This judgment was handed down remotely at 10.30am on 20 March 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
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HIS HONOUR JUDGE KEYSER KC
Judge Keyser KC :
Introduction
- Nimah Tandoori Limited ("the Company") was incorporated on 21 January 2022 as a private company limited by shares. It operates the business of the Simla Tandoori Restaurant ("the Business") at freehold premises at 83-85 Bridgend Road, Aberkenfig, Bridgend ("the Property"). The Company's issued share capital consists of two £1 shares. Mr Anwar Khan ("the Petitioner") and Mr Ankar Miah ("the Respondent") each hold one of those shares. The Petitioner and the Respondent are the directors of the Company.
- By his petition presented on 25 January 2024, the Petitioner seeks on order that the Company be wound up on the "just and equitable" ground under section 122(1)(g) of the Insolvency Act 1986. He alleges that the relationship between himself and the Respondent has broken down, and that the trust and confidence necessary to exist between them for the continuation of the Company's Business has been destroyed, by reason of two things: first, an assault committed against him by the Respondent on 31 July 2022; second, a breach of fiduciary duty committed by the Respondent by the withdrawal of £9,000 from the Company's bank account on 1 August 2022 without the Petitioner's knowledge and consent. The Petitioner says that, by reason of the breakdown of the relationship, the affairs of the Company are deadlocked.
- The Respondent denies that the affairs of the Company are deadlocked or that the parties are unable to cooperate in the running of the Business. He says that the incident on 31 July 2022 has been blown out of all proportion by the Petitioner and that the withdrawal of the money on the following day was simply to ensure that the Petitioner could not make it unavailable for payment of the Company's VAT liability. (The money was returned to the Company's bank account on 15 August 2022 and used to pay the VAT liability on 17 August 2022.) He says that, despite the breakdown of their personal relationship, the parties have been able to continue to run the Business successfully and that there is no deadlock in the management of the Company. He says, further, that the Petitioner is acting unreasonably in refusing to accept his offers to buy the Petitioner's interest in the Company and that the Petitioner is using these proceedings for the improper purpose of exerting pressure on him to sell his own interest to the Petitioner.
- In the remainder of this judgment, I shall begin by setting out the facts in rather more detail; however, although I have had regard to all of the evidence adduced before me I shall not refer to all of it. Then I shall set out the relevant law. Finally, I shall discuss the application of the law to the facts.
- I am grateful to Mr James Hannant, counsel for the Petitioner, and Mr Pearse Johnson, counsel for the Respondent, for their submissions.
The Facts
Background
- From 1995 until 2006 the Petitioner and the Respondent ran the Business in partnership together with Mr Abdul Quddus and a fourth partner. In 2006 the Petitioner, the Respondent and Mr Quddus acquired the share of the fourth partner, and the three of them operated the Business in partnership until September 2015. Mr Quddus was the chef, and the Petitioner and the Respondent ran the front of house. In 2015 the partners incorporated a limited company called Simla Tandoori Limited, of which the Petitioner, the Respondent and Mr Quddus were the equal shareholders and the directors, and thereafter Simla Tandoori Limited operated the Business. Mr Quddus ceased to be a director in 2019, and the Petitioner and the Respondent bought his one-third interest. After the incorporation of the Company in 2022, the assets of Simla Tandoori Limited were transferred to the Company, and the Company has operated the Business ever since.
The Property
- Title to the Property itself is registered in the names of the Petitioner and the Respondent. There is an issue between the parties as to the beneficial ownership of the Property. The Petitioner says that he and the Respondent hold it on an implied trust for the Company. The Respondent says that he and the Petitioner hold it on trust for themselves as tenants in common in equal shares. I am not called upon to determine that issue, but I do not think that I ought to ignore it.
- In 2020 the Petitioner and the Respondent were the claimants and Mr Quddus was the defendant in a Part 8 claim in the County Court in Cardiff in respect of the Property. The Details of Part 8 Claim, verified by a statement of truth by the claimants' solicitor, stated a detailed case. The Property had been purchased in 1994 by the original four partners for the purpose of occupying it in partnership as a restaurant. The Details recited changes in the partnership and in the ownership of the Property, followed by the dissolution of the partnership and the incorporation of Simla Tandoori Limited, in which the claimants and the defendant were equal shareholders. "In the circumstances, the parties agreed to hold the Property as Tenants in common" (Details, paragraph 5). "Subsequently, the Property continued to be held by the parties in their individual capacities. The Company was granted a lease of the Property for £15,000 per annum for the intention of continuing to operate from the premises as a restaurant and takeaway business" (Details, paragraph 6). The Details said that Simla Tandoori Limited had continued to occupy the Property as a restaurant and to pay rent. It recited the breakdown of the relationship between the claimants and the defendant and averred that "whilst the defendant remains a registered proprietor of the Property, it cannot continue to be used for the purpose for which it was intended" (Details, paragraph 14). The claimants sought and in due course obtained an order that Mr Quddus sell them his one-third share in the Property.
- The terms of the Part 8 claim present, at the least, a considerable difficulty in the way of the Petitioner's present contention that the Property is held by the parties on trust for the Company. The contention was put by Mr Hannant on the basis that the Property was a partnership asset and, as such, had become beneficially a corporate asset when the Business was incorporated. However, the Company is the successor to Simla Tandoori Limited, and it was the parties' case in the Part 8 claim that the individual former partners had remained the personal owners of the Property and, indeed, had granted a lease to Simla Tandoori Limited. I note, further, that the TR1 transfer of the Property to the Petitioner and the Respondent dated 2 September 2021, pursuant to an order of the County Court in the Part 8 proceedings, contained a declaration that the Petitioner and the Respondent were to hold the Property on trust for themselves as tenants in common in equal shares. In evidence to me, the Petitioner said that he had not understood the meaning of the declaration and that it was incorrect. However, it was consistent with—indeed, required by—the terms of his Part 8 claim, and both the substance and the detail of the Part 8 claim were inconsistent with the contention that the ownership of the Property by the partners in the unincorporated Business gave rise to an implied trust in favour of the incorporated Business (that is, the Company). The Property is not shown in the Company's accounts.
- Whether the Company has any kind of lease of the Property or any part of it is a different question. No lease or evidence of a lease or of payment of rent has been produced before me. The existence of a lease would be inconsistent with the Petitioner's case that the Company occupies the Property as beneficial owner.
- Accordingly, although I make no binding findings on the matter, I proceed on the basis that the Property is owned by the Petitioner and the Respondent as beneficial tenants in common in equal shares. The basis of the Company's occupation of the Property is unclear. Probably it is entirely informal, in circumstances where the same two people are the owners of the Property and the members and directors of the Company.
Breakdown of the relationship
- The Petitioner is rather older than the Respondent; he is 67 years old, while the Respondent is aged 57. The Petitioner has also been in poor health for a number of years, while the Respondent appears to be in good health.
