John Leslie Taylor v The Whitehall Partnership Limited & Anor.

It concerns me that what should have been a straightforward case involving whether the Company should be wound up has become so complicated. It may not have been if – as is now common practice (in the Business and Property Courts of England and Wales at least) – directions had been given when this case was being case-managed that it be tried by “pleadings”, i.e., points of claim, points of defence and the like, as appears now to be characteristic for unfair prejudice petitions (Footnote: ³ ) . As the main issue – on the part of the Respondent at any rate – was that the deadlock in the Company and the loss of mutual trust and confidence in the Company was caused entirely by the Petitioner, the questioning concentrated largely on the documents included in the bundles (Footnote: ⁴ ) , which meant that both parties – particularly the Petitioner – had to be taken through those documents to provide an explanation about their conduct by reference to the documents (Footnote: ⁵ ) . In addition, several matters were raised for the first time in the course of the trial by reference to the documents contained in the bundle or the answers given to the questions raised by one or the other party. What should have been a trial of a maximum of 2 days, therefore, took almost 6 days (without judgment being given) to complete.

The court might have made an order for disclosure and is likely to have done so if this case had been directed to be tried by pleadings (Footnote: ⁶ ) . In any event, even without such an order, the disclosure given by the Petitioner to the Respondent has been woeful. The Respondent had challenged several aspects of the Petitioner’s conduct, particularly in relation to the setting up by him of his new enterprises. He failed to provide any disclosure about those and many other matters, which made the evidence that he was giving very difficult to verify. It was not necessary for a formal order for disclosure to be made for this information to be given. The Petitioner should have provided the Respondent with any reasonable information concerning his new enterprises in order that the veracity of what he was saying could be tested, particularly as this had been raised as an issue by the Respondent. He failed to do so.

The Petitioner raised every conceivable point to support his claim that the deadlock between the parties or the loss of mutual trust and confidence had been contributed to, at least in part, by the Respondent. As noted throughout this judgment, some of these points were raised for the first time in the course of the trial. I have not considered it appropriate to decide every point which has been advanced by the Petitioner in these proceedings in order to determine the issues in the Petition. It is only necessary for me to decide whether the matters relied upon by the Petitioner are supported by the evidence which I have heard and, if they are, whether they warrant the relief sought by him against Respondent being granted: see, by way of examples,  Weymont v Place [2015] EWCA Civ 289, [4]-[6], per Patten LJ; and  English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605; [2002] 1 WLR 2409.

On the basis that the Respondent was in person, I considered it appropriate to undertake some of the questioning of the Petitioner myself in order to ensure that I had a complete picture of the evidence which he was giving to the court. I did so in line with CPR 3.1A, which I construe to apply not just to case-management and similar hearings but also to the case-management of the trial of a claim, and para. 65 of the Equal Treatment Bench Book (February 2021 Edition).

I am grateful to Mr Willetts for raising no objection to my taking this course of action. I indicated to Mr Willetts that if he thought I was asking questions above and beyond any attempt on my part to assist the Respondent, he should tell me. He did not stop me at any stage. The intervention on my part made it possible for me to obtain a much clearer basis upon which the Petitioner was seeking to advance his case before the court for a winding up order.

It is also appropriate to mention that the Petition or the witness statement in support should have contained all the facts and matters relied upon to support the making of a winding up order. Neither the Petition nor the witness statement of the Petitioner dated 10 August 2022 in support of the Petition does so. The witness statement contains the principal grounds upon which a winding up order is sought. Other than giving background information and referring to the deadlock between the parties, it provides almost no information about why the Company should be wound up (Footnote: ⁷ ) . In the circumstances, the Respondent could – and if she was properly advised is likely to – have applied to strike out the Petition on the basis that it could not support the making of a winding up order and it is difficult to see how, on the material before the court, the Petitioner could have resisted that: see, by way of example, Re WR Willcocks & Co [1974] Ch. 163.

I found much of the evidence of the Petitioner on the matters which were in issue between him and the Respondent difficult to accept.

The Petitioner gave a completely distorted picture about the Respondent’s conduct both in his written and oral evidence. He sought to portray himself as the victim of the Respondent’s conduct, while at the same time making scant mention of his own appalling conduct. His answers to questions were long and convoluted, often not answering the questions put to him. He sought to avoid answering questions which he found difficult to deal with and his response even to straightforward questions was to seek to blame the Respondent for their fallout, even though it is plain that the Respondent was little to blame for it. At times, I found the evidence which he gave to be simply untruthful. I will deal with examples of this below and as I analyse the various issues I need to determine.

I found the Petitioner’s evidence on the important issue of why he thought it appropriate to unilaterally remove the Respondent as a director of the Company and to write to the Financial Conduct Authority (i.e., the FCA) to remove her SMF3 authorisation on two occasions to be vague, evasive and entirely unconvincing.

In the course of giving his evidence, the Petitioner appeared to suggest that he was unaware that he could not remove the Respondent as a director of the Company or withdraw her SMF authorisation as he had done. He said that he had done so because the relationship had become so bad between them that he could not “even order a bag of coffee beans without controversy”. He said that he did what he thought he had to “purely to protect the business [of the company]” and that as “[the Respondent] longer carried out work, it would be necessary to remove the control function for her for disclosure purposes”.

There is no substance whatsoever in this. He has been a company director for many years and must have known that he could not remove another director without going through the necessary machinery under the company’s constitution to do so. He was also fully aware of the practice and procedures of the FCA and well knew that he could not unilaterally withdraw a person’s SMF3 authorisation. He could have sought the advice of Mr Mummery-Smith (Footnote: ⁸ ) or others – but did not do so. He took the view that as the Respondent was no longer employed by the Company, he could treat the Company as his own and unilaterally take these steps – and did so without notifying the Respondent. What is more, he withdrew the SMF3 authorisation of the Respondent twice, so the excuse that he gave of not knowing that he could not do this simply does not withstand proper scrutiny.

Of course, the Petitioner withdrew the steps which he took after the FCA wrote to him, but it shows that the Petitioner regarded the Company as belonging to him and that he could do as he pleased in running its affairs, even though the Respondent and he were equal directors and shareholders in the Company.

The Petitioner first sought to withdraw the Respondent SMF3 authorisation in December 2019. It is appropriate to set out what the FCA said in its letter to the Company dated 7 August 2020 in relation to his having done this:

There is little mention of this in either of his witness statements. It took a lot of questions for him to finally admit that he should not have done what he did. As I have said, despite knowing that he was not able to withdraw the Respondent’s SMF3 authorisation, he purported to do so again on 12 May 2021 and was required again to reinstate it on 25 February 2022 by the FCA.

In addition, it is interesting to note that, in providing his purported explanation to the FCA about the steps that the Petitioner took, the FCA observed that “Mr Taylor was not sufficiently open in the original application papers and subsequent correspondence with us regarding Joanne Taylor's position in the firm, and the purpose of her removal as CF1”. That was largely the impression I got of his evidence on this point.

Likewise, his conduct in relation to the setting up of his new enterprises, Whitehall Partnership LLP and Whitehall Equity Release Ltd. He was asked several questions about these enterprises before he finally admitted that they did or intended to operate in the same or similar business as the Company. Three points are appropriate for mention in this context: first, there is very little about this in either of his witness statements, which is surprising given that the matter was raised by the Respondent in her first witness statement; second, the Petitioner relies as one of his grounds in support of the Petition (see para. 27 of his first witness statement) the fact that the Respondent had set up a new company without his knowledge but makes no mention of his having set up businesses which undertake a similar business to the business of the Company; and third, he has provided no disclosure (Footnote: ⁹ ) to the Respondent about the businesses of these new enterprises and, specifically, whether any of the clients of the enterprises are or may be former clients or connections of the Company.

As I have said, the Petitioner was not forthcoming, on this issue, in the course of giving evidence about his new enterprises. So far as he suggests that these enterprises are not in the same business as the Company, on the evidence I have heard and seen, I reject what he has to say. His own email, in response to the Respondent’s email about this, suggests that there is some substance in what the Respondent is saying. In her email to the Petitioner dated 16 August 2019, the Respondent said:

If I have any criticism of the Respondent, it is that she questioned the Petitioner on every point (however small) in support of the position which she was advancing before the court. Much of the cross-examination on the first day of the trial, for example, was unnecessary, repetitive and excessive.

