New case on winding up of qausi-partnership companies

Tarloch Singh Badyal v Malkiat Singh Badyal and others [2019] EWCA Civ 1644

This case involved an appeal against the refusal of the High Court to order the winding up under s122(1)(g) of the Insolvency Act 1986 (IA 1986) of a ‘quasi-partnership’ company (i.e. a company that was in substance, though not in form, a partnership) owned by three brothers and their father.

The Court of Appeal noted Lord Lindley’s comments in his Treatise on the Law of Partnership cited in Re Yenidje Tobacco Co Ltd [1916] 2 Ch 426, that the court must be satisfied that that it was impossible for the participants to place the confidence in each other which they had a right to expect, and that such impossibility had not been caused by the person seeking to take advantage of it. A breakdown in mutual trust and confidence was only one of three relevant factors referred to by Lord Wilberforce in Re Westbourne Galleries [1973] AC 360, and the appellant’s behaviour lacked the other two, probity and good faith, principally because of his involvement in a competitor company. Where a petitioner was solely responsible for a breakdown in confidence because of his own misconduct, he did not qualify for relief under s122.

Note also David Milman's recent article ‘Legal characterisation of commercial relationships in the UK: the quasi-partnership example' (2019) 40(10) Company Lawyer 312.

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