Parminder Singh Dosanjh v Vallipuram Balendran & Anor, (Re Webb Estate Developments Ltd)

The petitioner presented a winding-up petition under section 122(1) of the Insolvency Act 1986 on the just and equitable ground, relying on an irretrievable breakdown in trust and confidence between equal shareholder-directors and functional deadlock. The court applied the statutory framework in section 125 (including section 125(5)) and the three-stage analysis illustrated in Chu v Lau: (a) entitlement to relief, (b) whether winding up would be just and equitable in the absence of other remedies, and (c) whether the petitioner had unreasonably failed to pursue other remedies.

The judge found the Company to be a quasi-partnership, that there was both functional deadlock and an irretrievable breakdown in mutual trust and confidence, and that a tangible benefit would follow a winding up (a probable surplus for distribution). The court held that there was no enforceable agreement treating monthly director drawings as expense reimbursements, that the March 2020 exchange amounted to assent to treat the drawings as repayments of directors' loans, and that a backdated invoice from a services company (TRS) was created after the event. The petitioner had filed accounts that were not board-approved, but that conduct did not bar relief: it was not so culpable as to require dismissal. Alternative remedies (share purchase proposals and structured demerger proposals) were either unrealistic or had been unreasonably resisted, so compulsory winding up was the appropriate, albeit last resort, remedy.

This is a first-instance Companies Court judgment on a petition to wind up Webb Estate Developments Ltd presented by one 50% shareholder-director (the petitioner) against the other 50% shareholder-director (first respondent) on the just and equitable ground. The petition rested on two pleaded and proven bases: an irretrievable breakdown in trust and confidence in a corporate quasi-partnership and a functional deadlock preventing the company from functioning.

Background and parties:

• The parties had conducted property management and development together since about 2011, originally via an LLP and then via Webb (incorporated 2018).
• Both directors had taken regular monthly drawings (£6,000 then £7,000 each). A dispute arose about whether those sums were repayment of directors' loans, dividends, directors' remuneration, or reimbursement of expenses.
• Accounts were not agreed; each director filed accounts that were not board-approved. One director (first respondent) later produced a retrospective invoice from a related services company (TRS), which the court found was created after the event.

Nature of the application: The petitioner sought a compulsory winding up under section 122(1)(g) of the Insolvency Act 1986 on just and equitable grounds; he relied on both breakdown of mutual trust (quasi-partnership principle) and functional deadlock.

Issues framed:

1. Whether the statutory test for just and equitable winding up was made out (entitlement to relief and tangible benefit on winding up).
2. Whether an alternative remedy was available and whether the petitioner had unreasonably failed to pursue it under section 125(5).
3. Whether the petitioner’s own conduct (including filing unapproved accounts) disentitled him to equitable relief.

Findings and reasoning:

• The court accepted that Webb was a quasi-partnership and that the relationship had irretrievably broken down; the management was functionally deadlocked on fundamental matters, including the form and accuracy of company accounts and the treatment of the monthly drawings.
• The court analysed the character of the monthly payments against the LLP agreement and the company articles, concluding they were not expenses properly reimbursable under the partnership agreement or the articles. The March 2020 email exchange was found to amount to assent to treat the drawings as repayments of directors' loans for future company accounts, but that did not remove the broader deadlock about account accuracy.
• The TRS invoice was backdated and unsupported; there was no agreement that TRS had provided services to Webb.
• The petitioner’s filing of accounts without board approval was criticised but not regarded as conduct sufficient to deny equitable relief: the petitioner did not come so unfairly to court as to be disentitled to a remedy.
• Alternative remedies (purchase of shares by one party, structured demerger or members' voluntary liquidation) were either impractical, unrealistic or had been reasonably resisted; proposals advanced by the respondent were contingent and likely to provoke further disputes.

Decision: Having regard to the statutory discretions in section 125 (including section 125(5)) and the authorities on deadlock and quasi-partnerships, the court concluded that compulsory winding up was appropriate. An order for compulsory winding up was made and the petitioner was to draft the formal order; residual questions (costs, consequential matters) were to be dealt with by agreement or short hearing.

This was a first-instance hearing. The court made a compulsory winding-up order in respect of Webb Estate Developments Ltd on just and equitable grounds. The judge found both functional deadlock and an irretrievable breakdown in trust and confidence between the equal shareholder-directors, that a tangible benefit (a surplus for distribution) was likely on winding up, and that there was no reasonable alternative remedy the petitioner had unreasonably declined. The petitioner’s imperfect conduct (filing unapproved accounts) did not bar relief.