Although she appeared in person, she had a complete grasp of the documents which were included in the Bundle. The fact that she sought to question the Petitioner on every conceivable point included in the Bundles shows only too clearly how – as Mr Mummery-Smith observed in his witness statement – “fastidious, detail-orientated, extremely-motivated and conscientious” the Respondent is and how she understood – and was prepared to argue – every detail of the case against her. These observations were also echoed by Employment Judge Wilkinson at para. 22 of his written judgment in the claim which the Respondent brought against the Company in relation to the termination of her employment.

Had the case-management directions included the parties’ respective cases being dealt with by “pleadings”, I may have limited her cross-examination of the Petitioner. However, on the basis that the Petitioner (initially at least) was laying the entire blame for the deadlock on her, she was entitled to ask him questions about how what he was saying could be consistent with several of the documents included in the Bundle, which she contended suggested otherwise, particularly as the Petitioner’s witness statements failed to deal properly with a number of the allegations made by the Respondent against the Petitioner. In addition, of course, she was in person and deserved some leeway in the way in which her questioning of the Petitioner was conducted.

As I have indicated, I have taken the position of the Respondent in these proceedings to be that she does not agree to a winding up order being made under any circumstances, so I must either decide either that the Company should be wound up on the evidence which I have seen and heard, or that it should not. If I decide against the making of a winding up order, I must dismiss the Petition. What then happens to the Company is not for me to consider, though it is likely to be placed in an invidious position. As she is not the petitioner, her motive in wishing the Petition to be dismissed is not relevant, though I accept her evidence that she hopes to be able to run the Company without the Petitioner and will, if the Petition is dismissed, either explore the possibility of putting together a team of professionals to enable her to do so or see if she can get investors to invest in the Company. Whether or not she will be successful is another matter, though it is not an aspect of this case that I am able to take into account. In short, she is perfectly entitled to invite the court to dismiss the Petition if the case for the winding up has not been made out by the Petitioner, regardless of what happens to the Company as a result.

The Respondent’s evidence was also fair and even-handed. She did not take any false points and was prepared to be corrected whenever that was appropriate. She did not make untruthful allegations against the Petitioner, as the Petitioner was prepared to do against her. Nor did she make allegations for which she did not have supporting information or evidence. For example, she properly indicated that she could not be sure whether any of the clients of the Company had left to join the Petitioner in his new enterprises. She “suspected” that some may have done but she could not go beyond asserting that this was simply her suspicion.

I, therefore, accept the substance of her evidence.

There is one requirement for the making of a winding up order about which there is, or can be, no issue between the parties: that requirement relates to whether the Company is deadlocked and whether the trust and confidence between the parties has been destroyed.

As at today’s date, the Company is plainly deadlocked and there is no question that there is no longer any mutual trust and confidence between the parties. Although, in the course of her submissions, the Respondent sought to suggest otherwise, I believe that she was confusing the existence of the deadlock and loss of trust and confidence with who was responsible for having caused them.

That the Respondent accepts that she and the Petitioner are deadlocked and there is no trust and confidence between them is admitted in her witness statement: see paras. 85-90 of her first witness statement dated 17 September 2022. Whatever views the Respondent has about the future of the Company, it cannot include any expectation that the Company will be able continue in business with both the Petitioner and the Respondent being involved in its running.

Nor can there be any issue about the Petitioner’s standing to bring the petition. He plainly satisfies the requirements of s. 124(2) of the IA 1986. The Respondent conceded this.

The Respondent no longer contends that the Petition should have been advertised. That must be right. Unlike a petition presented by a creditor, a petition brought by a contributory does not need to be advertised unless the court directs that it should be. It will be very unusual for the court to do so and, in the present case, no such direction was given.

Has the Petitioner exhausted all the remedies reasonably available to him before bringing the Petition?

Before presenting the Petition, the Petitioner brought an unfair prejudice petition (“the Unfair Prejudice Petition”) under s. 994 of the Companies Act 2006 against the Respondent seeking an order from the court that the Respondent sell her shares in the Company to the Petitioner at a price determined by the court. The Unfair Prejudice Petition was presented to the court in February 2021 and is included in the Bundle at page 60 onwards.

The grounds upon which the Unfair Prejudice Petition was presented are set out at pages 60-63 of the Bundle. They are broadly the same as the facts and matters, set out in the Petitioner’s written evidence, upon which the Petitioner relies in seeking a winding up order against the Company on the Petition. The Unfair Prejudice Petition would have been the ideal forum in which to the test those grounds.

If the grounds upon which the Petitioner relied in the Unfair Prejudice Petition had been made out at the hearing of that petition, the court is almost certainly likely to have granted the Petitioner the relief sought in that petition – i.e., that the Respondent sell her shares in the Company to the Petitioner at a price determined by it. The price would have taken into account all the matters upon which the Petitioner relied in contending that the rights and interests of the Petitioner had been unfairly prejudiced by the acts or omissions of the Respondent: see, by way of example, Scottish Cooperative Wholesale Society v Meyer [1959] A.C. 324 at 364, which states that, as a general rule, the court will value the shares of a respondent on the basis that the unfairly prejudicial conduct complained of had not taken place.

If the Petitioner had not established the grounds set out in the Unfair Prejudice Petition, the court is likely to have dismissed that petition. I do not know whether the Respondent had sought an order from the court (or intended to) that the Petitioner should sell his shares in the Company to her if the grounds set out in the petition were not established. The only documents in the Bundles are the Unfair Prejudice Petition and the order made by the District Judge Rich dated 19 November 2021. It is unlikely that she did (or intended to) and it is almost certain that the court would not have done so unless the Respondent had brought a cross-petition based on the Petitioner’s unfair prejudice (in which she had claimed that relief) and the grounds of the unfair prejudice upon which she relied had been established by her.

If the Unfair Prejudice Petition had been progressed to, and been dismissed at, trial, it might have been possible for the Petitioner to contend that he had reasonably pursued all the remedies which were available to him, and the deadlock had still not been resolved. But instead of bringing the Unfair Prejudice Petition to a conclusion by having it heard, and inviting an order for the sale of the Respondent’s shares at a price determined by the court which took full account of any “misconduct” or “prejudicial conduct” upon which he relied against the Respondent, he simply discontinued the Petition. The reason he did so is explained at para. 40 onwards of his first witness statement:

At para. 44 onwards of his skeleton argument, Mr Willetts sets out why the Petitioner has acted reasonably in seeking to have the Company wound up:

The Petitioner complains about the Respondent’s opposition to his Unfair Prejudice Petition. There is no substance in that point. The Respondent was perfectly entitled to oppose the Unfair Prejudice Petition. If she had not, the court is likely to have ordered the sale of her shares at a price which took account of the allegations which the Petitioner was making. The Respondent might have denied the allegations made against her by the Petitioner and agreed to sell her shares at a price to be determined by the court without taking those allegations into account. Whether or not the Respondent had agreed to that, the plain fact is that she was not obliged to. She was perfectly entitled to defend the petition based on what was said in it. I find it impossible to understand how she could be said to have behaved unreasonably by defending the petition and seeking a dismissal of it. She was not obliged to bring a cross-petition or seek any relief against the Respondent. It should, in those circumstances, have been up to the Petitioner to have had the petition tried and to have sought an order from the court for the sale of her shares in accordance with the prayer for relief set out in it.

Nor is there any substance in the point that the Respondent was not prepared to sell her shares based on any independent valuation of them. The court had directed the instruction of a single joint expert to value the shares. If the grounds set out in the petition had been established by the Petitioner, the court would undoubtedly have ordered her shares to be sold at a price determined by it, to take into account the value placed on them by the single joint expert. If the Respondent was being difficult – as the Petitioner contends – about cooperating with the instruction of a single joint expert, the Petitioner could have applied to the court for that expert to be nominated by the court or to give some other direction to enable it to have the material before it which would allow it to fix a price for the shares and – if the grounds in the petition could be established – to order the Respondent to sell the shares at that price. In fact, I was told by the Respondent, in closing, that the Petitioner had done that, but discontinued the Petition before the court could adjudicate upon that application. The fact of the Respondent asking for more money for the shares than they were worth is a complete irrelevance. If the Petitioner had proceeded with the petition, the value that the Respondent had placed on her shares would have been a complete non-issue. The court – not the Respondent – would have determined their value. So far as the Petitioner suggests otherwise, I reject what he says.

