Berlin HYP AG v Lumineau & Ors

On an application for an interim injunction, the court must ordinarily apply the American Cyanamid approach. The merits are considered only to determine whether there is a serious issue to be tried, unless the case is suitable for summary judgment. A clear case does not generally justify replacing that threshold with a merits-based test. Where the threatened conduct would cause irreversible prejudice, damages would be inadequate, and the respondent identifies no compensable prejudice from restraint, the injunction may properly be granted. A company’s published accounts must accurately reflect the directors’ approval. Where accounts materially misrepresent that approval and may otherwise be inaccurate, removal of the filing may be appropriate rather than a limited correction.

Berlin HYP AG, a minority shareholder in Brickvest Limited, sought interim relief in support of a petition under section 994 of the Companies Act 2006. The application concerned a proposed issue of shares and loan notes which allegedly breached the shareholders’ agreement and Brickvest’s articles because the relevant directors’ meetings were not quorate and the applicant’s consent had not been obtained.

The applicant also challenged Brickvest’s filed 2018 accounts, which appeared to represent that all directors had approved them although the applicant’s nominee had not done so and had raised substantive concerns. The court determined the injunction application, the appropriate correction to the accounts, and costs.

1. The court granted the interim injunction sought. The proposed issue was a reserved matter under the shareholders’ agreement and there was an extremely clear question as to breach. Applying American Cyanamid, the threshold of a serious issue to be tried was satisfied and substantially exceeded.

2. The court declined to replace the serious-issue threshold with a merits-based shortcut. Although Series 5 Software Limited v Philip Clarke, [1996] FSR 273 suggested that the later stages of American Cyanamid could be bypassed in a clear case, that approach was regarded as dangerous because it reintroduced the trial-within-a-trial difficulties which the established test was designed to avoid. The exception was a case suitable for summary judgment.

3. Damages would not adequately compensate the applicant if relief were refused. The issue would introduce new shareholders and debt and would irreversibly alter the applicant’s position. Conversely, no clear prejudice to Brickvest or the respondents from temporary restraint was identified, and the applicant’s undertaking in damages was supported by its financial position. It was therefore unnecessary to reach the balance-of-convenience stage, although preservation of the status quo would have favoured relief.

4. The filed accounts were materially inaccurate because they implied that the applicant’s nominated director had approved them. The appropriate remedy was not merely to remove references to his assent. Given the unresolved substantive concerns and the risk of third-party reliance, the court ordered removal of the accounts under section 1096 of the Companies Act 2006, subject to a seven-day opportunity for Brickvest to satisfy the court that the accounts could properly remain.

5. The hearing was inter partes because proper notice had been given, notwithstanding the respondents’ absence. Costs therefore followed the event. The respondents, but not Brickvest, were ordered to pay the applicant’s costs, summarily assessed at £45,000 within fourteen days.

First-instance decision. No prior appellate decision is stated in the judgment.