Giannis Ntzegkoutanis v Georgios Kimionis
|England & Wales
|21 December 2022
| EWHC 3178 (Ch)
|Claim No: CR-2022-001219
 EWHC 3178 (Ch)
HH JUDGE Klein SITTING AS A HIGH COURT JUDGE
Claim No: CR-2022-001219
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF COINOMI LIMITED (No. 10451885)
AND IN THE MATTER OF THE COMPANIES ACT 2006
Royal Courts of Justice, Rolls Building,
Fetter Lane, London, EC4A 1NL
James Mather and Max Marenbon (instructed by Enyo Law LLP) for the Petitioner
Stephen Robins KC (instructed by DAC Beachcroft LLP) for the First, Third and Fourth Respondents
Hearing date: 23 November 2022
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HH JUDGE Klein
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:30 a.m. on 21 December 2022.
This is the judgment following the hearing of the First Respondent's (“the respondent's”) application (“the application”), by notice dated 7 November 2022, for the striking out of, or for reverse summary judgment in respect of, two sub-paragraphs of the Petitioner's (“the petitioner's”) unfair prejudice petition (“the petition”) under ss.994–996 of the Companies Act 2006 (“CA2006”) for relief on the ground that the affairs of the Second Respondent (“Coinomi”) have been conducted by the respondent in a manner that is unfairly prejudicial to the petitioner's interests as a member of Coinomi. By the two sub-paragraphs in issue, the petitioner seeks relief against the respondent, and against the Third Respondent (“Cyprus”) and the Fourth Respondent (“BVI”), for what the petitioner contends was the respondent's misappropriation of Coinomi's business, which Cyprus and BVI dishonestly assisted, or in respect of which the respondent, Cyprus and BVI knowingly received Coinomi's assets. As presented at the hearing, the respondent seeks to strike out the two sub-paragraphs of the petition on the grounds that the petition discloses no reasonable grounds for seeking the relief pleaded in those two sub-paragraphs (see CPR 3.4(2)(a)) or that, to seek that relief, is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings (see CPR 3.4(2)(b)).
The question of principle which I have to determine is whether the petitioner ought to be permitted to proceed to trial on the petition in respect of matters, which could have been litigated against the respondent, Cyprus and BVI by way of a derivative claim, which, the respondent argued, by being pursued by way of an unfair prejudice petition, outflanked the limitations in CA2006 on making derivative claims.
The application notice makes clear on its face that the respondent seeks a striking out or reverse summary judgment only to the extent that the two sub-paragraphs in issue relate to him. That is probably because, although his lawyers also act for Cyprus and BVI, the petition has not been served on them and they have not submitted to jurisdiction. (As I shall mention, one of the other applications listed for hearing by me, in which Cyprus and BVI were represented, was an on-notice application by the petitioner for permission to serve the petition on Cyprus and BVI out of the jurisdiction). No particular point was made, though, by counsel at the hearing that, by the application notice, the respondent only seeks relief in relation to him. Nevertheless, any order I make ought to extend only to the respondent, and not to Cyprus or BVI, and counsel will need to consider further what, if any, effect my decision has on the petition against Cyprus and BVI.
For the purposes of the application, the dispute between the parties (that is, the petitioner and the respondent) can be derived from their statements of case.
The petitioner's case is as follows.
Coinomi was incorporated on 28 October 2016, dissolved on 13 October 2020 and restored to the Register by ICC Judge Jones on 23 March 2022. At all times, the petitioner and the respondent were the two equal shareholders in the company, which was in fact a quasi-partnership. The respondent incorporated Cyprus on 12 October 2018 and BVI in December 2018. He is a, or the, ultimate beneficial owner of those companies.
From about 2013, the petitioner conceived and developed a computer-based cryptocurrency wallet application which has been “widely acclaimed and recognised as providing a unique and useful service to holders of cryptocurrency”. The petitioner needed a partner (a joint venturer) with significant business experience to help market the product. He found the respondent, and they agreed that Coinomi would be incorporated as the vehicle for their joint venture, as, in fact, happened. All the petitioner's intellectual property relating to the product (“the Coinomi product”) was transferred to Coinomi.
