Taylor v Whitehall Partnership Ltd

This is a contributory's petition under section 122(1)(g) of the Insolvency Act 1986 seeking a winding up of The Whitehall Partnership Limited on the basis that it is just and equitable to do so because of deadlock and breakdown of trust between two 50/50 directors and shareholders. The court found that the company was plainly deadlocked and that mutual trust and confidence between the parties had broken down.

However, the petition was dismissed because the petitioner had not reasonably pursued available alternative remedies (notably an unfair prejudice petition under section 994 of the Companies Act 2006 which he discontinued) and because the petitioner’s own misconduct weighed strongly against making a winding up order. The judge emphasised the court's wide discretion under section 125 of the Insolvency Act 1986, the exceptional nature of winding up as a last resort, and the requirement that a contributory come with clean hands. The Court also observed that administration was an obvious, practicable alternative which the petitioner and his advisers ought to have considered.

The judge concluded that the petitioner sought an improper collateral benefit (including a strategy to avoid paying for the respondent’s shares and to continue business through new enterprises), had failed to provide proper disclosure and had acted in a way that made it unconscionable to exercise the discretion in his favour.

Background and parties

The petition was presented on 10 August 2022 by John Leslie Taylor, a 50% shareholder and director of The Whitehall Partnership Limited, against the company and his former wife Joanne Taylor (the other 50% shareholder and co-director). The petitioner sought winding up on just and equitable grounds under section 122(1)(g) of the Insolvency Act 1986, alleging deadlock in management and a fundamental breakdown of the relationship on which the company was founded.

Procedural posture and relief sought

• The petitioner relied on just and equitable grounds for winding up (s.122(1)(g) IA 1986).
• The respondent opposed winding up and proposed alternative remedies including orders for access to records, joint signatories, appointment of an independent compliance professional and other arrangements to enable the company to continue trading.
• The petitioner had earlier issued, then discontinued, an unfair prejudice petition under s.994 of the Companies Act 2006.

Issues framed

1. Whether the company was deadlocked or lost mutual trust and confidence.
2. Whether reasonable alternative remedies were available and whether the petitioner had unreasonably failed to pursue them (s.125(2) IA 1986).
3. Whether the petitioner was solely or mainly responsible for the deadlock (clean hands).
4. Whether the petitioner would obtain a tangible benefit from winding up.
5. Whether the petition was motivated by collateral or improper purposes.

Court’s reasoning and findings

• The court accepted that the company was deadlocked and that mutual trust and confidence had irretrievably broken down.
• On alternative remedies, the judge found that the petitioner had previously pursued an unfair prejudice petition but discontinued it for reasons the court did not accept as reasonable; the court emphasised that administration would have been an obvious and appropriate alternative which the petitioner and his advisers ought to have considered.
• On the petitioner’s conduct, the judge found serious shortcomings: the petitioner had repeatedly and unilaterally sought to remove the respondent as a director and had twice sought to withdraw her FCA SMF3 authorisation; he had set up new enterprises operating in the same sector, failed to provide proper disclosure, and used company intellectual property. The judge concluded this conduct amounted to coming to court without clean hands and that the petitioner sought a collateral benefit from winding up.
• The petitioner failed to establish that he would obtain a tangible benefit from winding up in a manner that justified the exceptional remedy.

Conclusion

The petition was dismissed. The judge observed the remedy of winding up is exceptional and one of last resort, and emphasised that a court should not permit a petitioner to derive an improper advantage from his own wrongful conduct. Costs and consequential matters were reserved for further hearing.

The Petition is dismissed. The court held that, while the company was deadlocked and mutual trust and confidence had broken down, the petitioner had not reasonably pursued available alternative remedies (including an unfair prejudice petition and the option of administration), had conducted himself improperly (including unilateral removal attempts, withdrawal of FCA authorisation, lack of disclosure and competing enterprises), and would obtain no appropriate tangible benefit; accordingly it would be unjust and unequitable to make a winding up order.