Alipour v Ary & Anor [1996] EWCA Civ 1229 (17th December, 1996)

LORD JUSTICE PETER GIBSON: This is the judgment of the court on an appeal by the Petitioner, Mr. Alipour, against the order dated 21 May 1996 of Knox J. whereby he dismissed the petition presented by the Petitioner to wind up U.O.C. Corp ("the Company") and discharged the appointment of a provisional liquidator made by Ferris J. on 19 April 1996. The petition is a contributory's petition, the petitioner claiming to be an allottee of shares in the Company. The Respondents, Mrs. Ary and Mr. Schweininger, who undoubtedly are shareholders in the Company, dispute the Petitioner's locus standi. The Judge decided that that dispute should be determined outside the petition; hence the order which he made.

There is much that is in controversy between the parties as to the true facts, but we must attempt to set out the salient features of the history of the dispute. The Company was incorporated on 28 March 1994 under the International Business Companies Ordinance of the British Virgin Islands as an international business company. Its registered office is in Tortola at the offices of its registered agent, Dantrust Ltd. ("Dantrust"). The Petitioner is an Iranian national and resident. Mrs. Ary was born in Iran and holds an Iranian passport. Mr. Schweininger is a German national and resident. It is the case of the Petitioner that the Company was formed and carried on business as a quasi-partnership between him, Mrs. Ary and Mr. Schweininger, though it was left to Mrs. Ary and Mr. Schweininger to form the Company. Further the Petitioner has never been a director of the Company but Mrs Ary and Mr. Schweininger are directors and, they say, the only directors.

The authorised share capital of the Company is U.S. $30. The Petitioner has what on its face is a share certificate, signed by Mrs. Ary and Mr. Schweininger, sealed with the seal of the Company and dated April 1994 for 10 $1 shares. He claims to have received this from Mrs. Ary. However the share register of the Company shows only two shareholders, Mrs. Ary and Mr. Schweininger, each of whom is registered as holding 15 shares of $1 each. It is the authenticity of the Petitioner's certificate that is at the heart of this dispute.

By a letter dated 26 June 1995 from Mrs. Ary and Mr. Schweininger to the Petitioner, they said that they would give him "a general idea about our partnership since the last two years". They referred to "a promise" by him that he was in a position to obtain oil from the National Iranian Oil Corporation and said: "That was the reason why we three conclude a partnership to set up the U.O.C. Company". They said that they had established branches of the Company in England, Germany, Austria, U.S.A. and the British Virgin Islands and that the starting costs exceeded $1 million, including $430,000 company taxes. They referred to a proposal by the Petitioner to pay a Mr. Saffari $200,000 and commented: "That was not agreed and this is an amount which is bigger than the profit of the partners." They put a proposal to the Petitioner "that each of us partners get $100,000" which with $100,000 to be paid to each of two others, came to $500,000. Each of the Respondents now asserts that the Company and the Petitioner have been working together in a business partnership and Mr. Kaye Q.C. for the Respondents submits that the Petitioner was only a partner in a commercial sense in that he was no more than a commission agent. In the light of the letter of 26 June 1996 we find those assertions and that submission unconvincing. It is clear that in that letter Mrs. Ary and Mr. Schweininger were treating the Petitioner as a partner with them in a partnership between the three of them, concluded to set up the Company, and as entitled to take an equal profit share with each of them.

