David Victor Garofalo v David Adrian Crisp & Anor

Interim proprietary relief is available in unfair-prejudice proceedings under Companies Act 2006, s 994, where the petition includes a sufficiently arguable claim to property or profits recoverable at trial. The usual injunction test is whether there is a serious issue to be tried, whether the balance of convenience favours relief, and whether it is just and convenient to grant it.

Relief must remain proportionate. A proprietary injunction may make a separate freezing order unnecessary. Information orders may support injunctive relief or earlier management orders, but should be confined to information necessary to make those orders effective and should not duplicate imminent ordinary disclosure without justification.

The petitioner, a substantial minority shareholder in Valorem Holdings Limited, brought an expedited interlocutory application against its former executive director and the director’s wife. He sought proprietary and freezing injunctions, information and banking orders, delivery up of emails and communications, and preservation orders in support of an unfair-prejudice petition under s 994 of the Companies Act 2006.

The application concerned alleged diversion and monetisation of the Seboni perfume brand, use of additional trading entities, dealings with a bank account, and failure to provide company information. The issues were whether the pleaded case supported interim proprietary relief, whether a freezing order was necessary, and which information and preservation orders were necessary and proportionate before trial.

1. Proprietary injunction. Interim proprietary relief is available in a petition under s 994 where the court’s powers include ordering an account to the company. The relief may preserve profits and tangible or intangible assets that could be transferred or accounted for at trial. The court applied the American Cyanamid test, as applied in Madoff Securities Ltd v Raven [2012] IL Pr 15: serious issue to be tried, balance of convenience, and justice and convenience.
2. The pleadings sufficiently encompassed a proprietary claim concerning Seboni. They alleged that it was a corporate opportunity, that the respondent acted in conflict while a director, and that he should account for profits. The evidence established a serious issue to be tried. The balance of convenience favoured preserving profits and intellectual property which might belong to the companies. Relief was just and convenient and was granted against both respondents so far as necessary to make the order effective.
3. Freezing order. A separate freezing order was refused. The amount attributable to Seboni profits was uncertain, the proposed costs component was excessive, and the respondent offered undertakings concerning assets in England. Proprietary relief and those undertakings were a more proportionate response.
4. Information and preservation. Information about Seboni proceeds and additional trading entities was ordered where it was ancillary to the proprietary relief or necessary to give effect to earlier management orders. The orders were narrowed to proportionate information about ownership, control, sales, purchasers and destination accounts. Wider personal-account disclosure, extensive communications and duplicative document production were refused where ordinary disclosure was imminent or the orders were disproportionate. Statements for the Chase Account and access arrangements were ordered, but final ownership of funds held in a third party’s account was not determined.