State House Trust Company Limited and others v Friend Media Technology Systems Limited and others

Injunction - reasons for dismissing the Plaintiff's application [2025]JRC158 Royal Court (Samedi) 13 June 2025 Before : Sir William Bailhache, Commissioner, and Jurats Christensen MBE and Berry Between (1) State House Trust Company Limited (in its capacity as Trustee of the G2007 Settlement) (2) Malcolm Friend (3) Denise Friend (4) DZ (PTC) Limited (in its capacity as Trustee of the DSZ 2022 Trust) (5) Jonathan Friend Plaintiffs And Friend Media Technology Systems Limited First Defendant Northedge Capital Fund III, LP Second Defendant Northedge Capital Coinvestment III, LP Third Defendant Byrom Coinvest LP Fourth Defendant Advocate J. W. Angus for the Plaintiffs. Advocate M. Kushner for the First Defendant. Advocate J. M. Dann for the Second to Fourth Defendants. judgment the COMMISSIONER: Introduction 1. In this judgment, the following expressions have the meaning attributed to them: “Company” means the First Defendant; “Enhanced Voting Rights” means those rights set out as described in paragraph [3] below; “Founder Director” means either of the Second and Fifth Plaintiffs, appointed pursuant to Article 15.2 of the Company’s Articles Association by the holders of over 50% in nominal value of the Company’s B2 shares; “Fund Manager” means NorthEdge Capital LLP; “Investment Agreement” means the Investment Agreement referred to at paragraph [14] below; “Joint Consent ” means

the consent of the Fund Manager and a Founder Director; “NEC Parties” means the Second to Fourth Defendants; “Tier 2 Event of Default” means any act, omission or event occurring which constitutes or is likely, with the passing of time or the giving of notice, to constitute an event of default relating to a breach of financial covenant under any of the banking or debt facilities for the time being of the Company or its associated companies.

2. This is the judgment of the Court on an application made by the Plaintiffs inter partes for immediate interim injunctions, in summary: (i) restraining the Defendants (or any of them) from seeking to exercise Enhanced Voting Rights, so as to take any steps concerning matters which required Joint Consent; (ii) within fourteen days of service of the Amended Order of Justice, requiring the Defendants to file affidavits providing disclosure (with supporting documentation) dealing with: (a) any attempts by the Defendants (or any of them) to rely on the Enhanced Voting Rights; (b) whether, when and how the matters purportedly approved by exercise of the Enhanced Voting Rights at the meeting of the Company in April 2025 have been carried into practical effect, and, specifically, when any bonus payments have been made to any manager; and (c) any communications with HSBC (including documentation provided to HSBC) in connection with the proposed breaches of financial covenants by the Company and / or its subsidiary, Friend MTS Limited (“FMTSL”). (iii) enabling the Defendants (or anyone notified of the order) to apply to the Court at any time to vary or discharge the orders (or such of them as affect that person).

3. The provision in the Company’s Articles of Association in relation to Enhanced Voting Rights is at Article 5.9 – 5.11 and is in these terms: “ 5.9 If an Event of Default has occurred or is subsisting and in the case of a Tier 1 Event of Default a Shareholder Majority notifies the Company, or, in the case of a Tier 2 Event of Default, the Fund Manager notifies the Company (in either case in writing) that such event or circumstance has occurred and is subsisting, then the number of voting rights attaching to the Investor Shares (as if they constituted one class of share) at any general meeting or on any written resolution shall be such number as is equal to 95% of the total voting rights attaching to all Shares in issue at the date of any such meeting or the date of circulation of any such resolution (calculated after the application of this article 5.9). 5.10 The enhanced voting rights attached to the Investor Shares by virtue of article 5.9 shall continue for so long as the relevant event or circumstance which triggered such Event of Default continues to subsist or, if earlier, until such matter is waived or otherwise remedied to the reasonable satisfaction, confirmed in writing, of the Fund Manager. 5.11 When exercising the enhanced voting rights attached to the Investor Shares by virtue of article 5.9, the holders of those Shares may not make changes to the Founder

Shares and/or to the Manager Shares which are disproportionately economically disadvantageous to the holders of the Founder Shares and/or the holders of the Manager Shares when compared to any changes made to the A Ordinary Shares and/or the B1 Ordinary Shares.” 4. The application for the interim injunctive orders under sub-paragraph (a) above is dismissed for the reasons given hereunder. We will hear further argument on the issue of disclosure if that should be necessary. The claims 5. By an Order of Justice issued on 25 October 2024, the Plaintiffs brought proceedings against the Defendants alleging that by the conduct of the NEC Parties the Plaintiffs had suffered unfair prejudice as shareholders in the Company as a result of which they claimed orders from the Court that either: (i) any or all of the NEC Parties and/or the Company be ordered to purchase the Plaintiffs’ shares in the Company or (ii) the Plaintiffs be ordered to purchase the NEC Parties’ shares in the Company, with the price payable in either case to be determined on such basis as set out in the Order of Justice or as set by the Court in such manner as it should think fit.

