Bisson -v- Barker, P. Bish, H. Bish and Viscount 2008 JLR N
This decision addresses the court's powers to order the winding up of a company on just and equitable grounds pursuant to Article 155 of the Companies (Jersey) Law 1991.
The company in question (the "Company") had operated two businesses in the Island. Relations between certain of the shareholders, involved in the management of the two businesses, broke down, such that it became impossible for them to continue to work together.
The court convened the Viscount to the proceedings at a stage when the parties were unable to find a liquidator who was prepared to act in the winding-up.
The Viscount submitted that he was only qualified to act as a liquidator in the context of a creditors' winding up. Alternatively, even if the Viscount were able to act as liquidator on a just and equitable winding up, the Viscount submitted that it would not be appropriate for the court to appoint him against his wishes and, in this case, he would not wish to act. In this context, the Viscount was concerned with regard to the issue of funding and did not consider it appropriate for the services of a public functionary to be made available where only private rights were involved and there was no issue of public interest.
However, these issues were not determined by the court as the parties did ultimately locate individuals who were willing to act as liquidators.
Just and equitable winding up
The issue which arose for the court was why it should exercise its powers to order a winding up on just and equitable grounds when the parties could be expected to wind the Company up voluntarily pursuant to the statutory summary winding up procedure.
The court was referred to Jean -v- Murfitt, Murco Overseas Limited and The Viscount 1996 JLR N[8c] where it was held that the paralysis of the company (in that case, arising from the break down of the relationship between the beneficial owners) was in itself a sufficient reason to order the winding up of a company on just and equitable grounds. It was held that the phrase "just and equitable" was to be given a flexible interpretation and that the circumstances of each case would determine whether or not it was appropriate to order a company to be wound up. A similar approach with regard to the need to give a flexible interpretation to the phrase was taken in re Leveraged Income Fund Limited 2002/209 31 October 2002, where winding up was ordered because the company's substratum had gone and, also, in In the matter of Belgravia JRC161, an order was made principally because the affairs of the company required investigation.
The court noted that, as a matter of English law, one situation in which winding up can be ordered is where the particular company is substantially a domestic company, in the nature of a partnership, with members unable to co-operate in the conduct of its affairs: Ebrahimi -v- Westbourne Galleries Ltd (1973) AC 360.
The court considered that at least two of the elements prescribed by Lord Wilberforce in the above authority as being likely to give rise to an exercise of the jurisdiction to wind up on just and equitable grounds were present in the circumstances before it, as there was an association formed on the basis of personal relationships involving mutual confidence and on the understanding that the shareholders would participate in the conduct of business.
However, the court also noted that both English authority and the case of Murco (referred to above) indicated that deadlock was itself a sufficient reason to wind up a company on just and equitable grounds. In this case, the court considered there to be a clear case of deadlock justifying the winding up of the Company on just and equitable grounds.
The court also noted that, whilst it might seem that the statutory summary winding up procedure could have been followed, the situation was such that there would be practical difficulties encountered in the context of the directors agreeing to sign the statement required in that context.
With regard to the other alternative of a creditors' winding up, as the parties constituted, to a substantial degree, the Company's creditors, this procedure would simply pass on to the creditors the same acrimonious state of affairs as prevailed between the shareholders and directors.
In conclusion, therefore, it was considered that a winding up on just and equitable grounds was the most appropriate procedure to be followed in the circumstances.