John Leslie Taylor v The Whitehall Partnership Ltd
| Jurisdiction | England & Wales |
| Judge | Mithani |
| Judgment Date | 17 March 2023 |
| Neutral Citation | [2023] EWHC 596 (Ch) |
| Court | Chancery Division |
| Docket Number | CASE NO: CR-2022-BHM-000388 |
In the Matter of the Whitehall Partnership Limited
And in the Matter of the Insolvency Act 1986
[2023] EWHC 596 (Ch)
HIS HONOUR JUDGE Mithani KC, SITTING AS A JUDGE OF THE HIGH COURT, at the Wolverhampton Combined Court Centre, Pipers Row, Wolverhampton, WVI 3LQ, on 17 March 2023
CASE NO: CR-2022-BHM-000388
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BIRMINGHAM
COMPANIES AND INSOLVENCY LIST (CH.D)
Mr Glenn Willetts (instructed by FBC Manby Bowdler LLP, solicitors) for the Petitioner
The Second Respondent, Ms Joanne Taylor, appeared in person.
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
His Honour Judge Mithani KC
(17 March 2023)
THE PETITION AND THE BACKGROUND CIRCUMSTANCES
This is a contributory's petition to wind up THE WHITEHALL PARTNERSHIP LIMITED which I will refer to as “the Company”.
The petition (hereinafter referred to as “the Petition” or “the Present Petition”) was presented on 10 August 2022 by John Leslie Taylor who is a 50% shareholder in the Company. I will refer to him as “the Petitioner”. The respondents to the petition are the Company and the Petitioner's former wife, Joanne Taylor, who holds the other 50% of the shares in the Company. As the Company is only a notional respondent to the Petition, I will refer to Mrs Taylor as “the Respondent”. I will refer to the Petitioner and the Respondent collectively as “the parties”. The Petitioner and the Respondent are the only directors of the Company.
The Petition was presented by the Petitioner in his capacity as a contributory. The Petitioner maintains that, under s. 122(1)(g) of the Insolvency Act 1986 (“IA 1986”), it would be “just and equitable” for the Company to be wound up.
The grounds upon which the Petitioner seeks a winding up order are set out in the following terms in the Petition:
“The grounds on which the winding-up order is sought are: winding-up order is made pursuant to Section 122(1)(g) of the Insolvency Act 1986 on the basis that it would be just and equitable for the Company to be wound up, in particular as: (1) There is deadlock in the conduct or the management of the Company; and (2) There has been a serious breach or breakdown in the underlying basis upon which the Company was set up.”
Paragraph 55 of the first witness statement of the Petitioner summarises the facts and matters upon which the Petitioner relies in support of his assertion that the Company is deadlocked or that the relationship of trust and confidence between the parties has broken down irretrievably. Those facts and matters are the same or similar to the grounds relied upon by the Petitioner in support of an unfair prejudice petition that the Petitioner brought against the Respondent, under s. 994 of the Companies Act 2006, which he subsequently discontinued:
“the … Respondent has conducted herself in a manner which has been unfairly prejudicial to my interests and has caused significant regulatory difficulties for the Company. The following facts and matters are submitted to be relevant:
55.1 The … Respondent no longer works for the Company on a full-time basis;
55.2 The … Respondent taken an appointment as a director of another company;
55.3 The … Respondent incorporated a new company as a vehicle for her own business venture;
55.4 The … Respondent has absented herself from the business of the Company since August 2019;
55.5 The … Respondent has refused to co-operate with me in dealing with the FCA;
55.6 The … Respondent issued an employment claim against the Company;
55.7 The … Respondent made a [sic] compliant to both the FCA and the Ombudsman about the Company and me personally; and
55.8 The … Respondent has refused to obtain a joint valuation of the shares in the Company.”
The Petitioner asserts that the Company is solvent. I am not sure that it is. In any event, even if it is, it is unlikely to remain so for too long.
