Alipour v Ary

A disputed contributory’s locus standi is not an inflexible bar to a winding-up petition. The Companies Court must consider all the circumstances. A creditor’s petition based on disputed debt will usually be dismissed, but it may proceed where the petitioner has a good arguable case and dismissal would probably deprive the petitioner of an effective remedy, cause injustice or provide another sufficient reason. The same flexible approach applies where a contributory’s status is disputed. The court should assess actual, rather than merely asserted, damage to the company. Modern validation and advertising procedures reduce the weight of the older practice requiring status to be established separately. Where asset dissipation creates a real risk of no effective alternative remedy, the petition should proceed.

The appellant presented a contributory’s petition to wind up a British Virgin Islands company on the just and equitable ground. He claimed to be an allottee of shares, but the respondents disputed his status and relied on the company’s share register, which recorded only their shareholdings.

Knox J dismissed the petition and discharged the provisional liquidator. He treated the dispute over locus standi, possible prejudice to the company and the availability of remedies in the British Virgin Islands as reasons for requiring the issue to be determined separately. The central issue on appeal was whether the petition should proceed despite the unresolved dispute where dismissal might leave the appellant without an effective remedy.

1. Appeal allowed. The Court of Appeal admitted the further evidence, set aside the dismissal of the petition and restored the provisional liquidator. The petition was allowed to proceed, without ordering a preliminary issue. The respondents remained entitled to establish at the hearing that the appellant was not an allottee.
2. The court confirmed that a foreign company may be wound up on the just and equitable ground under section 221(5) of the Insolvency Act 1986, and that a contributory may petition where the relevant shares were originally allotted to him under section 124(2)(b).
3. A creditor’s petition founded on disputed debt will normally be dismissed. That is a rule of practice, not law. It may yield where the petitioner has a good arguable case and dismissal would deprive him of a remedy, cause injustice or provide another sufficient reason for allowing the petition to proceed. On a contributory’s petition where locus standi is disputed, the court must consider all the circumstances, including likely damage or inconvenience to the company.
4. The older approach in Re J.N.2 Ltd. [1978] 1 W.L.R. 183 had reduced weight because modern validation-order and advertising practices substantially lessen the damage caused by a just and equitable contributory’s petition. The possibility of a genuine locus dispute remains relevant, but is not decisive.
5. The availability of proceedings in the British Virgin Islands was insufficient. The question was whether that remedy would be effective in light of the evidence that company assets might be removed from the jurisdiction. The appellant would probably be left without an effective remedy if the petition were dismissed. The practice must therefore yield to the interests of justice.
6. The appointment of the provisional liquidator was not a proper reason for dismissal where it had been justified by unchallenged evidence of jeopardy to the company’s assets. Bare assertions of damage were inadequate, particularly since the company appeared dormant.
7. The rules in Ladd v Marshall [1954] 1 WLR 1489 did not apply because there had been no trial on the merits. The court nevertheless exercised its discretion to admit important further evidence, having regard to the late service of the respondents’ evidence and the absence of prejudice.

1. Court of Appeal: Allowed the appeal, set aside the dismissal of the petition and the discharge of the provisional liquidator, and permitted the petition to proceed.
2. High Court, Knox J: Dismissed the contributory’s petition and discharged the provisional liquidator because the appellant’s locus standi was disputed and other factors favoured separate determination.