John Leslie Taylor v The Whitehall Partnership Limited & Anor.

On a contributory’s petition under Insolvency Act 1986, winding up on the just and equitable ground is a discretionary remedy of last resort. The court must consider whether the petitioner is entitled to relief, whether winding up would be just and equitable if no other remedy existed, and whether the petitioner acted unreasonably in failing to pursue an available alternative remedy.

The petitioner must also show a tangible membership benefit. The court may refuse relief where the petitioner’s misconduct caused the breakdown, where the petition is pursued for a collateral purpose, or where the petitioner lacks clean hands. These matters are assessed holistically. Serious misconduct after the deadlock may remain relevant to the overall exercise of discretion.

The petitioner, a 50% shareholder and director, sought the compulsory winding up of a solvent or potentially solvent company owned equally with his former wife. He relied on deadlock and the breakdown of mutual trust and confidence under section 122(1)(g) of the Insolvency Act 1986.

The respondent opposed winding up and proposed that the company continue, or that another remedy be pursued. The petitioner had previously presented an unfair prejudice petition under section 994 of the Companies Act 2006, seeking an order for the respondent’s shares to be sold, but discontinued it before trial. The central issues were whether an alternative remedy remained available, whether the petitioner had acted unreasonably, and whether his conduct, benefit and motive justified the discretionary remedy.

1. The petition was dismissed. The company was plainly deadlocked and mutual trust and confidence had broken down. The petitioner had standing and the petition did not require advertisement.
2. Under sections 122(1)(g), 125(1) and 125(2) of the Insolvency Act 1986, the court has a wide judicial discretion. It must consider whether the petitioner is entitled to relief, whether winding up would be just and equitable absent another remedy, and whether the petitioner acted unreasonably in failing to pursue an available alternative remedy.
3. The petitioner had pursued an unfair prejudice petition but discontinued it because of cost, delay and the respondent’s opposition. That was not reasonable pursuit to a proper conclusion. The court would have been able to determine the value of the respondent’s shares. The petitioner had also failed properly to consider administration, which was an obvious alternative capable of preserving and realising the company’s business as a going concern.
4. That conclusion alone justified dismissal. The court nevertheless considered the remaining matters. The petitioner was entirely responsible for the deadlock and loss of confidence. His unilateral attempts to remove the respondent as director and withdraw her regulatory authorisation, his exclusion of her from company information, his competing enterprises and his use of company intellectual property demonstrated that he did not approach the court with clean hands.
5. The court rejected a formulaic comparison of the parties’ misconduct. The overall conduct of each party had to be assessed holistically. Conduct occurring after the deadlock could remain relevant to the discretionary decision.
6. The petitioner failed to establish a tangible benefit qua shareholder. A mere desire to end a dysfunctional company or to obtain an orderly termination of a quasi-partnership was insufficient. His real objective was to obtain a collateral benefit by winding up the company and continuing the business through his new enterprises without paying for the respondent’s interest. It would have been unconscionable to grant relief for that purpose.