The authenticity of that letter is not disputed. The authenticity of three other documents is. The first in time is a document dated April 1994, purporting to be from Mrs. Ary and Mr. Schweininger to the Petitioner though given no more precise address than Tehran, and saying that they, as directors of the Company, would collaborate with the Petitioner in partnership on a commission basis, the partnership to be "valid until we decide otherwise". This was exhibited to an Affidavit of 20 May 1996 by Mr. Schweininger. The Petitioner denies seeing the document until it was an exhibit. The second is a document headed "Partnership Resolution" bearing a fax date 1 October 1995 and time (12.28) and a fax number which is that for a property in Dorset, Chaffeymoor Grange ("the Grange"). The Company is the registered owner of the Grange. The Petitioner claims that following the letter of 26 June 1995 he had asked for the documents relating to the costs referred to in that letter, and that he was asked to sign the "Partnership Resolution" in which he would state that he would "give back the shares and the original share certificate" to the Company and which stated "The partnership is herewith officially dissolved". He further claims that he was offered $200,000, but he did not accept the offer. Mr. Schweininger challenges the authenticity of the "Partnership Resolution". He has exhibited a copy of another letter to a business associate which bears the same fax date, time and fax number. It would therefore appear that at least one of the "Partnership Resolution" and the business letter, as a fax of the purported date, time and number, is a forgery. It is of course possible to change the date, time and number on any fax machine, and in the absence of forensic examination of those documents it is impossible to determine which is a forgery.

None of the documents requested by the Petitioner was supplied by the Respondents, despite a letter dated 6 February 1996 to them from the Petitioner's solicitors demanding a proper account. In mid-March 1996 the Petitioner was told by a Mr. Yousefpour, who was described by Mrs. Ary in a letter dated 24 April 1995 as being one of the Company's two "contact persons in Tehran", of a recent telephone conversation with Mrs. Ary. She said to Mr. Yousefpour that it was the Company's intention to seek to remove the Company's assets to another jurisdiction, though she was not specific as to which jurisdiction. She further said to him that the Company would be liquidated in the British Virgin Islands, a new company would be formed to hold the transferred assets and the Grange would be sold. All this is deposed to by Yousefpour in an Affirmation and that evidence has not been challenged by the Respondents.

On 18 April 1996 the Petitioner presented his petition. He claimed that he had been the registered holder of 10 shares in the Company since the end of April 1994, that the Company was a quasi-partnership between him and the Respondents, that the personal relationships of good faith, trust and confidence underlying the Company had irrevocably broken down, that the Company was solvent and that it was just and equitable that the Company be wound up. On 19 April Ferris J. on the Petitioner's ex parte application appointed an insolvency practitioner, Mr. Oldham, as provisional liquidator with extended powers. No doubt it was the risk of the dissipation of the assets particularly in the light of the evidence of Mr. Yousefpour that led Ferris J. to make that order.

On 24 April the order was served on Mr. Schweininger at the Grange by the Provisional Liquidator and his solicitor. It was the duty of Mr. Schweininger as a director of the Company to cooperate with the Provisional Liquidator by giving him such information concerning the Company and its business dealings, affairs or property as the Provisional Liquidator might reasonably require (s.235 Insolvency Act 1986). There is a revealing attendance note taken by the solicitor to the Provisional Liquidator of what Mr. Schweininger said, first before his solicitor (Mr. Baker) arrived and subsequently in Mr. Baker's presence, which the Provisional Liquidator has produced in evidence in an Affidavit sworn on 10 May. Mr. Schweininger made allegations to the Provisional Liquidator that the Petitioner was not a shareholder in the Company. When shown a copy of the Petitioner's share certificate, Mr. Schweininger said that he had not signed it, and that it was a forgery.

The Provisional Liquidator, in the light of those allegations relating to the locus standi of the Petitioner, very properly sought the directions of the court. His application came before the Judge on 21 May. Only the day before did Mr. Schweininger swear and serve the Affidavit to which we have already made reference, and Mrs. Ary did likewise that day. Included in Mr. Schweininger's Affidavit and exhibits was evidence from Dantrust as to the contents of the share register, and copies of two share certificates showing each of Mrs. Ary and Mr. Schweininger as owning 15 shares in the Company. Mr. Schweininger pointed to differences between the Petitioner's share certificate and those share certificates. Each of the Respondents said that there were only 30 shares in the Company and that the Respondents held all of them. Each said that no shares had been issued to the Petitioner. Each said that he or she had "never knowingly signed a share certificate in [the Petitioner's] name." Each said that he or she had never authorised the Company's seal to be used on a certificate in the Petitioner's name and she said that she had "never knowingly allowed a certificate to be sealed in his name".

