Anwar Khan v Ankar Miah & Anor

A just and equitable winding-up petition may succeed where there is functional deadlock or an irretrievable breakdown of trust and confidence in a corporate quasi-partnership. Continued trading does not by itself disprove deadlock, but it is relevant evidence. A petitioner’s contribution to the breakdown is not fatal unless the petitioner was solely responsible. The court must nevertheless refuse winding up where another remedy is available and the petitioner acts unreasonably in pursuing liquidation instead. An open offer to purchase the petitioner’s interest may constitute such an alternative remedy.

The petitioner and first respondent were equal shareholders and directors of the second respondent, a company operating a restaurant business. Their relationship deteriorated following a physical altercation and the respondent’s transfer of £9,000 from the company’s account. The petitioner sought a winding-up order under section 122(1)(g) of the Insolvency Act 1986, alleging deadlock and loss of trust and confidence.

The company continued trading, while the respondent repeatedly offered to purchase the petitioner’s shares and related property interest. The central questions were whether there was functional deadlock, whether trust and confidence had irretrievably broken down, and whether the petitioner was acting unreasonably in seeking winding up rather than accepting an alternative remedy.

1. Standing. The petitioner had shown a sufficient tangible benefit from a winding up. The continuing business, its attributed value, and the respondent’s offers to purchase the petitioner’s interest were sufficient to defeat the standing objection.
2. Functional deadlock. There was no functional deadlock. Deadlock requires an inability to co-operate which prevents the company functioning at board or shareholder level. Continued trading is not conclusive, but in this two-person business it indicated that the company was not paralysed. Commercial disagreement and outstanding repairs did not establish deadlock.
3. Trust and confidence. The company had the characteristics identified in Ebrahimi. It had developed from a partnership, both participants were expected to take part in management, and the business was conducted on a personal relationship of mutual confidence. That confidence had irretrievably broken down. Both parties contributed, but the petitioner was not solely responsible; the respondent’s assault was significant and the petitioner’s threats to stop the business were also relevant.
4. Remedy. Applying the three-stage analysis in Lau v Chu, the petitioner was entitled to some relief and winding up would have been just and equitable if no other remedy existed. However, the respondent’s repeated offers to buy the petitioner’s interest constituted an available alternative remedy. The petitioner’s refusal was driven by personal animus and a desire to prevent the respondent benefiting from his wrongdoing. That was unreasonable under section 125(2) of the Insolvency Act 1986.
5. The petition was dismissed. The court was not persuaded that a section 994 petition under the Companies Act 2006 supplied the relevant alternative remedy on these facts.