There is no merit in the Petitioner’s assertion that one of the reasons for not pursuing the Unfair Prejudice Petition was the costs he had incurred and the likely costs he would incur if the petition had to be tried. First, by discontinuing the petition, the Petitioner is not just liable for his costs of the Unfair Prejudice Petition but also the Respondent’s costs of that petition. In addition, it is difficult to see how his costs for pursuing the Present Petition are likely to be any less than the costs he is likely to have incurred if he had proceeded with Unfair Prejudice Petition, though both these matters are for detailed assessment. If the Unfair Prejudice Petition was going to last five days, then the trial time occupied in hearing the Present Petition has also been five days, though (I accept) it was given a two-day time estimate. However, to suggest he only became aware of his exposure to costs when his solicitors indicated to him that his costs budget might have to be increased seems to me to stretch credibility. He would have been told about the likely costs when he first instructed solicitors and would or should have been informed throughout the progress of the petition how the costs position would play out if the matter went to trial. An important purpose of costs budgeting is to provide an indication to a party of what costs they are likely to recover if they are successful in a claim or in a defence to a claim and what costs they are likely to have to pay to the successful party if their claim or defence is unsuccessful. If the litigation had become expensive to the Petitioner, he could have acted in person, as the Respondent was doing at the time, and continues to do. If he had decided to pursue a reasonable alternative remedy by bringing the Unfair Prejudice Petition, it is difficult to see why he would not have proceeded with it to a trial. If he had been successful, he could have recovered the costs of that petition from the Respondent, including possibly seeking a charging order over her shares to enforce those costs.

I do not, therefore, accept his reasons for discontinuing the petition. I find this to be clear not just from what I have said about but also by his current position relating to the Company.

On the second day of the trial, the Petitioner made an open offer to the Respondent in court that if the Respondent agreed to the making of a winding up order in respect of the Company, he would not claim the return of any capital of the Company in respect of his shareholding and would also not seek an order for the costs of the Petition against her. By that stage, the Petitioner had already incurred substantial costs in relation to Present Petition, so agreeing to forgo the costs of it if he was successful seems to me difficult to understand. I asked him if the offer to purchase the Respondent’s shares in the Company was still on the table. He told me that he was no longer prepared to buy the Respondent’s shares.

Even at that stage, the Petitioner was not prepared to consider pursuing a reasonable alternative remedy. If he had been prepared to enter into negotiations for the purchase of the Respondent’s shares, I might have been prepared to stay the petition for a short period to ascertain whether this was possible. Nor – despite asking Mr Willetts on a number of occasions – was he prepared to consider putting or assisting to put the Company into administration.

The Respondent believes that the Petitioner is motivated to seek a winding up order because he has already set up enterprises which trade, or will trade, doing the same business or businesses as the Company, and no longer needs to purchase the Respondent’s shares in the Company. If the Company is wound up, he will be able to walk away from the Company and possibly take several of the customers and clients of the Company to his new enterprises.

I am not going to speculate on why the offer to purchase the Respondent’s shares is no longer on the table, though there does appear to me to be considerable substance in what the Respondent says: if the Company is wound up, the Petitioner will simply be able to walk away from the Company, taking a significant part of the Company’s clients and customers to his new enterprise and, thereby, reduce the value of the shareholding of the parties to a negligible amount.

Whatever the reasons for the withdrawal of the offer, I am unable to accept that the reasons which he puts forward to the court for his abandonment of the Unfair Prejudice Petition are correct.

I should also add that I consider it highly unlikely, on the material that I have seen, that the Petitioner would have succeeded in the Unfair Prejudice Petition. The allegations he relied upon in that petition (which he also seeks to rely in seeking the winding of the Company) – even if they could be made out – are unlikely to have supported the making of an order for the relief sought in the petition. I cannot see how the Respondent can be criticised for pursuing complaints and claims against the Company or the Petitioner through the proper channels, even if they were found to be unmeritorious, still less that they amounted to prejudicial conduct on her part, particularly given the context in which they were made, i.e., the purported unilateral removal of her directorship and withdrawal of her SMF3 authorisation by the Petitioner. So far as the professionals instructed by the Company (such as ThreeSixty), there is no suggestion that they thought that the conduct of the Respondent was more culpable than that of the Petitioner: see the recommendations they make in their letter dated 29 August 2018.

Put simply and starkly, and taken at its highest, the Petitioner’s case on whether he pursued an alternative remedy is this: he started pursuing an alternative remedy by bringing the Unfair Prejudice Petition. He accepts that the court gave perfectly meaningful directions about how it might determine a fair price for the Respondent’s shares if he could prove his claim. However, he decided not to proceed with the alternative remedy because things got too much for him (particularly in terms of how much it would cost him to pursue that remedy). On that basis, he claims that he cannot be said not to have pursued the alternative remedy because he did, but only stopped pursuing it because it was getting too costly for him to do so, and the Respondent was seeking a price for her shares which he could not afford. He was, therefore, entitled to bring the Present Petition. How the Petitioner could conceivably be said to have pursued a reasonable alternative remedy, in these circumstances, is quite beyond my comprehension. In fact, he recognises this at para. 65 of his witness statement, in which he says:

But the Petitioner draws attention to the offer which he made for the purchase of the Respondent’s shares before launching his Unfair Prejudice Petition which he states demonstrates that that he made a reasonable offer which the Respondent unreasonable failed to take up.

The relevant exchanges on the point are at pages 347 onwards of the Bundle.

Page 347 of the Bundle contains a letter from Bridgepoint dated 16 August 2020 which sets out their involvement in the proposed purchase by the Petitioner of the Respondent’s shareholdings in the Company. This is the relevant excerpt from that letter:

The Respondent’s evidence was that this was not nearly as much as she believed her shares were worth. She was entitled to take that view.

Further offers for the purchase of the Respondent’s shares were made, including an offer of mediation on the part of the Petitioner, and the relevant pages are included at pages 331-333 and 414 and 417 of the Bundles. The letter at pages 313-333 is a letter (described as a “letter before action”) dated 15 December 2020 sent by the Petitioner’s former solicitors to the Respondent. That letter states that the Petitioner would be prepared to purchase the Respondent’s shares in the Company “at a valuation to be conducted by an independent accountant to be appointed (in default of agreement) by the President of the Institute of Chartered Accountants in England and Wales” on the basis that:

The letter also made it clear – a point upon which the Petitioner relies heavily – that if the proposals set out in it were not acceptable, the Petitioner would be prepared to consider “acceptable counter proposals”, failing which he would issue his Unfair Prejudice Petition. The letter also stated that the Petitioner would be prepared to go to mediation at any appropriate stage. The offer of mediation was repeated in their subsequent letters to the Respondent, included at pages 414 and 417 of the Bundle.

Prior to the above exchange, the Petitioner’s former solicitors had also indicated to the Respondent (see their letter dated 26 May 2020) that the Petitioner proposed that the Company pay the costs of the Respondent for any advice that she needed to take on the exchange of communication which she was having with the Petitioner relating to the proposed sale of her shares.

The Petitioner contends that this demonstrates three things: first, that the Petitioner did everything he could to resolve the deadlock which had arisen between the parties and that, rather than consider his proposals or come up with counter proposals for the determination of their dispute, she failed to respond substantively to his attempts to bring about a settlement of their dispute; second, referring to the dicta of Lord Briggs JSC in Lau v. Chu, that the court should not take an over-zealous approach to what remedies or options were available to, and should have been pursued by, the Petitioner. He had plainly pursued the most suitable remedy before resorting to the Unfair Prejudice Petition and, subsequently the Present Petition, and received no satisfactory response from the Respondent; and third, as the overtures he made were a genuine attempt to resolve the dispute, the court should take that into account in deciding how it should exercise its discretion.

I reject what he says. The offer on the table was for the Petitioner to buy the shares of the Respondent. He did not countenance the alternative possibility that the Respondent might have wished to purchase his shares and should have given her that option. Mr Willetts’ first response to that point was that the Respondent had not produced any evidence to demonstrate that she was in a position to pay for the Petitioner’s shares and then to say that having been invited to put forward counter proposals, the Respondent had failed to do that. I do not agree with either point. Despite the Petitioner’s former solicitors’ letter inviting the Respondent to put forward her counter proposals, the communication only refers to the proposed purchase by him of her shares, and this is reflected in the relief which the Petitioner sought in his Unfair Prejudice Petition. The apparent inability of the Respondent to provide evidence of her ability to purchase the shares is a complete non-point. If the Respondent was not given that option, it is difficult to see how the Petitioner can contend that even if that option had been given to her, she would not have been able to avail herself of that offer. It is, at least possible, that the Respondent would have been able to find the funds to purchase the Petitioner’s shares (Footnote: ¹¹ ) .

