There is a maxim in the law known as the 'Clean Hands Doctrine'. The maxim does not come into play “unless the depravity, the dirt in question on the hand, has an immediate and necessary relation to the equity sued for”. It sounds dramatic (and a bit filthy ...) but it basically means that a witness is not permitted to give untruthful evidence to the court. If only the same maxim was adopted by the kebab van at the end of Andy's road he might take fewer days off hanging over the basin of his shiny new toilet.
We mention it because a case reporting on 29 March, Re Whitehall Partnership Ltd, considered the court’s approach to making an order to wind-up a company on 'just and equitable grounds' in section 125 of the Insolvency Act 1986. The judge considered the general question of winding-up a company on just and equitable grounds, looking the implications of one or both parties bearing responsibility for the breakdown of the relationship. He expressed the view that the court is unlikely to exercise its discretion in favour of a petitioner who is solely or largely responsible for the breakdown. (This is, his hands are a bit grubby.)
The company in question carried on Financial Conduct related business and the relationship of the two married directors broke down following the dooming of their marriage, with the petitioner taking steps to exclude the respondent from the company, including twice trying to have her authorisation from the FCA determined, and withholding financial information from her. What had she done to him?
The judge considered that, on the facts, the section 125 requirements were not met. In particular, the removal of his wife as a director and his repeated attempts to have her FCA authorisation terminated, meant that the petitioner did not have 'clean hands'. He further found that the petitioner was seeking an improper collateral benefit from the making of a winding-up order; the advantage of a winding-up order was that he would be able to take over the company’s clients in a new business he had established without having to pay the respondent anything for the value of her shares. This was not a benefit to him in his capacity as a member of the company.
The judge further expressed the view that the court is unlikely to exercise its discretion in favour of a petitioner who is solely or largely responsible for the breakdown. On the general question of winding-up on just and equitable grounds, the judge considered the implications of one or both parties bearing responsibility for the breakdown of the relationship.
So if you weren't sure of the meaning of 'just and equitable breakdown' in the context of winding-up a company give the hands of the directors a sniff. Unless they smell of Tahitian vanilla and rose petals the court ain't going to buy it.