6. It was pleaded in the Order of Justice that for a number of reasons the Plaintiffs had suffered prejudice, namely: (i) their rights as set out in the Investment Agreement as members of the Company to receive management information from FMTSL had been disregarded in part or in whole; (ii) their rights to exercise oversight over, be consulted on, and grant approval in respect of, significant matters of policy had been disregarded either in part or in whole; (iii) their rights, exercisable through the Founder Directors’ appointment to the remuneration committee, to exercise oversight over and render decisions in respect of matters of significant import to the Company, namely the emoluments payable to the managers and senior employees had been disregarded either in whole or in part; (iv) their rights, exercisable through the appointment of a Founder Director to the audit and professional services committee to exercise oversight over and make recommendations in respect of matters of significant import to the Company, namely the appointment of outside consultants and the terms upon which such appointments ought to be made had been disregarded either in whole or in part; (v) their rights as set out in the Investment Agreement as members of the Company to exercise through the Founder Directors’ oversight over the Company’s affairs at its properly constituted board meetings of agreed

regularity had been disregarded; (vi) the failure to hold sufficiently frequent company board meetings in Jersey had the potential to put in jeopardy the Company’s offshore tax residency; (vii) their rights to information as set out in Clause 9.3 of and Schedule 8 to the Investment Agreement had been disregarded in whole or in part; (viii) their rights to (through the Founder Directors) exercise oversight over, be consulted on, and grant approval in respect of, the variation of the Fifth Plaintiff’s terms of employment had been disregarded in whole or in part; (ix) the Fifth Plaintiff’s ability in the management of the Company in his capacity as a director of the Company had been withdrawn by the suspension of his access to his email account and/ or the Company’s and FMTSL’s IT systems; (x) generally their right to have oversight and participate in the management of the Company, through the duly appointed and properly informed Founder Directors, had been deliberately contravened; (xi) such unfair conduct on its own and cumulatively: (a) had caused an irretrievable breakdown in relations between the Plaintiffs on the one hand and the majority shareholders (i.e. the NEC Parties) on the other; (b) constituted an exclusion of the Plaintiffs from the Company’s management, contrary to their legitimate expectation of continued and unfettered participation; and (c) has caused a justifiable loss of confidence in the probity of the Company’s management.

7. The First Defendant has filed an Answer which broadly adopts a neutral stance to the Plaintiffs’ Order of Justice, albeit confirming that it will of course abide by any discovery obligations. The NEC Parties have filed an Answer defending the various claims brought by the Plaintiffs, but in addition asserting that the Second, Third and Fifth Plaintiffs have embarked upon a course of conduct in which they were using the Company’s quorum requirements and the Joint Consent rights conferred by the Investment Agreement improperly to frustrate reasonable decision-making in respect of the Company in breach of their duties, all of which conduct was unfairly prejudicial to the interests of the NEC Parties in their capacity as members of the Company and that as a result the Defendants should be ordered to purchase the Plaintiffs’ shares in the Company but on a somewhat different basis from that asserted by the Plaintiffs in their Order of Justice or at a price to be determined by the Court in such a manner as it shall deem fit. By way of alternative prayer, the NEC Parties requested an Order regulating the conduct of the Company’s affairs for the future.

8. It is clear from the different claims advanced by the Plaintiffs and the NEC Parties that there is at least agreement that the relationship between them as co-shareholders in the Company needs to be brought to an end in one form or another. The Plaintiffs have expressed their preference that the Court should make an order that the NEC Parties buy out their interest; and that indeed is also the preferred solution of the NEC Parties. Nonetheless, there is the possibility remaining that the Court should either make an order that the Plaintiffs buy out the interest of the NEC Parties or that the Court should find some other Order which would regulate the conduct of the Company’s affairs in the future.

9. This focus on the pleadings is relevant because in the course of argument before us on the prospective injunctions, it was submitted by Advocate Angus that the positive effect of ordering the injunctions would be to improve corporate governance within the Company and force the Parties to work together until trial. We say immediately that for reasons which are apparent from the pleadings themselves, but are certainly also supported by so much of the correspondence between the Parties as has been put before us, that the possibility of such an improvement is extremely slim. Advocate Angus pointed to his firm’s letter of 13 December 2024 which he said set out a template for future relations between the Plaintiffs and the NEC Parties, but in our judgment the breakdown is conclusively shown by the penultimate paragraph – which invites the NEC Parties to confirm that the Company will proceed as required by the Plaintiffs failing which the Plaintiffs would reserve all rights to take action to regularise the position and as appropriate would seek compensation for the prejudicial treatment they had sustained. It does not seem to us to be at all likely that the Parties would row back from their respective positions given both the pleadings and the content of that letter, notwithstanding the submissions which Advocate Angus has made to us.