- In February 2022 the Petitioner required significant medical treatment. He was away from work for about four months, and during at least part of that time his son, Mr Imtiaz Khan, worked in the restaurant. I find that, while he was away from work, the Petitioner intimated to the Respondent that he was thinking of retiring from the Business, though he did not express any settled intention to retire. In early June he instructed a firm of surveyors and valuers to provide a market-value valuation of the Property. The valuation, dated 13 July 2022, recorded the purpose for which it was required as being, "Transfer between connected parties". This tends to confirm that the Petitioner was at least considering the possibility of selling his share in the Property, and probably the Company also, to the Respondent.
- The Petitioner returned to work at some point in June 2022. He had been working there for at least a month when a significant incident occurred at the restaurant late on the evening of 31 July 2022. The outline of what happened is clear, but there is a dispute about the details, which turns principally on the evidence of the parties themselves, although there is some relevant documentation. Staff who were in the kitchen heard raised voices during the incident, but it does not appear that they heard distinct threats or any screams or cries for help or anything indicating a physical altercation.
- The Petitioner's account is to the following effect. He and the Respondent were alone in the restaurant, while other staff were in the kitchen. The Respondent was holding an accounts list relating to suppliers and turnover, which was something that the parties would regularly discuss in the course of operating the Business. The Respondent became angry and aggressive; he had been increasingly like this with the Petitioner since the latter's return to work. The Petitioner assumed that there was some issue with the accounts list and attempted to calm the Respondent down. However, the Respondent became increasingly aggressive. He grabbed the Petitioner by the upper arms and shook him violently and then punched him twice in the face. Then he dragged the Petitioner to the rear exit leading into the car park. All the time the Respondent was shouting at the Petitioner; the Petitioner could not remember precisely what was said, but he said that the Respondent threatened more than once to kill him and that nothing was said about the Petitioner retiring. When they reached the rear exit, the Respondent released his grip and then pushed the Petitioner twice. The Petitioner fell, hit his head and lost consciousness. When he came round, he was lying outside the rear exit in the car park. As a result of the assault, the Petitioner suffered bruising to the face and left arm and a cut lip. His son called the police, who attended. The Petitioner then attended at hospital before going home.
- The Respondent's account is rather different and is to the following effect. As it was a Sunday evening, they were discussing the weekly income and expenditure figures. He told the Petitioner that the latter's ill health was affecting his ability to work and his manner towards customers (the Respondent says that he had received complaints), and he told the Petitioner that he ought to take more time off work to recover his health. The Petitioner grew angry at this. He said that he was fit to work, and he remarked to the effect, "If I can't work, I won't let you work—I will shut the place down"; and he threatened to block the bank accounts in order to stop the Respondent trading. In his witness statement, the Respondent said that at this point the Petitioner called his son, Imtiaz Khan, who was in a nearby takeaway restaurant, and that immediately afterwards Imtiaz Khan called him (the Respondent) and threatened him with violence. The Petitioner then made to leave, saying that he was going to get his son, and the Respondent lost his temper and pushed him, causing the Petitioner to stumble but not to fall. That was the limit of the physical contact. In his oral evidence, the Respondent said that the sequence of events was slightly different: the Petitioner said he was going to get his son; the Respondent lost his temper and pushed the Respondent; and it was after that push that Imtiaz Khan called him. Otherwise, he substantially maintained the account in his witness statement.
- Both the Respondent and Miss Zakia Khan (the Petitioner's daughter) reported the incident to the police; therefore there are two police reports.
- The first report shows that the Respondent called the police at 10.24 p.m., reporting that there was a "disturbance in progress" and that the Respondent's business partner was "threatening [him] with violence" and "being verbally [abusive?]". A police record made in the early hours of 1 August recorded that the parties were "currently in a civil dispute over Khan stepping down and retiring." It continued:
"Tonight after closing when all the customers were out Khan and Miah have had a verbal argument inside the restaurant over the business finances.
Tensions re [were?] high and the argument escalated. There has been a physical altercation …
After this Miah has allegedly received a phone call from Khan's son, whereby he allegedly says he is coming down to sort him out. This is a 20 second phone call with no witnesses and essentially no evidence other than a call log showing there was a 20 second call.
I informed Miah that this is not necessarily a threats of violence to which he stated, 'No actually he said he is going to beat me up.'
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Appears to have been some confusion over the report. This should potentially be crimed as malicious communications as oppose to POA offences. This is a civil matter which has boiled over due to high tensions. Suitable advice given to avoid escalation."
- The second report shows that Zakia Khan called the police at 10.33 p.m., reporting that her father had been "hit" and had a "cut lip" and was "shaken up." The report recorded the following narrative:
"Victim Anwar Khan and subject Amkar [sic] Miah are business partners and co-owners of the Simla Indian restaurant in Aberkenfig. They have worked together for 25 years but their relationship has become strained as Khan's age and underlying health issues mean he is considering shutting the restaurant and the [then?] retiring, which Miah has refused to accept. Miah has been described as a bully and has recently become more aggressive towards Khan and their staff.
At around 2220 on Sunday 31/07/22 the two were in the bar area of the restaurant going over the weekly accounts as usual when they began to argue. Khan has alleged that Miah then grabbed him by his collar with one hand and with enough force to rip his jumper and pull one of the buttons off his shirt. Khan states that Miah then punched him twice in the face and then began to push him out of the restaurant. He was pushed over and fell backwards into the fire door, hitting the back of his head.
Miah then left the restaurant to go call his family and the police. When officers arrived the situation was calm. Miah admitted to officers that he had pushed Khan but denied and punches or anything more serious.
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After giving a statement Khan was taken to hospital by his family for a check over, particularly as he has a colostomy bag."
Updates on 2 August 2022 record that Zakia Khan called the police again, saying that the Petitioner had "bruises from the assault which she has pictures of", and that later that day she sent the photographs to the police.
- There is a discharge letter dated 1 August 2022 from Princess of Wales Hospital, Bridgend, to the Petitioner's GP. This shows that the Petitioner attended at the Emergency or Minor Injuries Department of the Hospital at 1.16 a.m. on 1 August 2022, with a presenting complaint recorded as, "Assault / Head inj[ury] / facial inj[ury] / chest pain / colostomy bag prob". Under "Diagnoses" was recorded, "Head injury minor (normal des)". Under "Comments for GP" was recorded, so far as is relevant, "Attended following an alleged assault. Head injury – CT head nad [nothing abnormal discovered]."
- The bundle contains four photographs, two of them showing the Petitioner's face and head and two showing his left arm. For the Respondent, Mr Johnson observed that the photographs did not contain any information showing when they were taken and that there was no evidence of by whom they were taken. However, the Petitioner's evidence was that they showed the injuries he sustained in the incident on 31 July 2022. Further, the police reports show that Zakia Khan sent photographs of the alleged injuries to the police on 2 August 2022. I accept that the photographs in the bundle were taken shortly after the incident, and I think it probable that they are the photographs referred to in the police report. The photographs of the face were clearly taken on the basis that there were injuries to be seen, but I cannot identify anything that is obviously an injury. The photographs of the left arm show purplish bruising in the area of the triceps.
