Mr John Simpson v Mr Michael Agapios Diamandis
| Jurisdiction | England & Wales |
| Judge | Caroline Shea |
| Judgment Date | 15 April 2024 |
| Neutral Citation | [2024] EWHC 850 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2021-002450 |
[2024] EWHC 850 (Ch)
Caroline Shea KC, sitting as a Deputy Judge of the Chancery Division
Case No: CR-2021-002450
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Mr Fraser Campbell (instructed Mishcon de Reya) for the Petitioner
The First Respondent in person
Mr Ben Channer (directly instructed) for the Third Respondent
Hearing dates: 8 November 2023 (reading);
, 10, 13, 14, 16, 17 November 2023
Caroline Shea KC:
Introduction
This case concerns the transfer of a company, Tilon CG Limited (TCGL), out of the sole ownership of its holding company, Artemas Joseph Holdings Limited (AJHL), into the sole ownership of a new holding company, Tilon Holdings Limited (THL) (“the Transfer”). The price paid by THL for TCGL was £150,000. The Petitioner, Mr Simpson, says that its true value at the date of the Transfer was £2.9 million. Mr Simpson had (and still has) a 47.5% shareholding in AJHL, but no shares in THL. By contrast the First Respondent, Mr Diamandis, and the Second Respondent, Ms Leonard, who together instigated the transfer of TCGL, who respectively had a 47.5% and a 5% shareholding in AJHL, had 70.3% and 6.5% of the shares in THL, the purchasing company, at the time of the Transfer.
Mr Simpson claims that the Transfer was effected at a gross undervalue, with the effect of depriving him of the value of his interest in AJHL (and indirectly in TCGL), and vesting that value in the shareholders of THL. He alleges that Mr Diamandis deliberately kept him out of the loop when devising and implementing the plan to sell TCGL, and in effect ambushed Mr Simpson with a shareholder's resolution that he and Ms Leonard, with a combined majority shareholding in AJHL of 52.5%, passed in order to effect the Transfer. This course of action unfairly prejudiced Mr Simpson, within the meaning of section 994 of the Companies Act 2006 (“Section 994”). He alleges that the transfer of TCGL at an undervalue was in breach of the duties of Mr Diamandis, as a director of AJHL and in breach of the relationship of quasi-partnership in AJHL between Mr Simpson and Mr Diamandis. Mr Simpson seeks relief pursuant to section 996 of the Companies Act 2006 (“Section 996”) in the form of a retrospective buy out of his shares in AJHL.
Mr Simpson further claims that others were sufficiently complicit in the Scheme to fix them with liability. Ms Leonard, who owned 5% of the shares in AJHL and was allocated 8.7% of the shares in THL, worked together with Mr Diamandis to obtain a shareholder's resolution approving the Transfer. Mr Woollett, the Third Respondent, came on the scene when investment into TCGL was being sought. He provided advice, and agreed to take a place on the board of THL. After the Transfer, he was rewarded with a 15% shareholding in THL. The Fourth and Fifth Respondents invested in THL by means of convertible loans, to a value of £687,500. Their combined shares in THL following conversion of the loan notes would be 25%. All the Respondents were fully aware of the sale price, and of the fact that no shares in AJHL were allocated to Mr Simpson. They all, it is alleged, were complicit in the Scheme, and should be fixed with liability.
Of those Respondents, only Mr Diamandis and Mr Woollett were defending the claim at the substantive trial. Messrs Whitlock reached terms with Mr Simpson a few days prior to the trial. Ms Leonard was in court on the first day of the trial, represented (as was Mr Diamandis) by Mr Loxton on an application to adjourn the trial (“the Adjournment Application”) (which was refused for reasons appearing in the related judgment (“the Adjournment Judgment”)). The morning after the Adjournment Application had been refused, on the first effective day of the trial, I was informed that Ms Leonard also had now reached terms with Mr Simpson and would play no further part in the proceedings. The Sixth, Seventh and Eighth Respondents are the companies involved in the dispute, playing no active part in the proceedings. Unless the context requires otherwise, references to the Respondents are references to Mr Diamandis and Mr Woollett together.
