Magi Capital Partners LLP

On an application to stay a winding-up petition, the court must consider all the circumstances relevant to whether winding up is just and equitable. Deadlock, loss of substratum or cessation of trading does not make a winding-up order inevitable. Conduct forming the subject of an arbitration may be material, particularly where it may affect whether the petitioner should obtain relief. A stay is appropriate where the arbitrator is already seized of those allegations, can determine them more efficiently, and is the contractually agreed forum. The stay should be limited to a defined period and reviewed in light of the arbitration.

Two partners presented a petition to wind up Magi Capital Partners LLP on the just and equitable ground. A third partner alleged that they had improperly excluded him from the business and attempted to expel him, and those allegations were being considered in arbitration under the partnership agreement.

The third partner applied to stay the petition pending the arbitration. The petitioners argued that the arbitration would be academic because the partnership was no longer trading, the partners had fallen out, and a winding-up order was inevitable. The central issue was whether the allegations were materially relevant to the Companies Court’s decision and, if so, whether arbitration was the more appropriate forum.

1. Stay granted. The winding-up proceedings were stayed until 19 January, with a case management conference to be held by the Registrar on the first available date thereafter.
2. The court could not determine on the conflicting witness evidence, without cross-examination, whether the petition had been presented in bad faith or as an abuse to frustrate the arbitration. That ground therefore did not justify the stay.
3. The alternative ground succeeded. The allegations being arbitrated concerned the parties’ conduct before presentation of the petition. Such conduct could be material to the statutory question whether it was just and equitable to wind up the LLP. Deadlock and the disappearance of the business substratum were relevant examples, but did not by themselves require a winding-up order. The court had to consider all the circumstances, including conduct which might disentitle a petitioner to relief.
4. The arbitrator was the more appropriate forum because he was already seized of the dispute, could determine it more efficiently, and was the forum selected by the parties’ agreement. The arbitration findings would be binding on the parties and could inform the later winding-up hearing.
5. The stay was deliberately short and time-limited. The court would reconsider its continuation if the arbitration had not taken place. Possible investigation of a buy-out and the opportunity for a partner to clear his name were incidental advantages, not the fundamental reasons for the order.
6. Costs were reserved to the judge hearing the winding-up petition, because only that judge would have the full facts necessary to decide fairly the ultimate significance of the allegations.