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

A promise to suspend disciplinary proceedings may be contractually binding where the promisee presents proceedings promptly, in a modified form and at the promisor’s request. The consideration may consist of both detriment to the promisee and benefit to the promisor.

For an interim injunction in an unfair prejudice petition, the American Cyanamid test applies. The court should consider whether there is a serious issue to be tried, whether monetary or other final relief would be adequate, and where the balance of convenience lies. Preservation of the status quo is particularly important where interim steps may cause irreversible changes and the petitioner seeks a sale order rather than a clean break.

The petitioners brought an unfair prejudice petition under section 994 of the Companies Act 2006 concerning the management of Property Information Exchange Limited and related companies. They sought to restrain disciplinary hearings which could result in their dismissal as Bad or Very Bad Leavers, the loss of their shares for nominal sums and the redemption of loan notes.

The application was based primarily on an alleged contractual undertaking in an email stating that the hearings would remain on hold until determination of the petition. Alternatively, the petitioners sought interim relief under the principles in American Cyanamid v Ethicon Ltd [1975] AC 396. The central issues were whether the email was legally binding and, if not, whether interim injunctive relief should nevertheless be granted.

1. Final injunction. The application to enforce the email promise was treated as an application for final relief. The petitioners therefore had to establish, on the balance of probabilities, that the promise was legally binding.
2. Consideration. Presenting the petition the following day constituted valuable consideration. The petitioners acted within the respondent’s requested timescale and removed proposed injunctive relief from the petition. The respondent also obtained a benefit because it avoided an immediate injunction application, its costs and the uncertainty surrounding the shareholder dispute. The promise was therefore binding.
3. The threatened disciplinary hearings would breach that promise. A final injunction was granted prohibiting the hearings pending final determination of the unfair prejudice petition.
4. Alternative interim relief. Applying American Cyanamid v Ethicon Ltd [1975] AC 396, there was a serious issue to be tried. The relevant issue was the underlying unfair prejudice petition, rather than a mini-trial of whether the proposed conduct would ultimately violate the petitioners’ rights.
5. Damages or the wide remedial powers under section 996 of the Companies Act 2006 would not be adequate. The petitioners sought a sale order and intended to remain involved in, and potentially retake control of, the business. Dismissal and the resulting leaver consequences might produce changes that were difficult to reverse or fairly remedy. The status quo should therefore be preserved.
6. The balance of convenience favoured relief. Relevant factors included the petitioners’ proposed sale order, the risk of irreversible corporate changes, the respondent’s primarily financial interest, the absence of evidence of material business harm from retaining the petitioners, and the risk that dismissal would stifle an otherwise meritorious petition. The possibility that the parties would have to work together did not outweigh those considerations.
7. An appropriate cross-undertaking in damages was sufficient protection for the respondents. Even without the contractual undertaking, interim injunctive relief would have been granted on American Cyanamid principles.

Not stated in the judgment.