10. We turn next to the draft Amended Order of Justice which was before us. No order has yet been made giving leave to amend but we have been invited by consent to consider the application for injunctions on the assumption that the Order of Justice has been amended, it being agreed that if the injunctions were to be granted, there could not possibly be an objection to the amendment. We have proceeded on this basis, although we make it clear that the amendment application is a separate application which will stand or fall on its own merits.

11. The amendments shown in the draft amended Order of Justice contain recitals from the Investment Agreement and the Articles of Association relating to the Enhanced Voting Rights, the calling of a general meeting of the Company and the exercise of the Enhanced Voting Rights on one or more particular occasions following what was alleged to be a wrongful issuance of a Tier 2 Event of Default Notice by the Fund Manager. The issue of such notice was claimed to be an unfairly prejudicial act of itself, and also said to evidence an ulterior and improper motive on the part of the Defendants. We consider this in more detail below but in summary it is averred by the Plaintiffs that the issue of the Tier 2 Notice and the attendant invocation of Enhanced Voting Rights is particularly open to abuse because it enables the Fund Manager to control the affairs of the Company in accordance with directions given to it by the NEC Parties to the temporary or perennial exclusion of the Plaintiffs, thus avoiding the operation of the Joint Consent mechanism in the Investment Agreement by which some of the core rights of participation in management possessed by the Plaintiffs are protected.

12. The Amended Order of Justice not having yet been filed by consent or with an order of the Court, no Amended Answer has yet been filed. However it is clear from the NEC Parties’ Skeleton Argument before us that the allegations of a wrongful issue of the Tier 2 Notice and potential for abuse is strongly denied. We now turn to the background to the substance of the claim. The Investment Agreement 13. The Company was incorporated in Bermuda on 6 December 2005, but subsequently continued on 28 June 2022 as a Jersey company pursuant to Article 127(O) of the Companies (Jersey) Law 1991 (“the Companies Law”). As pleaded in the Order of Justice, the Company’s principal business, carried on largely through its United Kingdom trading subsidiary FMTSL, is that of providing advanced content security and anti-piracy services and solutions. FMTSL’s principal customers are major broadcasters and content owners / rights holders. The Fifth Plaintiff is said to be the architect of the technology which underpins FMTSL’s business. It is alleged in the Order of Justice that prior to the investment in the Company by the NEC Parties, he was singlehandedly responsible for the creation, maintenance and development of the Company’s technology. After the NEC Parties’ investment in the Company, he remained the Chief Product Officer of FMTSL and the Plaintiffs assert that he has been primarily responsible for developing its business. In the Order of Justice, it is asserted that he was in effect excluded from the management of the Company at the behest of the NEC Parties, and subsequently has resigned as a result of those Defendants rendering it untenable for him to remain an employee.

14. Following an approach by the Third Plaintiff, the NEC Parties entered negotiations in or about August 2021 for a potential investment in the Company. Ultimately this resulted in the Investment Agreement executed on 19 July 2022 through which the NEC Parties purchased a 53.8% share of the Company’s fully diluted share capital. As a result of the Investment Agreement, the present shareholding is divided between the A and B1 shareholders, who are the investors, the B2 shareholders who are the Plaintiffs, the founder members of the Company, the B3, C and D shareholders who are the managers, and the E shareholder who is an independent party albeit connected with the Fund Manager.

15. The Investment Agreement formed part of a suite of documents which together represented the basis upon which the majority stake in the Company was to be acquired. It contained a number of provisions material to our consideration of the present application.

16. The structure contemplated by the Investment Agreement included provision for the Fifth Plaintiff and a Founder Director to sit on the remuneration committee and a Founder Director on the audit and professional services committee. The former committee had the relevant powers to determine all matters concerning the emoluments of the managers, including any person connected with any manager, and it was to act by a majority: only if no majority could be ascertained would the questions be referred to the full board of directors. The audit and professional services committee was similarly to act by a majority, and had the obligation to recommend to the board the appointment of any external consultants, professional service advisers or external auditors and the level of their remuneration. We note that the Investment Agreement contemplated that there would be exit arrangements in relation to the transaction within four years of its entry into force. The holders of the B2 ordinary shares (the Plaintiffs) would be entitled to appoint, remove and replace up to two Founder Directors in accordance with the Articles of Association of the Company: furthermore the board of directors of FMTSL would include the Fifth Plaintiff as well as one of the investor directors.

17. Relevantly for the purposes of the present argument, the Company was not to carry out a number of potential actions without Joint Consent (that is the consent of the Fund Manager and the founder director) unless the investor shareholders were entitled to exercise Enhanced Voting Rights, when only the consent of the Fund Manager would be required.

18. Those actions covered a wide variety of activity, which included making changes in the share capital of the Company, acquiring other companies, disposing of the Company’s business or making any change in the business of the group of companies of which the Company was part, seeking a public listing of the Company’s shares, amending the Company’s Articles of Association, appointing or removing directors, appointing new auditors, changing the banking or other financial arrangements and incurring capital expenditure outside the Business Plan of more than £25,000.