- In my view, neither party gives a wholly reliable account of this unhappy incident. The Petitioner exaggerates what happened and fails to give a plausible account of how it originated. The Respondent minimises his actions. I consider that the most likely sequence of events is broadly as follows. The parties began to undertake their regular, weekly review of takings and expenditure. Some argument arose, probably concerning poor financial performance, and the Respondent became annoyed and made trenchant remarks about the Petitioner's unfitness for work. Having regard both to what subsequently transpired and to the fact (as I find it to be) that the Petitioner had mooted retirement but not made any firm decision to retire, I regard it as probable that the Respondent's remarks were not to the effect that the Petitioner might take further sick leave, nor were they expressive of displeasure that the Petitioner was thinking of retiring; rather they were to the effect that the Petitioner was no longer fit to work and should get out of the Business permanently. The Petitioner retorted to the effect that, if he could not be involved in the Business, he would make sure that neither could the Respondent and he would take steps to shut it down. As the argument became more heated the Petitioner made a call to his son, who in turn called the Respondent; in a short conversation, he said he was coming to the restaurant and his manner was forceful, even angry, but he did not make threats of violence. The Respondent became increasingly angry with the Petitioner and laid hands on him. He took firm hold of the Petitioner's arms and pushed him, causing the bruising to the left arm. He did not punch the Petitioner, but in the scuffle near the back door he caused slight swelling and a cut to the Petitioner's lip (too minor to be visible on photographs taken a few hours later) and the Petitioner stumbled (but did not fall), causing the back of his head to come into contact with the back door or the surrounding area. The Petitioner did not lose consciousness; if he had done so, it would have been recorded. (It is possible that the telephone conversations with the Petitioner's son took place at this point rather than earlier.) The Petitioner left the restaurant via the back door and went to meet his family at the nearby takeaway restaurant. The Respondent called the police, probably because he feared that Imtiaz Khan and other members of the family would shortly be coming to the restaurant and was afraid of their likely reaction to what had occurred.
- Matters took a further turn on Monday 1 August 2022. The Respondent logged onto the Company's online business banking savings account and from it transferred £9,000 into his own personal account. He says that he did this in order to protect the money, which was set aside for the purpose of paying the VAT, and that he did so for two reasons: first, the Petitioner had threatened to block the accounts, which would have made it impossible to carry on the Business; second, he had received calls from restaurant staff to the effect that they should not return to work as the restaurant was closing (I deal with this below). The Petitioner learned of the transfer of the £9,000 when he himself attended at the bank on 1 August. He then withdrew the entirety of the moneys standing to the credit of the Company's current account and closed the account.
- It should be mentioned here that, after mediation (see below) by the Bangladeshi community, to which both parties belong, all of the moneys were returned to the Company. In due course the Company's VAT liability was discharged, timeously, with the restored £9,000.
- The Petitioner's case against the Respondent is that his withdrawal of money on 1 August 2022 was a breach of fiduciary duty. Mr Hannant put it to the Respondent that he had withdrawn the £9,000 because he wanted it for his own purposes. I reject that. I accept that the Respondent withdrew the money because he feared that the Petitioner would block the bank accounts, as he had threatened to do, and thereby make it impossible for the Company to meet its liabilities for VAT. The current account was a different matter, because that was a trading account and one on which there were a number of direct debits.
- The question arises as to the Petitioner's reason for closing the current account. He says that it was to preserve the moneys, in circumstances where the Respondent appeared to have stolen £9,000 from the savings account. It may possibly be that he did believe that the money had been stolen. But I think it more likely that the very reason for his visit to the bank was to close the current account and thereby stop the business trading. For this, there are three reasons. First, he gives no other persuasive reason for going to the bank that day. In his witness statement, he said that he went because, given that he had been assaulted, he was very concerned as to the position of the business. I do not think that the altercation of the previous evening gave plausible grounds for believing that the Company's money was at risk from the Respondent. Second, he had (as I find) threatened to block the account and thereby prevent trading. Third, he had told staff not to return to work.
- There is conflicting evidence on this third point. The Respondent says that, when he left the restaurant after the altercation with the Petitioner and after the police had left, he had a telephone call from some kitchen staff who lived in the flat above the restaurant at the Property, who told him that the Petitioner had told them that the restaurant was closing and they would have to leave the flat. He says that he also received telephone calls from other members of staff, including a chef called Mr Tarek Miah (no relation, I was told, of the Respondent), who said that the Petitioner and his family had told them not to come back into work because the Petitioner was closing the restaurant. The Petitioner's evidence was that he had merely told Tarek Miah not to come into work on the following day; he had not told him never to return to work, and he had not told any other member of staff not to come to work. Tarek Miah made two witness statements, which were not agreed but were, by agreement between the parties, admitted as written evidence. In his statement dated 9 July 2024 on behalf of the Respondent, he said that the Petitioner had told him that he was shutting the restaurant and that he, Tarek Miah, should not come to work again; and he said that exactly the same message was repeated, shortly afterwards, by the Petitioner's son. In his statement dated 13 August 2024 on behalf of the Petitioner, he resiled from his earlier statement: he said that he did not recollect being told not to come into work again; rather, he had been told not to "come down for work" because there were some issues, which he took to mean that the restaurant would be closed temporarily but not permanently. The second statement accords with that of Imtiaz Khan, also dated 13 August 2024, and also admitted as non-agreed written evidence, in which he says that he told Tarek Miah that the restaurant "would be closed on Monday and that he should not come to work that day" but that he did not tell him it was closing permanently. To the same effect is the Petitioner's second witness statement, again dated 13 August 2024, in which he says that his own conversation with Tarek Miah only concerned the temporary closure of the restaurant on 1 August 2022. There is a stark contrast between the first and second witness statements of Tarek Miah: they are inconsistent and cannot, in my view, be easily reconciled by recourse to supposed misunderstanding. No obvious reason has been shown for giving an initially false account. It is, I think, more likely that the original account was true and that the witness has come, by whatever means, to modify the account. There are other reasons for thinking that the first statement is the true one. First, the Petitioner had, as I find, made remarks indicating a willingness and even intention to prevent the restaurant trading. Second, the telephone calls in question were made in the heat of the aftermath of the altercation with the Respondent, when (on my assessment) the Petitioner would have been likely to react strongly rather than more moderately with a view to reflection. Third, in both his statements Tarek Miah makes clear that he did not work on Mondays and was not due to work on 1 August; it is therefore unexplained why both the Petitioner and his son should have considered it necessary to call him in the small hours in order to tell him not to come in on his day off.
