Perkier Foods Ltd v Halo Foods Ltd

A mandatory interim injunction may be granted where there is a serious issue to be tried, the applicant has a substantial or high degree of assurance of success, damages would be inadequate, and the respondent can be protected by a cross-undertaking in damages. The court should assess the merits where the injunction is likely to determine the practical outcome of the proceedings. The distinction between prohibitory and mandatory injunctions does not alter the underlying inquiry: the court must adopt the course likely to cause the least irremediable prejudice. A contractual right to impose a credit limit will not be implied into a detailed commercial agreement unless necessary for business efficacy or so obvious as to go without saying.

Perkier Foods Ltd sought urgent interim injunctions against Halo Foods Ltd arising from agreements governing the manufacture and supply of snack products. Halo had refused to continue manufacturing the Bites product, imposed a credit limit, and purported to terminate the Manufacturing Agreement under clause 10.2.d, referring to Insolvency Act 1986, section 123.

The application raised whether the termination was effective, whether Halo had an implied contractual right to impose a credit limit, and whether Perkier should receive a mandatory injunction requiring continued manufacture and supply pending trial.

1. Purported termination. The court considered the cash-flow and balance-sheet tests in section 123 of the Insolvency Act 1986, applying the guidance in BNY Corporate Trustee Services Ltd v Eurosail-UK-2007-3BL plc [2013] UKSC 28 and the authorities summarised in Re Casa Estates (UK) Ltd (in liquidation) [2014] EWCA Civ 383. A balance-sheet deficit was not conclusive. On the evidence, Perkier’s negative balance-sheet position principally reflected directors’ loans which were not expected to be called in. The attempted termination was therefore ineffective, at least arguably and, on the material before the court, in substance.
2. Credit limit. The detailed Manufacturing Agreement contained payment terms but no credit-limit provision. Applying Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 15, there was at least a serious issue to be tried on whether such a term could be implied. The suggested credit-card analogy did not establish necessity or obviousness.
3. Mandatory injunction. The court assessed the merits because the injunction was likely to determine the practical outcome before trial. It had a substantial degree of assurance that Perkier would succeed. Following the approach in National Commercial Bank Jamaica Ltd v Olint Corpn Ltd [2009] 1 WLR 1405, the relevant inquiry remained the course likely to cause the least irremediable prejudice. The rarity of mandatory injunctions in commercial cases did not prevent relief where damages were inadequate.
4. The absence of an alternative UK manufacturer, the commercial importance of the Bites product, and the difficulty of quantifying Perkier’s loss made damages inadequate. Halo’s potential losses were capable of protection by Perkier’s cross-undertaking in damages. The balance of convenience also favoured preserving the status quo.
5. Interim injunctions were granted prohibiting the credit limit and requiring continued manufacture of the Bites under the Manufacturing Agreement. Halo was ordered to pay Perkier’s costs, summarily assessed at £51,843.64. Permission to appeal was refused.