John Simpson v Michael Agapios Diamandis & Ors

The court refused an application for an adjournment of a seven day trial in a petition brought under section 994 of the Companies Act 2006. The applicants relied on three grounds: (1) an alleged deterioration of the financial position of the company at the centre of the dispute (Tilon CG Limited) including a notice of intention to appoint administrators; (2) the consequent need for further disclosure, witness statements and supplemental expert evidence on valuation; and (3) inequality of arms because two respondents lacked legal representation at trial.

The judge applied Civil Procedure Rule 3.1(2)(b) and the overriding objective, and carried out the balancing exercise identified in Elliott Group Ltd v GECC UK [2010] EWHC 409 (TCC). The application failed because the alleged changed circumstances and late disclosure were the applicants' responsibility, there was no satisfactory explanation for the delay, the experts had been instructed to value the company and had given a joint statement, and the late material could be dealt with, if necessary, at a limited further hearing rather than by adjourning the whole trial. The judge ordered specific disclosure of documents relevant to the company’s financial health and reserved costs to the consequentials hearing.

Background and parties: The petitioner alleged that Tilon CG Limited (TCGL), a company transferred out of a holding company (Artemas Joseph Holdings Limited) into a new holding company (Tilon (Holdings) Limited) in which the petitioner had no shares, was sold at an undervalue by the first respondent acting as sole director. The petitioner claimed unfair prejudice under section 994 of the Companies Act 2006. The first and second respondents and a third respondent brought an application to adjourn the trial immediately before it was due to start.

Nature of the application: The respondents sought an adjournment of the seven day trial listed to commence 9 November 2023.

Issues before the court:

• Whether TCGL’s alleged financial deterioration (a notice of intention to appoint administrators) required an adjournment to permit further expert and factual evidence on valuation;
• Whether further disclosure and witness evidence should be directed and, if so, whether an adjournment was necessary;
• Whether the absence of legal representation for two respondents created an unfair inequality of arms justifying adjournment.

Court’s reasoning and decision: The judge treated grounds (1) and (2) together and concluded that the applicants had known of financial concerns when experts were instructed and had failed to disclose material or to alert their experts; that failure was an admitted breach of the duty of continuing disclosure. There was no satisfactory explanation for the lateness of the application or the failure to provide earlier disclosure or supplementary evidence. The court balanced prejudice and concluded that the petitioner would be significantly prejudiced by a long adjournment; the valuation issue might prove irrelevant if liability were not established, or the correct valuation date could predate the alleged deterioration. The judge accepted that if further valuation evidence were required it could be dealt with by a short further hearing rather than adjourning the whole trial for many months. On ground (3) the judge found the assertions about inability to fund counsel unsupported by evidence and that the applicants had had recent representation and had not explained the change. The application was therefore refused. The court ordered specific disclosure relating to TCGL’s financial health and reserved the costs of the application to the consequentials hearing following trial.

Authorities and rules relied on: Civil Procedure Rules (CPR) 3.1(2)(b) and the overriding objective; Elliott Group Ltd v GECC UK [2010] EWHC 409 (TCC) on the balancing exercise; re Phoenix Contracts (Leicester) Ltd [2010] EWHC 2375 (Ch) on determining valuation date.

The application for an adjournment is refused. The judge refused relief because the applicants’ own late disclosure and failure to inform or instruct their experts about material developments caused the delay and deprived the court of the evidence necessary to justify an adjournment; the overriding objective and the balance of prejudice favoured proceeding, and any relevant further valuation evidence can be dealt with at a short subsequent hearing. The court ordered specific disclosure of documents relevant to TCGL’s financial health and reserved costs to the consequentials hearing.