Holmes v Guardian Bank & Trust (Cayman) Ltd
| Jurisdiction | Cayman Islands |
| Judge | (Smellie, Ag. J.) |
| Judgment Date | 27 July 1993 |
| Court | Grand Court (Cayman Islands) |
| Date | 27 July 1993 |
(Smellie, Ag. J.)
R.D. Alberga, Q.C. and A. Turner for the plaintiff;
A. Jones for the defendant.
(1) Barron v. Potter, [1914] 1 Ch. 895.
(2) Francis v. Kuala Lumpur Councillors, [1962] 1 W.L.R. 1411; [1962] 3 All E.R. 633, dicta of Lord Morris applied.
(3) Redland Bricks Ltd. v. Morris, [1970] A.C. 652; [1969] 2 All E.R. 576, followed.
(4) Vine v. National Dock Labour Bd., [1957] A.C. 488; [1956] 3 All E.R. 939.
Injunctions-mandatory injunction-factors to be considered-applicant to show substantive action strong probability of success-if likelihood of success diminishes, court may discharge injunction
Employment-termination-reinstatement of employee-mandatory and prohibitory injunctions inappropriate forms of relief to secure reinstatement following wrongful dismissal if no special circumstances, wrong remedied by damages and employee capable of finding other employment
Injunctions-ex parte injunction-full and frank disclosure-dispute over ex parte applicant”s duty to make full and frank disclosure normally to be investigated at trial and not at inter partes hearing
The plaintiff sought relief against the defendant bank in his capacities as employee, shareholder and director of the company.
The plaintiff as holder of 50% of the ‘B’ shares in the defendant bank was one of two ‘B’ directors appointed to constitute the Board through which the ordinary business of the bank could be conducted. On March 19th, 1993, in his absence, a new ‘B’ director was appointed by the shareholders to replace the second such director who had resigned but whose resignation had not been accepted unconditionally.
The plaintiff subsequently attended meetings with the new appointee but on June 3rd was removed from his directorship. The procedure adopted by the shareholders was the voting in of new articles of association effectively to bring about the removal of the affirmative class rights of the plaintiff as a 50% shareholder and ultimately his dismissal. The plaintiff was, by virtue of his contractual obligations, obliged to vote for the new articles but refused to do so. On June 10th, he obtained ex parte mandatory and prohibitive injunctions against the defendant for the purpose of maintaining the status quo pending proceedings he intended to institute. No disclosure was made of the new articles or other documents by which the plaintiff was compelled to vote for them.
On July 14th the Board, acting under powers it had always had under the articles of association, recalled the ‘B’ director whose unconditional resignation had not been accepted and upon her reinstatement affirmed the plaintiff”s dismissal as a director and an employee and to this end the locks to his office were changed. The defendant then applied by inter partes summons to discharge the mandatory and prohibitive injunctions granted to the plaintiff. The plaintiff in the
meantime instituted proceedings for his reinstatement, for the recognition of his status as beneficial owner of shares and for the payment of dividends, the last two matters being important to other proceedings in which he was involved.
The defendant/applicant submitted inter alia that (a) the equitable remedies sought in the plaintiff”s application were not available in cases involving contracts of employment or, alternatively, the plaintiff had failed to show any special circumstances to justify the granting or continuance of such relief; and, in any event, since this was a case that might sound in damages, mandatory injunctive relief was inappropriate; (b) the plaintiff for several reasons, including a change of circumstance, was not entitled to maintain the mandatory injunction since the action in aid of which the ex parte order was granted did not show a ‘high probability of success’; and (c) since the plaintiff had not disclosed everything material to the granting of the ex parte order, it was open to the court to discharge the injunction without enquiring into the merits. This the court was entitled to do whether the material non-disclosure was accidental or deliberate.
The plaintiff/respondent submitted in reply inter alia that (a) the circumstances were special as they involved the breach of the articles of association of the defendant company and any resolution purportedly taken contrary to those articles had to be ultra vires and a nullity. Consequently, his purported dismissal remained a nullity and given the exceptional circumstances that he also had a vested interest as a shareholder, the equitable relief sought (i.e. ultimately a declaration that he was still employed by the defendant and entitled to retain his interests) was attainable and therefore the injunctions in aid of that relief should remain; (b) he therefore still retained a ‘high probability of success’ to justify the continued imposition of the mandatory injunction, more so because (i) the change of circumstance alleged by the defendant had been contrived in bad faith to bring about his dismissal and to compel him to dispose of his interest in the company; (ii) as a shareholder he had an inherent right to sue for an injunction to restrain the company from doing an ultra vires act and to mandate the continued payment of his dividends if dividends were properly declared; and (iii) overall, the special circumstances and bad faith shown entitled him to such equitable relief as was available pending the hearing of the action; (c) as a separate consideration to justify the continued imposition of the prohibitory injunction, there were still serious issues to be tried which the court should not attempt to try on the affidavits and accordingly should maintain the status quo pending trial; and (d) the alleged non-disclosure was not material to the ex parte application or to the present hearing since it was relevant only to the arguments in the substantive hearing.
Held, discharging the injunctions:
(1) On the grant of the ex parte mandatory injunction the strength of the plaintiff”s case was an important consideration and for the continuation of that relief he had to show that he had a ‘strong
probability of success.’ An equally important principle applicable to the case was that the court would not grant specific performance of contracts of service unless special circumstances could be shown (page 432, line 41 – page 433, line 15).
(2) The court was therefore obliged to consider at this stage whether all or any of the events germane to the issues affected (and if so in what manner) the plaintiff”s strong probability of success or, on the other hand, whether the defendant had a good arguable case. Specifically, since there was nothing in its articles of association to preclude the defendant”s reinstating a director whose resignation it had not accepted, it was arguable that the plaintiff”s appointment to the position was effectively if wrongfully terminated on the date of the reinstatement. This development had to be regarded, at least arguably, as altering the legal state of affairs and the nature of the plaintiff”s case to the extent that it was no longer clear that he had a strong probability of succeeding in the relief sought (page 433, line 29 – page 434, line 28).
(3) Accordingly, as the case involved a contract of employment, the plaintiff had to show there were special circumstances to justify maintaining the injunction to keep him in the employ of the defendant. His status in each capacity in which he claimed such relief should be considered. It must be concluded that no such special circumstances existed since (a) he could no longer uphold his position as a director of the defendant; (b) although he was bringing an action for the recognition of his status as a beneficial owner of shares in the defendant and for the payment of dividends, it was now apparent that he sought to do so primarily in the context of another action; (c) moreover, even if his status as a shareholder and therefore as a person entitled to dividends were in issue, that was a consideration independent of the question of his employment, as that status could not give him an actionable right to compel the defendant to maintain his contract of employment; and (d) thus the only remaining basis on which to proceed was that of an employee engaged on a contract of service. Since he could not clearly succeed in showing that his dismissal was a nullity, his case was confined to the unexceptional circumstance of wrongful dismissal. As a further consideration, it was not disputed that his remedies were entirely capable of sounding in damages nor had it been suggested that his status as a banker was so irremediably affected as to prevent him from finding other employment. Accordingly, the ex parte mandatory injunction granted the plaintiff would be discharged (page 434, line 38 – page 435, line 40).
(4) As to the prohibitory injunction, the test to be applied was whether there were serious issues to be tried. But since the plaintiff”s case had in all probability become one wholly of wrongful dismissal, and since there had also been de facto dismissal (the locks on the doors of his office having been changed) there was no justification for the continuation of this injunction which would be tantamount to compelling the
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