The aftermath
- On account of the Respondent's intervention, the restaurant was open for business on Monday 1 August 2022, though the Petitioner did not work. On 2 August the Petitioner attended for work. The Respondent was concerned at the situation. He contacted members of the Bangladeshi community to assist in resolving the situation.
- A meeting with the community was held on 3 August 2022. The Petitioner offered to accept £170,000 for his half share. (All discussions, realistically, considered the Company and the Property together.) The Respondent rejected that offer. After a lengthy meeting, the Respondent offered to accept £160,000 for his own half share. Agreement was reached on that figure, and it was agreed that the parties would instruct their respective solicitors to draw up a formal agreement. Meanwhile, the parties would continue to operate the Business through the Company. As part of the agreement, the Petitioner agreed not to pursue a criminal complaint against the Respondent in respect of the incident on 31 July 2022. (The police Investigation Update records the withdrawal of the complaint later in August.)
- The Respondent subsequently resiled from the agreement, feeling that the pressure of expectations on the part of the community after such a long meeting had caused him to agree to disadvantageous terms. In his witness statement he explained that he quickly realised that it would be difficult to find alternative premises at which to carry on a restaurant business; he did not want to leave a business that he had spent nearly thirty years building up and he was no longer interested in selling his share. The Petitioner is equally adamant that he does not want to sell his own share. In the two-and-a-half years since the mediated agreement was made, the Business has continued to operate, with both the Petitioner and the Respondent playing a part in its running. I shall say more about this later.
- I shall set out some significant matters in the history of negotiations between the parties.
- On 9 November 2022 the Respondent's solicitors wrote to the Petitioner's solicitors, explaining why he was no longer willing to abide by the earlier agreement and making his own proposal.
"We understand that your client's original intention during the 3rd August meeting was to facilitate his own retirement from the business, by selling his own shares in the Company (and interest in the property) to our client. The terms proposed by your client during that meeting were not agreeable to our client.
Your client then offered to purchase both our client's shares in the Company as well as his part interest in the property for the aggregate sum of £160,000. Our client was minded to accept this offer (subject to contract) on the basis that he had the opportunity to use the consideration to purchase another property. Therefore, it was essential that the matter be concluded swiftly.
However, your client has delayed in proving draft purchase documentation, and as a result our client has now lost the opportunity to purchase the other property which is no longer on the market.
As a result, our client is no longer agreeable to sell his shares and property interest to your client.
However, our client appreciates that relations have broken down between him and your client and it is in both of their interests to part ways.
In light of all of the above, and subject to contract, our client is prepared to offer to purchase your client's shares in the Company and his interest in the property on the same terms offered by your client - i.e. for an aggregate price of £160,000 broken down as £60,000 for the shares, and £100,000 for the property. The purchase price would be paid in full in cash on completion."
- It appears that there was no response to that offer.
- On 5 December 2022 the Respondent's solicitors wrote to the Petitioner's solicitors:
"My client is not prepared to sell his interest in the business or the property. My client's offer as set out under our letter dated 9th November remains open to your client. If your client is not minded to accept, then our clients will have to find a way to continue working together in the business."
- On 24 April 2023 solicitors instructed by the Petitioner wrote a letter before action to the Respondent, intimating an intention to seek a winding-up order as a result of deadlock and loss of trust and confidence. The letter said that they would not proceed with the petition if the Respondent confirmed promptly that he would agree to sell his share in the Company to the Petitioner. A few points in the letter might be noted. First, it alleged that the Respondent had excluded the Petitioner from management of the Company. Second, it said that the Respondent's conduct had left the Petitioner "bereft of options to leave the Company … thus rendering him stuck in place". Third, it envisaged the result of a winding-up order:
"Upon the winding up of the Company the assets shall be sold, and any remaining monies shall be distributed to the shareholders in proportion to their shareholding. It is very likely that your share of any receipted sums will be significantly lower than that which has been offered by our Client in order to purchase your share."
- On 27 April 2023 the Respondent's solicitors responded that the previous offer to purchase the Petitioner's shares remained open and was "the means by which the deadlock and any loss of trust and confidence can be remedied."
- On 9 May 2023 the Petitioner's solicitors wrote, saying again that the petition could be avoided if the Respondent agreed to buy the Petitioner's share in the Company and the Property. The letter contained a detailed rebuttal of the Respondent's complaint that delays by the Petitioner had led to his decision to resile from the earlier agreement. It said:
"It seems that your Client has failed to provide an accurate account of his refusal to purchase our Client's interest at the time, and this sudden volte face further eroded the trust and confidence our Client has in the continuation of any business dealings with your Client whatsoever.
Given the true history, which unfortunately differs from that which is portrayed by your Client, our Client has no faith that he would complete any transaction. Rather, in keeping with the assault perpetrated against our Client, it appears that your Client is attempting to manipulate the situation so as to force our Client out of the business.
It stands to reason that your Client should not benefit from his misdeeds, and it is perfectly reasonable that our Client should have difficulty in believing that he is not acting in good faith."
- On 12 May 2023 the Respondent's solicitors responded to this as follows:
"Your client basically ignored this offer made last year [i.e. 9 November 2022] and did not respond. When we pointed out in our 27 April letter that it remained open for acceptance, your response was to suggest that our client should not 'benefit from his misdeeds' and that you did not consider that our client was acting in good faith. It is difficult to understand how your client reached this conclusion when he did not respond to the offer.
This argument runs completely contrary to your attempts to set up a position where your client is stuck in a business without any possibility of an exit when the relationship has broken down and he fears for his personal safety."
The letter went on to repeat an offer to purchase the Petitioner's shares:
"Our client remains ready, willing and able to buy your client's shares in the Company and the property for £160,000.
Our client considers that this would be a significant overpayment when set against the price paid to a former 1/3 partner in 2021 (Mr Quddus). At that time, a professional valuation of the property was obtained from HRT surveyors which put the value of the property at £140,000.
Alternatively, if your client does not want to accept this offer, our client would be prepared to pay your client £70,000 for his share of the property and have the shares in the company valued by an independent accountant. Our client would be prepared to be bound by that valuation of the shares. However, in our client's view, that exercise may well produce a lower valuation.
If this offer is not acceptable, then your client should go ahead with the petition, which will be opposed."
- By a letter dated 6 July 2023 the Petitioner's solicitors rejected the Respondent's offer (which they misstated) and communicated an offer by the Petitioner either (a) to buy the Respondent's share in the Company and the Property for £170,000 or (b) to buy the Respondent's share in the Property for £70,000 and his share in the Company for a price to be determined by an independent valuer. The letter said that the Respondent "should not be rewarded for his misdeeds in forcing our Client from the business" and, rather strangely, that a failure to accept the Petitioner's offer would "simply further [underline] the inability for the company to continue." It concluded by saying that a petition would be issued if the offer were not accepted within 14 days.
