Giannis Ntzegkoutanis v Georgios Kimionis & Ors.

An unfair prejudice petition may theoretically include relief belonging to the company, but such relief should ordinarily be pursued through a derivative claim. The court should examine the substance of the complaint and, especially, the relief sought.

Following Re Chime Corpn Ltd, it is generally an abuse of process to use an unfair prejudice petition to circumvent the statutory limitations on derivative claims where the relief cannot conveniently be adjudicated in the petition. Such cases are rare and exceptional. The court must assess convenience, procedural fairness, efficiency and proportionality at an early stage. Where the claims require fuller pleading and complex quantification, striking out may be appropriate.

The petitioner brought an unfair prejudice petition under sections 994–996 of the Companies Act 2006 concerning Coinomi Limited, alleging that its affairs had been conducted unfairly by the respondent director and shareholder.

Two parts of the petition sought compensation for Coinomi and constructive trusts over assets allegedly misappropriated by the respondent and received by related companies. The respondent applied to strike out those claims or obtain reverse summary judgment, arguing that they were derivative claims improperly brought through an unfair prejudice petition.

The central issue was whether the claims should be allowed to proceed in the petition or constituted an abuse of process because they could properly be pursued only by derivative proceedings.

1. The application succeeded in relation to the compensation claim and constructive trust claim. Paragraphs 32.2 and 32.3 of the petition were struck out as against the First Respondent. Reverse summary judgment was not granted.

2. The court had theoretical jurisdiction under section 996 of the Companies Act 2006 to determine claims for relief benefiting the company. The practical question was whether it should exercise that jurisdiction in the unfair prejudice proceedings.

3. The court adopted the approach in Re Chime Corpn Ltd. A case which would otherwise be brought as a derivative claim should proceed through an unfair prejudice petition only in rare and exceptional circumstances. The court should be satisfied at an early stage that the relief can conveniently be adjudicated within the petition. If it cannot, pursuing it in the petition is an abuse of process.

4. The distinction is between mismanagement and misconduct, assessed by reference to the nature of the complaint and the relief sought. Breach-of-duty allegations may support an unfair prejudice petition where they establish unfairly prejudicial management and relief such as a buy-out. Where the claim seeks a direct remedy for wrongs done to the company, such as compensation, restitution or a constructive trust, a derivative claim is ordinarily the proper vehicle.

5. The statutory permission regime for derivative claims and the need for efficient litigation supported the Chime approach. The relationship between unfair prejudice petitions and derivative claims remains sensitive to the precise circumstances and relief claimed.

6. Here, the alleged misappropriation required fuller pleading of Coinomi’s business, assets and any corporate opportunity, and identification of assets allegedly received by the other companies. The compensation claim would also require complex quantification of Coinomi’s loss or the respondents’ gains. Those matters could not conveniently be tried as part of the petition.

7. The court declined to determine the alternative strike-out ground under CPR 3.4(2)(a), and did not grant reverse summary judgment because the application notice did not identify the relevant point of law and judgment might have created an unintended obstacle to derivative proceedings.