England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ARNOLD J
[2017] EWHC 2381 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		30 January 2018

Lord Justice Patten :

1. This is an appeal from an order of Arnold J dated 20 September 2017 dismissing with costs the application by the appellants for disclosure of various categories of documents and other information relating to the operation and financing of a casino at Victoria Gate in Leeds ("the Casino").
2. At the time of the hearing before the judge the Casino was operating under a gaming licence held by Global Gaming Ventures (Leeds) Limited ("Leeds") which was the ultimate subsidiary of the first appellant, Global Gaming Ventures (Group) Limited ("Group"). Group is owned and controlled by the second appellant, Mr Wollenberg. Group is a 75 per cent shareholder in the first respondent, Global Gaming Ventures (Holdings) Limited ("Holdings"). The remaining 25 per cent is owned by Mr Herd, the second respondent. At the time of the hearing Holdings owned and controlled Global Gaming Ventures (Developments) Limited ("Developments") of which Leeds is a wholly owned subsidiary. Developments was incorporated to develop and fit out the Casino which Leeds now operates. The sole asset of Holdings was its interest in Developments.
3. What I shall refer to as the Global Group was established as a joint enterprise between Mr Wollenberg and Mr Herd and until recently both were directors of Holdings, Developments and Leeds. They have now fallen out, in part due to differences of opinion about the operation of the Group and, in particular, its finances. At the time of the hearing before Arnold J they remained directors of Holdings, although Mr Herd has subsequently resigned. But, for reasons which I shall come to, Mr Wollenberg had by then been removed as a director of Developments and Leeds leaving Mr Herd as the sole director of those companies.
4. The development and operation of the Casino was financed by Summit Partners (GGV) Sarl ("Summit") under the terms of a facilities agreement dated 17 February 2016 ("the Facilities Agreement"). The total amount of the facility was US$41.75m. Developments was the borrower under this agreement with Holdings and Leeds joining in as guarantors. Further security was provided in the form of a debenture ("the Debenture") under which Holdings charged its shares in Developments and Developments charged its shares in Leeds to Summit by way of fixed first charge. It was a term of the Debenture that in the event of a default under the Facilities Agreement including the non-payment of interest, Summit would be entitled to appoint Receivers over the shares.
5. At the same time a shareholders' agreement in relation to Holdings ("the Shareholders Agreement") was entered into between Group, Holdings, Developments, Leeds and Mr Herd under which "all significant policy and management decisions" of Holdings would be referred to the board of Holdings before implementation (clause 3.1) and Holdings and Group (as its shareholder) agreed to exercise all powers available to them to procure that Holdings should "ensure that all its business other than routine business is undertaken or supervised by the directors": clause 4.1(c). By clause 4.2 the parties also agreed to procure that each group company (other than Holdings) would comply with the provisions of clause 4.1 in relation to that group company.
6. Clause 5.1 provided:

"GGV Holdings shall provide to each Shareholder and its Nominated Director(s) and where requested, to their representatives, such information relating to the Group as any Shareholder may reasonably request from time to time and without prejudice to the foregoing, GGV Holdings shall keep the Shareholders fully and promptly informed of all material developments regarding the Group's financial and business affairs and all significant events (including and material litigation or arbitration) which will or may affect the Group."

7. "Group" is defined in clause 1.1 of the Shareholders Agreement as Holdings and its subsidiaries from time to time. "Shareholder" includes Group and Mr Herd as the registered shareholders in Holdings.
8. Clause 12.1 also provided:

"Shareholders' procurement obligation

Each of the Shareholders agrees it shall exercise its rights hereunder and as a Shareholder in GGV Holdings in such manner as could reasonably be expected to prevent, and shall not exercise those rights in any manner which could reasonably be expected to result in:

(a) a breach by GGV Holdings of any of its obligations under this Agreement or any restrictions imposed upon it under its Articles (whether or not enforceable against GGV Holdings itself); or

(b) the affairs of any members of the Group being carried on in a manner inconsistent with the terms of this Agreement."