So far as the reference to mediation is concerned, I am not sure that it carries any great weight in the exercise of the discretion which the court has to undertake in the present case, though it may have some relevance on the issue of costs. In any event, the Respondent did not reject the offer of mediation as is clear from her letter dated 1 September 2022. I find the suggestion that the Company should pay the costs of the Respondent to take legal advice difficult to understand given that the parties were equal shareholders and directors in the Company, but demonstrates that, even on the Petitioner’s case, he seemed to think that he was entitled to treat the Company as his own to the exclusion of the Respondent (Footnote: ¹² ) .

But there are three other matters which wholly undermine the Petitioner’s case on this point. First, it is wrong to suggest that the Respondent failed to engage with the Petitioner in response to the proposals he was putting forward to her. The Respondent responded to the letter from the Petitioner’s former solicitors by email dated 27 December 2020 (which, inexplicable was not included by the Petitioner’s solicitors in the Bundle), in which she said, in terms, that she was not going to be badgered into selling her shares. Second, and more crucially, at that stage, she had been excluded from having any say in the running of the Company and had no access to the accounting records of the Company, despite having asked the Petitioner to provide her with her login credentials to access those records. In those circumstances, it is difficult to see how she could countenance the possibility of selling her shares, particularly as she was concerned that the Petitioner had “rendered her shares in the Company valueless”. Third, the Respondent suggested a sale of the shares of the Company to True Potential – see para 13 of her first witness statement – to which the reply of the Petitioner (contained at para. 28 of his witness statement) (Footnote: ¹³ ) was:

The proposal to approach True Potential was first made by the Respondent in December 2021. No response to this proposal was provided by the Petitioner until the service of his second witness statement. This was despite a reminder being sent by the Respondent to the Petitioner to the Petitioner’s solicitors on 1 September 2022 and a reminder being sent by her to the Petitioner on 4 October 2022. Even if the Petitioner is correct that this proposal was not viable – and I have serious misgivings about that – not to have responded to her until his second witness statement is difficult to understand. But, as I have pointed out above, this letter shows not only that the Respondent was not being obstructive with negotiations but perfectly willing to consider any proposal which did not undervalue the value of her shareholding in the Company. The Petitioner’s response to this proposal, made for the first time in his witness statement, demonstrates that the only proposal he was prepared to consider was a sale of the Respondent’s shares to him.

It is correct that the offer made by the Petitioner’s former solicitors in their letter dated 15 December 2020 referred to her having full access to the accounting information of the Company to enable her to consider the offer they were making on behalf of the Petitioner, but that was only if she agreed to the terms suggested in that letter.

Nor is there any substance in the suggestion that she did not cooperate with the Petitioner or the court in seeking to engage with the directions made by the court for the appointment of an independent valuer.

She plainly did, as is clear from her email to the Petitioner’s present solicitors dated 1 March 2022, which was also not included in the Bundle, but produced by her on 28 February 2023, the last day of the trial. When the point was first made by Mr Willetts, on behalf of the Petitioner that the Respondent had failed to cooperate with the appointment of an independent expert, I was left with the clear impression that she was being difficult and refusing to engage with the Petitioner and the Court in progressing the matter forward in accordance with the directions given by the court for appointing an independent valuer. However, nothing could have been further from the truth. Her email states that she does not agree to any of the three names put forward on behalf of the Petitioner because none of them seemed to her to be independent and she gave full reasons why. She had perfectly valid reasons for taking that view. She said that she was prepared to invite the court to appoint one in the absence of a suitable expert being agreed between them. She made that clear, stating in the final paragraphs of her email the following:

I should add that I have not seen any response to that letter (if there is one) but it seems to me clear that she was perfectly entitled to be satisfied that court-appointed the valuer should have no prior connection with the Petitioner. She believed – in my judgement, rightly – that the Petitioner was manipulating the whole process relating to the purchase of her shares and that she could only trust the court to put forward a name that was independent. She even agreed to provide her consent to a proposed order for that to be done. I was told on 28 February that having applied to the court to nominate an expert, the Petitioner discontinued the Unfair Prejudice Petition before the court could determine that application.

In the course of the trial, I broached with Mr Willetts the possibility of the Company being placed into administration. I said that I saw why that could be more advantageous than the winding up of the Company. An administrator would be able to continue to run the business of the Company and sell its goodwill and assets as going concern, which a liquidator would not be able to do.

Mr Willetts made two points in response. First, he said that the Company could not be put into administration without the cooperation of the Respondent and suggested that the Respondent might not cooperate with that course of action, though, of course either party could apply to the court for an administration order. There is no substance in that point. If the parties had discussed this or if the Petitioner – who was being advised by solicitors and counsel – had put this to the Respondent and the Respondent had taken advice about it, including seeking the advice of an insolvency practitioner, it is difficult to see why she should not have accepted that this was a better course for her than the winding up of the Company. In any event, the Petitioner could have applied to the court for the making of the administration order, even if the Respondent refused to cooperate with him in making an “out of court” appointment. While of course, not in any way being in a position to say definitively, on the material before me, it is difficult to see why a court would refuse to do so.

The second point made by Mr Willetts that as the Company was able to pay its debts as and when they fell due, the court was unable to make an administration order as a result of the application of para. 11 of Schedule B1 to the IA 1986, which he indicated expressly stated that a company had to be unable to pay its debts before the court could make an administration order. This was wrong. When I indicated to him that I thought the court make one in relation to a company which might not be able to pay its debts in the future, Mr Willetts had to accept that this was correct and that para. 11 also dealt with that situation.

The requirement that the company cannot pay its debts does not just encompass a company which is “cash flow” insolvent but also a company which is “balance sheet” insolvent: see para. 111 of Schedule B1 to the IA 1986, which adopts the definition contained in s. 123 of the IA 1986 as to what is meant by the expression “unable to pay its debts”. I am satisfied, for the reasons stated below, that even if the Company is not “cash flow” insolvent, it is almost certainly balance sheet insolvent. In addition, I agree with the Respondent that even if this is wrong (i.e., that the Company is neither cash flow nor balance sheet solvent), it is likely soon to be in that position. The requirement in para. 11 is, therefore, amply satisfied.

If the Respondent is correct – and I appreciate that the Petitioner did not have an opportunity properly address this – that the Company has no prospect of recovering the amount of £33,758.38 referred to under “other debtors” in the draft balance sheet included in the Bundle, then the figure for current (and overall) assets would have to be reduced appropriately. Also, if the Respondent is correct that the draft balance sheet does not appear to include some £62,500 owing to the directors or their associates, then the Company is, now, “balance sheet” insolvent, with little prospect of a dividend being paid to the members towards their shares. This is more so the case when one adds the significant costs and expenses which will be associated with the Company being placed in compulsory liquidation.

Even if I am wrong that the Company is presently insolvent, in my judgment, the Company is likely shortly to become insolvent if the Petition is dismissed. This comes from the Petitioner’s own evidence. The Petitioner said to me that if I dismissed the Petition, he would relinquish his directorship in the Company. Neither he nor Mr Willetts disagreed that if that were to happen, the Company would soon become insolvent if – as they both suspect – the Respondent is unable to run it without the Petitioner.

The placement of the Company into administration was a strategy available to the Petitioner and ought properly to have been considered by him (as being obvious to him and his advisers) before he needlessly launched the Present Petition. If the court was not satisfied that an administration order should be made on that application, it could have ordered the Company to be wound up: see para. 13 of Schedule B1 to the IA 1986. This would have provided the Petitioner with the outcome he presently seeks from the court.

