Paul Dinglis v Andreas Dinglis
Jurisdiction | England & Wales |
Judge | Mr Adam Johnson,Adam Johnson |
Judgment Date | 28 June 2019 |
Neutral Citation | [2019] EWHC 1664 (Ch) |
Court | Chancery Division |
Docket Number | Case No: CR-2016-002904 |
Date | 28 June 2019 |
In the Matter of Dinglis Properties Limited and in the Matter of the Insolvency Act 1986
[2019] EWHC 1664 (Ch)
Adam Johnson QC SITTING AS A DEPUTY HIGH COURT JUDGE
Case No: CR-2016-002904
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Business and Property Courts of England & Wales
7 Rolls Buildings, Fetter Lane
London, EC4A 1NL
David Peters (instructed by Ingram Winter Green LLP) for the Petitioner
Daniel Lightman QC, Mark Hubbard and Kristina Lukacova (instructed by Bircham Dyson Bell LLP) for the Respondents
Hearing dates: 22 March, 25–29 March and 1–5 April 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Adam Johnson QC
A. | Introduction | 1 |
B. | The Witnesses and Evidence | 12 |
C. | Factual Background | 18 |
(i) Andreas' background and early days in business in England | 19 | |
(ii) DPL is established | 27 | |
(iii) Andreas' Gifts of Shares in DPL | 37 | |
(iv) The 1990s: DPL, DEL, The Cyprianos Companies and DPSL | 41 | |
(v) Salaries and Dividends | 61 | |
(vi) DML | 66 | |
(vii) 2002: Andreas' relocation to Cyprus | 72 | |
(viii) 2002–2008: Management of DPL in England; Andreas' Businesses in Cyprus | 79 | |
(ix) Other Events: 2006–2009 | 94 | |
(x) The 2008 Financial Crisis: Impact on Andreas' Cypriot Businesses | 97 | |
(xi) Exclusion of Paul from DPL | 104 | |
(xii) Ongoing Access to Funds by Paul | 120 | |
(xiii) 2013: Exclusion of Cheryl from DPL | 129 | |
(xiv) 2013–2015: The Matrimonial Proceedings | 135 | |
(xv) 2015–2019: The Chancery Action | 153 | |
(xvi) Shareholdings in DPL | 166 | |
D. | Legal Framework: Outline | 167 |
E. | Exclusion from Management: Quasi-Partnership | 170 |
(i) The Authorities | 170 | |
(ii) Paul's case in the Petition | 187 | |
(iii) Paul's case at trial | 201 | |
(iv) Conclusion on quasi-partnership | 219 | |
F. | Exclusion from Management: Alleged Misconduct by Paul | 220 |
(i) Can Andreas rely on matters he was not aware of? | 220 | |
(ii) Was Paul's exclusion justified and therefore not unfair? | 227 | |
G. | Andreas' Actions in 2015–2016 | 238 |
(i) Were breaches of fiduciary duty properly pleaded? | 238 | |
(ii) Factual background: Use of DPL's funds | 266 | |
The Maremonte Companies and Gatemark | 266 | |
Andreas settles with National Bank of Greece | 269 | |
The Schedule 1 Payments | 274 | |
The Maremonte Loans | 278 | |
The Consultancy Agreement and Fees | 282 | |
The Personal Loan | 287 | |
Repayment to DPL | 293 | |
(iii) Authenticity of the Consultancy Agreement and Personal Loan | 299 | |
(iv) Was there a breach of the Understandings by Andreas? | 305 | |
(v) Does Paul have a valid complaint under Companies Act, Section 175? | 306 | |
(vi) Breach of fiduciary duty: the Maremonte Loans | 312 | |
(vii) Breach of fiduciary duty: the Personal Loan | 319 | |
(viii) Breach of fiduciary duty: The Consultancy Agreement and Fees | 322 | |
(ix) The Schedule 1 Payments | 325 | |
(x) Was Andreas' conduct unfairly prejudicial? | 329 | |
H. | Remedy | 337 |
(i) Should Paul be given a remedy? | 339 | |
(ii) MHGL | 344 | |
(iii) Minority discount | 354 | |
I. | Overall Conclusion and Disposal | 369 |
Adam Johnson QC:
A. Introduction
This is the hearing of a Petition under section 994 of the Companies Act 2006 (the “ Companies Act” or “ CA”). The Petitioner is Paul Dinglis (“ Paul”). He has a 12% shareholding in Dinglis Properties Limited (“ DPL”), the Third Respondent. At various times Paul's mother, Iris, and his sister, Cheryl, have also held (directly or indirectly) minority shareholdings in DPL.