19. The Investment Agreement is to be governed by English law and the parties to it agreed to submit to the exclusive jurisdiction of the English Courts in relation to any claim or matter, whether contractual or non-contractual arising under the agreement or any of the documents in the agreed form. We were informed by Advocate Angus that this provision did not affect the jurisdiction of the Royal Court to deal with the matter currently before it; because although it might be said that the matters canvassed before us arose out of the Investment Agreement or other documents in the Agreed Form, the Court’s jurisdiction arose under Part 20 of the Companies Law to give relief to shareholders who asserted they had suffered unfair prejudice in the conduct of the Company’s affairs. Advocate Dann for the NEC Parties did not demur from this proposition, and we accept that the Court’s jurisdiction under these provisions of the Companies Law cannot be removed by an agreement of this kind.

20. In the Order of Justice, it is asserted that there was a partnership understanding between the Plaintiffs and the NEC Parties as a result of which the Company and FMTSL have been and remain quasi-partnership companies. It might be thought that this would be a difficult proposition to establish given Clause 28.1 of the Investment Agreement which provides that “Nothing contained in this agreement shall be deemed to constitute a partnership between the parties or any of them”. Furthermore, at Clause 28.5, the parties agreed that: “This agreement, together with any documents in the agreed form and all documents entered into or to be entered into pursuant to the terms of this agreement, constitutes the entire agreement between the parties with respect to all matters referred to in this agreement…” However, we are not required to consider the point any further because Advocate Angus confirmed that for the purposes of the present hearing the existence or otherwise of the partnership understanding was not a relevant feature and we should proceed upon the basis that no such claim at this stage was maintained. This we have done.

21. The facts we have set out above do not appear to be materially in dispute. However, the claim for unfair prejudice both under the Order of Justice and the proposed amended Order of Justice clearly is disputed, and the question is whether or not any interim injunctive relief is necessary to protect the Plaintiffs pending the hearing of the substantive application. The test 22. The parties were largely agreed as to the test we should apply, with one qualification. It was accepted that the primary test was that established by the House of Lords in American Cyanamid Co v Ethicon Limited [1975] AC 396, which has been applied by the Royal Court on a number of occasions – see for example Alpha Print Limited v Alphagraphic Printshop of the Future (United Kingdom) Limited [1989] JLR 152 and the recent case of Dandara (Jersey) Limited v Clancy [2025] JRC 068. In our view, the relevant principles are: (i) Has the plaintiff shown on the evidence before the Court that there is a serious question to be tried? If not, then no injunction is granted. (ii) If there is a serious question to be tried, then will damages awarded at the trial be an adequate remedy for the plaintiff? If so, then no injunction is granted. (iii) If damages in those circumstances would not be an adequate remedy for the plaintiff and an interim injunction was granted to which he was later found not to be entitled,

would damages be an adequate remedy for the defendant? If so, then subject to consideration of (iv) below, normally an injunction will be granted on the plaintiff’s usual undertaking in damages, fortified where appropriate. (iv) If damages would not be an adequate remedy for the defendant if an injunction were granted to the plaintiff to which he was later found not to be entitled, the Court will go on to consider the balance of convenience with a view to avoiding the greater risk of injustice i.e. which party will suffer more damage not capable of being easily measured in financial recompense from the grant or refusal of the injunction. (v) If the balance of convenience is fairly even, it may be prudent for the Court to preserve the status quo. (vi) Where there is approximately equal damage not capable of being easily measured in financial recompense to both parties, it is proper to look at the relevant strength of the parties’ substantive cases. If one is disproportionately stronger than the other this may swing the balance.

23. Advocate Dann accepted on behalf of the NEC Parties that the “serious question to be tried” was a low bar, but he asserted that where the grant of the interim injunction did not merely hold the ring but effectively determined the issue in dispute between the parties, a higher degree of assurance as to the merits of the application was called for at this stage – this was referred to as the “American Cyanamid plus test”, referred to in Martin and Co (UK) Limited v Cedra Limited [2015] EWHC 1036 (Ch) where Mrs Justice Rose said at paragraph 16: “There is thus no clear formulation of what the “Cyanamid plus test”, as Mr Quinn appearing for the defendants referred to it, is in a case such as the present. Mr Quinn says that the Court must be satisfied that the claimant is more likely than not to succeed at trial and, if I am not satisfied that the claimant is likely ultimately to be victorious, then this application should fail. I would prefer to say that I consider that I should not grant this injunction, unless I consider it appropriate to do so having regard to the merits of the case as they appear to me on the affidavit evidence, and having regard to the fact that by the time any trial can be brought on, these covenants will either wholly or substantially have run their course.” 24. The background to those comments in that case was that the issue between the parties was much

affected by various restrictive covenants operating both during and after the currency of the agreement, but almost certainly would come to trial after the restrictive covenants had expired: and it was those covenants which the interim injunctions sought to protect. The judge therefore accepted that it was a case where the interlocutory injunction was likely to give effect to all the relief sought by the plaintiffs, because it was unlikely that a trial would be brought on before the expiry of the covenant terms.

