Yiannakis Chambi v Aristos Aristodemou & Anor

For an unfair-prejudice petition under Companies Act 2006, the petitioner must establish unfair conduct of the company’s affairs, prejudice to the petitioner’s membership interests, and a proportionate basis for relief. In a quasi-partnership company, mutual trust and confidence and agreed equality may be relevant equitable considerations. A director’s dishonest filing of accounts, self-dealing use of company funds, unauthorised litigation, interference with membership or directorship rights, and failure to call a properly requested meeting may each contribute to unfair prejudice. A petitioner’s subsequent misconduct will affect relief only where it has an immediate and necessary relation to that relief. The court may order a buy-out at an appropriate valuation date and without a minority discount.

Mr Chambi petitioned under section 994 of the Companies Act 2006 concerning the affairs of Guest Supplies Intl Limited. A preliminary judgment determined that Mr Chambi and Mr Aristodemou were equal shareholders and directed reconstitution of the register. The trial concerned liability and remedy.

Mr Chambi alleged dishonest accounts, diversion and misapplication of company money, unauthorised or improper litigation, interference with his status as shareholder and director, and failure to convene a general meeting. Mr Aristodemou’s defence had been struck out following non-compliance with disclosure and verification orders. The central issues were whether the pleaded conduct was unfairly prejudicial and, if so, what relief was appropriate.

1. Liability. The petition was well founded under section 994. The court assessed the conduct against the whole relationship, subject to the pleadings, evidence and procedural orders. The company was properly regarded as a quasi-partnership because the parties’ arrangements and relationship involved mutual trust and confidence, equality of shareholding and management rights, although that expression was not a term of art.
2. The filing of accounts which the director knew to be false and misleading was unfairly prejudicial. The accounts were statutory records on which members and others were entitled to rely. Their inaccuracy damaged the relationship of trust and confidence, exposed the company to financial and reputational risk, and jeopardised its position with HMRC.
3. The misapplication ground succeeded. Payments from the company account, including payments benefiting another business and personal expenditure, were established by the payment records. General margin arguments did not answer the actual payments, and the absence of a detailed positive case or disclosure did not create a defence. The conduct was a self-dealing abuse of the respondent’s powers as director and was plainly prejudicial.
4. Diversion of settlement monies from debt-recovery cases succeeded where company recoveries were directed to the respondent’s account. The South Place litigation ground established unfairness but not prejudice because the ultimate effect of the settlement could not be determined. The separate claim brought without board authority caused company expenditure and risk of adverse costs and therefore established unfair prejudice.
5. Failure to record the petitioner’s shareholding, erroneous filings, purported removal as director and later removal as director were unfairly prejudicial until corrected. Failure to convene a general meeting caused no proven prejudice because section 305 supplied a remedy.
6. The petitioner’s secret recordings, access to documents, reporting of misconduct and demand for compensation did not bar relief. The clean-hands analogy applies only where the petitioner’s misconduct has an immediate and necessary relation to the relief sought. That threshold was not met.
7. Relief by purchase of the petitioner’s shares was appropriate. The valuation date should reflect the petitioner’s effective departure from the company, and the valuation should be undiscounted for lack of control. Valuation directions were reserved to the consequentials hearing.

First-instance decision. The court referred to an earlier preliminary-issue judgment, [2024] EWHC 1610 (Ch), which determined the parties’ equal shareholdings and directed reconstitution of the company’s register.