Horlick v Taylor & Ors

The court granted an interim injunction restraining a meeting of Rockpool Investments LLP from taking place before 28 days, concluding there was a sufficiently strong prospect that the respondents breached the LLP deed's duty of "utmost good faith" (clause 16.1.2) by implementing a substantial issue of capital and proposing root-and-branch amendments on seven days' notice. The judge applied a higher threshold than the usual American Cyanamid test because an interlocutory order postponing the meeting would be dispositive of a key aspect of the litigation, relying on China Investment Fund and Cayne v Global Natural Resources. The court found damages would not be an adequate remedy and that the balance of convenience favoured postponement given the magnitude of the proposed changes and the lack of meaningful notice or consultation.

Background and parties:

• The applicant, Mrs Nicola Horlick, is a Tier B member of Rockpool Investments LLP. The respondents include the managing partner, Mr Matthew Taylor, and other members of the governing committee.
• Notice was given on seven days' notice of a meeting to consider a substantial increase in issued capital (diluting existing Tier B holdings) and wide-ranging amendments to the LLP deed, including removal or reduction of the duty of utmost good faith (clause 16.1.2).

Nature of the application:

• The applicant sought an interim injunction to restrain the meeting due to alleged breaches of the deed, principally clause 16.1.2, and sought relief to unwind the dilution or damages for loss.

Issues framed:

• Whether there was a sufficiently strong case that the duty of utmost good faith had been breached by the timing and method of issuing capital and calling the meeting on minimal notice.
• Whether damages would be an adequate remedy and where the balance of convenience lay.
• What standard of likelihood of success should apply where an interlocutory order would effectively determine a key issue.

Court's reasoning and conclusions:

• The proposed capital issuance substantially diluted existing members' voting and economic positions; the amendments were extensive and had not been consulted on.
• The court accepted that examples of interfering with meetings are rare and that strict contractual notice had been given, but concluded that the combination of short notice, significant change and lack of prior information gave a high prospect of breach of clause 16.1.2.
• Because an injunction postponing the meeting would be dispositive of that aspect of the litigation, a higher standard than the usual American Cyanamid threshold was appropriate, as supported by China Investment Fund and Cayne; on that higher standard the applicant still had prospects sufficient to continue.
• The court found damages would be unlikely to be adequate and that the respondents' assertions of imminent harm from delay were exaggerated; accordingly the balance of convenience favoured an injunction delaying the meeting for at least 28 days.

Procedural outcome: the court ordered that the meeting scheduled for the next day should not take place and should not be arranged earlier than 28 days from the date of the order.

The court granted an interim injunction restraining the proposed meeting from taking place until at least 28 days from the date of the order. The judge held there was a sufficiently strong prospect that the respondents had breached clause 16.1.2 (utmost good faith) by arranging substantial capital issuance and extensive amendments on seven days' notice, damages would not be an adequate remedy and the balance of convenience favoured postponement; a higher than usual interlocutory standard was applied because the order would be dispositive of a key issue.