Faced with this evidence Mr. Joffe for the Petitioner accepted that the claim in the petition by the Petitioner that he was the registered holder of 10 shares could not be maintained, and he sought an adjournment from Knox J. to put in evidence that the Petitioner was an original allottee of the 10 shares and as such entitled to present a petition. The Judge however was prepared to proceed on the footing that the Petitioner now claimed to be an allottee and the Judge accepted an undertaking on behalf of the Petitioner that an affidavit would be sworn setting out the evidence for that claim. Mr. Joffe suggested to the Judge that the question of the locus standi of the Petitioner might be determined by way of a preliminary issue in the petition But the Judge, in a judgment of characteristic lucidity, rejected that suggestion. He referred to the judgment of Brightman J. in Re J.N.2 Ltd. [1978] 1 W.L.R. 183, in which that judge had held that where there was a contributory's petition but the petitioner's status as a contributory was in dispute, that dispute should be determined first before the petition was presented. He also referred to the decision of this court in Re Claybridge Shipping Co. S.A. [1981] Com. L.R. 107 in which it had been held that it was only a rule of practice that a creditor's petition based on a disputed debt would be dismissed.

"On balance I have come to the conclusion that I should not direct a preliminary issue. My reasons are as follows. The appointment of a provisional liquidator, in my view, is significantly intrinsically detrimental to the company and there is also the fact that, so far as I am aware, the petitioner does not have any assets within the jurisdiction. I do not accept the proposition that where there is a provisional liquidator appointed that reinforces the argument in favour of having a preliminary issue. It seems to me that is a circumstance which is intrinsically likely to cause detriment to a company. There is in fact in evidence before me from each of the two shareholders a statement on oath that the company is suffering detriment as a result of the appointment of the provisional liquidator and, as I have said, that does seem to me to be an intrinsically probable state of affairs.

Fourthly, although the reasoning of Brightman J. in part is now of less force than it used to be when he gave the judgment that he did in 1977, I think the basic proposition that a petitioner should establish his locus standi is still a valid point of departure but I accept that that is only practice and that it is not an inflexible rule and that other factors do have to be taken into account. But having considered them, I do not come to the conclusion that the other factors persuade me to depart from what Brightman J. in that case said."

Although the Petitioner's further Affirmation goes beyond what had been undertaken to the Judge, Mr. Kaye Q.C. sensibly did not object to that evidence being adduced and left it to this court to decide whether to allow Mr. Evans' Affidavit. We indicated that we would allow all the further evidence. There has been no trial on the merits and so the rules laid down in Ladd v Marshall [1954] 1 WLR 1489 do not apply, though the court in exercising its discretion will pay particular attention to the reasons why the further evidence was not adduced before the court of first instance. In the present case the service of the Respondents' evidence only the day before the hearing, coupled with the contents of that evidence and the fact that no application had been made by the Respondents for the dismissal of the petition, explain why that evidence was not produced to the Judge. Although the further evidence was in the hands of the Respondents by early June, no attempt has been made by them to meet that evidence and they do not claim that they would be prejudiced by the evidence being before the court.