- In ensuing correspondence, the Respondent's solicitors repeated his offer to buy the Petitioner's share in the Company and share in the Property for £160,000 (2 August 2023); and the Petitioner's solicitors repeated his offer to buy the Respondent's share in the Company and share in the Property for £170,000 (11 January 2024), saying that they were now in a position to issue the petition and that they would do so unless the Petitioner's offer were accepted.
- The petition was presented in the Business and Property Courts of England and Wales on 25 January 2024. It was subsequently transferred to this Court. The case management conference was before His Honour Judge Jarman KC, sitting as a Judge of the High Court, on 21 August 2024.
- On 29 August 2024 the solicitors for the Respondent wrote a letter containing his open offer either (a) to purchase the Petitioner's share in the Company and the Property for £160,000 or (b) to purchase those shares for a price assessed on an independent valuation. The letter provided confirmation of funding available for the Respondent for payment of the purchase price.
- On 13 September 2024 the Petitioner's solicitors responded to that offer as follows:
"Whilst your Client providing evidence that he may be able to proceed with his proposed offer is somewhat helpful, this does not address the two issues at hand. Firstly, our Client's position remains that he does not wish to sell his share. Secondly, he has no faith that your Client will complete any proposed transaction, even if he were so minded, given your Client's previous conduct.
Our Client maintains, as he has done throughout this process, that the agreement as originally set out ought to have been honoured.
Furthermore, your Client had not indicated that the agreement, wherein he would sell his interest to our Client, was contingent on another business transaction until such time as it was beneficial to explain his failure to progress the transaction.
Our Client does not want to sell his share. He does not wish to retire from the business. He does not wish for your Client to benefit from being the sole owner of the business as a result of his assault on our Client.
For these reasons, your Client's offer cannot be accepted."
- On 10 January 2025 the Petitioner, by his solicitors, made an offer to purchase the Respondent's interest in the Company and the Property for £175,000.
- On 13 January 2025 the Respondent, by his solicitors, rejected that offer and repeated the offer to purchase the Petitioner's interest for £160,000. The letter said: "Our client is simply not able to walk away from the Company or the Property for any amount of money, because the business of the Company is his job and at this point of his life he is not in a position to retire, to stop working or to set up a new venture elsewhere."
- On 21 January 2025 the Petitioner rejected the Respondent's offer and repeated the offer in his letter of 10 January 2025.
The Law
- The Insolvency Act 1986 provides in relevant part:
"122 Circumstances in which company may be wound up by the court
(1) A company may be wound up by the court if—
…
(g) the court is of the opinion that it is just and equitable that the company should be wound up."
"125 Powers of court on hearing of petition.
(1) On hearing a winding-up petition the court may dismiss it, or adjourn the hearing conditionally or unconditionally, or make an interim order, or any other order that it thinks fit; but the court shall not refuse to make a winding-up order on the ground only that the company's assets have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets.
(2) If the petition is presented by members of the company as contributories on the ground that it is just and equitable that the company should be wound up, the court, if it is of opinion—
(a) that the petitioners are entitled to relief either by winding up the company or by some other means, and
(b) that in the absence of any other remedy it would be just and equitable that the company should be wound up,
shall make a winding-up order; but this does not apply if the court is also of the opinion both that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy."
- The principles applicable to winding up on the "just and equitable" ground under section 122 of the Insolvency Act 1986 were explained by the Judicial Committee of the Privy Council in Lau v Chu [2020] UKPC 24, [2020] 1 WLR 4656. (Those principles were held to be applicable to the corresponding legislation of the Territory of the Virgin Islands.) The judgment of the Board, delivered by Lord Briggs JSC, is clear and comprehensive and mentions specific points of direct relevance to this case, and I shall set out much of what it said concerning the law.
"14. A just and equitable winding up may be ordered where the company's members have fallen out in two related but distinct situations, which may or may not overlap. First, a winding up may be ordered to resolve what may conveniently be labelled a functional deadlock. This is where an inability of members to co-operate in the management of the company's affairs leads to an inability of the company to function at board or shareholder level. …
15. Secondly, where the company is a corporate quasi-partnership, an irretrievable breakdown in trust and confidence between the participating members may justify a just and equitable winding up, essentially on the same grounds as would justify the dissolution of a true partnership. This jurisprudence was developed as an aspect of the law of partnership in England in the mid-19th century, and is exemplified in the following passage from the judgment of Sir John Romilly MR in Harrison v Tennant (1856) 21 Beav 482, 496—497:
'I do not base my decision upon any particular reported case, but upon the principle that the circumstances under which the parties entered into the partnership have, by matters over which they have no control, materially altered, that these altered circumstances have, combined with the conduct of the parties themselves, produced a mistrust which the court cannot say is unreasonable; and that, taking all these things together, it is impossible that the partnership can be conducted upon the footing on which it was originally contemplated, without injury to all these persons concerned, and that taking all these matters together, it makes this a case in which, in my opinion, it is the duty of the court to pronounce a decree for the dissolution of the partnership.'
It is clear, for example from Pease v Hewitt (1862) 31Beav 22 and Atwood v Maude (1868) LR 3 Ch App 369, 373, that a dissolution of a partnership might be ordered even where both parties were to blame for the breakdown in mutual trust and confidence.
…
17. The important potential distinction between the two types of breakdown case is this. If there is a complete functional deadlock, then a winding up may be ordered regardless whether the company is a corporate quasi-partnership. But if the company is of that type, then a breakdown of trust and confidence may justify a winding up even where there may not be a complete functional deadlock. In the former case winding up is a remedy for paralysis. In the latter it is the response of equity to a state of affairs between individuals who agreed to work together on the basis of mutual trust and confidence where that trust and confidence has completely gone. But of course both may exist together, and a complete breakdown in trust and confidence may well be the cause of functional deadlock, in a two party quasi-partnership like the present.
18. The well-known leading case on whether a company is a quasi-partnership is In re Westbourne Galleries Ltd; Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 ('the Ebrahimi case'). It contains a summary of the circumstances in which the relationship between the members of a company may cause their strict legal rights to be subjected to equitable considerations which has stood the test of time. At pp 379—380 Lord Wilberforce said:
'The foundation of it all lies in the words "just and equitable" and, if there is any respect in which some of the cases may be open to criticism, it is that the courts may sometimes have been too timorous in giving them full force.
The words are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure.
That structure is defined by the Companies Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The "just and equitable" provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way.
It would be impossible, and wholly undesirable, to define the circumstances in which these considerations may arise. Certainly the fact that a company is a small one, or a private company, is not enough. There are very many of these where the association is a purely commercial one, of which it can safely be said that the basis of association is adequately and exhaustively laid down in the articles. The superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements: (i) an association formed or continued on the basis of a personal relationship, involving mutual confidence—this element will often be found where a pre-existing partnership has been converted into a limited company; (ii) an agreement, or understanding, that all, or some (for there may be "sleeping" members), of the shareholders shall participate in the conduct of the business; (iii) restriction upon the transfer of the members' interest in the company—so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.