9. The obligations under the Shareholders Agreement (including those under clauses 3, 4, 5 and 12.1) continue to subsist and be enforceable so long as the relevant party remains a Shareholder of Holdings: see clause 19.
10. The Casino opened for business in January 2017 but within a comparatively short space of time a dispute arose between Summit and Mr Wollenberg and Mr Herd about distributions to them as shareholders. There were also cash flow difficulties in relation to the operation of the Casino. At the beginning of June 2017 Mr Wollenberg and Mr Herd proposed various measures to address the problem. These included the deferral of interest payments due under the Facilities Agreement and the sale of certain currency hedges. Summit was not prepared to accede to these requests but it did agree to appoint Union Gaming, an investment bank which specialised in the gaming sector, to assist in raising further capital. They were appointed on 15 June 2017 and proceeded to contact potential investors.
11. The background to these attempts to resolve Developments' cash flow difficulties was the breakdown I have referred to in the relationship between Mr Wollenberg and Mr Herd. Mr Wollenberg says that he became aware during a board meeting held on 4 July 2017 that Mr Herd had contacted Summit without his knowledge to discuss various options and had been told by Summit that its preferred option was for Mr Wollenberg to defer taking his consultancy fees but for Mr Herd to continue to be paid. Mr Herd says that Mr Wollenberg's claim for expenses exceeded the guidelines agreed for employees and that he, Mr Herd, was unwilling to agree to the payment of expenses at a time when Developments was unable to meet the interest due under the Facilities Agreement. He accepts that this led to a heated conversation between the two directors during which Mr Wollenberg told him that he should not contact Summit. As the judge noted, it appears that Mr Wollenberg had formed the view that Mr Herd was not performing adequately as the CEO of Developments and Leeds and should resign. Whatever may be the merits of this dispute, it is clear that there had been a significant breakdown in the relations between the directors which was bound to be a matter of concern to Summit and any other potential investor in the business.
12. On 24 July 2017 a further board meeting took place which two representatives of Summit attended by telephone. The minutes of the meeting (taken by Mr Paul Spence of Hill Dickinson) record that Mr Wollenberg again expressed a lack of confidence in Mr Herd and asked him to step aside. The meeting also discussed the payment of the next instalment of interest under the Facilities Agreement which was due on 1 August and it was made clear to Summit's representatives that the payment could not be made. Mr Herd says that Mr Wollenberg told the meeting that he (Mr Wollenberg) was unaware that this was the case, although it had been discussed at previous board meetings. In the event, Summit was asked to agree to defer the payment. It reserved its position and asked for Developments to produce a turnaround plan in respect of the Group's business. This was presented to Summit on 28 July. Mr Wollenberg says that he did not agree with what he terms the downbeat figures in the plan prepared by the Executive Committee and still believes that there were good prospects of turning the business around. But the plan did at least buy the Group some time because on 31 July Summit agreed to defer the 1 August interest payment for two weeks.
13. Mr Wollenberg and Mr Herd took advice from Hill Dickinson about their duties as directors in relation to the continued trading of the Casino business should Summit withdraw its financial support. But on 11 August matters came to a head when Summit indicated that it would not agree to any further deferrals of interest payments unless Group and Mr Herd were willing to transfer to it ownership of Holdings. In an e-mail to Hill Dickinson, Summit's solicitors said:

"Summit is not prepared to grant a further interest deferral while the existing shareholders preside over continued financial underperformance. The only turnaround plan which Summit would be prepared to support would involve the orderly transfer of ownership of the equity in Global Gaming Ventures Holdings Limited to Summit in return for broad releases for the directors and shareholders but without any further economic participation in the group on the part of the existing shareholders."

