Lonrho Africa (Holdings) Ltd v Norse Air Ltd & Ors

Contractual information obligations must be construed in their commercial context. A shareholder’s right to information may extend to appointing accountants to investigate specified records, even where the agreement separately provides remedies following breach. A request must be reasonable and not oppressive, but the shareholder’s motive is generally irrelevant if that requirement is met.

Where a clear breach has occurred, the court may grant mandatory interlocutory relief. The principal question is which course carries the least risk of injustice if wrongly decided, with particular weight given to the claimant’s prospects of establishing its right and the comparative adequacy of damages.

Lonrho acquired a substantial shareholding in Norse Air under a subscription agreement. Clauses 8.1.3 and 8.5 required information to be supplied and permitted the appointment of accountants following breach. After concerns about Norse’s financial position and the use of Lonrho’s investment, Lonrho appointed Deloitte to inspect specified records. The defendants refused access.

Judge Mackie granted an ex parte order requiring access. Mr Justice Teare later suspended it pending the defendants’ challenge. The issue before Flaux J was whether clause 8.1.3 had been breached, whether the clause 8.5 notices were valid, and whether the injunction should continue against the company and the individual defendants.

1. Contractual information rights. Clause 8.1.3 was expressed in wide terms. It did not restrict the means by which information could be obtained or prevent Lonrho from appointing accountants. Clause 8.5 operated principally as a remedy following breach and did not confine the earlier information obligation.
2. The request for seven specified categories of documents was not a blanket demand. The defendants’ refusal to provide them was a clear breach of clause 8.1.3. The request was reasonable because it was directed to understanding the company’s finances, the use of the investment and the causes of its losses. Lonrho’s motive was irrelevant provided the request was reasonable. A desire to assess whether to acquire the defendants’ interests would in any event have been legitimate.
3. Subsequent breaches could not retrospectively validate the clause 8.5 notices, but that issue was academic because an existing breach clearly existed when the notices were served. The notices were therefore valid.
4. Relief against the individuals. Although clause 8.5 was directed technically to the company, an injunction against the individual defendants was appropriate under section 37 of the Supreme Court Act 1981. They controlled the business and premises and were refusing to co-operate. The third defendant was sufficiently arguably a de facto director because she was held out as managing director.
5. Mandatory injunction test. The court applied the four-stage approach in Nottingham Building Society v Eurodynamics Systems Ltd [1993] FSR 468, adopted in Zockoll Group Ltd v Mercury Communications Ltd [1998] FSR 354. The overriding consideration was the least risk of injustice if the order proved wrong. The court had a high degree of certainty that Lonrho would establish its right, and the balance of convenience strongly favoured continuing the injunction. Damages were inadequate for Lonrho, whereas the defendants could readily be compensated if the order ultimately proved unjustified.
6. The ex parte disclosure complaint failed. Candid disclosure required known points in the defendant’s case to be drawn to the court’s attention, but did not require anticipating disputed factual arguments by trawling through the evidence.
7. The order against all defendants was continued until trial or further order, and the suspension imposed by Mr Justice Teare was lifted. Costs were ordered on the indemnity basis, subject to detailed assessment, with an interim payment of £160,000 within 21 days.