It is these, and analogous, factors which may bring into play the just and equitable clause, and they do so directly, through the force of the words themselves. To refer, as so many of the cases do, to "quasi-partnerships" or "in substance partnerships" may be convenient but may also be confusing. It may be convenient because it is the law of partnership which has developed the conceptions of probity, good faith and mutual confidence, and the remedies where these are absent, which become relevant once such factors as I have mentioned are found to exist: the words "just and equitable" sum these up in the law of partnership itself. And in many, but not necessarily all, cases there has been a pre-existing partnership the obligations of which it is reasonable to suppose continue to underlie the new company structure. But the expressions may be confusing if they obscure, or deny, the fact that the parties (possibly former partners) are now co-members in a company, who have accepted, in law, new obligations.
A company, however small, however domestic, is a company not a partnership or even a quasi-partnership and it is through the just and equitable clause that obligations, common to partnership relations, may come in.'
19. The Ebrahimi case reinforces the principle that an applicant for a just and equitable winding up is not barred from his remedy merely because the breakdown or deadlock upon which he relies has been caused to some extent by his own fault. As Lord Cross put it, at pp 383-384:
'People do not become partners unless they have confidence in one another and it is of the essence of the relationship that mutual confidence is maintained. If neither has any longer confidence in the other so that they cannot work together in the way originally contemplated then the relationship should be ended unless, indeed, the party who wishes to end it has been solely responsible for the situation which has arisen.'
20. It is well established that winding up is a shareholders' remedy of last resort. But this does not mean that winding up is unavailable to members if they have any other remedy. The member retains a significant element of choice in the remedy to be sought, even though the court has the last word. As is clearly enshrined in section 167(3) of the 2003 Act [corresponding to section 125(2) of the Insolvency Act 1986], the court carries out a three-stage analysis, asking: (a) Is the applicant entitled to some relief? (b) If so, would a winding up be just and equitable if there were no other remedy available? (c) If so, has the applicant unreasonably failed to pursue some other available remedy instead of seeking winding up?
21. The legal burden of proof is on the applicant at stages (a) and (b). But it shifts to the respondent at stage (c) … In In re a Company (No 2567 of 1982) [1983] 1 WLR 927, 933, Vinelott J held that 'other remedy' in section 225(2) [of the Companies Act 1948, a forerunner of section 125(2) of the Insolvency Act 1986] was not limited to a statutory remedy provided only by the court. For example, an unreasonable refusal to accept a fair offer for the applicant's shares might bar relief by way of winding up. The Board agrees with this analysis."
Discussion
Tangible benefit: standing
- Mr Johnson submitted that the Petitioner had not established that he stood to receive a "tangible benefit" in a winding up of the Company, and that therefore the Petitioner lacked standing to bring and pursue the petition. He relied on the decision of the Court of Appeal in In re Rica Gold Washing Company (1879) 11 Ch D 36, where a fully paid-up shareholder in a company that had no assets sought a winding up order in order to bring about an investigation into allegedly fraudulent practices. The headnote of the report begins:
"A fully paid-up shareholder who presents a petition to wind up the company must both allege in his petition and show by evidence that there are assets of the company of such an amount that in the event of a winding-up he would have a tangible share of surplus to receive."
The principle was stated by Sir George Jessel M.R. at 42-43:
"Now I will say a word or two on the law as regards the position of a petitioner holding fully paid-up shares. He is not liable to contribute anything towards the assets of the company, and if he has any interest at all, it must be that after full payment of all the debts and liabilities of the company there will remain a surplus divisible among the shareholders of sufficient value to authorise him to present a petition. That being his position, and the rule being that the petitioner must succeed upon allegations which are proved, of course the petitioner must show the court by sufficient allegation that he has a sufficient interest to entitle him to ask for the winding up of the company. I say 'a sufficient interest', for the mere allegation of a surplus or of a probable surplus will not be sufficient. He must show what I may call a tangible interest. I am not going to lay down any rule as to what that must be, but if he showed only that there was such a surplus as, on being fairly divided, irrespective of the costs of the winding up, would give him £5, I should say that would not be sufficient to induce the court to interfere in his behalf."
In In re Chesterfield Catering Co. Ltd. [1977] Ch 373, at 379, Oliver J said that that passage laid down a rule, to which the only exception was:
"that a petition will not be regarded as demurrable on the ground of the petitioner's lack of locus standi if his inability to prove his locus standi is due to the company's own default in providing him with information to which, as a member, he is entitled."
Oliver J also observed that the concluding words of section 125(1) did not abrogate the rule.
- Mr Johnson submitted that the petition did not aver facts constituting a tangible benefit to him in the event of a winding up. He further submitted that, as the Property could not be taken to be included among the assets of the Company, and as the Company's accounts had not been put in evidence, there was no basis on which the court could find that a winding up of the Company would result in a tangible benefit to the Petitioner.
- I reject this submission. The petition treats the Property as being a beneficial asset of the Company; as I have said, I proceed on a different basis. However, the valuation of the Property obtained in July 2022 valued it at £200,000. This tends to suggest that, in the community-led negotiations in August 2022 (which are referred to in the petition), a 50% interest in the Company was being valued at around £60,000 to £70,000. Recent offers and counter-offers imply similar assumptions. The alternative offers made by the Petitioner on 6 July 2023 indicate a lower value of the Property (in line with a valuation of £140,000 in May 2021) and might therefore indicate a higher valuation of the Company. At all events, the evidence indicates clearly that the parties themselves are attributing significant value to the Company. This, together with the fact that the Business continues to trade and that the Respondent wants to acquire the Petitioner's share in it for value, is enough to satisfy me that a challenge to the Petitioner's standing ought not to succeed. If and insofar as the challenge rests on a pleading point: first, the point ought to have been taken earlier, and not in the skeleton argument for trial; second, I regard the petition as formally adequate; third, I would if necessary have given permission for an amendment to cure any formal defect. It is as well, in a relatively simple case (however hard to answer) arising from a straightforward factual situation, not to lose touch entirely with practical common sense.
Functional deadlock
- Functional deadlock exists "where an inability of members to co-operate in the management of the company's affairs leads to an inability of the company to function at board or shareholder level": Lau v Chu at [14] (emphasis added). The final words in that passage indicate that the fact that the Company has been able to continue trading is not itself conclusive of the absence of functional deadlock. Nevertheless, in what is effectively a two-man restaurant business, the continued ability to trade is, in my view, some indication that there is no deadlock. Winding up on account of deadlock is "a remedy for paralysis", and there may be a breakdown of trust and confidence without there being also a deadlock: Lau v Chu at [17].
- In my judgment, there is no functional deadlock in the Company.
- The following passages in the petition set out the case as to deadlock.
