David Victor Garofalo v David Adrian Crisp & Ors

The court granted urgent ex parte interim relief in support of an intended petition under sections 994 and 996 of the Companies Act 2006, finding a very strong prima facie case of unfair conduct by the First Respondent. The judge concluded there was compelling evidence that the First Respondent caused the English Companies to trade into Russia in breach of a prior agreement between the parties, the Relationship Agreement, and in breach of the Russia (Sanctions) (EU Exit) Regulations 2019 (notably regulation 46B and provisions defining luxury goods).

On that basis the court held it was just and convenient under section 37 of the Senior Courts Act 1981 and the court's injunctive jurisdiction to grant wide-ranging interim measures until the Return Date, including removal of the First Respondent as director and the temporary appointment of the Petitioner and two named proposed directors; an imaging order to preserve electronic evidence; orders for delivery up and preservation of books and records; a passport restriction on the First Respondent (later varied by consent); and prohibitions on contact with staff and attendance at company premises. The court applied the American Cyanamid principles by analogy for injunctive relief and the Anton Piller/search order test for imaging orders, and accepted the Petitioner’s cross-undertaking in damages as fortified by specified assets.

The applicant, who is a substantial shareholder and director in a group of perfume companies (the English Companies), sought urgent ex parte interim relief to preserve the companies and their records pending an intended petition under s.994 and s.996 of the Companies Act 2006. The application was heard in private because publicity would have defeated its purpose.

Background and parties:

• The English Companies form part of a group trading in luxury perfumes. The Petitioner and the First Respondent were equal shareholders and directors of the principal trading company and holding company; other shares were held by friends and family of the First Respondent.
• The Petitioner alleged the First Respondent had caused the companies to trade into Russia after the imposition of sanctions, contrary to a prior agreement between them (the Russia Agreement) and the Relationship Agreement, and in breach of the Russia (Sanctions) (EU Exit) Regulations 2019. The Petitioner also raised other concerns (furlough irregularities and use of a banned ingredient) but the court declined to rely on those matters at this stage because the evidence was hearsay.

Relief sought: imaging of electronic devices and cloud accounts, preservation and delivery up of corporate books and records, removal of the First Respondent as director and appointment of replacement directors, prohibitions on contact with staff and attendance at the main premises, a passport order to prevent flight, and related disclosure and injunctive relief.

Issues framed:

1. Whether there was a serious issue to be tried under s.994 and a real prospect of success on the intended s.996 relief;
2. Whether the balance of convenience and the adequacy of damages justified the grant of mandatory and prohibitory interim relief analogously to American Cyanamid;
3. Whether an imaging order should be made applying the Anton Piller/search order criteria;
4. Whether ancillary orders such as delivery up and a passport order were necessary and proportionate.

Court's reasoning and findings:

• The court found an exceptionally strong prima facie case that the First Respondent had caused sales into Russia post-sanctions, relying on three principal strands of evidence: (a) a recorded conversation in which the First Respondent described continuing sales into Russia, (b) documentary evidence discovered at the Greenhithe Facility including invoices and despatch documents addressed to Russian recipients or intermediaries, and (c) third-party test purchases showing products on sale in Moscow as recently as August 2023.
• The court found it likely the First Respondent knew of and intentionally breached the parties' Russia Agreement and his fiduciary and statutory duties, and that the conduct was unfair and prejudicial within s.994. The alleged reputational and commercial damage was likely to be severe and irreparable in practice.
• The court applied the American Cyanamid principles by analogy, concluding there was a serious issue to be tried, that damages would not be an adequate remedy for the petitioner, and that the balance of convenience favoured granting interim relief to avoid immediate and irreparable harm to the business. The court also applied the high threshold for imaging/search orders: extremely strong prima facie case, serious damage and real risk of destruction of evidence, and found those factors satisfied.
• The court accepted the petitioner’s cross-undertaking in damages after the petitioner provided evidence of assets to secure it.

Disposition: The court made the imaging, preservation/delivery up, injunctive, director removal and appointment, passport and ancillary orders on the terms summarised in the judgment, to operate until the Return Date or further order. The passport order was subsequently varied by consent.

The court granted the ex parte application and made wide-ranging interim orders (removal of the First Respondent as director of the English Companies and temporary appointment of the Petitioner and two named directors; an imaging order over electronic devices and cloud storage; preservation and delivery up of company books and records; a passport restriction on the First Respondent (later varied by consent); and prohibitions on contacting staff and attending the Greenhithe Facility). The orders were justified by an exceptionally strong prima facie case that the First Respondent had caused the companies to trade into Russia in breach of the Relationship Agreement, the Russia Agreement and the 2019 Regulations, presenting an immediate risk of severe reputational and commercial prejudice and a real risk of destruction of evidence; the balance of convenience and the adequacy of the petitioner’s cross-undertaking supported interim relief under section 37 SCA 1981 and related provisions.