UK Construction and Law

The party who caused the deadlock cannot use a winding up to escape it

By Staff Writer  |  2 September 2026

A petition to wind up a company holding 11 London rental properties was dismissed although both the deadlock and the loss of trust relied on were made out. The petitioner's own controller had caused them.

Two brothers held one share each in a company incorporated in the Isle of Man in August 1995, which over the years bought some 11 properties in London and let them out. On his own estimate the properties are worth between 4.5 and 5 million pounds and they carry no charge. One brother's share is held through a corporate vehicle, the other's through a nominee. There are two directors, one from each side, and no casting vote.

That structure held for 30 years and then broke. In earlier proceedings in the Isle of Man, tried over five days in February 2024, the court declared that the nominee held its share on trust for the second brother and found that the case run against him had been manufactured with untrue evidence. A costs order of 250,000 pounds on account, on the indemnity basis, followed on 3 July 2024 and remains entirely unpaid.

On 14 July 2025 the first brother's company presented a contributory's petition in London seeking to wind the company up as an unregistered company on just and equitable grounds under section 221(5)(c) of the Insolvency Act 1986. It said no board or shareholder meeting had been held since May 2024, that the bank account had been frozen since August 2024, and that the two sides were in functional deadlock.

Three questions, and only the first was answered in his favour

In APL Holdco Limited v Apple Properties Limited [2026] EWHC 2245 (Ch), handed down on 1 September 2026 after a two day trial in June, the court applied the three stage analysis in Lau v Chu. Is the petitioner entitled to some relief? If so, would a winding up be just and equitable if there were no other remedy? If so, has the petitioner unreasonably failed to pursue another remedy instead? The burden sits on the petitioner for the first two questions and shifts to the respondent for the third.

The first question was answered yes. It was common ground that this was a quasi-partnership, there was no dispute that trust and confidence had gone, and the court found functional deadlock: two shareholders, two directors, no mechanism to break a tie. That took the petitioner no further, because a petitioner who is the sole cause of the breakdown is not entitled to the remedy.

Deadlock does not belong to whoever names it first. The court asks who produced it.

The court applied the sole cause test rather than a wider main cause formulation, and held that a petitioner can be the sole cause even though the respondent has played some part in what happened. The second brother had refused to meet without a proper account of the company's affairs, and the court accepted his evidence that this was his only reason and that he would otherwise engage. The court held that refusal to be entirely justified, and a response to the deadlock rather than a part of its cause.

an unprovoked assault only becomes a fight if the victim fights back

Mr Philip Rainey KC, sitting as a Deputy Judge of the Chancery Division

The clean hands objection succeeded on the same facts. Company money had been used to pay the personal legal costs of defending the Isle of Man claim, a cash balance of at least 460,000 pounds had gone, and rental income had been routed since 2022 through another company under the same control and retained there. A liquidator appointed on this petition would have started work with no liquid funds and an obligation to chase the petitioner's own side for an account.

Forum was the third answer

The petitioner also failed at the third stage. The Isle of Man court had already made findings, granted injunctions and given liberty to apply, and remedies were available there that an English winding up court cannot give. Bringing the petition in England had the effect of denying the other side any cross petition for unfair prejudice or any derivative claim, since those could only be brought in the Isle of Man. The petition was dismissed.

The transferable point is not confined to family property companies. Fifty fifty joint ventures on projects fail in the same shape, and a party who has starved its counterparty of information, taken venture money for its own purposes and then applied to dissolve the venture on the ground that nothing can be agreed should expect the court to ask who made the agreement impossible, and to answer it before deciding anything else.