I do not agree with Mr Willetts that this remedy or option falls within what Lord Briggs described in Lau v. Chu as the court imagining “every potential alternative remedy”. It was an obvious course of action which should have been pursued by the Petitioner. The reason it was not was – as I find – the alternative of a winding up petition would be more beneficial for the Petitioner in the sense that having diluted the value of his and the Petitioner’s shareholding by the manner he conducted the business of the Company, including wrongly using the Company’s intellectual property for the benefit of his LLP – and possibly transferring or taking away (or intending to) the contacts and clients of the Company at no cost to him. Although there is no evidence of the Petitioner having done this at present – the Petitioner having said that he has not taken any of the clients of the Company to his new enterprises – there is no question in my mind that this is what he intends to do, and this is clear from his own communication to which I have referred above. Whether he is entitled to or not is not for me to decide on this petition – and to that extent, the cases relied upon by Mr Willetts (such as Faccenda Chicken Limited v. Fowler [1987] Ch 117) are not relevant to the determination of the Petition. So far as the Petitioner states that he has not taken away any clients or customers of the Company, the Respondent rightly stated that she was unable to test this point, at this stage, because of the failure on the part of the Petitioner to provide proper disclosure, but she strongly suspected that this is what the Petitioner has done. The complete failure on the part of the Petitioner to give disclosure on this issue – combined with the fact that he is already using some of the intellectual property of the Company – appears to me to suggest that even if he has not done so now (about which I have grave misgivings), he almost certainly intends to do so in the future.

So far as it is suggested by the Petitioner that the Respondent could have considered the possibility of placing the Company into administration but did not, there are two points that are appropriate for mention: first, she has appeared in person throughout (i.e., both in connection with the Unfair Prejudice Petition and the Present Petition), and could not have thought about the possibility of this remedy being available to her until I mentioned it; but, second, and perhaps more importantly, she does not seek a winding up order and there is no requirement on her part, therefore, to demonstrate that she pursued an alternative remedy.

The possibility of the placement of the Company in administration was mentioned by me several times in the course of the trial. The Petitioner could have considered whether that might have been a better strategy than winding up, not least because if he claims that he has not been guilty of any wrongdoing, he must be as interested as the Petitioner in getting the best value for the assets of the Company and this can best be achieved by an administration, as opposed to a winding up. But the reason for pursuing the winding up – or the only inference which can be derived from pursuing this as the only remedy available to him – is that if the Company is wound up, the Petitioner will not have to pay anything towards the shares of the Respondent and will be able to trade in his new enterprise with – as the Respondent suggests – a significant (if not substantial) number of former clients following him into his new enterprise, a point which the Petitioner alludes to at para. 28 of his second witness statement in which he says (referring to the Respondent’s statement) that ‘[his] relationship with each client is vital to the Company's performance. Hence, the only viable solution was for me for me to buy the Second Respondent's shareholding. (My emphasis). Whether that is a breach of duty is not for me to decide on the Petition, but if the Respondent is correct – and in my judgment, she is, based on his having used the intellectual property of the Company without the consent of the Company – then the motive for bringing the Present Petition is not to achieve an orderly realisation of the assets of the Company. It is to provide an improper collateral benefit to the Petitioner, which, based on the Petitioner’s wrongful conduct (whether or not it is unlawful), he should not be entitled to do.

One further point is appropriate for me to mention: as I have already said, the Petitioner made an open offer on the second day of the trial to waive his entitlement to the return of any dividend on his shareholding and not to seek the costs of the Petition if the Respondent agreed to an order being made that the Company should be wound up.

There is nothing of substance in the offer. For the reasons referred to above, there is unlikely to be any dividend paid to the shareholders, given how the affairs of the Company have been run since the Respondent was excluded from being involved in them. So far as the Petitioner’s costs of the Petition are concerned, the Petitioner is not entitled to assume that even if the Company is wound up, the Court would order all of his costs to be paid by the Respondent. By the second day of the trial, it became apparent that the Petitioner might, at least partly, be responsible for some of his own costs, and perhaps some of the Respondent’s costs also, given that, even on his case, he accepted that he must bear some responsibility for the loss of trust and confidence between him and the Respondent. In addition, the Respondent has the benefit of recovering the costs she has incurred (albeit only as a litigant in person) as a result of the discontinuance of the Unfair Prejudice Petition, for which the Petitioner would also have to give at least some credit.

Mr Willetts indicated that the offer to waive dividend and costs was the only offer available to the Respondent because “much water had flowed under the bridge”. The only reason that an offer to purchase the Respondent’s shares in the Company is not available is that the Petitioner has put himself in a position (lawfully or not) where he stands to take all of the clients and customers of the Company without having to pay for having done so. That the Respondent believes this to be so is set out in para. 13 of the Respondent’s first witness statement in which she says:

While purporting to deal with para. (a), above in his second witness statement, the Petitioner provides no observations about the Respondent’s allegations. It is difficult to see how the statement made by the Respondent is incorrect. The shareholding of the parties is bound to be substantially diminished by the winding up of the Company.

Mr Willetts made the remarkable submission that if I found that the Petitioner was unlikely to succeed on his Unfair Prejudice Petition, I could conclude that the only available remedy for him was to seek the winding up of the Company. The Unfair Prejudice Petition is not before me, so I am not able to make any definitive finding on it, though it is based on evidence which I believe is not just weak and flimsy but also inherently inconsistent. But, on the facts, even if Mr Willetts is right, I am unable to accept that the Petition has reasonably pursued all the remedies properly available to him. In any event, if I were to allow the Petitioner to succeed on the premise advanced by Mr Willetts, it would mean permitting the Petitioner to benefit from his own egregious conduct. In addition, in such a case, the Petitioner would not be able to persuade me to make a winding up order based on the “clean hands” principle or on the basis that his motive for bringing the petition was not to seek an orderly winding up of the affairs of the Company but to derive an improper collateral benefit from the making of the winding up order against the Company.

In the circumstances, I come to the clear conclusion that the Petitioner did not reasonably pursue any alternative remedy – or more accurately – that having decided to pursue it, did not reasonably see it to a proper conclusion.

Accordingly, on this basis alone, it would be inappropriate for me to exercise my discretion to make a winding up order in favour of making it. The Petition must, therefore, be dismissed.

While that makes it unnecessary for me to go on to consider the “clean hands”, “some tangible benefit” and “motive” points, it is appropriate, for the sake of completeness, that I do so.

There is no question in my mind that the behaviour of the Petitioner towards the Respondent has been unacceptable and inexcusable. As I have already indicated, I am unable to accept his assertion that the removal of the Respondent’s SMF3 authorisation or the purported removal of her as a director was a genuine error designed to enable him to run the Company more efficiently. If there was any truth in that, the Petitioner would not have sought to remove the SMF3 authorisation for the second time once he was asked by the FCA to reinstate her authorisation after he had done so on the first occasion.

The Petitioner does not deny the statement made by the Respondent at para. 76 of her second witness statement dated 17 September 2022 in which she says that her SMF3 was withdrawn on two occasions by the Petitioner and, on both occasions, was reinstated by the FCA, though he disputes the reason advanced by the Respondent about why he decided to withdraw it.

The Petitioner sought to avoid discussing his bad behaviour towards the Respondent in his witness statements and sought to minimise it in the course of giving evidence. Throughout his communication with the Respondent, both before and after the presentation of the Unfair Prejudice Petition and the Present Petition, he has, as I have said, sought to portray himself as the victim, whereas, in reality, it is the Respondent who is the victim. He also threatened to call the Police for harassment when the Petitioner wrote to him seeking various information relating to the Company, which she was perfectly entitled to do. It is extraordinary that he decided to do so. It can only be because he did not want to answer some of the searching questions that he was being asked by the Petitioner.

While accepting that his conduct may have been reprehensible, the Petitioner states that the court must also take into account the conduct of the Respondent which is alleged to have led to the deadlock in the Company or the complete loss of trust and confidence between the parties.

As I have already indicated, I accept as impeccable logic the substance of that proposition. However, I am unable to find that the Respondent was in any way guilty of culpable conduct which can be said to be the cause of the breakdown in the business relationship of the Petitioner and the Respondent or the loss of confidence between her and the Petitioner.

Let me first deal with the Petitioner’s conduct. There are several aspects of this which are of grave concern. I have already alluded to some of these. The first is his deliberate and unilateral exclusion of the Respondent to be involved in the running of the Company (including attempting to remove her as a director) and to withdraw her SFM3. As I have pointed out above, this happened not just once but twice. It is significant that there is little reference to this in either of his witness statements. It is arguable that when seeking a remedy of this nature, a petitioner has a duty of candour to the court (i.e., to provide full and frank disclosure to the court of all relevant matters, including matters which were unfavourable to his case) in order to enable the court to decide how it should exercise its discretion to wind up the Company under s. 122(1)(g) of the IA 1986.

Mr Willetts took the Respondent through a substantial amount of the documentation in the Bundle. Rather than support the case of the Petitioner, it demonstrates that the Petitioner acted as if the Company belonged to him; specifically, he considered it right to decide how he should run it and did not believe that the Respondent had any say in the matter.

