Anthony Fane v Graham Wellesley & Ors

On a summary judgment application, the court may determine a short point of contractual construction where the evidence is sufficient and there is no realistic prospect that further evidence would affect the result. A contractual obligation to provide specified documents ordinarily requires production of documents that exist or have existed; it does not require their creation unless the contract says so.

Specific performance and mandatory injunctions remain discretionary. The court may refuse relief where the order is uncertain, pointless, oppressive, disproportionate or where damages may be adequate. Declaratory relief is also discretionary and should be approached cautiously where the declaration may affect a non-party. A shareholder’s right to appoint a nominated director may be refused specific enforcement where there is a realistic prospect that the shareholder’s own breach would have removed that right.

The claimant, a shareholder in the fourth defendant company, applied for judgment on admissions and summary judgment under CPR 14.4 and CPR 24.2. The application concerned contractual and constitutional rights arising under a shareholders’ agreement, the company’s articles, a charge over the claimant’s shares, a deed concerning a beneficial interest in those shares, information rights and the right to appoint a nominated director.

The defendants admitted several matters, including that the claimant remained a Principal Shareholder and that the charge was a permitted transfer. They nevertheless resisted some declarations, sought to maintain a counterclaim concerning the transfer of a beneficial interest to the claimant’s former wife, and opposed an order appointing the claimant’s nominee as a director.

1. Summary judgment principles. The court applied the realistic-prospect test under CPR 24.3. It could determine construction issues summarily where the evidence was sufficient and no reasonable further evidence was likely to affect the outcome. It had to avoid a mini-trial, but need not accept unsupported assertions at face value.
2. Information rights. Clause 11.2 of the shareholders’ agreement required provision of specified documents where they existed or had existed. It did not require the company to create management accounts, reports, budgets or business plans which had not been created. The claimant obtained orders for monthly group management accounts for defined periods, the audited consolidated accounts for 2023, and credit-card expenditure reports after November 2020. Orders were refused for other categories because the documents did not exist, would serve no useful purpose, would impose disproportionate cost, or the proposed order was uncertain.
3. Former spouse and beneficial interest. On the proper construction of Article 49.1.2, the reference to the former spouse of any of the above persons did not include the former spouse of the member whose shares were being transferred. Article 49.6 supported that construction. The claimant’s former wife therefore ceased to be a Privileged Relation on divorce, and the transfer or purported transfer of a 50 per cent beneficial interest was not a permitted transfer. The court left open, for trial, the ultimate effect of a transfer made without the required Transfer Notice.
4. Counterclaim and declarations. The counterclaim for a declaration that the Deed was invalid was dismissed because the defendants had no real prospect of obtaining that relief whether the beneficial transfer was effective or ineffective. The remaining counterclaim relief was not summarily dismissed, including relief concerning a Transfer Notice and damages. The court declined declarations materially concerning the rights of the absent former wife because it was not satisfied that all sides of the argument had been fully put.
5. Director appointment. The claimant was a Principal Shareholder and had served a notice proposing the appointment of Mr Rajani. The defendants’ earlier objections did not comply with the contractual requirement for a written objection within 10 business days after the notice. However, there was a real prospect that the claimant’s failure to serve a Transfer Notice concerning the beneficial interest would have reduced his holding below the relevant threshold and removed his appointment right. It would therefore be inequitable to order specific performance of the appointment obligation at this stage.
6. Charge. The charge was admitted to be a permitted transfer and was declared not to contravene clause 17.6 of the shareholders’ agreement. No declaration was made concerning the future obligation under Article 49.5 because the proposed declaration did not address all possible triggering events and would be uncertain.
7. The application was therefore allowed in part. Costs and consequential matters were adjourned to a consequential hearing.