Giannis Ntzegkoutanis v Georgios Kimionis

Hearing date: 1 November 2023

Approved Judgment

This judgment was handed down remotely at 10.30am on 12 December 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

This appeal, from a decision of His Honour Judge Klein (“the Judge”), sitting as a Judge of the High Court, raises issues as to when it is legitimate for an unfair prejudice petition brought pursuant to Part 30 of the Companies Act 2006 (“the 2006 Act”) to claim relief in favour of the company to which the petition relates.

Basic facts

At all times since its incorporation in 2016, Mr Giannis Ntzegkoutanis, who is the appellant, and Mr Georgios Kimionis, who is the respondent to the appeal, have each held half of the issued shares in Coinomi Limited (“the Company”). Mr Ntzegkoutanis and Mr Kimionis also became directors of the Company, and Mr Kimionis remains one. There is a dispute as to whether Mr Ntzegkoutanis is still a director.

It is Mr Ntzegkoutanis' case that the Company was formed as the vehicle for a joint venture involving the exploitation of a cryptocurrency “wallet” application (or “app”) which he had devised. According to Mr Ntzegkoutanis, he had the idea for the wallet in about late 2013 and subsequently took steps to develop it into a marketable product, which he called “Coinomi”. Mr Ntzegkoutanis says that he transferred his intellectual property relating to the app to the Company when that company was established.

Mr Ntzegkoutanis maintains that, over time, he was excluded from management of the Company (including by his purported removal as a director) and, further, that Mr Kimionis misappropriated the Company's business and assets. In that regard, it appears to be common ground that:

i) On 12 October 2018, the third respondent to the petition, Coinomi Holdings Ltd (“Coinomi Cyprus”), was incorporated in Cyprus at Mr Kimionis' instigation;

ii) On 12 December 2018, Coinomi Cyprus applied to register the “Coinomi” trademark with the U.S. Patent and Trademark Office;

iii) On 20 December 2018, Mr Kimionis gave instructions for ownership of the “coinomi.com” domain name to be transferred to Coinomi Cyprus;

iv) In the autumn of 2019, Mr Kimionis gave instructions for the developer of the Coinomi app given in the Google Play Store and the Apple App Store to be changed from the Company to Coinomi Cyprus;

v) On 25 November 2019, a further company called “Coinomi Ltd” (“Coinomi BVI”), the fourth respondent to the petition, was incorporated in the British Virgin Islands (“the BVI”) at Mr Kimionis' instigation as a subsidiary of Coinomi Cyprus;

vi) By the end of January 2020, Mr Kimionis had procured the transfer of the intellectual property in respect of the source code of the Coinomi app to Coinomi Cyprus. Coinomi Cyprus subsequently licensed Coinomi BVI to use that source code;

vii) On 29 July 2020, Coinomi Cyprus applied to register Coinomi's logo with the U.S. Patent and Trademark Office; and

viii) Mr Kimionis is the ultimate beneficial owner of Coinomi Cyprus and Coinomi BVI.

Mr Ntzegkoutanis alleges in paragraph 26 of the petition that Mr Kimionis breached duties that he owed to the Company as a director in procuring or permitting the transfer of the Company's business and assets to Coinomi Cyprus and Coinomi BVI. In paragraph 30, Mr Ntzegkoutanis asserts that as a result of the misappropriations which he contends took place:

“30.1 Coinomi Cyprus and Coinomi BVI are liable to the Company 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 the Company.

30.2 Further or alternatively, Coinomi Cyprus and Coinomi BVI dishonestly assisted Kimionis' breaches of fiduciary duty to the Company referred to in paragraph 26 above and are liable to the Company on that basis.”

