Brown & Anor v MML Capital Europe VI Equity II SA & Ors

The court considered an application within an unfair prejudice petition under section 994 of the Companies Act 2006 for injunctive relief to restrain disciplinary proceedings against the petitioners. The primary issue was whether an email of 2 July 2019 from the respondent PIE constituted a legally binding contractual undertaking to place the disciplinary hearings "on hold until such time as the petition has been determined". The judge held that the 2 July Email was enforceable: the petitioners presented the petition the next day in accordance with that indication, which amounted to valuable consideration (detriment to the petitioners and benefit to PIE), and therefore created a binding promise. Accordingly a final injunction was granted prohibiting PIE from proceeding with the disciplinary hearings pending determination of the petition.

Subsidiary findings: the court treated the primary relief as an application for final injunction (to be decided on the balance of probabilities) rather than as purely interim relief; alternatively, on classic American Cyanamid principles the petitioners would in any event have been entitled to interim relief because there was a serious issue to be tried, damages would be inadequate (given the risk of irreversible consequences under the leaver provisions) and the balance of convenience favoured preserving the status quo. The petitioners’ cross-undertaking in damages was accepted as adequate.

This is an application made within an unfair prejudice petition under section 994 of the Companies Act 2006. The petitioners, David and Alix Brown, who had been majority shareholders and directors of Property Information Exchange Limited until a 2017 private equity investment and restructuring, sought injunctive relief to restrain disciplinary proceedings said to risk their being designated as "Bad" or "Very Bad" leavers under the transactional documents and thereby losing shares and loan notes for nominal sums.

The background facts were: following the 2017 investment by MML and a corporate reorganisation, the Browns retained a significant but reduced holding in Holdco; investigatory meetings in 2018–2019 led to allegations of financial irregularity; disciplinary hearings were set and repeatedly adjourned after correspondence. On 2 July 2019 PIE’s solicitors sent an email stating that if the petition was issued and served the following day the hearings would be placed on hold until the petition had been determined. The petitioners then presented the petition on 3 July 2019 without seeking injunctive relief at that time. PIE later sought to reconvene the disciplinary hearings and the petitioners applied within the petition for injunctive relief restraining PIE from holding or acting on those hearings until the petition was decided.

The court framed two issues: (i) whether the 2 July Email created an enforceable contractual undertaking (the primary case), and (ii) alternatively whether interim injunctive relief should be granted on American Cyanamid principles.

The judge’s reasoning on the primary issue was that consideration existed because the petitioners acted the next day in accordance with PIE’s request and did so in a modified form (removing an injunctive relief section), which amounted to detriment to them and a benefit and certainty to PIE; Chitty on Contracts and established authority on benefit/detriment were applied. On that basis the promise was binding and the threatened reconvening of the hearings breached that promise. The court therefore granted a final injunction broadly in the terms sought, restraining PIE from proceeding with the disciplinary hearings pending final determination of the petition.

On the alternative American Cyanamid case the court found: (1) there was a serious issue to be tried on the petition; (2) damages or monetary relief would be inadequate in practice because of the risk of irreversible consequences under the leaver provisions and the practical difficulty of restoring the petitioners’ position; and (3) the balance of convenience favoured preserving the status quo pending trial. The petitioners’ cross-undertaking in damages was found adequate.

The operative relief granted was an injunction restraining PIE from proceeding with the proposed disciplinary hearings until final determination of the petition (or further order), and the court invited the parties to agree the detailed form of order.

At first instance the court granted the petitioners' application and made an injunction prohibiting PIE from proceeding with the proposed disciplinary hearings pending final determination of the unfair prejudice petition. Rationale: the 2 July 2019 email constituted a binding contractual undertaking supported by consideration (the petitioners presented the petition the following day in accordance with that indication), and in any event interim injunctive relief would have been justified on American Cyanamid principles because there was a serious issue to be tried, damages would be inadequate given the risk of irreversible consequences under the leaver provisions, and the balance of convenience favoured preserving the status quo. The petitioners' cross-undertaking in damages was accepted as adequate.