"8. The Petitioner therefore asks that the court wind up the Company on the basis that to do so would be just and equitable because of the following matters (which are discussed in more detail below):
…
c. Preventing, by intimidation and threats, the Petitioner from participating in the management of the Company; …"
"32. To date a number of further issues have arisen due to the conflict, including but not limited to:
a. The roof of the Property requires repair, something which has not been discussed despite some emergency patching undertaking last year;
b. Renovations of the upstairs elements of the Property, including several rooms and offices;
c. General maintenance, including painting of the Property is required, but cannot be agreed;
d. Repairs are required to facilities, including the men's toilets and car park area, where potholes are causing a health and safety concern; and
e. The restaurant has been unable to reprice its menu in light of the current increase in costs, this has led to a deterioration in the profitability of the business."
"42. This [the failure of community-led negotiations in 2022 and 2023] has led to a paralysis of the Company, with the Petitioner unable to participate in the management of the Company and having lost all trust and confidence in the First Respondent and the continuation of the Company.
Conclusion
43. The Company is in deadlock, as neither the Petitioner nor the First Respondent can make a decision without the other, and given the First Respondent's behaviour the Petitioner is not minded to continue in business with him."
- The allegation that the Petitioner has been excluded, whether by intimidation and threats or otherwise, from participation in the management of the Company was not supported by the written or oral evidence—indeed, in cross-examination the Petitioner accepted that he was not excluded from participation in management—and was not pursued at trial.
- The allegation concerning pricing of the menu seems to me to be nothing more than a commercial disagreement between the two men. There is nothing untoward about that; in his witness statement the Petitioner himself said that, during the "very long time" over which they had worked together, "there had previously been disagreements of a normal business nature." This appears to be another such disagreement. In fact, there is very little evidence—especially from the Petitioner—about the precise nature of the disagreement. So far as I can make out, the Petitioner is more eager to increase prices to take account of increased costs, and the Respondent, who denies that he has refused to increase prices, takes a more cautious approach because of the impact of higher prices on the customer base in times of financial stringency. I have no idea which of them, if either, has the better view. But I do not see this commercial disagreement as justifying invocation of the concept of functional deadlock, far less as showing any basis on which it would be just and equitable to wind up the Company.
- As for repairs to the Property, there are a number of points to be made. First, as I have already explained, it seems to me at present that the Property is beneficially owned by the Petitioner and the Respondent, not by the Company, and there is no evidence that the Company is liable for repairs. The winding up of the Company would not resolve any deadlock, though I accept that it might in due course pave the way for the parties to dispose of the Property. Second, the fact, if it be such, that maintenance and repairs are required does not show that there is functional deadlock in the Company, merely that there are outstanding items of maintenance and repair. Third, the Petitioner's evidence on these matters rests at the highest level of generality and the barest level of assertion; I refer, for example, to paragraph 36 of his first witness statement. In his second witness statement, he said at paragraph 14: "Since the assault, I have cooperated with the First Respondent as required to ensure that the business continues to operate until this matter is resolved." That is confirmed by the continued trading of the Business. However, when it comes to the repairs and maintenance, he states (paragraphs 29 and 31): "It has not been possible to arrange for the necessary repairs and maintenance to be carried out due to the breakdown in the relationship between the First Respondent and me. … The repairs are not able to be carried out as neither I nor the First Respondent are able to work together effectively as a result of the breakdown of trust between us." In the absence of any explanation of the latter statements, they appear to be inconsistent both with the former statement and with the continued trading of the Company. They also raise the question why it has not proved possible to do supposedly necessary decorative works in the restaurant itself, while it has proved possible to do emergency patching to the roof (as alleged in the petition). Fourth, the evidence of necessary works is meagre. There is no evidence, beyond the Petitioner's assertion, that any repairs to the roof are required at this time. There are no photographs of potholes in the car park. The Respondent accepted in his witness statement that there was a leak at the alleyway beside the Property, but in his oral evidence he said that it had been repaired. It is common ground that there are repairs and refurbishment required on the upper floors of the Property, but there is a dispute as to why they have not been carried out. Anyway, those areas are not part of the restaurant and there is no evidence to persuade me that they are the responsibility of the Company or the result of deadlock in the management of the Company, or indeed that the carrying out of the works has any bearing on the operation of the Business. The photographs purporting to show the need for decoration in the restaurant indicate only trivial matters.
Breakdown of trust and confidence
- In my judgment, however, there has been an irretrievable breakdown in trust and confidence between the Petitioner and the Respondent, such as would be capable of justifying the dissolution of a true partnership. The circumstances in which the superimposition of equitable principles upon the corporate framework established by the articles is likely to be justified, as explained by Lord Wilberforce in the Ebrahimi case, clearly obtain here. The association between the parties was formed and has long continued on the basis of a personal relationship that was for many years formalised in a true partnership and, after incorporation, has seen the business carried on in substantially the same way. It has clearly been understood that both men are to be fully involved in the business, and (the Petitioner's health issues aside) they have been. What appears from the evidence to be the informal way in which the Property has been utilised for the Company, though jointly owned by the parties, tends to provide some indirect confirmation that they have run the business on the basis not so much of rights and duties defined by the corporate constitution but on the basis of their mutual trust and confidence and personal relationship Even though the parties have been able to keep the business running since their falling out, their current mutual distrust and antipathy are evident from the narrative set out above, were manifest in the course of the hearing, and are such that they continue to work together by necessity alone.
- I regard both parties as having contributed to the breakdown of trust and confidence. The Respondent contributed in particular by assaulting the Petitioner. Although the incident has been exaggerated by the Petitioner, it is not to be dismissed as of no importance; the Petitioner has been understandably upset by it, though I do not believe that he is (as he claims to be) afraid of the Respondent. The Petitioner has contributed to the breakdown, in particular by his threats to shut down the business and the steps he took to bring that about: see in particular paragraphs 22, 26 and 27 above. Underlying these matters is something for which neither party can be held responsible, namely the Petitioner's poor health and his consequent inability to continue to play the part he used to in the business. At all events, it is important to remember that a winding-up order can be made even if both parties were to blame for the breakdown in mutual trust and confidence; only if the petitioner has been "solely responsible for the situation which has arisen" should his contribution to that situation preclude a winding up order: ibid: see Lau v Chu at [15] and [19]. That is not the case here. Accordingly, I turn to consider whether it is just and equitable to make a winding-up order.
Is a winding-up order an appropriate remedy?
- This question is to be answered by means of the three-stage analysis identified in Lau v Chu at [20]. The three stages reflect the structure of section 125 of the Insolvency Act 1986. However, it does seem to me that, where equitable considerations are concerned, the different stages of the analysis need not be (so to speak) hermetically sealed, and that matters relevant to one stage of analysis may also be relevant to other stages. (Compare the analytical framework of proprietary estoppel.)