The relief sought is specified in paragraph 32 of the petition. That reads:

“The Petitioner therefore prays as follows:

32.1 for an order that Kimionis do sell his shares in the Company to the Petitioner, at a valuation reflecting the losses caused to the Company by his conduct;

32.2 for an order that the First, Third and Fourth Respondents [i.e. Mr Kimionis, Coinomi Cyprus and Coinomi BVI], as applicable, do account and/or pay damages to, and/or compensate the Company 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 the Company in respect of such property in the hands of the First, Third and Fourth Respondents 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 the Company as may be necessary to vindicate its interests and obtain compensation and/or other remedies pursuant to the conduct complained of in this Petition; and

32.5 for such other order as the Court thinks just.”

The petition was presented on 22 April 2022. Mr Ntzegkoutanis further issued an application for permission to serve Coinomi Cyprus and Coinomi BVI out of the jurisdiction.

On 19 August 2022, Mr Kimionis filed points of defence. These tell a very different story to the petition. According to Mr Kimionis, it was he rather than Mr Ntzegkoutanis who came up with the basis of the Coinomi app; Mr Ntzegkoutanis worked on the Coinomi app as a contractor; Mr Kimionis incorporated a BVI company called Dollzen Limited (“Dollzen”) to own and carry on the Coinomi business; the Company was intended to act as Dollzen's agent and provide services to it; Mr Kimionis became increasingly dissatisfied with Mr Ntzegkoutanis' performance and behaviour; in part as a result of Brexit, Mr Kimionis decided that Dollzen's assets should be transferred to a Cypriot company (in the event, Coinomi Cyprus); and the intention was that Mr Ntzegkoutanis should have non-voting shares in Coinomi Cyprus. This is said in paragraph 88 of the points of defence:

“[T]he Coinomi business never belonged to [the Company]. Rather, it belonged initially to Mr Kimionis personally and subsequently to Dollzen, which retained [the Company] to act as its agent and to perform the various functions identified above. The transfer of Dollzen's assets to Coinomi Cyprus did not involve any misappropriation of [the Company's] property. Rather, it was part of a restructuring of the business which was ultimately beneficially owned by Mr Kimionis. Since Dollzen did not have any creditors or any shareholders other than Mr Kimionis, it was not improper for him to restructure his business by transferring Dollzen's property to Coinomi Cyprus in this way.”

Mr Ntzegkoutanis has pointed to various pieces of evidence as support for his version of events. However, Mr James Mather, who appeared for Mr Ntzegkoutanis (as he also did before the Judge), rightly did not suggest that either we or the Judge could or should attempt to determine at this stage which party's case is well-founded. Nor did the Judge do so.

The application for permission to serve Coinomi Cyprus and Coinomi BVI out of the jurisdiction was listed to be heard on 23 November 2022 together with an application for an order requiring Mr Kimionis to provide certain information. Shortly before this, on 7 November, Mr Kimionis issued an application for paragraphs 32.2 and 32.3 of the petition to be struck out pursuant to CPR 3.4(2)(a), CPR 3.4(2)(b) and/or the Court's inherent jurisdiction pursuant to CPR 3.4(5). In the event, it was that application which occupied the Court on 23 November. The service out and information applications were adjourned.

The Judge handed down his judgment (“the Judgment”) on 21 December 2022. He concluded that paragraphs 32.2 and 32.3 of the petition should be struck out as against Mr Kimionis.

Mr Ntzegkoutanis now challenges that decision in this Court.

Unfair prejudice petitions

Provision for unfair prejudice petitions is nowadays to be found in Part 30 of the 2006 Act, which comprises sections 994–999 and replaced sections 459–461 of the Companies Act 1985 (“the 1985 Act”).

Section 994 of the 2006 Act allows a member of a company to apply by petition for an order under Part 30 on the ground:

“(a) that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or

(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.”

Section 996 of the 2006 Act deals with the Court's powers under Part 30. It states:

“(1) If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.

(2) Without prejudice to the generality of subsection (1), the court's order may—

(a) regulate the conduct of the company's affairs in the future;

(b) require the company—

(i) to refrain from doing or continuing an...