25. Both parties in Martin and Co v Cedra accepted that the interlocutory injunction would be determinative of the position. That is not the case here, and ascertaining the test to be applied is obviously an important first step.

26. The NEC Parties assert that the injunctions would effectively prohibit them from making any use of their Enhanced Voting Rights until after trial of the issue. That trial would be far from imminent. In particular they assert that the effect of granting the injunction would remove from them their ability to use to the Enhanced Voting Rights in exactly the circumstances in which the parties agreed they should arise – namely where there was a Tier 2 Event of Default. Thus it is said that the injunction application would in substance seek final resolution of the issue between the parties.

27. While we agree this would be the effect of the injunctions, we do not think it is correct to say that the grant of the injunctions would finally resolve the issues between the parties. The application of the Plaintiffs in their Order of Justice is for buy or sell orders in relation to the shares in the Company – either that the NEC Parties buy the Plaintiffs’ shares, or that the NEC Parties sell the Plaintiffs their shares. Their claims for this relief turn on whether they can establish unfair prejudice in accordance with Part 20 of the Companies Law. It is true that one of the bases on which the Plaintiffs’ claim that they have been unfairly prejudiced lies in the use of the Enhanced Voting Rights and what is said to be the unreasonable, and therefore unlawful, issue of the Tier 2 Notice. However it is not the only basis upon which unfair prejudice is asserted and relief is claimed. Indeed the issue of the Tier 2 Notice occurred after the issue of the proceedings seeking the relief described and its issue and the use of Enhanced Voting Rights on one occasion since is only part of the case of unfair prejudice pleaded in the Amended Order of Justice.

28. In other words, the Plaintiffs’ application for relief can be expected to proceed to a full hearing whether the injunction is granted or not.

29. There are strong policy reasons why the Court should be cautious about descending into the merits of any particular claim at an interlocutory stage on affidavit evidence alone. In our judgment this is not a case where it is appropriate to do so, and we apply the American Cyanamid test and not the American Cyanamid plus test. A serious issue to be tried?

30. In fairness to the parties, there was not much dispute that the draft Amended Order of Justice did raise a serious issue to be tried. That issue is not just the question of the Tier 2 Notice, but is generally the allegations of unfair prejudice. The parties concentrated on whether the issuance of a Tier 2 Notice also raised a serious issue to be tried, because that was the major reason for the application for an injunction. Dealing with that issue alone however, the Plaintiffs’ case was that there were three essential questions which the Court would have to face. The first was whether a banking default was reasonably likely in the next twelve months. The second was whether the exercise of rights by the Fund Manager in the issue of the notice giving rise to Enhanced Voting Rights was subject to a duty of reasonableness. The third was whether in fact the notice given by the Fund Manager had been issued reasonably. Advocate Angus made the submission that there was self-evidently a serious issue to be tried as two professional accountants had taken different views in respect of the first question which the Court would face, namely whether a banking default was reasonably likely in the next twelve months.

31. Advocate Dann accepted that there was a duty of reasonableness, but he submitted that at this stage the Plaintiffs could not point to anything which suggested the duty had been breached. He pointed to correspondence with one of the FMTSL customers which indicated that there would be a substantial reduction in payments made by that customer in the ensuing months. That customer was key, producing 49% of the Company’s income as at October 2024. The impact on the Company’s EBITDA would reduce by approximately £1.3 million, potentially leading to a breach of the banking covenant later this year. That being so, he submitted that although it was a low bar, the Court should scrutinise the facts on the merits to the extent that we can bearing in mind that the Plaintiffs put their case as one where no reasonable person in the position of the Fund Manager could have decided to issue the notice as it did.

32. In our view there is no doubt that there is a serious issue to be tried. We are not willing to resolve the difference of opinion between two accountants on the strength of the affidavit evidence alone coupled with a notice from one of the Company’s customers. In our view, the effect on the Company’s EBITDA and whether that will amount to a breach of the banking covenant will be a matter for expert evidence at least in part when it comes to trial, and that is not available to us now.

33. We now turn to the second question. Are damages an adequate remedy?

34. This is a claim for orders as a result of what is alleged to be unfair prejudicial treatment of the Plaintiffs as shareholders in the Company. Advocate Angus contended that there would be a sea change in corporate governance as a result of the decision to issue the notice so that the investors had Enhanced Voting Rights. There was not any particular transaction which he submitted they had in mind, but it was that change in corporate governance which was the fear that there could be one. This was not a matter that could be measured in damages. His submission was that terrible and unspecified things might happen as a result of the exercise of Enhanced Voting Rights, and it was therefore right to grant the injunction.