- In short, I am satisfied that the Petitioner is entitled to some relief, because otherwise he would for practical purposes be tied into a quasi-partnership with the Respondent in circumstances where the mutual trust and confidence that formed the basis of the relationship had been destroyed. I am also satisfied, for the same reason, that, if no other remedy were available to the Petitioner, it would be just and equitable that the Company should be wound up. But I do not consider it just and equitable to make a winding-up order, because I am satisfied that some other remedy is available to the Petitioner and that he is acting unreasonably in seeking to have the Company wound up instead of pursuing that other remedy.
- The "other remedy" available to the Petitioner is the sale of his interest in the Company—and, in all likelihood, his interest in the Property, with which a winding-up order seems inapt to deal—to the Respondent.
- On behalf of the Petitioner, it is maintained that it is not unreasonable of him to refuse to sell his interest to the Respondent but instead to seek a winding-up order. This invites examination of the Petitioner's reasons. Why is he seeking a winding-up order? Why will he not sell to the Respondent? What is he trying to achieve?
- The Petitioner, in correspondence and in his evidence, has given several reasons for his repeated offers to buy the Respondent's shares in the Company and the Property and his persistent preference for a winding-up order to a sale of his own shares to the Respondent. First, he says that he wants to continue to run the Business. Second, he says that he does not regard the Respondent's offers to buy his share as made in good faith and does not believe that the Respondent would perform any agreement to buy his share. Third, he is clear that he does not want the Respondent to benefit from his own wrong.
- I regard the third reason as the true one. The concern that the Respondent should derive no benefit from the consequences of the assault was expressly stated both by the Petitioner in evidence and by Mr Hannant in his closing submissions. I bear in mind, of course, that in the initial community-led negotiations the Petitioner did offer to sell his shares to the Respondent. However, I think that there are two important factors to consider: first, that there was fairly clearly a good deal of social pressure (I in no way suggest improper pressure) to reach a quick agreement; second, that the Petitioner was plainly angered by the Respondent's decision to resile from the agreement actually reached, namely that he would sell his share to the Petitioner. Although the Petitioner initially expressed willingness to sell to the Respondent, he has since been adamant that he will not do so because the Respondent must not benefit from his own wrong. So the Petitioner's position on this point has hardened.
- I reject the other reasons given by the Petitioner for refusing the Respondent's offers. The second reason does not make sense, because there is no good reason to suppose that the Respondent is less to be trusted in an agreement to buy the Petitioner's share than in an agreement to sell his own share to the Petitioner. I regard the second reason as being both a mere excuse and a deliberate display of mistrust.
- I also do not believe the first reason. I consider it unlikely that the Petitioner genuinely wants to run the Business. He has a long history of poor health, and he was actively contemplating retirement roughly three years ago and was apparently struggling with work in the Business. Perhaps more significant is the Petitioner's attitude towards a winding-up order. At the conclusion of his evidence, I tried to elicit from him what he envisaged as the result of a winding-up order. His reply was to the effect that it would bring the Business to an end—which was unfortunate but the way things go with businesses—and result in a distribution to the shareholders. In his closing submissions, Mr Hannant insisted that the Petitioner's intention was to buy the Company's assets from the liquidator, so that he could carry on the Business for himself. However, that was the very answer that the Petitioner failed to give to me. I do not think that this ought to be dismissed as an oversight or misunderstanding on the Petitioner's part. I deliberately gave him every opportunity to tell me that, as the Respondent would not sell to him, he was hoping that the liquidator would, but it was clear that this was not in his mind. In that regard, I note the following passage in the letter dated 29 August 2024 from the Respondent's solicitors, shortly after the hearing on 21 August 2024:
"We refer to the recent directions hearing before HHJ Jarman KC.
…
At the hearing, the judge asked your Counsel what your client wanted and your Counsel replied that your client wanted the business to be wound up and any assets distributed.
When it was pointed out that open offers had been made for his share in the business, the Judge asked why these offers had not been accepted or pursued. This was a very pertinent question as your client was asking the Court to accept that a winding up order was the only means of him leaving the business and realising his share. With respect, it would be obvious to any objective observer that selling a share would likely realise significantly more than a distribution of assets after a winding up order.
The only response offered by your Counsel was that your client did not believe that the offers had been made in good faith or would be honoured.
This response was frankly remarkable and overlooks the fact that your client has never expressed any interest in selling his share in the business or testing whether our client's offers were genuine. The other obvious point is that the property from which the Company trades is not owned by the Company, but our respective clients and any winding up order would not address the sale of the property.
Taking a step back as the Honourable Judge did at the hearing, your client is asking the Court to wind up an ongoing and profitable business so that your client can realise his share, when he has already been offered significantly more than he would realise through a winding up order for that share."
The response to that letter from the Petitioner's solicitors on 13 September 2024 did not dispute or even touch on what had been said at the case management conference. The closest it came to doing so was the following passage:
"Our Client does not want to sell his share. He does not wish to retire from the business. He does not wish for your Client to benefit from being the sole owner of the business as a result of his assault on our Client.
For these reasons, your Client's offer [see paragraph 34 above] cannot be accepted."
- The attitude displayed by the Petitioner is of a piece with his immediate reaction to the incident on 31 July 2022, which showed a willingness to cut off his nose to spite his face. It may be that the Petitioner is willing to bid to acquire the Business from the liquidator, if that is necessary in order to prevent the Respondent acquiring it. I also acknowledge his initial offer to sell to the Respondent (as to which, see my remarks above). But whereas the Petitioner has questioned the good faith of the Respondent's offers to acquire his share, I am doubtful whether his own offers to acquire the Respondent's share were made in the hope of or even desire for their acceptance: they might have a tactical advantage, but there was little likelihood that they would actually be accepted. I do not believe that he genuinely wishes to take over and run the Business. That he seeks in these proceedings a remedy that, on his own account, would bring the Business to an end, is an indication of this.
- For the Respondent, Mr Johnson submitted that the Petitioner was acting unreasonably in pursuing a winding-up order rather than a remedy under section 994 of the Companies Act 2006. I am not persuaded of that and would not have refused a winding-up order on that basis. A petition under section 994 must be based on the conduct of the company's affairs, not with the acts of the members themselves in their capacity as such. It is at least seriously arguable that the matters relied on by the Petitioner, insofar as they have any real substance, would not suffice to ground such a petition. There would also be a question whether, if (contrary to my view) the Petitioner were genuinely desirous of running the Business on his own account, an order requiring the sale of the Respondent's share would be considered appropriate relief—such a remedy is certainly available, but it is unusual and might give rise to difficult questions.
- However, as explained above, I consider that the Petitioner is acting unreasonably in pursuing a winding-up order instead of seeking agreement to sell his share in the Company (and, indeed, in the Property) to the Respondent. The correspondence sent on behalf of the Petitioner has characterised his position as one of being locked into the Company, so that a winding-up order is his only escape unless the Respondent will sell to him. That is not true. He does not want to sell to the Respondent for reasons that amount to personal animus. I do not regard his position as reasonable and do not consider that it is just and equitable to wind up the Company.