Mr Diamandis's position
Mr Diamandis, who appeared in the substantive trial in person, defends this claim robustly. He says that the value of TCGL at the date of the transfer was nil (based on the evidence of his expert, Mr Isaacs), and certainly no more than £150,050. The Transfer was therefore for full value, AJHL was fully compensated, and no question of prejudice to Mr Simpson arises. He maintains it was necessary, in order to secure investment, to extract TCGL from the ownership of AJHL which was perceived by potential investors as contaminated by other, poorly performing, assets held by AJHL, and who made their investment conditional upon TCGL being separated from AJHL. Thus, it is alleged, selling TCGL out of AJHL was necessary in order to save the business from collapse. He maintains he would have been in breach of his duty to TCGL and its shareholders had he not taken the steps of selling it out of AJHL and into THL. He further suggests that Mr Simpson refused to participate in the Transfer, in effect turning down shares that were offered to him, shares which continued (and he said at trial continue to this day) to be available for him after the Transfer.
Mr Woollett's position
Mr Woollett denies any liability. He too relies on the evidence of Mr Isaacs, that the value of TCGL at the date of the Transfer was nil. He distances himself from the events leading up to the Transfer, saying that he performed the modelling of various ownership structures and allocations of shares that were considered whilst investment was being sought solely on the instruction of Mr Diamandis. He himself was never proactive in designing or advancing those structures, nor was he an architect of the plan to extract TCGL for AJHL and transfer it to THL. Whilst his pleaded case is that Mr Simpson has suffered no prejudice, he gave oral evidence that he regards it as manifestly unfair that Mr Simpson was not allocated any shares in THL. He denies that he was responsible for, or sufficiently implicit in, that outcome, and alleges that he always assumed that Mr Diamandis would distribute shares to Mr Simpson at some stage.
The core elements of the Scheme
It is Mr Simpson's case that Mr Diamandis, with Mr Woollett's full knowledge and involvement, hatched a scheme (“the Scheme”) to transfer TCGL into a new holding company, whilst compensating AJHL at a fraction of the actual value of TCGL, to Mr Simpson's prejudice. There are three core elements to the Scheme as alleged. The first element concerns the value of TCGL at the date of transfer. Mr Simpson claims that it was in fact worth £2.9 million but only £150,050 was paid. The second element to the scheme was the decision made to extract TCGL from AJHL, in which Mr Simpson and Mr Diamandis were both equal minority shareholders, and into THL, wholly owned by Mr Diamandis. This restructuring would deprive Mr Simpson both of any influence over TCGL as a shareholder of AJHL, and of the value of his interest in AJHL. The third element of the Scheme was the decision deliberately to keep Mr Simpson out of the loop, with a failure to provide information as the search for new investment proceeded. A request Mr Simpson made for an update on progress remained unanswered, as did more formal requests made in the latter stages by his solicitor. He was in effect frozen out, and denied information, thus denying him the opportunity to contribute to the plans, be properly compensated for his interest in AJHL, and participate in the future operations of TCGL.
Evidence
Although there were several witness statements in the bundle, only three witnesses of fact gave oral evidence: Mr Simpson, Mr Diamandis, and Mr Woollett.
Mr Simpson was measured when giving evidence, to the point of being laconic. He gave careful thought to the questions he was asked, and gave careful answers. On occasion he gave the impression he was finding it irksome to be answering questions, particularly when being cross examined by Mr Diamandis in person, but that is perhaps unsurprising in view of the rift that has grown between them. Neither at the time he gave his oral evidence, nor when assessing that evidence in the light of contemporaneous documents and submissions that have been made, did I find any cause to doubt the truthfulness of his evidence.
Mr Diamandis was a relatively excitable witness, at times appearing fuelled by his own sense of rightness; again, perhaps unsurprising given the nature of the dispute. His memory did not always serve him well. He gave the impression on more than one occasion of someone who had convinced himself of the truth of a memory or position, and became more entrenched with every repetition of it. By way of example, Mr Diamandis averred in his witness statement, and several times under cross examination, that UKSE (an entity which was considering investing in TCGL) had withdrawn from negotiations due to concerns about Mr Diamandis's age, and about his being the sole director of AJHL. He stated this in his witness statement, and repeated it several times when being cross examined, until he was taken to an email addressed to him in which it was spelt out in terms that UKSE withdrew because of Mr Diamandis' history of directors' disqualifications, and current litigation. There were further examples of similar inaccuracies in his evidence, which I refer...
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