14. Mr Wollenberg pointed out with some justification that if the alternative was the insolvency of Developments, Leeds and Holdings this would have serious consequences for the gaming and premises licences under which the Casino operated. Leeds was advised that the administration of one or more of its parent companies would entitle the Gambling Commission and the City Council to revoke the gaming and premises licences which would have a serious adverse effect on the sale value of the business. Mr Herd was willing to agree to a transfer of his shares provided that Group also transferred its shares in Holdings to Summit but at the same time he faced demands from Mr Wollenberg to settle various overdue bills rendered by Dentons UKMEA LLP where Mr Wollenberg was a consultant. There was concern that this might amount to a preference but Mr Herd's resistance to the payments led to further disagreement with Mr Wollenberg.
15. On 14 August Dentons wrote to Ropes & Gray, Summit's solicitors, requesting a further deferral of the interest due so as to allow turnaround consultants to be appointed. In their e-mail Dentons indicated that if the proposal was not accepted the directors might be left with no alternative but to invite Summit to appoint administrators. Mr Wollenberg also proceeded to take action against Mr Herd. On 15 August he purported to remove him as an employee with Leeds and filed at Companies House notice of Mr Herd's removal as a director of both Developments and Leeds. The operating companies were informed of this on 16 August with Summit being informed by e-mail of these changes. The notices were described in the e-mail as part of what Mr Wollenberg regarded as necessary in order to repair the damage caused by Mr Herd's mismanagement of the business. Mr Wollenberg acknowledged that these actions constituted an event of default under the Warrant Agreement that had been made between Developments, Leeds and the shareholders contemporaneously with the Facilities Agreement but said that this was unavoidable as the lesser of two evils.
16. Summit reacted adversely to these actions. Its solicitors wrote to Mr Wollenberg reminding him that in a position of insolvency the directors owed duties to the creditors and re-affirming Summit's unwillingness to continue to support the Group whilst it remained under the control of the existing shareholders. Ropes & Gray demanded that Mr Wollenberg should revoke the notices of termination and take no further steps to remove Mr Herd as a director of any company within the Group. Mr Wollenberg replied by e-mail on 16 August refuting the allegations against him and accusing Summit of aligning themselves with Mr Herd "the principal architect of the company's predicament". At the end of the e-mail Mr Wollenberg said that if he concluded the business was no longer viable the board would take steps to appoint an administrator.
17. On 17 August Summit served a notice of default under the Facilities Agreement and appointed two partners in FTI Consultancy as Receivers over the shares in Developments. Mr Wollenberg was then removed as a director of Developments. The intention of Summit through the Receivers was also to remove Mr Wollenberg as a director of Leeds. They told Mr Herd that they would then proceed to market the shares in Developments but, unless a sale price could be achieved which effectively discharged the debt owed to Summit, the more likely course was that the shares and therefore the Casino business would be transferred to Summit or its nominee for a nominal consideration.
18. Mr Wollenberg attempted to call a board meeting of Leeds with a view to placing the company into administration. Summit's response was to issue a letter confirming that their continued support for Developments was conditional on the removal of Mr Wollenberg as a director of Leeds by 5 pm on 18 August. The Receivers took immediate steps to reduce the quorum for a board meeting of Developments from two to one and an urgent general meeting of Leeds was then called on short notice for 2.50 am on 18 August when Mr Wollenberg was removed. Mr Wollenberg through his solicitors protested about his removal as a director and claimed that it was a breach of the Shareholders Agreement. But he accepted for the purposes of these proceedings that he had been effectively removed as a director of Developments and Leeds leaving Mr Herd as the sole director.
19. Summit then proceeded to deal with the outstanding loan under the Facilities Agreement and a possible sale of Holdings' shares in Developments. They indicated to Mr Wollenberg in an e-mail of 22 August that they would support the re-financing or sale of Developments to a third party and invited him to make "any credible proposal you have in that regard". Mr Wollenberg met the Receivers on 29 August who indicated that they were looking to achieve a quick sale of the shares in Developments with indicative offers being sought within a two week period. This was confirmed by a circular inviting bids for Developments which the Receivers issued the same day. The circular invited indicative non-binding offers for the company by 5 pm on 13 September with the sale process being completed as quickly as possible thereafter. The bids were to be based on publicly available information together with further information which the Receivers supplied to interested parties who had signed a confidentiality agreement. The circular stated that potential purchasers should be prepared to fully refinance the Summit facility which then stood at US$42.2m.
20. Mr Wollenberg said in his evidence that he was obviously concerned about the finances of the Group and the impact this would have on the solvency of Holdings which was a guarantor of the Summit facility and of which he remained a director. Following the meeting with the Receivers on 29 August, he expressed concerns about the sales process proposed in the circular and questioned whether sufficient time had been allowed for the sale process; whether the form of marketing adopted by the Receivers was appropriate and whether adequate financial information about the business had been made available to potential purchasers. In that connection, he noted that the exercise by Union Gaming to identify potential investors appeared to have been abandoned.
21. On 8 September Mr Wollenberg's solicitors, Dechert LLP, wrote to Holdings and to Mr Herd requesting copies of documents relating to the recent financial performance of Leeds. The letter said that the information was sought under clause 5.1 of the Shareholders Agreement as "such information relating to the Group as any Shareholder may reasonably request". It was also stated that Mr Wollenberg required the information in order to monitor the sales process being conducted by the Receivers and to allow him to perform his duties as a director of Holdings. This led to correspondence between Dechert and Fladgate LLP, Mr Herd's solicitors, in which the position was taken that the Requested Documents were not in the possession of Holdings and in any event constituted information belonging to Developments and Leeds to which Mr Wollenberg was no longer entitled. The release of information by Developments and Leeds would require the consent and co-operation of the Receivers.
22. On 15 September Mr Wollenberg and Group issued the application which is the subject matter of this appeal. It took the form of a Part 8 claim form seeking a mandatory order that Holdings and/or Mr Herd should provide inspection and permit copies to be taken of what are referred to (and I shall also call) the Requested Documents. At the same time the appellants issued and served an application notice seeking an order for the same relief with inspection of the Requested Documents to be provided by no later than 4 pm on 19 September. The Requested Documents are identified as those listed in Dechert's letter to Holdings and Mr Herd of 8 September. But, as set out in the draft order attached to the application notice, disclosure was sought of:

"1.1. From 17 August 2017:

1.1.1. Daily trading figures for the casino located at Victoria Gate, Leeds, England ("Casino");

1.1.2. Daily cash balance reports of the Casino;

1.1.3. All communications of Harris Hagan LLP and/or Mr Herd with the Gambling Commission, whether by way of key event notifications or otherwise including whether for on behalf of GGV Holdings, Global Gaming Ventures (Developments) Limited ("GGV Developments") and/or Global Gaming Ventures (Leeds) Limited ("GGV Leeds") and/or otherwise by GGV Holdings, GGV Developments and/or GGV Leeds;

1.1.4. Notes of all Executive Committee meetings of the Group;

1.2. Profit and Loss statements and cash flow forecasts for the Group produced since 29 July 2017;

1.3. All communications of Mr Herd and/or Duncan Batchelor ("Mr Batchelor") since June 2017 with Summit Partners (GGV) SARL directly or indirectly relating to a Facilities Agreement and/or a Warrant Agreement entered into on 17 February 2016 including whether for or on behalf of GGV Holdings, GGV Developments and/or GGV Leeds and/or otherwise by GGV Holdings, GGV Developments and/or GGV Leeds;

1.4. All communications of Mr Herd and/or Mr Batchelor since June 2017 with bankers and other financial institutions, including without limitation Investec (hedging), Barclays (banking), Novomatic (leasing) including whether for or on behalf of GGV Holdings, GGV Developments and/or GGV Leeds and/or otherwise by GGV Holdings, GGV Developments and/or GGV Leeds;