The Respondent opposes the making of the winding up order. In para. 96 of her witness statement dated 17 September 2022, she asks the court:
“to reject the winding up of the Company in favour of the following:
a. That the Petitioner be ordered to provide me access to all company records, including financial ones; and
b. That we both be joint signatory on all bank accounts for all transactions; and
c. That the Company be ordered to appoint an independent professional, perhaps from a firm who provides compliance services; and that the directors be ordered to agree to honour that professional's opinion as a casting vote where deadlock on the decisions of the Directors occur — subject to FCA [i.e., Financial Conduct Authority] approval of this arrangement. The firm is currently too small to carry the burden of paying a non-executive director or chair for regular enough meetings; and
d. That all minutes for directors and shareholder meetings be signed by us both, or that we prepare written resolutions instead.”
It would appear from this paragraph of her witness statement that she wishes the Company to continue trading. The Petitioner has made it clear to her, and to this court, that if the Petition is dismissed, he will resign his directorship in the Company. He is unable to countenance any situation in which he would be willing to run the Company together with the Respondent.
This court cannot force the Petitioner to remain a director of the Company, still less require him to run the Company jointly with the Respondent if he does not wish to do so.
It is clear to me, from the material I have seen, that the most appropriate way of dealing with the deadlock which has arisen between the parties would have been to place the company into administration. If the parties could not have agreed to an “out of court” appointment of an administrator, the court could have made an administration order on the application of either the Petitioner or the Respondent. If the Company were to enter into administration, the administrator would not only be able to continue the business of the Company in order to enable the goodwill, business and other assets of the Company to be sold as a going concern 1, but would also be able to undertake the wide-scale investigation which the Respondent wishes to see happen to enquire into the conduct of the Company during the period that the Respondent says she was excluded from having any say in it.
As I have said, on the material before me, I can see a clear case for the Company to be placed into administration. If I had the power to, I might have made an administration order in relation to the Company on my own initiative. But I do not have that power. The order can only be made on an application of a person specified in para. 12 of Sch B1 to the IA 1986. While the Respondent might not understand the consequences of the Company being put into administration as she is not legally qualified, I find it surprising that the Petitioner, who is (and has throughout been advised by solicitors and counsel) should not have thought that this course of action was the most appropriate in the present case. That he has not applied for an administration order is, as I find, because he seeks to derive a personal benefit from the Company being wound up which would not be available to him if the Company were to be placed into administration.
When, on the first day of the trial, I broached the question with the parties (given that it was obvious to me that the Company was deadlocked) about whether placing the Company in members' voluntary liquidation might be better than making a winding up order in relation it (because it would avoid the significant costs associated with the compulsory winding up of the Company), Mr Willetts was quick to respond that it would be. He was less forthcoming with my suggestion that the Company be placed in administration. There has been no, or no proper, explanation given by him or the Petitioner about why this would not be a more appropriate course of action than having the Company wound up. I am clear that it has a lot to do with
the “exit strategy” that the Petitioner has planned for his departure from the Company if the Company is wound up by the court and – indeed – even if it is notIt is appropriate for me to give a short background summary of the facts and matters which led to the presentation of the Petition.
The Petitioner and the Second Respondent are the only two directors of the Company. They each hold 50% of the issued share capital in the Company. There is no provision in the Company's constitution about how deadlocks between the shareholders should be resolved.
The Petitioner and the Respondent married in 1992. Following the irretrievable breakdown in their marriage and personal relationship, their divorce was finalised by the grant of a decree absolute on 4 February 2015.
I understand that there was neither any agreement nor a court order setting out how the shares held by the parties in the Company were to be dealt with following the breakdown of the marriage. I raised that point in the course of the hearing but was told that I should disregard it.
The Company was incorporated on 7 March 2001, having formerly traded as a partnership, with both the Petitioner and the Respondent as partners of that partnership. That business was transferred into the Company and continued by the Company. The Petitioner and the Respondent each acquired a 50% shareholding in the Company, and were both appointed as directors of the Company.
The Company is said to be both “balance sheet” and “cash flow”, solvent, i.e., it has a surplus of assets over liabilities (including...
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