While I am not bound by the decision of the Employment Tribunal, I make no findings about the matters (such as “duress”) which the Respondent sought to maintain in her responses to the questions she was asked. Nor – purely in an employment context – do I seek to go behind the findings made by the Employment Tribunal. Just as the Employment Judge Wilkinson stated in his judgment that he did not wish to trespass into my territory, I do not wish to trespass into his.

But even accepting – as I do – the decision of the Employment Tribunal on the employment issues which arose from the claim made by the Respondent against the Company, the following exchanges (Footnote: ¹⁵ ) between the parties, in an employment context only, give a flavour of how the Petitioner felt that he was in charge of the Company, that the Respondent was no more than an employee and that he could run it as he saw fit:

In his first witness statement, the Petitioner confirms that the ThreeSixty Report was commissioned by him unilaterally, without the consent of the Respondent, apparently “out of necessity and concern to ensure that the Company remained compliant”.

There is nothing in the ThreeSixty Report dated 29 August 2018 which supports the Petitioner’s assertion that the Respondent was performing her functions in the Company poorly. The most that can be said was that the Respondent was over-zealous in the attention that she gave to the affairs of the Company’s clients. But – as the Respondent said and I accept – the system which the Company had in place for this was agreed between the Petitioner and the Respondent many years previously (since 2004/5) and, as the Respondent also said in evidence, if she departed from it, she might not be considered as “doing her job properly”. It is clear that when ThreeSixty suggested that the system was “over-engineered” and would need to change, the Respondent readily accepted that suggestion: see the Respondent’s letters dated 10 September 2018 and 5 June 2019.

Whether or not the Respondent was intimidated at the meeting which ThreeSixty had with the parties, as she suggested, I agree with Mr Willetts that ThreeSixty highlighted various matters at the meeting about the operation of the Company, including the fact that she and the Petitioner found it difficult to work together in the Company. But over and above that, I am unable to accept that the ThreeSixty report supports the case being advanced by the Petitioner.

I do not read the ThreeSixty Report as confirming that the parties were deadlocked or had lost trust and confidence in each other at the time when the meeting between them and ThreeSixty took place; rather the converse of that situation seems to me to be correct. It is correct that para. 1 of the report states that the parties had “decided … that it [was] not prudent to continue as business partners” but there is no indication that, at that stage, the parties could not make joint decisions on behalf of the Company (as they had been doing previously for some time following the breakdown of their marriage) or that they had lost trust and confidence in each other. The ThreeSixty report was primarily focussing on how the existing modus operandi of the Company could be improved and, in that context, the report was not being critical of one party or the other, but was advising on how the existing systems in place for looking after the interests of clients could be improved and the profitability of the Company enhanced by cutting out unnecessary work which was being undertaken in the Company. Mr Willetts sought to lay the blame for this on the Respondent but that is palpably incorrect as is the Petitioner’s assertion in his first witness statement that the “Respondent refused to engage meaningfully” with the proposals made by ThreeSixty and others about the apparent deadlock which had arisen in the Company. Nor am I prepared to accept the statement made by him in the witness statement that he “immediately began overhauling the Company's systems and controls to follow the recommendations” and that this “was met with opposition by the … Respondent”. The plain fact is that when these points were made to the Respondent in the course of her cross-examination by Mr Willetts, she had a satisfactory answer to each and every one of them and Mr Willetts was unable to develop any of the criticisms he sought to make good on behalf of the Petitioner. There was, I find, no opposition to what was being proposed, as is clear from the Respondent’s letters dated 10 September 2018 and 5 June 2019. If there was any failure to put in place the recommendations put forward by ThreeSixty, it was down to the Petitioner who failed to respond (or respond satisfactorily) to the communication sent to him by the Respondent about what was being proposed by ThreeSixty.

I find, as a fact that, at the time of the ThreeSixty meeting, the parties were not “deadlocked” or lost trust and confidence in each other, as the Petitioner would have me accept. At the stage of the ThreeSixty meeting, the Respondent had, as I state above, willingly agreed to put in place the new systems which ThreeSixty had recommended for the Company. There is no question that the relationship of the parties was deteriorating and had reached a difficult situation. But it is wrong to say that it had reached a point where they were deadlocked or had lost mutual trust and confidence in each other. For example, in her letter dated 10 September 2018, in which the Respondent agrees to implement the recommendations of the ThreeSixty Report, the clear impression is that that whilst they were both exploring a parting of ways, the situation had not developed between them as to suggest deadlock or loss of mutual trust and confidence. The time when the deadlock and loss of confidence arose was much later. It occurred when the Petitioner sought to remove the Respondent as a director of the Company and sought to withdraw the SMF3 authorisation of the Respondent in December 2019.

This largely kicks into the long grass Mr Willetts’ submissions, based on his interpretation of the observations of Lord Oliver in Vujnovich v Vujnovich, that the court should concentrate on the cause, as opposed to the consequences, of a petitioner’s conduct in deciding whether the petitioner was coming to the court with clean hands. In other words, the court should look at conduct leading to the deadlock or loss of trust and confidence, as opposed to conduct taking place after such deadlock or loss and confidence. But I should make it clear that if I had found that there was no such link, I would nonetheless have found that the Petitioner did not satisfy the “clean hands” principle. I say that for several reasons.

I am unable to accept that there is some sort of precondition or requirement that a court cannot exercise its discretion to dismiss a contributory’s petition simply because the conduct complained of occurs after the deadlock or loss of trust and confidence. The making or refusal to make a winding up order on a contributory’s petition involves the exercise of a discretion. The discretion is a wide, subject only to the requirement that it should be exercised judicially. It seems to me to be contrary to principle that the discretion of the court to dismiss a petition cannot be exercised where a person has been guilty of serious misconduct, but that misconduct has arisen after the parties are deadlocked or have lost trust and confidence in each other.

In my judgment, it would be wrong for the discretion of the court to be exercised in favour of the making of a winding up order if the petitioner has conducted himself in the manner in which I have found the Petitioner to have done in the present case. I consider that the error that Mr Willetts has fallen into is thinking that each factor that informs the decision of the court on how it should exercise its discretion should be considered independently, so that if any one factor is determined in favour of the petitioner, the court should exercise its discretion in favour of the petitioner. I consider that the correct approach of the court is to look at all the factors and decide whether the overall conduct of the petitioner warrants the exercise of the discretion of the court to be undertaken in his favour. In other words, the court should take a holistic approach to the question whether the petitioner has behaved badly, of which the causal connection between the misconduct and the deadlock (or loss of confidence) may be one factor for the court to consider. In my judgment, none of these factors, including the pursuit of an alternative remedy, which is a requirement that the court must consider under s. 125(2), makes it necessary for the court to exercise its discretion in a particular way, though the existence of an alternative remedy which the petitioner has not pursued is almost always likely to militate against the making of a winding up order. In the present case, it would be unconscionable for the Petitioner to benefit by the discretion being exercised in his favour where he has behaved so badly, and it would be wrong for the court to exercise the discretion in his favour on the basis that the causal link referred to was missing.

But even if I am wrong about that, the motive of a petitioner in seeking a winding up order is important, so even if the causal link (or lack of it) warrants the court deciding the “clean hands” principle in favour of a petitioner, the motive for bringing the Petition would make it appropriate for the discretion of the court to be exercised against him.

I do not believe that what I have said above is inconsistent with the observations of Lord Oliver in Vujnovich v Vujnovich. If, and so far, as it is, I respectfully disagree with them.

As I have said, throughout these proceedings – including at the trial – the Petitioner has sought to minimise his appalling behaviour, while seeking, in every way, to portray the Respondent in the worst possible light. While describing the setting up by the Respondent of her jewellery company (Loco Jo Ltd) as a breach by her of her duties as a director (see paras. 54 and 55.2 and 55.3 of the Petitioner’s first witness statement and para. 24 onwards of the Unfair Prejudice Petition), he totally failed to give the court any account of the enterprises which he set up in what appears to be a position of direct conflict with the business which the Company carries out. It is no surprise that Mr Willetts made scant mention of the Respondent’s new enterprises. He could hardly do so if the Petitioner’s own conduct on this issue was so wanting.

But what the Petitioner says is that the Respondent’s conduct must also be taken into account and there is a lot to complain about how she has behaved. The Petitioner says she is partly at fault for the deadlock or the loss of confidence. If that is correct, then the decision of the court should be exercised in favour of the relief which the Petitioner seeks on the Petition, i.e., the making of a winding up order.