1.5. All communications of Mr Herd and/or Paul Sculpher ("Mr Sculpher") since 1^st August 2017 with Hammerson PLC in relation to the premises occupied by the Casino including whether for or on behalf of GGV Holdings, GGV Developments and/or GGV Leeds and/or otherwise by GGV Holdings, GGV Developments and/or GGV Leeds;

1.6. Minutes of all board meetings of any Group company since and including that held on 24th July 2017; and

1.7. All documents related to the sale process for the shares of GGV Developments being conducted by Lisa Jane Rickelton and Mr Simon Ian Kirkhope of FTI Consulting as Receivers."

23. In the claim form the appellants pleaded that Mr Wollenberg is entitled to inspect this material in his capacity as a director of Holdings and as the representative of Group in support of its rights under clause 5.1 of the Shareholders Agreement because the sale of the shares in Developments is a material development in the financial and business affairs of the Group. Disclosure and inspection is also sought in exercise of Mr Wollenberg's common law right to access all documents reasonably required for the performance of his functions as a director of Holdings which are held either by that company or by Mr Herd. So far as necessary, reliance is placed on ss. 386 and 388 of the Companies Act 2006 which require a company to keep adequate accounting records and to keep such records open to inspection by the company's officers.
24. The application for immediate injunctive relief in the form of an order for disclosure and inspection of the Requested Documents came before Arnold J on 18 September 2017 when he gave directions for evidence leading to an expedited hearing on 20 September. As part of the order made on 18 September Mr Herd gave an undertaking to use his best endeavours to collate the documents and other information set out in paragraph 1 of the draft order to the extent that they were in his possession, custody or control and our understanding is that this was done in preparation for the hearing on 20 September.
25. The immediate urgency which justified the application for interim relief was the ongoing marketing and imminent sale of the shares in Developments. But, as the judge noted, the relief sought on the application was the entirety of the relief sought in the Part 8 claim, although it was being sought as interim relief in that action and not by way of application for summary judgment under CPR Part 24.
26. Arnold J began his judgment by asking himself whether there was a serious issue to be tried and, if so, what course of action was likely to cause the least risk of irremediable prejudice to either side. In so doing, he relied on the Opinion of the Privy Council in National Commercial Bank Jamaica Ltd v Olint Corpn Ltd [2009] UKPC 16 where the Board said that the route likely to cause least prejudice was the one to take whether the injunctive relief sought was prohibitory or mandatory:

"17. In practice, however, it is often hard to tell whether either damages or the cross-undertaking will be an adequate remedy and the court has to engage in trying to predict whether granting or withholding an injunction is more or less likely to cause irremediable prejudice (and to what extent) if it turns out that the injunction should not have been granted or withheld, as the case may be. The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other. This is an assessment in which, as Lord Diplock said in the American Cyanamid case [1975] AC 396, 408:

"It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them."

18. Among the matters which the court may take into account are the prejudice which the plaintiff may suffer if no injunction is granted or the defendant may suffer if it is; the likelihood of such prejudice actually occurring; the extent to which it may be compensated by an award of damages or enforcement of the cross-undertaking; the likelihood of either party being able to satisfy such an award; and the likelihood that the injunction will turn out to have been wrongly granted or withheld, that is to say, the court's opinion of the relative strength of the parties' cases."

