Giannis Ntzegkoutanis v Georgios Kimonis & Ors

An unfair prejudice petition may seek relief in favour of the company alongside a remedy personal to the petitioner. The statutory permission regime for derivative claims does not govern relief sought by a member in the exercise of the member’s personal right under Companies Act 2006 section 994, even where the relief would benefit the company.

A claim solely for company relief, or one designed to evade the derivative-claim filter, may be abusive. A genuine petition combining company relief with a share purchase or other exclusively unfair-prejudice remedy should not ordinarily be struck out. Any difficulty in determining company relief conveniently, including questions of quantum, generally calls for case management rather than strike-out.

The appellant and first respondent each held half the shares in a company established in connection with a cryptocurrency wallet application. The appellant alleged exclusion from management and the diversion of the company’s business and intellectual property to companies controlled by the first respondent.

By a petition under Part 30 of the Companies Act 2006, the appellant sought an order requiring the first respondent to sell his shares. He also sought compensation, an account and declarations of constructive trust in favour of the company. The High Court, in [2022] EWHC 3178 (Ch), struck out the latter claims against the first respondent as an abuse of process because they could have been pursued derivatively and could not conveniently be adjudicated within the petition.

The issues were whether the statutory derivative-claim regime barred those claims and whether English law adopted the restrictive approach derived from Re Chime Corp Ltd.

1. Appeal allowed. The claims for compensation and declarations of constructive trust in favour of the company were not abusive. The application to strike them out was dismissed.
2. The Court has power under sections 994–996 of the Companies Act 2006 to grant relief in favour of the company. Ordinarily, such relief should correspond to relief which the company could have obtained by successfully prosecuting its own cause of action.
3. Section 260 did not bar the disputed claims. A petitioner exercising the personal statutory right under section 994 does not seek relief “on behalf of the company” within section 260(1)(b), although the relief sought may benefit the company. Lord Justice Newey and Lady Justice Whipple also considered the claims to be “in respect of” causes of action vested in the company under section 260(1)(a). Lord Justice Snowden disagreed on that point, reasoning that section 260(1)(a) concerns representative enforcement of the company’s cause of action. The disagreement did not affect the result because all members of the Court agreed that section 260(1)(b) was not satisfied.
4. A petition claiming only relief in favour of the company would be improper and should instead proceed through the derivative-claim regime. A mixed petition may also be abusive where the petitioner is not genuinely pursuing an exclusively unfair-prejudice remedy and is attempting to bypass the Part 11 permission filter.
5. Where a petitioner genuinely seeks both company relief and a remedy available only in unfair prejudice proceedings, such as a share purchase order, it will not ordinarily be appropriate to strike out either the petition or part of its requested relief. The same conduct may constitute both unfairly prejudicial mismanagement and a breach of duty harming the company.
6. The restrictive “Chime approach” did not represent English law. Company relief is not confined to rare and exceptional cases, nor must the court be satisfied at the pleading stage that liability and quantum can conveniently be determined with the petition. Difficulties concerning pleading, trial structure or quantum ordinarily require case-management directions, which may include deferring part of the company claim.
7. The appellant genuinely sought to acquire the first respondent’s shares and restore the allegedly diverted assets. The company claims were closely connected with the valuation of those shares, and there was no evidence of an attempt to evade Part 11.

1. Court of Appeal (Civil Division): By [2023] EWCA Civ 1480 , allowed the appeal and dismissed the application to strike out the claims for compensation and constructive-trust declarations.
2. High Court, Insolvency and Companies List: By [2022] EWHC 3178 (Ch) , struck out those claims against the first respondent as an abuse of process.