Eraaya Lifespaces Limited v Elara Capital Plc & Ors

Interim mandatory injunctions are governed by the same underlying principle as prohibitory injunctions: the court must select the course creating the least risk of irremediable prejudice. Because mandatory relief is intrusive and difficult to undo, the court ordinarily requires a high degree of assurance that it will ultimately prove correct and an unusually strong and clear case.

Joinder is appropriate where the proposed party can materially assist in resolving connected issues, particularly where separate proceedings risk inconsistent findings. Collateral use restrictions apply to documents supplied to non-parties, including information derived from disclosed material. Retrospective permission is exceptional but may be granted where the breach caused no material prejudice and joinder is necessary in the interests of justice.

Eraaya sought an interim mandatory injunction requiring Elara to confirm to GLAS that approximately US$40 million from a second bond issue could be released to Eraaya. The Bondholders sought to be joined, contending that they had arguable proprietary and personal claims concerning the funds. Elara and the Bondholders also sought declarations or retrospective permission concerning the use of claim documents supplied by Elara to the Bondholders before joinder.

The court considered the strength of Eraaya’s contractual claim, the Bondholders’ arguable trust and misrepresentation claims, the balance of convenience, joinder under CPR 19.2(2), and collateral use under CPR 31.22 and 32.12.

1. Injunction dismissed. There was a serious issue to be tried, but Eraaya’s claim was far from strong. The Engagement Letter appointed Elara as a financial adviser and did not readily impose an independently enforceable obligation to give the confirmation required by clause 3.4 of the Second Settlement Agency Agreement, to which Elara was not a party.
2. The mandatory nature of the relief, and its practical finality, required the court to give substantial weight to the merits and to the risk of irremediable prejudice. Applying the approach in National Commercial Bank Jamaica Ltd v Olint Corporation Ltd [2009] 1 WLR 1405 (PC), and the heightened caution described in Shepherd Homes Ltd v Sandham [1971] Ch 340, the case did not meet the required standard.
3. The Bondholders had an arguable proprietary claim. The evidence supported arguable express-trust, Quistclose-trust and rescission-based constructive-trust analyses. The contractual and factual material was capable of showing that the funds were not at GLAS’s free disposal and were subject to restrictions concerning the pledge and acquisition of Ebix.
4. The balance of convenience decisively favoured refusal. Eraaya’s alleged financial and regulatory prejudice was largely compensable or insufficiently evidenced. By contrast, the Bondholders faced a substantial risk of losing proprietary rights if the funds were released and Eraaya or VLL could not meet a later judgment.
5. Joinder granted. CPR 19.2(2)(a) and (b) confer a wide power. The Bondholders could assist the court, their claims were closely connected with the injunction dispute, and separate determination created a real risk of inconsistent findings. A claimant has no general right to prevent joinder where the proposed party’s claim is materially different from the claimant’s claim. A draft pleading was not required on these facts.
6. Collateral use. Supplying the documents to the Bondholders, who were then non-parties, and their use of them, breached CPR 31.22 and 32.12. The use was not yet use for the purposes of the proceedings, although it was close to the boundary and the documents were materially relevant to joinder.
7. Retrospective permission was nevertheless granted. The breach was not deliberately advertent, there was no material prejudice, a timely application would have succeeded, and debarring the Bondholders from using the documents would have been disproportionate. The joinder application was not an abuse of process.