27. This was not a case in which it could be said that damages would be an adequate remedy and so the judge went first to consider whether the claim raised a serious issue to be tried. Mr Herd was and remains the real and effective defendant because Holdings cannot actually participate in the proceedings without his consent under the Shareholders Agreement. In relation to the claimants, Mr Wollenberg is not a party to the Shareholders Agreement and so bases his claim on his rights as a director of Holdings. Group, on the other hand, does rely on clause 5.1 of the Shareholders Agreement. Although its claim under clause 5.1 lies against Holdings rather than Mr Herd who has the relevant documents and information, the judge accepted that an order made against Holdings could be complied with by Holdings requiring Mr Herd as its director to provide the necessary disclosure. But Mr Herd contended before the judge that Mr Wollenberg's right to inspect the books and records of Holdings was limited to accounting records.
28. The judge looked at the authorities relating to the rights of directors both under s.388 of the Companies Act and at common law to access the books and records of the company including the decision of Morgan J in Dilato Holdings Pty Ltd v Learning Possibilities Ltd [2015] EWHC 592 (Ch) where the earlier authorities were considered. He considered that there was a serious issue to be tried on the question whether the director's rights of inspection extended to all the books and records of the company provided that the right was being invoked for a proper purpose. The respondents do not contend that the judge was wrong to take this view and I will proceed on the basis that it is arguable that the right of inspection is as wide as the appellants contend.
29. The judge then had to consider whether the books and records in question were limited to those which were, properly speaking, the property of Holdings or also included those relating to Developments and Leeds. Mr Herd's case on this is that documents relating to the other two companies are not to be treated as the books and records of Holdings merely because he was at the time of the application a director of Holdings. He has in any event now resigned. But the appellants contend that the companies in the Group were run without differentiation in what might be described as a collective manner so that Group information highly material to the position of Holdings should have been made available to the board of Holdings.
30. The judge declined to express even a provisional view on the scope of the documentation which could be said to be disclosable to Mr Wollenberg as a director of Holdings in the present case. This, he said, depended on factual questions about the modus operandi of the Group which were contentious and could not be resolved on the evidence as it stood. Again, there has been no real criticism of his taking this position, although his view does, I think, amount to an acceptance that the appellants' case on this is a possible outcome and is not precluded by some relevant principle of corporate personality. Instead the judge concentrated on the other aspect of the principle governing access by directors to company records which is that it must not be sought for an improper purpose.
31. Mr Wollenberg offered an undertaking to the Court only to use the documents and information disclosed for the purpose of discharging his duties as a director of Holdings. Mr Marshall QC had submitted that Mr Wollenberg's purpose in seeking the disclosure was to protect the interests of Holdings whose shares in Developments were being sold by the Receivers and which was a guarantor under the Facilities Agreement of the indebtedness to Summit. But, on behalf of Mr Herd, Mr Bompas QC contended that Mr Wollenberg's purpose was to frustrate the Receivers in the sale of the shares and then to use the documents and information for the purpose of litigation against the Receivers, Summit and possibly Mr Herd.
32. The judge had of course considered the evidence of events leading up to the appointment of the Receivers which I summarised earlier in this judgment. I will have to return to some of these matters when considering the arguments on this appeal but there is no doubt that Mr Wollenberg did indulge in a certain amount of brinkmanship in his dealings with Summit in the final days leading up to the Receivers' appointment. His threats to place Developments into administration were almost by his own admission in the correspondence likely, if carried out, to result in considerable harm to Developments and Leeds because it risked the loss of the licences necessary to continue the operation of the Casino business. Since Developments was the only asset of Holdings, the loss to that company would also have been considerable.
33. On the other hand, it might be and I think is said that these threats were in some ways a last ditch attempt by Mr Wollenberg to force Summit to the negotiating table in circumstances where he remained confident of the value of the business and was anxious to prevent its loss which, according to him, was in large part due to the inadequacy of Mr Herd as the CEO. Once Summit had resolved the impasse by appointing the Receivers and had removed Mr Wollenberg as a director of Developments and Leeds his scope for action was limited to attempting to secure the best outcome in relation to the sale of the shares in Developments. That was of direct relevance in terms of value to his interests as a joint owner of the business through Holdings and the result of the sale process was of paramount importance to Holdings as a company and as guarantor of the loan. The task of the judge was therefore to differentiate between Mr Wollenberg's conduct prior to the appointment of the Receivers and his interests as a director (and through Group) a shareholder in Holdings following the appointment and to ask himself whether the inspection sought could be impugned as made for an improper purpose merely because it might provide Mr Wollenberg and Group with the information they needed in order to challenge the sale process being conducted by the Receivers.
34. The judge, relying on what had been said by Sir John Chadwick in Oxford Legal Group Ltd v Sibbasbridge Services plc [2008] EWCA Civ 387 at [44], said that the question whether inspection might be used to cause damage to the company was likely to be decisive in weighing up where the balance of convenience lies on an application for disclosure by way of interim relief. Applying an objective rather than subjective test of whether disclosure would cause such damage in the present case, he said:

"I consider that it is arguable that Mr Wollenberg's purpose is improper, at least in the sense that there is an objective risk that it may cause damage to Holdings."

35. For the reasons I have already indicated, that assessment is challenged on this appeal. Mr Wollenberg's focus in obtaining disclosure of the Requested Documents would have been, it is said, on the sale process relating to the shares in Developments. Since Mr Wollenberg had an equal interest with Summit in ensuring that any sale was at the best price reasonably obtainable and preferably at one which discharged the existing loan to Summit, it is difficult to see how this, even on an objective basis, was likely to harm the interests of Developments and the judge does not articulate why he thought otherwise.
36. Arnold J then considered Group's claim which, as I have said, is based on clause 5.1 of the Shareholders Agreement. It was said on behalf of Mr Herd that clause 5.1 entitles the shareholder to information rather than to documents as such but the principal objection to the disclosure sought was that the information was not reasonably requested. Consistently with his view that the inspection sought by Mr Wollenberg might cause damage to Developments, the judge said that he considered Mr Herd's objection to disclosure to be arguable.
37. That left him to consider which course was likely to involve the least risk of irremediable prejudice to the parties. The urgency behind the application for interim relief from the appellants' point of view was that the Receivers were embarked on an accelerated sales process which, in Mr Wollenberg's view, was not best suited to obtaining the best offers for the Casino business. The Receivers are not of course parties to these proceedings but they had made it clear in correspondence that they considered their primary duty to be to secure repayment of the debt to Summit through a sale of Developments. They accepted that they had a duty to obtain a proper price for the shares but disputed Mr Wollenberg's assertion that the sale process should be elongated to allow more extended marketing to take place.
38. The judge said that he considered the position taken by the Receivers to be a reasonable one. Mr Wollenberg raised the question of whether the Receivers had sent the circular to all the potential investors identified by Union Gaming referring in particular to a company called Century Casinos Inc ("Century") that had not, he said, been contacted. The Receivers' position was that they had given consideration to all of the parties identified by Union Gaming and had contacted those whom they considered should be approached. Century had not been contacted by the Receivers but it had been made aware of the bidding process by Mr Wollenberg on 19 September and was therefore in a position of being able to make an indicative bid if it wished to do so.
39. A particular concern of Mr Wollenberg expressed to the judge by Mr Marshall was that the real objective of the sales process was to justify the transfer of Developments to Summit or one of its subsidiaries for only nominal consideration. In part this was based on what had been said earlier about the course which Summit would adopt if it was unable to find a purchaser for Developments at a price which would discharge the existing indebtedness. The judge recognised that this was an understandable concern on the part of Mr Wollenberg. He said:

