Anwar Khan v Ankar Miah & Anor

The petitioner sought a winding-up order under section 122(1)(g) of the Insolvency Act 1986 on grounds of a breakdown in trust and confidence and alleged deadlock between the two equal shareholders and directors of a small restaurant company. The court found an irretrievable breakdown of mutual trust and confidence sufficient to bring equitable principles into play, but concluded there was no functional deadlock because the business continued to trade. The judge applied the three-stage test in Lau v Chu and Ebrahimi: the petitioner was entitled to some relief, and a winding up could be just and equitable in the absence of other remedies, but the petitioner was acting unreasonably in refusing a realistic alternative. The alternative remedy available was a sale of the petitioner’s interest to the respondent, and the petition was dismissed because the petitioner unreasonably refused to pursue that route.

Background and nature of the application: The petitioner, a 50% shareholder and director of Nimah Tandoori Limited, presented a petition under section 122(1)(g) of the Insolvency Act 1986 seeking winding up on just and equitable grounds. He relied on (a) an assault by the respondent on 31 July 2022 and (b) the respondent’s withdrawal of £9,000 from the company bank savings account on 1 August 2022. The company operates a restaurant from premises beneficially owned by the parties as tenants in common, a matter not finally determined.

Procedural posture and issues:

• Whether the petitioner had standing by showing a tangible benefit in the event of a winding up.
• Whether there was a functional deadlock preventing the company from functioning at board or shareholder level.
• Whether the company was a corporate quasi-partnership and, if so, whether there had been an irretrievable breakdown of trust and confidence justifying winding up.
• Whether a winding-up order was an appropriate remedy or whether some other remedy was available and the petitioner was unreasonably failing to pursue it.

Court’s reasoning and findings: The court accepted that the petitioner had sufficient tangible interest to present the petition, taking account of valuations and the parties’ negotiations. The judge found no functional deadlock because the business continued trading and there was no cogent evidence that the petitioner had been excluded from management. However, on equitable grounds the court found an irretrievable breakdown in trust and confidence: the relationship had its origins in a long partnership, continued informally after incorporation, and had been personal in character. Both parties had contributed to the breakdown: the respondent by physical intervention and the petitioner by threats to shut down the business and other conduct. Applying the three-stage analysis in Lau v Chu, the judge held that some other realistic remedy was available — sale of the petitioner’s interest to the respondent (or vice versa), with numerous offers exchanged — and that the petitioner was acting unreasonably in refusing to pursue that remedy because of personal animus and an insistence that the respondent must not benefit from his wrongdoing. As a result the court concluded it would not be just and equitable to wind up the company and dismissed the petition.

Subsidiary findings: The court proceeded on the working assumption that the freehold premises were beneficially held by the two individuals as tenants in common in equal shares; there was no evidence of a lease to the company. The £9,000 withdrawn by the respondent was returned and used to pay VAT. The court rejected arguments that the petitioner genuinely wished to continue to run the business rather than realise value by sale.

The petition for winding up is dismissed. The court found an irretrievable breakdown of mutual trust and confidence (engaging equitable principles applicable to corporate quasi-partnerships) but concluded there was no functional deadlock and, crucially, that a practicable alternative remedy (sale of the petitioner’s interest to the respondent) was available and the petitioner was unreasonably refusing that remedy; accordingly a just and equitable winding up was not appropriate.