James Robert Hersov v Energy Research Lab Ltd

The claimant, a shareholder and former chief executive, applied to continue an ex parte interim injunction restraining the company from operating provisions of its articles (article 37) that treated the company as agent for sale of his shares following alleged summary dismissal. The court applied the established test for interim injunctions (American Cyanamid) and the strict duty of full and frank disclosure on without‑notice applications (as summarised in Tugushev v Orlov).

The judge found a serious breach of that duty by the claimant arising principally from an unexplained and deliberate delay which meant the application had to be made without notice. Because of that material non‑disclosure the earlier ex parte order was discharged and the claimant’s renewed application was dismissed. As an independent and alternative ground, the court held that the petition primarily sought a conventional buy‑out under section 994 Companies Act 2006, so a money remedy would be adequate and an interim injunction was not justified.

• Relevant contractual and constitutional provisions: employment contract clauses 18.1 and 20.2 and article 37 (deemed transfer notice and auditor valuation).
• Procedural history: ex parte injunction granted 24 September 2024 and varied to 10 October 2024; unfair prejudice petition (s.994 CA 2006) presented 27 September 2024.

The claimant held approximately 8% of the defendant company and had been its chief executive. After his employment was notified as non‑renewed and he was summarily dismissed on grounds of alleged gross misconduct, the company relied on clause 20.2 of his employment contract and article 37 of its articles to treat his termination as a deemed transfer notice and to offer his shares to other shareholders at an auditor‑certified price (£80 per share).

The claimant applied ex parte for an interim injunction restraining the company from operating the articles‑based sale procedure. HHJ Monty KC granted an ex parte injunction on 24 September 2024; that order ran to the return day and was, by consent, extended to 10 October 2024. The claimant then presented an unfair prejudice petition under section 994 Companies Act 2006 on 27 September 2024 and sought continuation (in effect renewal) of the interim injunction until trial of the petition.

The defendant opposed renewal, relying chiefly on a witness statement alleging material non‑disclosure by the claimant in the original without‑notice application. The principal non‑disclosure complaint was the claimant’s delay in bringing the application and the absence of any adequate explanation for why the matter was left so late that the application had to be without notice. The defendant also argued that the injunction would prejudice other shareholders who would lose the opportunity to acquire the shares under article 37 and that damages under a cross‑undertaking would be inadequate. Other points included alleged non‑joinder of majority shareholders and the availability of alternative remedies.

The court considered the law on without‑notice injunctions and the duty of fair presentation (as summarised in Tugushev v Orlov). The judge found that the claimant had deliberately failed to explain the delay between the events in mid‑August and the application in late September, that the claimed reason (attempts to use legal expenses insurance and change of solicitors) did not suffice and that the omission was a clear and serious breach of the duty to present a without‑notice application fairly. Applying the principle that an order obtained without full disclosure will be discharged even if it might otherwise have been made, the court discharged the earlier ex parte order and dismissed the claimant’s renewed application.

As an alternative and independent ground, the court observed that the petition principally sought a conventional buy‑out and that, in that context and in light of authorities cited, a money remedy would be adequate; consequently there was no need to preserve the shares in specie by injunction. The court also dealt with subsidiary points: it rejected the non‑joinder argument, held the company itself would not be exposed to claims for obeying a court injunction (though purchasers might lose an opportunity) and indicated that damages to compensate other shareholders could be quantified if necessary. The balance of convenience analysis did not alter the result.

The court discharged the ex parte order made by HHJ Monty KC and dismissed the claimant’s application for a renewed interim injunction. The primary rationale was a serious breach of the duty of full and frank disclosure in making a without‑notice application, principally because the claimant failed to explain a deliberate and unexplained delay. As an independent ground, the petition sought a conventional buy‑out so damages would be an adequate remedy.