"Counsel for the applicants made no bones about the concern that underlies these criticisms is that the ultimate objective of Summit is to engineer a sale of the shares to itself for minimal consideration. That is an understandable concern having regard to the statement made by the Receivers in the letter of 11 August. Nevertheless, it seems to me that there is presently no reason to believe that the Receivers, who are licensed [insolvency] practitioners and members of a well-known firm, advised by well-known solicitors, will do anything other than act properly in accordance with their duties. Of course, if it turns out that no sale can be concluded with any third party, then the result may be that the Receivers will be forced to sell the shareholding to Summit for whatever they can get. There is no reason to believe at this stage, however, that that is likely to be the outcome of the sale process."

40. He then made the following assessment of whether the appellants would suffer irremediable prejudice if disclosure was refused:

"If one asks what harm the applicants will suffer if the documents and information are not provided now, but are only provided later after the trial of the Part 8 claim, then I consider that the answer is that the applicants will only suffer harm if and to the extent that the Receivers do not properly discharge their duties in selling Holdings' shareholding in Developments. For the reasons that I have given, however, I do not see that there is any realistic prospect on the basis of the evidence presently before the court that the Receivers will act otherwise than properly in accordance with their duties. Moreover, if the Receivers were to act otherwise than in accordance with their duties, the applicants would have a remedy in the form of a claim against the Receivers. In essence, as I see it, the present application is an application for documents and information which are really sought in the short term with a view to trying to police the performance of the Receivers of their duties and in the medium term, in effect, by way of pre-action disclosure prior to a claim against the Receivers, and possibly other parties. That does not seem to me to be a basis upon which the court should order disclosure of the information and documents at this stage. If disclosure of the documents and information is not ordered at this stage and, contrary to my present assessment, it turns out that the Receivers do not perform their duties, then the applicants will have a remedy against the Receivers."

41. In relation to the prejudice which Mr Herd would suffer if disclosure were ordered but it subsequently transpired at trial that it ought not to have been, the judge was faced with a submission by Mr Herd that if the sale was derailed the damage to Holdings and himself would be unquantifiable. There was no dispute, the judge said, about Mr Wollenberg's purpose in seeking the disclosure being to police the sale of Developments by the Receivers. Indeed that was the basis of the application:

"….. Therefore, I consider that there is a very real prospect that, if disclosure is ordered, the applicants will use the documents and information at the very least to interrogate the Receivers in circumstances where the Receivers no doubt are working hard to try and ensure a successful sale and very possibly as support for an application for an interim injunction to restrain the sale. It seems to me that, while it is not my function to prejudge the outcome of any such application for an interim injunction to restrain the sale, Mr Herd is right to be concerned that Mr Wollenberg should not be assisted in making any such application at this stage. If, of course, Mr Wollenberg can persuade the court hearing any such application that an injunction is merited without the assistance of such documentation, that is another matter.

60. More generally, I agree with counsel for Mr Wollenberg that the key consideration here is the solvency of the three companies in question, that is to say Holdings, Developments and Leeds and the exposure of the creditors that will result if there is a formal insolvency process. As it seems to me, Mr Herd is justified in fearing that the result of an order for disclosure as sought would be to increase that risk. The resulting damage to Mr Herd is something which it seems to me would be extremely difficult to quantify. Therefore there is a very real risk of irremediable prejudice to Mr Herd so far as his 25 per cent interest in Holdings is concerned notwithstanding the offer of a cross-undertaking in damages and even assuming, as I have said, that the applicants are good for an order for damages in due course. I consider that that risk of irremediable prejudice if the order is wrongly made outweighs the risk of irremediable prejudice to the applicants if the order is wrongly refused."