35. By contrast, Advocate Dann submitted that it was clear that the remedy for the unfair prejudice alleged would be an order that one party buy out the other. Indeed it was the primary position of both parties that it would be the NEC Parties who bought out the Plaintiffs. While there might be argument as to the test to be applied in reaching the price at which that buy out transaction would take place, it was nonetheless a monetary figure.

36. In our judgment the arguments from both Parties have confused what is in fact a straightforward position. The claim for unfair prejudice includes but is not limited to the issue of the Tier 2 Notice. At the end of the day, the claim for unfair prejudicial behaviour will either be established or it will not. If it is not established, there is no order to be made. If it is established then there will be an order for buyout, one way or another, which will have a monetary value. It is not the case therefore that damages will not be an adequate remedy if unfair prejudice is established.

37. While there may be some consequential orders at a later stage, we do not think any Order is likely to be made to “regulate the Company’s conduct” in the future, as both Plaintiffs and Defendants contemplate in their pleadings: the Court would be very reluctant to be drawn into what would effectively be the day to day management of the Company in circumstances where there was dispute between its shareholders.

38. It may be that the result of the NEC Parties having control of the Company in the period from now until the orders are made, if they are, after trial, actions will have been taken by the NEC Parties which are alleged to have reduced the value of the Company, and therefore the amount which would be paid to the Plaintiffs if their shares are to be bought by the NEC Parties. Nonetheless, that dispute, if there is one, can be resolved and the Court would be able to make an appropriate order at the time of fixing the price at which the buy out is to be completed. In other words, it is not the case in our judgment that damages (or perhaps more appropriately in this case the fixing of the price) will not be an adequate remedy. It will be part of the remedy which is granted, if any is granted.

39. It follows that the injunction is not necessary because any wrongful conduct by the Defendants, if any, can later be monetised. On that basis, the Plaintiffs have not satisfied this part of the American Cyanamid test and are not entitled to an injunction.

40. Advocate Angus relied on the decision of Mr James Pickering KC, sitting as a Deputy High Court judge in Re R-Squared Limited [2020] EWHC 23 (Ch). In particular, the judge found that, in the context of a claim for interim injunctive relief in an unfair prejudice claim, the second stage of the American Cyanamid test, namely that damages would be an inadequate remedy, applied just as much to unfair prejudice petitions as it did to any other form of underlying proceedings. He found it was indeed a convenient starting point that the position of the company in that case should not be altered or disturbed more than was absolutely essential between the presentation of the petition and its final determination at trial – reliance was placed on dicta to that effect by Harman J in Re A Company (No 002612 of 1984) [1985] BCLC 80 when he said this: "I would add that, as it seems to me, in cases of litigation under section 75, it is most desirable that the position of the company be not altered or disturbed more than is absolutely essential between the presentation and the hearing of the petition. The existing share structure, the existing contractual rights, the present service contracts and so forth, should in my judgment be maintained as they are pending the determination of the litigation. There might be circumstances where change was essential, but if possible the existing position should be preserved. In my judgment, that is a factor which in these matters arising under contributories petitions is particularly powerful and has more than the normal "Cyanamid" force in favour of preserving the status quo, since it is the very nature of this matter that the status quo must affect the remedy which may be available." (the judge’s emphasis).

41. We note in passing that the existing contractual position in this case includes both the fact that the Founder Directors have particular rights in connection with the Joint Consent provisions and also the fact that the Fund Manager has the right to use the Enhanced Voting Rights where a Tier 2 notice has been served.

42. Summarising some broad propositions in relation to the grant of interim injunctions in the context of an unfair prejudice petition, the judge in Re R-Squared Limited went on to say this at paragraph 53 of his judgment : “…(3) Where, however, the petitioner ultimately seeks a buy out order (requiring the respondent to buy him / her out) the remedies available to the trial judge hearing the petition under (what is now) Section 996 of the [Companies Act] 2006 are so wide and unfettered that they will often be considered adequate to compensate the petitioner – who in this scenario would be having a clean break from the company – from any wrongs carried out between the presentation of the petition and its final determination at trial. In such circumstances, it is likely that interim injunctive relief will be refused: see, for example, Pringle v Callard [2007] EWCA Civ 1075. (4) Where, on the other hand, the petitioner ultimately seeks a sale order (requiring the respondent to sell his / her shares to the petitioner), although the remedies available to the trial judge hearing the petition under Section 996 of the CA 2006 are, as stated above, wide and unfettered, it is less likely that those remedies will be considered adequate to compensate the petitioner – who in this scenario would be remaining in, or even taking control of, the company – from any wrongs carried out between

the presentation of the petition and its final determination at trial. In such circumstances, interim injunctive relief is more likely to be granted: see, for example, Williams v Brinkman [2004] EWHC 601.” 43. In our judgment there are a number of points to be made in relation to these conclusions. First, it is accepted that the remedies available to the English Courts under what is now Section 996 of the Companies Act 2006 are equally available to the Royal Court under the Companies Law. Second, in this case the primary remedy which both Plaintiffs and NEC Parties seek is a buyout order requiring those Defendants to buy the Plaintiffs out. That is their primary request, and the fact that, as an alternative, there is a prayer in the draft Amended Order of Justice for a sale order does not detract from the point that the primary relief the Plaintiffs are seeking falls into that category where one would expect the Court’s powers to be sufficiently adequate to ensure no injustice is done.

