Harding v Edwards

The petitioners, two sister shareholders and directors of Brand & Harding Limited, successfully petitioned for a winding up order under section 122(1)(g) of the Insolvency Act 1986 on just and equitable grounds. The court applied the Ebrahimi v Westbourne Galleries test for quasi‑partnership companies and found that (i) the company was intended and run as a quasi‑partnership, (ii) mutual trust and confidence between the family shareholders had broken down, and (iii) the management was deadlocked and improperly conducted. Key factual bases for the decision included persistent disputes about the company accountant, denial of access to company records at the registered office, attempted removals of the petitioners as directors and a shareholding distribution that made future deadlock likely. The court rejected alternatives to winding up because no practicable or trustworthy buy‑out could be agreed.

Background and parties. The petitioners, sisters Sally Harding and Rosemary Walton, are shareholders and directors of Brand & Harding Limited, a family farming company. The principal respondent, Mrs Elizabeth Edwards, is their sister and a director who had acted as bookkeeper and administrator. The third respondent was a trust under the late father’s will and the second respondent was their mother, who suffered incapacitating illness and had a Court of Protection deputy. The petition sought winding up under the "just and equitable" jurisdiction in section 122(1)(g) of the Insolvency Act 1986.

Nature of the claim. A petition for an order winding up the company on just and equitable grounds, relying on the company being a quasi‑partnership and on deadlock, breakdown of mutual confidence and improper management.

Issues framed by the court.

• Whether the company was intended and run as a quasi‑partnership;
• Whether there had been a breakdown of mutual trust and confidence or deadlock in management;
• Whether alternatives to winding up were available and reasonably pursued (for example a buy‑out or internal remedy); and
• Whether it was just and equitable to exercise the court’s discretion to wind up.

Facts and evidence. The farm company was family‑owned, with day‑to‑day farming carried out under contract by an external farmer. After the father’s death the three sisters were appointed directors. Disputes arose over the firm acting as accountant (particularly the role of Mr Edwards, husband of Mrs Edwards, who was also a trustee), access to company records kept at the registered office (Mrs Edwards’ home), attempted suspensions and removals of the petitioners as directors and the appointment of Mr Edwards as a director, and the distribution and voting of shares (including trust shares). The deputy for the mother did not actively participate, increasing the risk of deadlock.

Court’s reasoning and conclusion. Applying the principles in Ebrahimi and Re Yenidje, the court found that the company was a quasi‑partnership and that the sisters reasonably expected to participate in management. The court identified four features demonstrating jurisdiction and no practicable remedy other than winding up: disputes over the accountant and perceived conflicts of interest; withheld access to company records at the registered office; attempts to remove and replace directors in contested meetings; and a shareholding configuration likely to produce ongoing deadlock. Proposed buy‑outs were impracticable or unacceptable to the petitioners because of valuation disputes and the risk of future minority oppression. The judge therefore exercised her discretion to wind up the company.

This first instance petition was granted. The court held that Brand & Harding Limited was a quasi‑partnership in which mutual trust and confidence between the principal family shareholders had irretrievably broken down, that management was deadlocked and improperly conducted, and that no reasonable or enforceable alternative to winding up was available. Accordingly it was just and equitable to wind the company up under section 122(1)(g) of the Insolvency Act 1986.