42. Since the judge dismissed the interim application, one or two important events have occurred. As mentioned earlier, Mr Herd has now resigned as a director of Holdings. More importantly, the bidding process did not produce an acceptable offer for Developments and on 3 October 2017 Developments was sold and the shares transferred to an associate company of Summit for a nominal consideration of £1 leaving the existing indebtedness in place with no equity return to Holdings.
43. Mr Wollenberg and Group challenge the judge's order on a number of grounds but their starting point is that the judge was wrong to deal with the application on ordinary Cyanamid principles when, in order to accommodate the urgency of the position, the relief sought on the application was the entirety of the relief sought in the action. The order made by the judge was likely to dispose of the proceedings and he should therefore have concentrated on the relative strength of each party's case rather than merely asking himself whether there were serious issues to be tried and then deciding the application on the balance of convenience. In NWL Ltd v Woods [1979] 1 WLR 1294 the House of Lords recognised that the application of the Cyanamid principles might need to be modified in such cases to reflect the fact that by the time of any trial the events to which the proceedings related would be over so that if an injunction was to be granted at all it had, so to speak, to be now or never. In such circumstances it was permissible for the court to consider the degree of likelihood of the applicant succeeding in its claim at trial when weighing up the balance of convenience.
44. In my view, this was such a case. The appellants sought disclosure of the Requested Documents in order to monitor or police the sale by the Receivers of the shares in Developments. There was no doubt that this was intended by the Receivers to be a short-term process as was apparent from the circular sent to potential purchasers. If Mr Wollenberg was to make meaningful representations to the Receivers or conceivably to seek injunctive relief delaying the sale the disclosure needed to be immediate. By the date of any trial, the sale would have taken place. No opportunity would exist for a more leisurely or detailed consideration of the strength of the claim before the conclusion of the sale process.
45. The judge was clearly entitled and, in my view, right to take into account the harm which disclosure might do. But, in the circumstances of the case, the appellants were, I think, entitled to have the potential consequences of the relief they were seeking weighed against the relative strength of their case for disclosure and not simply by reference to what course would do the least harm. If they were able to demonstrate to the judge that their claim had a significant prospect of success, that should in my judgment have been taken into account when determining where the balance of convenience lay.
46. That leads me to a consideration of the causes of action relied upon. I can begin with clause 5.1 of the Shareholders Agreement. Holdings was and remains under a contractual obligation to provide Group as one of its shareholders with such information relating to the Group (which includes Developments and Leeds) as the shareholder may reasonably request. This includes keeping the shareholders fully and properly informed of all material developments regarding the Group's financial and business affairs and all significant events affecting the Group. The latter part of the clause seems to me to embody a positive obligation which requires to be performed regardless ("without prejudice to the foregoing") of the making of a request by the shareholder and therefore irrespective of whether such a request would or would not be reasonable. Since no-one can seriously suggest (nor do they) that the sale of Holdings' only asset was not of significance to the company which remained a guarantor of the debt, it is difficult in my view to see how the possible use to which Mr Wollenberg might wish to put the information can affect the obligation to disclose. There were, as I have said, points taken about the scope of the disclosure sought but the claim under clause 5.1 was not really opposed on those grounds or rejected by the judge for those reasons. All of the material appears to relate either to the finances and operation of the Casino business and the Group; to the Facilities Agreement under which the business is financed; or to the sale process. The documents were by the hearing in the possession or control of Holdings and the ownership of individual documents is irrelevant to whether they fall within the obligation under clause 5.1. In any event, Mr Wollenberg, who is a solicitor, offered an undertaking to use the documents only for the purpose of discharging his duties as a director of Holdings. It seems to me that Group has therefore a strong claim for disclosure of the Requested Documents under clause 5.1 of the Shareholders Agreement and that the judge was wrong to treat the obligation to disclosure as subject to a requirement that the request should be a reasonable one. I will, however, return to the question of purpose after considering Mr Wollenberg's own claim to be entitled to access to the Requested Documents.
47. As explained earlier, the judge rejected Mr Wollenberg's claim for access to the Requested Documents on the ground that disclosure was sought for an improper purpose in the sense of being used in a way which would cause damage to Holdings. There were and I think still are issues as to the ownership of the documents and whether they can properly be regarded as the books and records of the company for the purposes of s.388 of the Companies Act and any common law rights which Mr Wollenberg possesses in his capacity as a director. The judge was, I think, right to say that this issue could not finally be determined on the evidence available on the application and I am content to take the same course. Mr Bompas has not sought to persuade us otherwise and the risk of unauthorised disclosure is considerably diminished by the undertaking which Mr Wollenberg offered to the Court.
48. The real issue therefore is whether the judge was right to regard disclosure as having been sought for an improper purpose in the sense described above. Mr Bompas emphasised in his submissions as he did before Arnold J that his clients' real concern was that disclosure might lead to the insolvency of Developments. As mentioned by the judge in his judgment, it was said that Mr Wollenberg's purpose was to frustrate the performance by the Receivers of their duties and to provide a possible basis for legal action against them, Summit or Mr Herd. Considerable reliance was placed on Mr Wollenberg's actions prior to the appointment of the Receivers when, as I have explained, he threatened Summit with the appointment of an administrator over Developments and had to be removed as a director before that could take place. It is obvious that the insolvency of Developments would have been disastrous for the company as well as for its shareholders and Mr Wollenberg was clearly aware of that because he deployed the same arguments against Summit when trying to negotiate a deferral of the interest payments due under the Facilities Agreement.