Moreover the new evidence is of importance. The Petitioner first corrects the statement of Mr. Evans in his second Affidavit that it was not until April 1995 that the Petitioner obtained sight of his share certificate. The Judge had commented on that evidence that the Affidavit of Mr. Evans was not specific as to how it was that the Petitioner's locus standi was claimed to exist and that it did not correct what was said in the petition, which included the claim that 10 shares had been registered in the Petitioner's name since the end of April 1994. What is now said by the Petitioner is that he was first informed by Mrs. Ary in April 1994 that she was holding a share certificate in his name together with the Memorandum and Articles of Association and that they were delivered by Mrs. Ary to him in Tehran in August 1994. The fact that the Petitioner is now correcting the sworn evidence of his solicitor which could only have been obtained from the Petitioner does not reflect well on his credibility, but the claim which he now puts forward, that he is the allottee of 10 shares as shown on the share certificate apparently signed by the Respondents and handed to him by Mrs. Ary, is supported by two pieces of new evidence. First the report of Dr. Giles shows that in her opinion the share certificate of the Petitioner was signed by Mrs. Ary and Mr. Schweininger. Of course Dr. Giles quite properly states that she cannot entirely exclude the possibility that they did not sign, but her opinion that that possibility is unlikely is clear. Moreover in her opinion the Company's seal or one from the same mould was affixed to the certificate. That is particularly significant as it suggests that only someone in control of the seal or the seal's mould could have affixed the seal, and it is hard to see how the Petitioner, who was not an officer of the Company, could have done so or caused it to be done. Dr. Giles also gives her opinion that the paper used for the share certificate has a watermark matching those on a letter of credit used by Mr. Schweininger. Second, the Petitioner now exhibits correspondence from Mrs. Ary in Farsi to himself in 1995 and in several letters there are references to him as being a shareholder.

Mr. Joffe submitted that the Judge erred in treating Re J.N.2 Ltd. as good law, when he should have declined to follow it, that even if that decision is still good law, in the light of all the evidence, including the new evidence not available to the Judge, there was no bona fide dispute on the locus standi of the Petitioner, and that even if Re J.N.2 Ltd. is good law and there was a bona fide dispute, the Judge erred in not following the approach indicated by Claybridge Shipping in a case where the Company is a foreign company and there was evidence that if the petition was struck out, the Petitioner would probably be without a remedy and suffer injustice. Mr. Kaye on the other hand rightly stressed that the Judge was exercising a discretion and submitted that this court could only interfere with that exercise on limited grounds which were not present here. He said that the Judge had not erred in law or principle and had properly balanced the rival factors. He submitted that the new evidence changed nothing and that the decision of the Judge caused no injustice.

We start with the law. It is not in dispute that the court can wind up a foreign company like the Company notwithstanding that it is not registered under the Companies Act 1985, and that the circumstances in which it may be wound up include the court being of the opinion that it is just and equitable that the Company should be wound up (s.221(5) Insolvency Act 1986). The limited circumstances in which a contributory may present a winding-up petition include where the shares in respect of which he is a contributory were originally allotted to him (s.124(2)(b) ibid.). The share register of a company is prima facie evidence of the number of shares in issue, but the memorandum and articles of association of the Company allow the directors to issue shares as registered, and the holders of all the shares in a company can agree to increase the authorised share capital and to allot shares. Mrs. Ary and Mr. Schweininger, by their own sworn evidence, are and have been the only shareholders and directors of the Company.

It has long been the practice of the Companies Court when faced with a creditor's petition based on a disputed debt to dismiss the petition, insisting that the dispute be determined outside the petition (see, for example, Stonegate Securities Ltd. v Gregory [1980] Ch.576). The reason for the practice has been essentially pragmatic. The vast majority of petitions to wind up a company are creditors' petitions. The Companies Court procedure on such petitions is ill-equipped to deal with the resolution of disputes of fact. There are no pleadings, there is no discovery and there is no oral evidence normally tolerated on such petitions, even though no doubt pleadings and discovery could be ordered and oral evidence received, and the Companies Court like any other court is perfectly capable of determining such disputes. But that it is only a rule of practice and not one of law for the Companies Court to refuse to determine a dispute on the creditor petitioner's locus standi was made clear in two cases.

The first is Re Russian and English Bank [1932] 1 Ch. 663, in which Bennett J. held that, notwithstanding the general rule that a disputed debt may not be the basis of a creditor's petition, in the case of a foreign company the alleged creditors of which would be without a remedy unless they could proceed by way of a winding-up petition, the Companies Court could wind up the company on the footing that it would be the duty of the liquidator to consider the claims of the petitioning creditors.

