APL Holdco Limited v Apple Properties Limited

A contributory’s petition to wind up a solvent foreign company on the just and equitable ground requires more than a constitutional deadlock. The court must consider entitlement to relief, whether winding up would be just and equitable absent another remedy, and whether the petitioner unreasonably failed to pursue an available alternative. In a quasi-partnership, breakdown of trust and confidence and functional deadlock are distinct but overlapping grounds. Fault is not automatically fatal, but relief is ordinarily unavailable where the petitioner is the sole cause of the breakdown or has unclean hands sufficiently connected to the relief. A remedy in the company’s place of incorporation may be an alternative remedy, not merely a forum choice. Prior proceedings, non-compliance with orders, dissipation of company funds and diversion of income may make an English winding-up unjust and inequitable.

APL Holdco Limited presented a contributory’s petition under section 221(5)(c) of the Insolvency Act 1986 seeking the winding up of Apple Properties Limited, an Isle of Man company holding a portfolio of London rental properties. Lake Limited, the nominee shareholder for Shafe Buksh, opposed the petition.

The parties accepted that the company was a quasi-partnership and that trust and confidence had completely broken down. Findings in earlier Isle of Man proceedings were binding. The issues included functional deadlock, attribution of Habib Bush’s conduct to Holdco, clean hands, collateral purpose, alternative remedies and whether it was just and equitable to order a winding up.

The petition was dismissed. The court accepted that the jurisdictional threshold for winding up a foreign unregistered company was met, but held that the equitable discretion should not be exercised.

1. Under sections 220 and 221 of the Insolvency Act 1986, the company was capable of being wound up. The core requirements identified in Re Real Estate Development Co [1991] BCLC 210 were satisfied. The court nevertheless stated that caution must be greatly heightened where a solvent foreign company is the subject of a contributory’s petition.
2. Following Lau v Chu [2020] UKPC 24, the court applied the three-stage analysis under section 125(2) of the Insolvency Act 1986. Holdco was prima facie entitled to relief because the company was a quasi-partnership affected by breakdown of trust and confidence and functional deadlock. However, winding up was not just and equitable in the circumstances, and Holdco had unreasonably failed to pursue the alternative remedy available in the Isle of Man.
3. Functional deadlock and breakdown of trust and confidence were distinct but overlapping grounds. Continued management of the property portfolio through Century 22 did not prevent a finding of functional deadlock. Habib was the sole cause of both the breakdown and the deadlock. Shafe’s legal proceedings and refusal to engage without the information required by the Isle of Man order were legitimate and proportionate responses to Habib’s conduct.
4. Habib’s conduct could be attributed to Holdco because Holdco was, in substance, his nominee or privy. In any event, the conduct could not be relied on to establish breakdown and deadlock while being excluded from the assessment of whether equitable relief should be granted. Habib also lacked clean hands. His dishonesty, failure to provide information, dissipation of company funds and diversion of rent were directly connected with the relief sought.
5. The petition was not an abusive collateral-purpose petition. Realising Habib’s share to meet liabilities was a consequence of liquidation, and the petition had a genuine winding-up purpose. Those matters nevertheless remained relevant to the equitable discretion. A winding-up in England would also prejudice or complicate potential Isle of Man remedies and disclosure rights.

It was therefore not just and equitable to make a winding-up order. The petition was dismissed.