49. But, by the time that the application came to be heard, that risk was over and any leverage which Mr Wollenberg had was limited to challenging the sale process commenced by the Receivers. Mr Marshall submits that to seek to challenge the actions of the Receivers is not ipso facto an improper purpose. That seems to me to be right. By then Group, as the majority shareholder in Holdings, was in a battle to preserve the only significant asset of that company which was its ownership of Developments. The sale represented the only chance of finding a purchaser for Developments who would be able to discharge the existing indebtedness to Summit and, with it, the liability of Holdings as a guarantor. The alternative which, despite the judge's expectation to the contrary, has now come to pass is that Holdings has lost its only asset for no consideration and remains liable to Summit under the Facilities Agreement.
50. It is therefore difficult in my judgment to justify the conclusion that by seeking potentially to challenge the Receivers' conduct of the sale (even assuming that there are any grounds to do so) Mr Wollenberg and Global were threatening the interests of Holdings or the solvency of it and Developments. It was never in Summit's interests as subsequent events have shown for Developments to be placed into administration. Its only value rests in it (through Leeds) being able to continue the Casino business. Objectively speaking, Mr Wollenberg's actions prior to the appointment of the Receivers, although unjustifiable in themselves, did not provide a sound or sufficient basis for inferring damage to Holdings or Developments thereafter once the legal and economic realities post-receivership are taken into account. At the very least the appellants were entitled to the information in the Requested Documents for the purpose of monitoring their rights as shareholders. Whether they would (on examination of the material) have had any basis for challenging the course of action taken by the Receivers is a different matter which lies outside the scope of this appeal. But in rejecting the application on the basis that it was made for an improper purpose, the judge in my view erred and the exercise of discretion which he carried out cannot stand.
51. So far as necessary, the same applies to the position of Mr Herd. He is naturally concerned that Mr Wollenberg may seek to make him a defendant to some kind of derivative action brought in the name of Holdings. Quite what breaches of duty (if any) could be alleged against him is not clear but I cannot see why the possibility of a claim being brought against Mr Herd in the future based on the information contained in the Requested Documents should make the disclosure legally objectionable. Nor do I accept the submission that Mr Herd might have suffered loss in the form of the value of his shareholding in Holdings had the appellants used the Requested Documents to challenge the sale of the shares in Developments. It was equally in Mr Herd's interests that the sale value of Developments should have been maximised and, as Mr Marshall pointed out, Mr Herd was in fact willing to transfer his shares to Summit for nothing.
52. That brings me then to considering what order this Court should now make. One of the issues now raised is whether and to what extent this Court in exercising its own discretion should take into account the change in circumstances; in particular the sale of the shares in Developments to Summit; the resignation of Mr Herd as a director of Holdings and the request for further information about that sale contained in the letter from Dechert to Fladgate dated 4 October 2017.
53. It seems to me that one cannot ignore what has happened since the hearing on 20^th September 2017 but that neither the completion of the sale process nor Mr Herd's resignation as a director can affect the appellants' entitlement to disclosure of the Requested Documents. Although there can now be no question of proceedings by Group or Mr Wollenberg to interfere with the sale, the appellants remain entitled to see the Requested Documents for the reasons I have explained. If anything, the risk of damage being caused to Developments is even less than before but Group, as a shareholder in Holdings, and Mr Wollenberg, as a director of Holdings, still have a legitimate interest in knowing how and in what circumstances the Receivers have come to transfer Developments to Summit for a nominal consideration. There was discussion at the hearing as to what (if any) cause of action the appellants or Holdings might have against the Receivers or even Summit and whether it might be possible to seek rescission of the sale on grounds that there had been a breach of fiduciary duty by the Receivers to the appellants or Holdings in relation to the sale process. I do not propose to go into that. Whether there are grounds for challenging or impugning the sale to Summit lies in the future and is not a matter which this Court is either able or required to decide for the purposes of this appeal. The Requested Documents remain disclosable for the reasons I have already given.
54. Mr Herd has ceased to be a director of Holdings but he has already collated the documents and, if we so order, can presumably disclose them. He remains a party to the Shareholders Agreement and is under a duty (so far as it remains in his power to do so) to facilitate the performance of Holdings' obligations under clause 5.1: see clause 12.1 of the Shareholders Agreement.
55. Mr Bompas took the point that the obligations of Holdings under clause 5.1 relate to the Group as defined which now no longer includes Development and Leeds. I do not accept that. Although the change in the ownership of Developments will affect the ability of Holdings to obtain further information or documentation from its former subsidiaries, it already has the Requested Documents and remains under a contractual obligation to provide them in accordance with the Shareholders Agreement as drafted.
56. On the other hand, we have been concerned on this appeal with questions of principle governing the application for disclosure of the Requested Documents. Although those principles will apply to the October request for the further information, there has been no real opportunity in the context of this appeal for the respondents to raise any objection to disclosure of the additional information which is particular to the documents concerned. The change in circumstances may raise difficulties which require to be properly determined at a further hearing. I would not therefore order disclosure of that material at this stage. That can be dealt with in the Chancery Division by way of amendment to the appellants' Part 8 claim.
57. For these reasons, I would allow the appeal and order disclosure of the Requested Documents.

Lord Justice Kitchin :

58. I agree.

Lord Justice Floyd :

59. I agree also.
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