Mission Capital Plc v Sinclair & Anor

Specific performance of the core obligations of an employment contract is ordinarily unavailable, including for a company director. Interim mandatory relief restoring employment or directorship requires particular caution because it may create a greater risk of injustice than preserving the status quo. The court considers the claimant’s prospects of establishing the right, the degree of assurance available, and the balance of justice.

A director has a personal cause of action where he or she is improperly excluded from board meetings. That claim is arguable even where the director’s status is disputed and is not dependent on a prior determination that the directorship is beyond dispute.

Permission for a derivative claim must be refused where the statutory conditions require refusal. Otherwise, the court considers the statutory discretionary factors, including good faith, the importance of the claim to a notional section 172 director, ratification, the company’s position, and alternative personal remedies.

The claimant company sought interim relief following a board meeting at which the defendants’ employment and directorships were purportedly terminated for alleged unacceptable conduct and failure to meet financial forecasts. The defendants disputed the validity and purpose of the board’s actions, alleging breach of fiduciary duty and seeking restoration to employment and the board.

They also sought permission under Part 11 of the Companies Act 2006 to continue a derivative claim against the non-executive directors, an executive director and the company. The applications concerned interim mandatory injunctions, joinder, derivative-claim permission and costs indemnity.

1. Interim employment relief. The court declined to decide finally whether the company’s wrongful repudiation had terminated the employment contracts. There was no seriously arguable prospect, on the evidence, that sufficient mutual confidence would exist at trial to justify specific performance. Even assuming some prospect of that relief, the balance of justice favoured refusal. Restoring the defendants to executive positions while the parties were in litigation would be likely to produce workplace strife and prejudice the company.
2. Interim directorship relief. The defendants’ argument that the personal right to act as directors arose only where their status was undisputed was rejected. The principle in Pulbrook v Richmond Consolidated Mining Company supported an arguable personal claim by a director improperly excluded from the board, even where the validity of the directorship was disputed. However, the mandatory injunction restoring the defendants to the board was refused in the exercise of discretion. The court was not sufficiently assured of success, and the balance of justice did not favour reinstatement.
3. Mandatory injunction principles. The court applied the approach endorsed in Nottingham Building Society v Eurodynamics Systems and Zockoll Group v Mercury: the court must assess the risk of injustice, recognise the greater risk ordinarily created by a mandatory order, consider the degree of assurance of ultimate success, and weigh the competing risks where that assurance is absent. Similar caution applied to imposing a director on a company, as stated in Pringle v Callard.
4. Derivative claim. Sections 261 and 262 established a two-stage permission process, combined in this case. Under section 263(2)(a), permission had to be refused if a person acting under section 172 would not seek to continue the claim. The claim was not purely duplicative, so that mandatory bar was not engaged. Nevertheless, applying section 263(3), the court found good faith but gave limited weight to the claim’s importance, regarded ratification as speculative, and considered that the defendants could pursue the relevant matters through an unfair prejudice petition under section 994. Permission was therefore refused. The non-executive directors and Mr Phillips were joined to the counterclaim.

This was a first-instance decision on interim applications. Earlier interim relief had been granted by Treacy J and subsequently continued and modified by Dobbs J. The present court dismissed the applications for injunctive relief, refused permission to continue the derivative claims, and allowed joinder of the non-executive directors and Mr Phillips to the counterclaim.