I cannot see how any of the matters about which the Petitioner complains can be said to have contributed to the deadlock or loss of trust and confidence. As I have said, the Petitioner has sought to portray himself as the victim in the matters relating to the breakdown of his relationship with the Respondent while portraying the Respondent as the person guilty of all the wrongdoing which is meant to have led to the collapse of their business relationship, including, on one occasion, threatening to report her to the Police for harassment (see his letter dated 11 September 2021) because she wrote to him on various occasions complaining that she did not agree with the way he was conducting the affairs of the Company. In reality, the converse of this situation is true.

The complaints made by the Petitioner against the Respondent are of a wide and generic nature, unsupported by any detail or evidence. Where any detail is provided by the Petitioner, it is usually either untrue or does not withstand proper scrutiny when analysed in detail.

Leaving aside issues relating to the application of employment law, and the decision of the Employment Tribunal, I cannot see how the Respondent’s refusal to work the additional days which the Petitioner insisted upon can amount to culpable conduct on her part. Whether (as the Respondent asserted) she had little work to do at the time or whether he was asking her to work an extra day without pay, the plain fact is that she was perfectly entitled to refuse to work the extra day. The Petitioner sought, unilaterally, to increase the number of days she worked, and she was perfectly entitled to refuse to do so. There is no suggestion – and if there is I reject it – that she did not, or could not, discharge her directorial duties by continuing to work the number of hours she did.

That the Petitioner sought to impose his will on the Respondent on this issue is demonstrated by the exchange between the parties referred to above in which the Petitioner stated that he “[could] no longer allow you to take every Friday off work. I have been very explicit about the reasons for my decision”. (My emphasis).

I am not sure the extent to which – having referred to this at paras. 28 and 29 of his first witness statement – the Petitioner relies upon the forming of the Respondent’s jewellery company (Loco Jo Ltd) as supporting his premise that the Respondent was guilty of culpable conduct.

What is quite remarkable is the statement made by the Petitioner at paras. 27-29 of his first witness statement in which he says:

Some of the contents of these paragraphs of his witness statement are simply untrue. The Petitioner knew full well about the Respondent’s involvement with Top Church Training Ltd, the Respondent having properly disclosed that to him in the course of her communication with him. The following extracts of the exchanges between them by email on 3 April 2019 make this clear:

This point is also confirmed by Judge Wilkinson at para. 27(e) of his judgment dated 30 April 2021, from which judgment Mr Willetts quoted extensively in seeking to undermine the evidence of the Respondent. It is difficult to see why the Petitioner decided to rely upon this as one of his complaints about the conduct of the Petitioner against the Respondent in his first witness statement when Judge Wilkinson had made an express finding to the effect Loco Jo Ltd was a dormant company and Top Church Ltd was a charitable enterprise.

While complaining that the Respondent gave him no information about these companies before setting them up, the Petitioner makes no mention of having set up (without informing the Respondent) his own enterprises doing the same or similar business to the Company, in what would appear to be a direct situation of conflict with the business being conducted by the Company. If the Company were to be wound up, there might also be the question about whether the Petitioner had “taken over” the name (and the goodwill associated with it) of the Company, by trading in the same name as the Company, including whether the Petitioner might be in breach of s. 216 of the IA 1986.

Nor can I see any basis upon which it is possible for the Petitioner to deduce that by setting up a new company and working as a charity trustee, the Respondent “was no longer prepared to work for the Company on a full-time basis or possibly at all”. This statement is, at best, a complete non-sequitur; it is not just unsupported by the evidence but is a complete distortion of the truth. That there is no substance in this allegation of wrongdoing made by the Petitioner against the Respondent is plain from the fact that the Petitioner did not pursue the allegation further in his second witness statement following the response to the allegation provided by the Respondent in her first witness statement. Nor did Mr Willetts seek to cross examine the Respondent on this topic.

I cannot see how the claim made by the Respondent about her employment to the Employment Tribunal can be seen to be culpable. The Respondent was perfectly entitled to make the claim, and the fact that she was unsuccessful in it cannot support any basis for suggesting that she was wrong to make it. She had a legitimate sense of grievance about how she had been treated by the Company (acting solely through the Petitioner) and was perfectly entitled to exercise her right to bring a claim to see whether she might have been wronged. There is no conduct in bringing the claim which can be capable of criticism.

There is nothing in the judgment of the Employment Tribunal which helps the Petitioner. The Employment Judge made it clear that the judgment only dealt with employment issues and that often the parties sought to conflate the issues which were before him by making allegations and cross-allegations that were more appropriate for determination in the Unfair Prejudice Petition which was before this court at the time.

Nor am I bound by the factual findings which Employment Judge Wilkinson arrived at. So far as it is thought that the findings I make in the Present Petition are inconsistent with the findings which the Employment Judge made, I am not bound by the latter findings. It has not been suggested by Mr Willetts that departing from the findings made by the Employment Judge would amount to an abuse of process and I am clear in my mind that there can be no abuse of process for me to do so, based on decisions such as Hunter v Chief Constable of the West Midlands[1982] AC 529 and Re Queens Moat House plc, Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321.

The complaint made by the Respondent to the Financial Services Ombudsman is another reason relied upon by the Petitioner in alleging that the Respondent contributed to the deadlock or the lack of trust and confidence between the Parties. The Petitioner states that the Respondent had no proper grounds for complaining to the Ombudsman. I do not agree. Whether or not she did, she was perfectly entitled to complain to the Ombudsman about the way she felt that the Company had dealt with her retirement planning. She claimed that the Company had advised her not to take out a personal pension plan and that, as a result of her position as director of the Company, she would benefit from the future sale of the company which would provide her future retirement provision.

As she pointedly observed, during the course of her submissions, the issue for the Ombudsman was whether he was able to investigate the complaint, rather than whether the complaint had any merit. As the Ombudsman observed in his review decision dated 9 March 2022:

This was not a spurious complaint, as the Petitioner would have me accept. She complained to the Ombudsman because she did not have the funds to bring a claim against the Company in the civil courts, one reason for that being that she was starved of any income as a result of the actions of the Petitioner. She did the next best thing she could. She complained to the Ombudsman, which did not involve her in any cost. The complaint was legitimate but unsuccessful because it was not supported by the evidence that the Ombudsman would have liked to have seen.

At para. 21 of his second witness statement, the Petitioner also criticises the complaint made by the Respondent to the Information Commissioner about the wrongful use by the Company of her personal data, though this complaint is not included in the summary of allegations set out at para. 55 of his first witness statement. Other than simply mentioning the fact of the complaint having made by the Respondent, he says nothing else about it. What he completely fails to mention is that the complaint was upheld by the Information Commissioner who directed that the Company should take steps to remedy the breach. The Respondent statement that the Company has failed to take those steps was not challenged on behalf of the Petitioner.

I have dealt with the complaint by the Petitioner about the reduction of her working hours. The suggestion that she needed to work more hours or an additional day and that she contributed to the deadlock or the loss of trust and confidence by not doing so is a complete fallacy. At paras. 42-45 of her first witness statement, she provided the following explanation about this:

The exhibits to which she refers in these paragraphs largely support what she says. The Petitioner’s case on this was, in the main, to refer to the decision of the Employment Tribunal but there is little in it which assists him. The plain fact is that, on this issue, the Respondent’s evidence was clear and consistent and the evidence of the Petitioner untrue, evasive and uncertain.

At para. 55.4 of his first witness statement, the Petitioner states that the Respondent refused to cooperate with him with the Financial Conduct Authority (“FCA”). He elaborates upon this at para. 35 of that witness statement in the following terms:

In the first place, it is appropriate to point out that it was the Petitioner’s purported unilateral withdrawal of the Respondent’s SMF3 withdrawal that led to the FCA writing to the parties on 7 August 2020. The relevant excerpts of that letter are set out above, but what is clear from it is that the FCA did not think that the Petitioner was open and upfront with them. There is no criticism of the Respondent, though the FCA rightly indicated to both parties that it was important to resolve the disputes which arise between them.

However, what is important is the Respondent’s response to the FCA letter. On 12 August 2020, the Respondent wrote to the Petitioner setting out an action plan about how they could address the concerns which the FCA had raised – concerns which were primarily of the Petitioner’s making.

