Anka Mandleson v Padel Solutions UK Limited & Anor

On an interim injunction application, the court must choose the course likely to cause the least injustice, assuming there is a serious issue to be tried. The assessment includes whether damages would adequately compensate the applicant and the respondent if the injunction is wrongly granted or refused.

Loss of an ownership interest, together with associated rights whose value is difficult to quantify, may not be adequately compensable by damages. By contrast, a threatened loss arising from the failure of a proposed share sale may be measurable by reference to the difference between the agreed valuation and the company’s actual value. An injunction may therefore be granted subject to a fortified cross-undertaking in damages.

The claimant held a substantial minority shareholding in Padel Solutions UK Ltd. A majority of shareholders purported to exercise a drag-along right under article 9 of the company’s articles, requiring the claimant and other non-selling shareholders to sell their shares to Atlas Padel Group Ltd.

The claimant challenged the effectiveness of the revised drag notice and sought an urgent interim injunction preventing completion before trial. The issues were whether there was a serious issue to be tried, whether damages would be an adequate remedy, and how the competing risks of injustice should be managed pending determination of the claim.

1. Interim injunction granted. The court considered that the appropriate course was to restrain completion pending trial, subject to fortification of the claimant’s cross-undertaking in damages.
2. There was a serious issue to be tried because the claim was realistic rather than fanciful. The question whether an offer was on arm’s-length terms might require examination of how the offer arose and whether the selling shareholders had considered whether it was fair and reasonable for unwilling shareholders, rather than examination of price alone. It was therefore arguable that the articles contained the pleaded implied term concerning fairness and reasonableness.
3. There was also an arguable issue under article 9.1 whether the largest shareholder genuinely intended to transfer all his interest, given his continuing role in the company and the possibility of future expansion. The court made no final finding and confined its conclusions to the interim application.
4. Damages were not an adequate remedy for the claimant. The immediate subject matter was her proprietary ownership interest in her shares. Loss of that interest could also involve loss of the benefit of a pre-emption right under article 5 and the possibility of acquiring a much larger or controlling interest, matters difficult to value financially.
5. The selling shareholders’ potential losses were more readily measurable. If the Atlas transaction were lost, loss could be assessed by comparing the proposed £1 million valuation with the company’s actual value at the relevant time. The company’s presently unclear potential claims did not alter the overall assessment.
6. Because of the early stage of the proceedings and uncertainty surrounding available assets, the cross-undertaking was required to be fortified by payment into court or a bank guarantee in the sum of £500,000. The precise terms of the order were to be settled after further submissions.