44. Third, it is clear from the argument over the use of the Enhanced Voting Rights that they cannot be applied so as to diminish the value of the Plaintiffs’ shareholding. That is provided for by the Articles of Association. Fourth, if, as here, the real argument is going to be over the price at which the shares are bought or sold, it does not seem to us to be very relevant to ask whether the NEC Parties will be buyers or sellers. The force of the point, that a different approach is needed where the respondent will be selling to the petitioner, only becomes apparent in our judgment when the absence of the injunction will lead to a drop in the value of the Company or some other prejudice which is somehow not capable of being reflected in the share price. That does not seem to us to be relevant here at all. In any event, even if such an argument could be constructed – and in all his submissions Advocate Angus only had the theoretical point to make that the judge did in the extract set out above – we are faced here with a set of private equity investors whose interest lies in enhancing the value of the Company in order that they may exit from it; and any enhancement in value would benefit the Plaintiffs as well as the private equity investors. In our judgment therefore the argument based on Re R-Squared Limited does not hold water in the present case.

45. In Evalve Inc & Ors v Edwards Lifesciences Limited [2019] EWHC 1158, [2020] FSR 4, Henry Carr J, at paragraphs 27 / 28, summarised the standard approach as follows: “The claimant needs to establish that it would suffer irreparable or unquantifiable harm itself, otherwise intervention by the Court by the grant of an interim injunction would not be justified.” 46. We agree and are not satisfied that the Plaintiffs have established that that harm would be suffered.

47. It is said by the Plaintiffs that if the injunction is not granted, they will effectively be sidelined from any ongoing involvement in the management of the Company until trial. If they were to fail in their application at trial based on the Tier 2 ground, then of course it follows that they will have been effectively sidelined, but rightly so on this hypothesis because the Tier 2 Notice will have been validly issued. If on the other hand they are successful on this or any other ground, then the buyout / sale orders will likely be made with the consequences set out above. In that event, the fact that the Plaintiffs will have been sidelined from any ongoing involvement in the management of the Company is in those circumstances neither here nor there. In argument before us, Advocate Dann confirmed on two occasions on behalf of the NEC Parties that the Third and Fifth Plaintiffs have been receiving and will continue to receive the same board packs as all the other directors. The Fund Manager will not make decisions by itself in a darkened room and the Founder Directors will have all the same information available to them as any other director. Indeed, he pointed out that it is only on one occasion that Enhanced Voting Rights have been exercised since the Tier 2 Notice – this was because there was no agreement at the remuneration committee meeting as to salary increases and as

a result the issue had to go to the board where it was resolved using those Enhanced Voting Rights. That being the only occasion on which the rights had been used, he submitted it was clear that the true position was some distance away from that alleged by the Plaintiffs. Other than the occasion when the Enhanced Voting rights have been used – and possibly over the payment of a bonus - we agree that there was no evidence before us that the NEC Parties intend to sideline the Plaintiffs from exercising their rights to be involved in the management of the Company. The balance of convenience 48. Although we have resolved for the reasons given above that it would not be appropriate to grant the application for the injunctions because damages will make an adequate remedy, we think it is appropriate to consider what the balance of convenience would be if we had not reached that conclusion.

49. It is said by the Plaintiffs that the potential damage if the injunctions are not granted is unlimited because the Enhanced Voting Rights are so wide-ranging. Accordingly, it is said that the Plaintiffs do not know what the NEC Parties intend to do through the use of Enhanced Voting Rights or for how long they will be subject to the NEC Parties seeking to rely on those rights. It is interesting to note in this context that the Enhanced Voting Rights are said by the Plaintiffs to be potentially very wide-ranging: and yet at the same time, one of the reasons for contesting the NEC Parties’ submission that there is great potential for deadlock if the Enhanced Voting Rights cannot be used is that the potential for deadlock is limited to those cases where Joint Consent is required. Yet as we have seen, the range of matters where Joint Consent is required is in effect quite extensive, so the potential for deadlock seems to us to be wider than the Plaintiffs contend.

50. It is clear from the submissions of the Plaintiffs that the damage which cannot be reflected in financial recompense lies in a fear of the unknown. That fear derives from the breakdown of trust between the Founder Directors and the Fund Manager, the reasons for which are impossible to ascertain with any certainty at this stage.