The respondent has been a director of Coinomi since its incorporation. As such, he has owed CA2006 duties (and equivalent common law duties) to the company, as follows:
i) to exercise his powers only for the purposes for which they were conferred;
ii) to act in a way that has been considered by him (in good faith) to be most likely to promote Coinomi's success for the benefit of its members as a whole;
iii) to avoid a situation in which he has, or could have, a direct or indirect interest that conflicts, or possibly might conflict, with Coinomi's interests;
iv) to declare any interest in any proposed transaction or arrangement with Coinomi;
(together, the respondent's “director's duties”).
There are two strands to the respondent's unfairly prejudicial conduct.
The first strand, which I will refer to as “the mismanagement allegations”, relates to the way in which the respondent managed his relationship with the petitioner.
The respondent “engaged in repeated fits of anger and verbal abuse” towards the petitioner and “undermined him”, excluding him from a Skype group chat for example. He “procured for himself practical control over [Coinomi's] financial affairs and business and failed to provide the petitioner with any material visibility over these matters or information in respect of them”. He also caused filings at Companies House to the effect that the petitioner was no longer a director of Coinomi or a person with significant control of the company.
The second strand, which I will refer to as “the misappropriation allegations”, relates to the respondent's “misappropriation of [Coinomi's] business and assets and procurement of the company's dissolution”.
In December 2018, following its incorporation by the respondent, Cyprus applied to register the “Coinomi” trademark with the US Patent and Trademark Office, and the respondent caused the coinomi.com domain name to be transferred to Cyprus. In 2019, the respondent caused the Google Coinomi Listing and the Apple Coinomi Listing to refer to Cyprus, rather than Coinomi, as the developer of the Coinomi product (and, since then, those listings have been further altered to show BVI as the developer of the Coinomi product). The respondent also caused the intellectual property in the Coinomi product source code to be assigned to Cyprus, and, in 2020, Cyprus applied to the US Patent and Trademarks Office to register Coinomi's logo.
In acting in this way, the respondent has been in breach of his director's duties, in particular by procuring or permitting, without the petitioner's knowledge or approval:
i) the misappropriation, or transfer, of particular assets of Coinomi for no consideration, to Cyprus and/or BVI;
ii) the misappropriation, or transfer, of effectively the whole of Coinomi's business and assets, for no consideration, to Cyprus and/or BVI;
iii) the misappropriation, or transfer, of the corporate opportunity associated with the Coinomi product, and/or the joint venture, away from Coinomi, for no consideration, to Cyprus and/or BVI.
Furthermore, the respondent has retained, directly or indirectly, Coinomi's cryptocurrency which, in April 2022, may have been worth £3.5 million, and he may have retained further cryptocurrency, with a value of £1.4 million in April 2022, which he (the respondent) claims was stolen in June 2018.
Further, in the light of the misappropriation allegations:
“…Cyprus and…BVI are liable to [Coinomi] as knowing recipients in respect of such of its assets as they received and hold all such assets and their proceeds on constructive trust for Coinomi.
Further or alternatively,…Cyprus and…BVI dishonestly assisted [the respondent's] breaches of fiduciary duty to [Coinomi] and are liable to the company on that basis.”
As a result of the mismanagement allegations and the misappropriation allegations, the petitioner pleads as follows, in para.32 of the petition:
“The petitioner therefore prays as follows:
32.1. for an order that [the respondent] do sell his shares in [Coinomi] to the petitioner, at a valuation reflecting the losses caused to [Coinomi] by his conduct;
32.2. for an order that the [respondent, Cyprus and BVI], as applicable, do account and/or pay damages to, and/or compensate [Coinomi] in respect of their gains and the company's losses resulting from the conduct complained of in this Petition;
32.3. for declarations of constructive trust in favour of [Coinomi] in respect of such property in the hands of the [respondent, Cyprus and BVI] as properly belongs to the company;
32.4. in the alternative and to the extent necessary, the petitioner seeks authorisation to pursue such litigation on behalf of...
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Giannis Ntzegkoutanis v Georgios Kimionis
...COURTS OF ENGLAND AND WALES INSOLVENCY AND COMPANIES LIST (ChD) His Honour Judge Klein (sitting as a Judge of the High Court)  EWHC 3178 (Ch) Royal Courts of Justice Strand, London, WC2A 2LL James Mather (instructed by Enyo Law LLP) for the Stephen Robins KC (instructed by DAC Beachcr......