Mr Yiannakis Chambi (also known as John Chambi) v Mr Aristos Aristodemou (also known as Ari Aristodemou)

Hearing dates: 16–19 April, 13 May 2024

Introduction

For some 5 ¹/₂ years John Chambi and Ari Aristodemou sat at desks opposite each other running the business of Guest Supplies Intl Limited (the “Company”) for, as Mr Chambi thought, their joint benefit. Given his personal financial struggles, he became increasingly bemused by Mr Aristodemou's much more luxurious lifestyle. So when in March 2017 Mr Aristodemou treated his family to a £26,000 holiday to Florida, Aruba and St Lucia, Mr Chambi went to the Enfield branch of HSBC and began his investigations. On 27 December 2017, at the end of a party, he recorded secretly his confronting Mr Aristodemou with accusations of embezzling £1.1m from the Company. Promises to “sort things out” having been fruitless, Mr Chambi arranged a further meeting with Mr Aristodemou for 14 August 2018, at The Salisbury Arms, Winchmore Hill. Again recording secretly, he told Mr Aristodemou that his marriage had broken down, and demanded £750,000. Since then they have been involved in a multi-faceted dispute of unusual bitterness. It is as a result of Mr Chambi's disclosures that there is a current COP9 investigation into Mr Aristodemou.

On 26 September 2022 Mr Chambi presented a petition under section 994 Companies Act 2006 (the “Act”) (the “Petition”). Mr Aristodemou's application to stay the Petition in favour of the Company's proceedings in the Central London County Court under number H10CL319, to which Mr Chambi had been joined on 2 September 2021 (the “Central London Claim”), was dismissed by Deputy ICC Judge Passfield on 28 October 2022; and by order of HH Judge Monty KC in February 2023 the Central London Claim is itself now stayed. On 6 March 2023 Mr Aristodemou applied within the Petition to amend his points of defence dated 7 December 2022, and to withdraw his admission that Mr Chambi was a “shareholder, member or a transferee of shares” in the Company. At the CCMC on 7 March 2023 I granted the withdrawal and amendment, and ordered a preliminary issue in the following terms:

“the extent (if any) of the Petitioner's and the First Respondent's shareholding in the Company (the “Preliminary Issue”) which issue shall include:

a. Whether the Petitioner is a member of the Company and/ or a transferee of shares in the Company and, if so, what is the extent of his shareholding and/ or what is the number of shares in respect of which he is a transferee.

b. Whether the Respondents are estopped or barred through acquiescence from denying that the Petitioner is a shareholder and/ or member and/ or transferee of shares in the Company and the nature, effect and extent thereof and any remedy arising therefrom.

c. Whether the register of members should be rectified and/ or reconstituted and if so whether this should be retrospective.

d. Whether the claim to rectify the register of members is barred by laches or by s.128 of the Act.

e. Whether (in the circumstances) the Petitioner has locus under s.994 of the Act to bring the Petition”.

This is the trial of the Preliminary Issue. Over its course the issues have narrowed in two respects. First, as Mr Anderson anticipated in opening and as Mr Buttimore accepted in closing, on the facts either there was an agreement or there was not, and an analysis through estoppel and acquiescence is going to be redundant either way. Secondly, as Mr Anderson conceded in opening, section 128 of the Act is not in its terms going to bar relief by entry on the register, as indicated obiter by ICC Judge Mullen in Re B&S Partnership Ltd[2023] EWHC 648 (Ch) at [23] (with whom I agree).

Law

This has been put shortly, and is not now contentious.

By section 550 of the Act directors of a company may exercise a power to allot shares in it; and it was for them to do so here.

By section 558 shares are “taken to be allotted when a person acquires the unconditional right to be included in the company's register of members”.

