Fitrite Fencing and Decking Limited v John Ross & Anor

The power to vary or revoke an interim order is exercised sparingly, ordinarily only after a material change of circumstances or where the original decision rested on misstated facts. Strike out and summary judgment require a claim or defence with no realistic prospect of success; disputed evidence and issues requiring oral evidence generally make those remedies inappropriate. A company’s knowledge is determined objectively and contextually. Knowledge of one director or employee does not automatically constitute the company’s knowledge where the company is the alleged victim of wrongdoing. Fortification of a cross-undertaking requires evidence of likely loss, sufficient risk and causation, and cannot ordinarily be ordered after the injunction decision.

The claimant alleged that its former directors, John Ross and Sharon Wright, had breached fiduciary and other duties through unauthorised payments and transactions involving company assets. Mrs Wright relied on a settlement agreement containing a release for claims founded on facts already known to the claimant. The defendants applied to admit covert recordings, set aside or vary injunctions, strike out or obtain summary judgment on the claim against Mrs Wright, and obtain fortification of the claimant’s cross-undertaking in damages. The central issues were whether the evidence established prior company knowledge, whether the claim had a realistic prospect of success, and whether circumstances justified discharge or fortification of the injunctions.

1. Applications determined. The applications to strike out or obtain summary judgment, discharge or vary the injunctions, and obtain fortification of the cross-undertaking were dismissed.
2. Under CPR 3.1(7), an order may be varied or revoked only in limited circumstances. Following Tibbles v SIG plc [2012] 1 WLR 2591, the usual grounds are a material change of circumstances or misstated facts underlying the original decision. The defendants’ evidence did not establish either ground.
3. The transcripts of covert recordings were admitted for the interlocutory applications. Their admission did not determine whether the recordings would be admissible at trial.
4. The strike-out and summary-judgment tests substantially overlap. Strike out is a draconian last resort. Summary judgment requires a realistic, rather than fanciful, prospect of success, but the court must avoid a mini-trial while considering the evidence and any evidence reasonably available at trial. Applying those principles, the transcripts and other material did not establish that all relevant transactions were known to the claimant before the settlement agreement. Disputed facts, contractual interpretation and matters requiring oral evidence meant that the claim remained realistically arguable.
5. Whether knowledge is attributed to a company is an objective and contextual question. The relevant purpose, legal rule and duty must be considered. The principle in Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1, drawing on Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, prevented the court from treating knowledge of an individual director as automatically constituting knowledge of the company, particularly where the company alleged wrongdoing by its directors.
6. Fortification was unavailable after the injunction decision. In any event, the defendants failed to provide evidence of likely uncompensated loss or sufficient deterioration in the claimant’s financial position. The three requirements identified in Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2014] EWCA Civ 1295 were not satisfied.
7. The argument under section 479 of the Companies Act 2006 failed. The claimant’s £18 million liability and guarantee had been disclosed before the original injunction hearing, so there was no material change or misleading concealment.