Nash & Ors v Lygren & Ors

An injunction prohibiting any steps to seek the removal of directors extends to formal procedural acts that initiate or advance the removal process. It covers proposing a resolution, convening or adjourning a meeting, and maintaining a resolution for later use. The acts remain prohibited even if conditional, intended to take effect later, or ultimately ineffective in law.

For contempt, notice, the prohibited act or omission, intention to perform it, and knowledge of the facts making it a breach must be proved beyond reasonable doubt. A genuine misinterpretation of the order does not excuse an established breach, although intention may affect sanction. A director may be liable where he wilfully fails to take reasonable steps to ensure a company obeys an order.

The applicants sought findings that Procedo Enterprises Establissement and its directors, Atle Lygren and Dr Ernst Walch, were in contempt of an interim injunction made by HHJ Worster on 29 October 2019. The injunction prohibited Procedo from taking any further steps to seek the removal of three directors of EMC Cement Holdings Ltd.

Procedo later proposed a resolution reducing the board to two named directors, convened a members’ meeting to consider it, and adjourned the meeting. The respondents argued that no breach occurred until directors were actually removed, that the resolution was subject to a judicial fetter, and that procedural defects or adjournment cured the position. The central issues were whether those acts were prohibited steps and whether the respondents were culpable.

1. The application succeeded. Procedo, Mr Lygren and Dr Walch were in contempt of the injunction. Procedo was fined £100,000 and each individual respondent £25,000. The applicants’ costs were awarded on the indemnity basis, assessed at £92,648.

2. The court applied the formulation in FW Farnsworth v Lacy [2013] EWHC 3487 (Ch): contempt required notice of the order, a prohibited act or required omission, intention to act or omit, and knowledge of the facts making the conduct a breach. The criminal standard of proof applied.

3. The words “any steps to seek to remove” were wider than completed removal. They included acts initiating or pursuing a constitutional process intended eventually to remove directors, including proposing a resolution, convening or adjourning a meeting, and giving notice of an adjourned meeting.

4. The prohibition was not avoided because the resolution was conditional, intended to take effect after the injunction ended, or procedurally ineffective. Such acts remained steps seeking removal. The court did not need to decide whether the proposed mechanism complied with Companies Act 2006 procedures.

5. The injunction was sufficiently clear. A genuine but incorrect interpretation of it did not excuse breach, though belief could be relevant to sanction. The respondents’ correspondence showed deliberate continuation of the prohibited process rather than an honest misunderstanding.

6. The directors were personally liable because they participated in the acts or wilfully failed to stop or counteract them. Adjournment sine die did not cure the contempt while the resolution remained available for use.

First-instance contempt proceedings arising from an interim injunction made by HHJ Worster on 29 October 2019. No return-date hearing had taken place.