The First Respondent to the Petition is Paul's father, Andreas Dinglis (“ Andreas”). Although the size of his shareholding has fluctuated, at all material times Andreas has owned or controlled a majority shareholding in DPL. Until 2009 Andreas' shareholding was held in his own name. In 2009, however, it was transferred to the Second Respondent, Master Holdings Group Limited (“ MHGL”), a company incorporated in the British Virgin Islands. It is common ground that Andreas exercises ultimate control over MHGL.
The background to the Petition is a catastrophic falling out between the members of the Dinglis family. Since 2013, this has resulted in extensive and complex litigation between the family members, in which (largely) Paul and Cheryl have sided with Iris against Andreas. This has included divorce proceedings initiated by Iris against Andreas in July 2013, which resulted in a final Order dated June 2015 (the “ Matrimonial Proceedings”); and proceedings in the Chancery Division by DPL and a related company, against a number of Defendants including Paul and Cheryl, which were initiated by Andreas on 11 June 2015 and eventually resulted in a decision of the Court of Appeal dated 8 February 2019, shortly before the start of this trial (the “ Chancery Action”).
As a result of the Matrimonial Proceedings, Iris' then 12% shareholding in DPL, held via her vehicle Warner Shareholdings Limited (“ Warner”), was transferred to MHGL in October 2015. More recently, there has been a reconciliation between Cheryl and Andreas. At an earlier stage in the present action, Cheryl's corporate vehicle, Eagle Shareholdings Limited (“ Eagle”), was a Petitioner alongside Paul, but that claim was settled in August 2018 and Eagle's 12% shareholding in DPL was transferred Dinglis Investments Ltd (“ DIL”), a further company controlled by Andreas, for a consideration of £1,414,459.09 (equivalent to £117.89 per share). The upshot is that MHGL presently owns 76% of the issued share capital of DPL, DIL 12%, and Paul 12%.
Paul's allegations focus on (1) his exclusion from the management of DPL by Andreas from June 2012 onwards, including Andreas having denied him access to financial and other information concerning DPL; and (2) certain payments from DPL initiated by Andreas from March 2015 onwards, said to give rise either to breaches of fiduciary duty by Andreas in his capacity as a director of DPL, or alternatively to breach of an understanding binding on Andreas in equity as to how the business of DPL was to be conducted.
At the heart of Paul's case in relation to his exclusion from management, and featuring also as part of his case on Andreas' later conduct, is the contention that DPL was a quasi-partnership company, of the type famously described by Lord Wilberforce in Ebrahimi v Westbourne Galleries [1973] AC 360. Paul argues that Andreas' strict legal rights as majority shareholder were subject to certain equitable constraints, arising from what he describes in his Petition as “ Understandings”, to the effect that:
i) Each of Paul, Cheryl and Andreas would be entitled to be involved in the business and management of DPL (“ Understanding 1”).
ii) Each of them would be entitled to have access to all of DPL's financial records (“ Understanding 2”).
iii) DPL's business would be operated for the general benefit of what Paul describes as the “ Family Members” – i.e., Andreas, Iris, Paul and Cheryl (“ Understanding 3”).
Andreas' position (in broad outline) is that:
i) DPL is not and never has been a quasi-partnership. In any event, there has never been any understanding or other equitable constraint which limited his entitlement as shareholder to remove Paul from management. Even if there were, he was entitled to do so in June 2012 in light of Paul's misconduct.
ii) He was not in breach of fiduciary or any other duty in authorising the contested payments made by DPL from 2015 onwards, and in any event no prejudice has flowed from such payments because the relevant funds have all (or substantially all) been paid back.
iii) In fact, DPL has prospered greatly under Andreas' direction since he took back control in 2012. It would be unfair to Andreas for any Order to be made requiring him to purchase Paul's shares at a value which gives Paul the benefit of Andreas' industry and DPL's success from June 2012 onwards, to which Paul has contributed nothing and which in fact he has actively impeded.
An Order for Directions was made on 29 January 2018, which included the following at paragraph 3:
“ There be a first trial limited to the following issues:
(1) whether the Petitioner [Paul] has been unfairly prejudiced in his capacity as a minority shareholder in the 3 rd Respondent [DPL] by the actions of either the 1 st and 2 nd Respondents [i.e., Andreas and MHGL]; and
(2) whether an order should be made requiring the 1 st and/or 2 nd Respondents to purchase the Petitioner's shares and, if so, whether any such order should involve a discount for those shares representing a minority holding (but not the extent of that discount)
(together, the ‘First Issues’).”
Thus, the hearing before me was intended to be confined to the “ First Issues”. Unfortunately, as matters developed, there was some disagreement as to the intended scope of the First Issues, and specifically whether they should include a determination, if a share purchase Order is to be made, of the date of valuation of the shares covered by that Order. Andreas argues that I should determine the date of valuation, and Paul argues that I should not.
Additionally, an issue arose at the hearing as to whether the allegations of breach of fiduciary duty made by Paul were adequately pleaded in his Petition. Andreas argued that they were not; Paul argued that...
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