The court confirmed that the American Cyanamid principles apply to interim remedies in s.459 petitions but that their application is qualified by the nature of relief sought in contributory petitions: where the final remedy is financial (for example a buyout) interim interference with the company's business will not normally be justified if financial compensation at trial would be adequate.

The court accepted that the trial judge was entitled, as a matter of case management, to stay the petition for mediation and to 'hold the ring' pending valuation and settlement, but found aspects of the interim orders too wide. It discharged the mandatory order preserving the respondent's £750 weekly payment and reduced the scope of the injunctions by requiring the appellants to give two clear days' prior written notice of any transaction over £10,000 to Mrs Callard and the petitioner's solicitors; access to company documents was limited to use for valuation and mediation only. The court relied on authorities including American Cyanamid, O'Neill v Phillips, Re a Company and Re Posgate in reaching its decision.

Background and parties: Mr Callard, owning one third of the issued shares in Trailer Care Limited, presented a petition under section 459 Companies Act 1985 alleging unfair prejudice and exclusion from a quasi‑partnership. The respondents were the two majority shareholders (the Pringle brothers) and the company. Management disputes, suspension of Mr Callard’s employment and steps to remove his nominated director wife, Mrs Callard, led to the petition and an urgent interim application for injunctions and access to documents.

Procedural posture: The interim application was heard by Mann J in the Chancery Division on 27 July 2007; orders were made and the appellants appealed. The appeal came before the Court of Appeal on 15 August 2007 (this judgment), following directions made by Jacob LJ on 1 August 2007 requiring mediation and certain interim restrictions.

Nature of relief sought: Interim injunctions restraining removal of Mrs Callard as a director, preventing changes to bank mandates and salary/dividend arrangements, mandatory orders for access to premises and documents, and preservation of certain payments pending resolution; on the substantive petition, a buyout was sought (share purchase by the majority at fair value without minority discount, or alternatively sale of the majority shares to the petitioner).

Issues framed:

• Whether there was a serious issue to be tried on the section 459 petition such that interim injunctive relief ought be granted, applying American Cyanamid principles;
• Whether damages or a valuation remedy would be adequate at trial (and thus whether interim relief was necessary);
• Whether offers by the respondents engaged the O'Neill v Phillips criteria so as to render further prosecution an abuse of process or strike out the petition;
• How the court should exercise case management powers in preserving the status quo, providing access to information for valuation and directing mediation.

Court’s reasoning and outcome on issues: The court held that American Cyanamid principles apply but must be qualified in the context of section 459 petitions where the substantive relief is monetary or a buyout; if financial compensation or a valuation can adequately redress any prejudice, an injunction disabling the company's ordinary business is less likely to be justified (drawing on Hoffmann J’s reasoning in Re Posgate and Re a Company). The judge below was entitled to take a case management approach and stay the petition for mediation and valuation while preserving rights necessary for valuation. However, some interim orders were excessive: the mandatory order preserving the full £750 weekly payment was discharged as employment remuneration and dividend issues are dealt with by valuation and the Companies Act 1985 provisions, and more limited protections (two clear days’ written notice of transactions over £10,000 and access to documents solely for valuation/mediation) were ordered instead.

Practical implications: The decision emphasises careful application of interim injunction principles in unfair prejudice petitions, the desirability of preserving the status quo only where its alteration would affect the final remedy, and the court’s scope to use case management tools (stay, valuation and mediation) rather than broad interim prohibitions on corporate acts.

Appeal allowed. The Court of Appeal held that the judge below was entitled to stay the s.459 petition for mediation and valuation and to preserve the position required for valuation, but that certain interim orders were too wide. The court discharged the mandatory order preserving the £750 weekly payment and required the appellants to give two clear days' prior written notice of any transaction over £10,000 to Mrs Callard and the petitioner's solicitors; access to documents was limited to use for valuation and mediation. The court allowed the appeal subject to the undertaking and directed the parties to agree a minute of order.

Appeal from the High Court, Chancery Division (Mann J) following interim orders made on 27 July 2007; permission to appeal entered 30 July 2007; Jacob LJ made directions on 1 August 2007 (relating to inspection, attendance and mediation) and the appeal was heard in the Court of Appeal on 15 August 2007 resulting in this judgment ([2007] EWCA Civ 1075).