51. On the other hand, the NEC Parties contend that the risk to them if the injunction is granted is that they will be unable to exercise the control over the Company which had always been contemplated was their protection for the investment they made if circumstances arose which justified bringing those arrangements into force. The whole purpose of the Tier 2 Notice was to enable the investors, who had far more at stake as to the value of the Company than the Plaintiffs (who as a result of the private equity investment had been able to withdraw considerable sums from the Company), to take control if the Company was facing a dour financial position. There would indeed be argument as to whether that dour financial position had arisen, but if it had, that was exactly what the Tier 2 Notice arrangements were designed to protect by putting the investors in control.

52. We cannot know at this stage whether the NEC Parties are correct in their assertion that those circumstances have come about: but if they have, there is much force in their submission that to grant the injunction deprives them of the protection which they had always contemplated would be necessary for their investment: and in that context one should recall that their stake in the Company is much higher than that of the Plaintiffs. It is in their interests that the financial affairs of the Company should be improved and / or turned round, depending on which view one takes of the current financial situation. In our judgment, the NEC Parties have more to lose than the Plaintiffs and there is no reason for them to undermine the value of the Company - quite the reverse.

53. During the course of the hearing, we asked Advocate Dann to review those areas of activity which the NEC Parties had in mind and which would be inhibited by the grant of the injunctions. Having taken instructions, he confirmed that there was no intention to make any alteration to the Articles of the Company, nor to procure the issuance of any further shares in the Company other than for incentivising management. Equally, there was no intention to call an Extraordinary General Meeting of the Company pursuant to Article 13.5 of the Articles, nor request the resignation of any director in accordance with Article 14.2.3: nor to appoint or remove a person as a director in accordance with Article 17.7.2.

54. It was accepted, we think by both sides, that it was the proposed injunctions at sub-paragraphs (h) and (i) which were likely to cause the most anxiety. They are in these terms: “(h) Cause, pursuant to Schedule 7, Part 1, paragraph 8.2.3(a) of the Investment Agreement, the audit and professional services committee to recommend and approve the appointment of external consultants, professional service advisers or external auditors (including the level of remuneration to be paid to the same); (i) Conduct any of the matters referred to in Schedule 7, Part 2 of the Investment Agreement on the basis that joint consent requirements are suspended as a result of Enhanced Voting Rights having been invoked.” 55. For any major structural change there would have to be an amendment to the Articles of Association or the dismissal of the Founder Directors. In either case, the proposed activity will immediately be known to the Plaintiffs. They can, if so advised, bring back a further application for an injunction targeted at the particular activity which is proposed. If it is right to grant such an injunction on the information then available, then of course it will be so granted. However, until that stage is reached, if it is, it appears to us that the balance of convenience lies firmly against the grant of the injunctions. This is because, assuming the disputes between the Parties cannot

be resolved by settling the mechanism for establishing the price for the buyout/sale of the shares, the NEC Parties have more to lose than the Plaintiffs and until there is some circumstance which shows that the proposed activity would damage the Plaintiffs but not the NEC Parties, there is no reason to contemplate that control of the Company by the NEC Parties would be exercised otherwise than for the benefit of the Company.

56. The structure of the private equity investment in this case was perhaps slightly unusual in the sense that the Founder Directors, mostly non-executive, had in fact more executive responsibilities than might have been customary, through the operation of the Joint Consent requirements. Nonetheless, that structure had its own inbuilt protections for the investors. The status quo ante is reflected in the contractual documentation. If circumstances arose where a Tier 2 Notice was permissible, then it followed that the NEC Parties would be able to exercise, through the Fund Manager, their control of the Company without the need for Joint Consent. Here there is argument as to whether the circumstances had in fact arisen where a Tier 2 Notice was legitimate. That can only be determined at trial. It appears to us that there is certainly scope for argument that the status quo is that the NEC Parties ought to be able to exercise the control which the formal documentation envisaged; and even if that is not correct, the balance of convenience lies in permitting them to do so because, given that the circumstances for the issue of the Tier 2 Notice may have validly arisen, this is exactly the situation in which the agreement of the Parties was that the NEC Parties should have the ability to take control.

57. Accordingly, if the question before us fell to be determined on where the balance of convenience lay, then our discretion would have been exercised in favour of the Defendants.

58. For all these reasons the application for the grant of the injunctions is dismissed. We invite any costs applications within 21 days of this judgment being handed down, with any responses being filed within 14 days thereafter. We will decide costs issues on the papers unless any party requests an oral hearing. Authorities Companies (Jersey) Law 1991. American Cyanamid Co v Ethicon Limited [1975] AC 396. Alpha Print Limited v Alphagraphic Printshops of the Future (United Kingdom) Limited [1989] JLR 152. Dandara (Jersey) Limited v Clancy [2025] JRC 068. Martin and Co (UK) Limited v Cedra Limited [2015] EWHC 1036 (Ch). Re R-Squared Limited [2020] EWHC 23 (Ch). Re A Company (No 002612 of 1984) [1985] BCLC 80. Evalve Inc v Edwards Life Sciences Limited [2019] EWHC 1158.