The Respondent made it clear that these were simply her suggestions. She set out, at length, how it might be possible for them to demonstrate to the FCA that whatever their past differences, they would ensure that the Company “would forthwith operate in the manner the FCA expects”. The Petitioner responded to that email on the same date (Footnote: ¹⁶ ) by stating that he and the Petitioner were miles apart and that he could simply not work with the Respondent again, stating, “I'd rather pay you to stay home, because I'm not going to run this business with your involvement. I'm sorry I just can't go through that again”.

The Petitioner had no answer to this in his oral evidence. Whether – as he appeared to suggest – the letter was “overly-complicated”, the response it elicited from the Petitioner was that he would not discuss the matters raised with the Respondent and would rather pay her to stay home. When I took him through the first few points in the action plan, it was plain, there was nothing complicated or controversial about it. The Respondent was simply seeking the Petitioner’s observations to the action plan in an attempt to persuade the FCA that they had addressed, or were in the course of addressing, the FCA’s concerns. The letter may have been lengthy. Some aspects of what the Respondent suggested may even have been unacceptable to the Petitioner. But the Respondent was not insisting that the Petitioner agree with her suggestions. She was doing little more than attempting to ensure that the Company’s compliance and other procedures were put on a proper footing. To point-blank reject the proposals and then to complain that the Respondent had not responded appropriately to the FCA’s concerns is a gross distortion of the truth.

Two other points about the alleged conduct of the Respondent should also be mentioned: first, her refusal to sign the company accounts. She was perfectly entitled to refuse to do so. It is difficult to see how the Respondent could sign the accounts if she did not agree with their contents (as she made clear to the Petitioner on several occasions – see, for example, her email dated 8 September 2021 to the Petitioner) and was blocked from accessing any of the accounting records of the Company in order to satisfy herself that the accounts were correct. It was not that she was refusing to take steps for the Company to adopt proper accounts. As late as 25 August 2022, she had written to the Petitioner reminding him, among other things, to deal with the auditing of the accounts, which she had requested the Petitioner to agree to with her, sometime previously. Despite this, the Petitioner unilaterally submitted unapproved accounts to Companies House. The same applies to any other approvals that were required from the Respondent which the Petitioner claims the Respondent was unreasonably withholding. For large periods after the Petitioner removed her from having any say in the Company, including withdrawing her SMF3 authorisation, the Respondent had no idea what her status in the Company was. It is difficult to see how she could have been expected to assist in the completion of forms and documents while her status in the Company remained uncertain. The Petitioner may consider these to be empty formalities. The Respondent is right not to.

Second, the suggestion that the Respondent did not cooperate with the holding of a meeting to approve the accounts of the Company or to transact any of the other business of the Company requiring board approval is not correct.

It is correct that she refused to attend a face-to-face meeting with the Respondent, but she put forward other ways to deal with meetings with the Petitioner as her email clearly dated 8 September 2021 clearly sets out:

Whether or not the Petitioner agrees with why the Respondent refused to attend face-to-face meetings with him, the Respondent was entitled to feel threatened by meeting the Petitioner in person. But she indicated to the Petitioner that she was open to alternative suggestions to meet, and, as she correctly observed when giving evidence, she would have been perfectly prepared to attend a remote meeting or to deal with any outstanding matters by way of a written resolution which she had suggested in her earlier email of the same date to the Petitioner (Footnote: ¹⁷ ) and which, as a matter of pure company law, a company is perfectly entitled to do in order to make decisions.

It must follow from what I have stated the Petitioner does not come to court with clean hands. He was entirely responsible for the deadlock and the loss of trust and confidence between him and the Respondent. Nor can the Respondent be stated in any way to have contributed to the deadlock or the loss of trust and confidence between the parties.

The best way of demonstrating that a petitioner may receive some tangible benefit as a result of the winding up of a company is to prove that there is likely to be a distribution of dividend to the shareholders, which includes the Petitioner. This has to be balanced carefully with the motive of a petitioner in seeking a winding up. For example, it cannot be correct for a shareholder-director to dissipate the assets of a profitable company with the result that the company will pay a significant smaller payment to its shareholders on a winding up and to assert that the company must be wound up because he will receive a return of capital on his shares and, thereby, derive a benefit from the winding up. I deal with the motive of the Petitioner below.

Will the Petitioner receive some tangible benefit from the winding up of the Company?

So far as a return on his capital is concerned, I do not believe, for the reasons already stated, that he will. But it is said, on his behalf that as the Company is deadlocked and all mutual trust and confidence between the parties has been lost such, the Company should be wound up on the basis that if it had been an unincorporated partnership, the partners would be entitled to, and be interested in, bringing the partnership to an end by way of a dissolution. In addition, it has to be in the interests of the Petitioner and the Respondent that a company which is “dysfunctional” should be put to bed by a winding up order being made to bring its operations to a close.

I am unable to accept this submission. If these matters informed the decision of the court on what was a “tangible benefit”, they would exist in every situation where a company was run as a quasi-partnership or where a company had ceased to function, such that an orderly winding up of its affairs would be beneficial for the petitioner.

It seems to me to be plain from the authorities I have mentioned above that in order to establish that a petitioner will receive a “tangible benefit”, it is necessary for him prove that he will receive some benefit qua shareholder which he would only (or best) be able to obtain if the company was wound up. One example where this requirement might be said to be satisfied is where a director-shareholder has been guilty of fraudulent or wrongful trading. In such a case, a shareholder who was not a director would have a legitimate reason to place the company into liquidation on the basis that such a claim may only be pursued by a liquidator (or administrator) of the company and, if successful, provide a return towards his holding of shares.

In the present case, it is difficult to see how the Petitioner can claim to derive a tangible benefit from the winding up of the Company. It is plain that he will derive no such benefit if the Company is wound up.

It has long been held that the making of a winding up order on a creditor’s petition involves the petitioner exercises a “class right”, i.e., he pursues the remedy for himself and for the benefit of all the other creditors of the Company, though it would be an unusual course for the court to refuse to make a winding up order if the petitioner can prove both that the company is indebted to him and cannot pay the amount due to him: see, by way of examples, Bowes v Directors of Hope Life and Insurance Guarantee Co  (1865) 11 HL Cas 389 per Lord Cranworth at 402; and Re Chapel House Colliery Co  (1883) 24 Ch D 259, CA. In such a case, he would usually be entitled to a winding up order ex debito justitae.

It has long also been established that it is an abuse of process to pursue a winding-up petition for a collateral purpose, such as protecting the petitioner’s interests in some capacity unrelated to his shareholding: for examples, see  Re Bellador Silk Ltd [1965] 1 All ER 667; and Re JE Cade & Son Ltd [1991] B.C.C. 360.

This is exactly what the Petitioner is seeking to do in the present case. He attempted to remove the Respondent as a director, sought twice to unilaterally remove her SMF3 authorisation, prohibited her from having any access to the accounts of the Company, conducted the business of the Company as if he were the sole director and shareholder of it, tried to purchase the Respondent’s shares on the basis of her conduct, including instigating an unfair prejudice petition against her and then discontinuing it, set up competing enterprises, used some of the intellectual property of the Company without the Respondent’s knowledge or consent, failed to provide disclosure of documents to enable the Respondent to enquire into his conduct of the Company and unjustifiably sought to challenge the Respondent’s conduct in the conduct of the business of the Company while he was in control of the Company throughout this period. He is likely to have substantially reduced the value of the Respondent’s shareholding in the Company as a result of all of that. Having behaved in this appalling way, he now seeks to wind up the Company, knowing he is likely to be able to take over all of the former clients and customers of the Company without having to pay for them. His motive is to profit from his wrongful actions, even if he claims that those actions are not unlawful.

If the Company were wound up in such circumstances, the Petitioner would derive a collateral benefit for his wrongful actions at the expense of the Respondent. It would, in my judgment, be neither just nor equitable to wind the Company up in such a case. Indeed, it would be wholly unconscionable for the court to exercise its jurisdiction in favour of the Petitioner by making a winding up order on the Petition.

The Petition is, therefore, dismissed.

Issues relating to costs and any other matter arising from this judgment (including the basis upon which they should paid, i.e., whether they should be awarded on the standard or indemnity basis) may be dealt with when judgment is handed down. I will ask my clerk to list the matter for a short hearing, with an estimated length of 1 hour. I would prefer a face-to-face hearing, though if this proves difficult for either party, I will consider directing the hearing to take place remotely.