The second case is the Claybridge Shipping case. In that case alleged creditors petitioned to wind up a foreign company. The petitioning creditors' debt was disputed by the company, though not on substantial grounds, as this court held. But each of Lord Denning M.R., Shaw and Oliver L.JJ. emphasised that the practice of not allowing a petition based on a disputed debt to proceed was no more than a rule of practice. The Master of the Rolls approved the statement in Buckley on the Companies Acts 13th ed. (1957) at p.336 (now 14th ed. (1981) at p.850):

"That is a very wise and sensible statement. In these days we have many foreign companies carrying on business here. Their assets are liable to be removed at a moment's notice by the stroke of a pen. They can be removed from the reach of creditors. It was the reason why we developed the Mareva injunction. It was to stop a debtor from removing his assets out of the jurisdiction to the prejudice of the creditor. In order to obtain a Mareva injunction, it is always sufficient that there should be a "good arguable case". The same should apply in regard to a petition for winding up of a foreign company. Otherwise the assets will disappear.

I would like to add this further .... In the case of English companies there may be circumstances which warrant a departure from the general rule. The circumstances may show that there is a danger of the assets being removed out of the jurisdiction and put out of reach of creditors. Whenever this appears, then it should be sufficient to warrant a petition for winding up that the creditor should have a "good arguable case" that the debt is owing and unpaid. I entirely agree that a petition for winding up should not be used as the means of getting in a debt which is bona fide disputed on substantial grounds - on which the company would get unconditional leave to defend. But I think the Companies Court should be able to look into the bona fides of the defence. If it is obviously a "put-up job" - or if it is so insubstantial that a Queen's Bench master would only give conditional leave to defend - then I should think the petition to wind up should stand. In short I think that the Companies Court should keep the remedy flexible - for the sake of all creditors - so that the assets may not be disposed of or removed by the company before there is a chance of dealing with them. So I would hold that the statement in Buckley with regard to foreign companies should also apply to English companies if the special circumstances so demand."

Shaw L.J. said that "[the rule of practice] might be overborne in a particular set of circumstances where its application might result in injustice". Oliver L.J. said that the rule of practice must give way to circumstances which make it desirable that the petition should proceed, although it might be that that would only apply in very exceptional circumstances. He pointed out that the company was not trading and had no substantial assets anywhere but in this country and that if the petition was struck out, the petitioner was effectively without remedy. He also drew attention to the fact that if the petition proceeded, the company still had the right to defend the petition when it came on for hearing. He continued:

Now the jurisdiction in relation to restraining advertisement and striking out a petition which is based upon a debt which is subject to a bona fide and substantial dispute is, I think, a salutary one, because a winding-up petition is a Draconian measure which, even if it does not succeed, can have very serious consequences for the company by publicly affecting its credit and reputation. It ought not, therefore, to be used as a means of putting on pressure in cases of genuine dispute, and it is right that the Companies Court should as a matter of its practice keep a watchful eye on proceedings which can so easily be abused. But, having said that, the refusal of the court to entertain cases where the underlying debt is said to be disputed is, in my judgment, a matter of practice only. It is not, in general, convenient that the very status of the petitioner to proceed with his petition should be fought out on a winding-up petition."

"But the court must, I think, remain flexible in its approach to such cases. There may well be cases where to compel the creditor to go off to another division of the court to establish his debt would effectively deprive him of any remedy at all. That may, of course, be inevitable where the court is convinced that the dispute is a genuine one, genuinely raised and persisted in, and one which cannot conveniently be determined in a short space of time on hearing the one application - and that, I think, must be particularly the case even in cases which can perhaps conveniently be dealt with where the grounds of dispute have been known to and canvassed with the petitioner well before the presentation of the petition.