Allotment is distinct from issue. As Lord Templeman said in National Westminster Bank plc v IRC [1995] 1 AC 119, 126, describing the Act's predecessor:

“The Act of 1985 preserves the distinction in English law between an enforceable contract for the issue of shares (which contract is constituted by an allotment) and the issue of shares which is completed by registration. Registration confers title. Without registration, an applicant is not the holder of a share or a member of the company: the share has not been issued to him… A person who has been allotted shares is in as good a position in equity as a person to whom shares have been issued but that does not mean that there is no distinction between allotment and issue; an allotment creates an enforceable contract to issue and accept shares”.

A “member” of a company, as defined in the Act, is by section 112 either (1) a subscriber to its memorandum, deemed to become a member on its registration and who “must be entered as such in its register of members”, or (2) “Every other person who agrees to become a member of a company, and whose name is entered on the register of members”.

The members may therefore be subscribers to the memorandum, or those others who have agreed to become members and whose name is in the register either (for our purposes) consequent on allotment or on transfer.

It follows from the above that an allotment is only constituted when made in favour of an identifiable person. It cannot be used to create some equivalent to authorised share capital.

It is not now disputed that if the Court finds here that there was a specifically-enforceable agreement that Mr Aristodemou transfer two shares from his own name to Mr Chambi, including execution by Mr Aristodemou of a share transfer form, then Mr Chambi would have the right to his name being entered in the Company's register of members.

While the clean hands point was initially put in relation to the estoppel and acquiescence claims, their engaging equitable jurisdiction, it could apply as well to the specific enforcement of any agreement. Mr Anderson has provided a quotation from Snell (34 ^th edition) at 5–010:

“the question is not whether any general moral culpability can be attributed to B, the party seeking relief, but is rather whether relief should be denied because there is a sufficiently close connection between B's alleged misconduct and the relief sought. It is accepted therefore that ‘the scope of the application of the ‘unclean hands’ doctrine is limited’ and the maxim is applicable only in relation to conduct of B which has ‘an immediate and necessary relation to the equity sued for’, so that B is ‘seeking to derive advantage from his dishonest conduct in so direct a manner that it is considered unjust to grant him relief’”.

The obligation on a company to maintain a register of members is contained at section 113; an obligation which it is for its directors to ensure it meets. The Court nevertheless has the ability under section 125 to decide questions of title and “any question necessary or expedient to be decided for rectification of the register”. That can include a reconstitution of the register (which, in whatever names, both parties say is appropriate here, as if a register ever existed it has not been produced); and the dates of registration may in any event be retrospective: Re Sussex Brick Company [1904] 1 Ch 598, followed by Roth J in Re I Fit Global Limited[2013] EWHC 2090 (Ch).

That relief may be subject to the doctrine of laches, where there has been lapse of time in asserting a cause of action such that it would now be inequitable to grant relief on it. Mr Anderson cites the example of Re ISIS Factors plc[2004] BCC 359, in which Blackburne J determined obiter that he would have refused relief as the applicant had been “sitting back and doing nothing for seven years”. “Nothing” meant just that: no receipt of or request for a share certificate, annual accounts, or notices of meetings; and ignoring letters for a call; until it turned out the company had become very valuable. While cases depend on their facts, those were extreme.

The importance of the Preliminary Issue is that it is only a member who has locus to present a petition under section 994, albeit that (as here) in an appropriate case that locus may be determined within the petition: see the recent collation of the law by ICC Judge Greenwood in Re Contingent & Future Technologies Limited[2023] EWHC 2451 (Ch).

The witnesses Mr Chambi

Mr Chambi has been investigating Mr Aristodemou's affairs since March 2017. He began with a sense of grievance at their contrasting worldly fortunes which has only magnified. He has done all in his power to bring down Mr Aristodemou, among other things reporting him to the Police, Action Fraud and the Insolvency Service, and assisting some of the Company's debtors in resisting its claims to payment. He believes Mr Aristodemou to have diverted hundreds of thousands of pounds from the Company, effectively at his half-expense. The surprise in his evidence was not that he was on the lookout for traps in cross-examination, or that he had rehearsed his answers thoroughly, but that he gave his evidence calmly and with relative equanimity, trying to understand...