But it ought not, in my judgment, to be an inflexible rule that the Companies Court should never take upon itself the burden of determining the matter on the hearing of the petition. It does so in petitions on the just and equitable ground, and it is only too easy for an unwilling debtor to raise a cloud of objections on affidavits and then to claim that, because a dispute of fact cannot be decided without cross-examination, the petition should not be heard at all but the matter should be left to be determined in some other proceedings. Whilst I do not in any way, therefore, seek to weaken the rule of practice as a general rule, I think that it ought not to be assumed to be inflexible and to preclude the Companies Court from determining the issue in an appropriate case simply because the debtor files mountains of evidence raising disputes of fact which require to be determined by cross-examination. The court must, I think, reserve to itself the right to determine disputes - even in some cases substantial disputes - where this can be done without undue inconvenience and where the position of the company, whether it be an English company or a foreign company, is such that the likely result in effect of striking out the petition would be that the creditor, if he established his debt, would lose his remedy altogether."

The observations of this court in Claybridge Shipping were applied by this court in Capital Landfill (Restoration) Ltd. v William Stockler & Co. (unreported, 5 September 1991) in which a creditor's petition to wind up an English company was allowed to proceed, notwithstanding that the debt was disputed. A factor which weighed with the court was the possibility that a liquidator might seek to set aside a floating charge granted by the company which was prima facie insolvent.

It should be noted that Oliver L.J. referred to the practice of the Companies Court to take upon itself the burden of determining what he called "the matter", but which we take to be the disputed status of the petitioner to proceed with the petition, on the hearing of petitions on the just and equitable ground. Such petitions by a contributory alleging that the company is a quasi-partnership frequently involve the determination by the Companies Court of numerous disputes of fact. However in Re J.N. 2 Ltd. Brightman J. considered whether a contributory's petition by a petitioner, whose locus standi was bona fide disputed, to wind up a company on the just and equitable ground, should be struck out. He said (at pp.187,8):

"It is, of course, common practice to dismiss a creditor's petition if the debt is bona fide disputed by the company. That seems to me a wholly proper attitude to be adopted by the court. The presentation of a winding up petition has an immediate effect on the ability of a company to deal with its assets, although capable of mitigation by an appropriate order under section 227 [of the Companies Act 1948]. Frequently in the case of a trading company the presentation of a petition will damage the financial standing of the company. It therefore seems to me obviously correct that the court should not allow a creditor's petition to remain on file longer than is necessary once the status of the petitioner is in doubt.

In my judgment this reasoning applies with even greater force to a petition by a person whose status as a contributory is in dispute. In the case of a disputed creditor's petition, the petitioner has at least an unsatisfactory claim against the assets of the company. A person asserting that he is a contributory has not, in so asserting, any claim against the company's assets. It makes no difference whatever to the quantum of the company's assets whether the contributory succeeds or fails in his claim to be a shareholder. It therefore seems to me to be all the more important that he should not be permitted to present a petition and thereby interfere with dispositions by the company of its assets and risk damaging the financial standing of the company, so long as his right to be a shareholder of the company is in dispute. Basically, the dispute is not between the company and a person claiming against the company, but between a shareholder and a person claiming to be a shareholder. Let that dispute be settled first before the company is brought on to the scene by the presentation of a petition. By being brought on to the scene I mean of course as a substantial party.

The basis of Brightman J.'s decision was first and foremost the damage to the company, particularly a trading company as it was in that case, through the existence of the petition, and secondly the fact that the dispute is between the shareholder and a person claiming to be a shareholder, which meant that there was even less justification for allowing the petition to damage the company than if the dispute was between a private person claiming to be a creditor and the company.

Mr. Joffe submitted that Re J.N.2 Ltd. , although correct at the time it was decided, should no longer be followed. He rightly pointed out that significant procedural changes have occurred since 1977 when that case was decided. First, while there is still a provision, s.127 of the 1986 Act (the successor to s.227 Companies Act 1948), avoiding any disposition of the company's property, any transfer of shares and any alteration in the status of the company's members made after the commencement of the winding up (deemed to commence at the time of the presentation of the winding up petition if the company is wound up: s.129(2) of the 1986 Act) unless the court otherwise orders, the practice of the court is to order otherwise in relation to dispositions of the company's property in a case where the company is solvent. The petition must state whether the petitioner consents or objects to a validation order under s.127 (see Practice Direction (Companies Court : Contributory's Petition) [1990] 1 W.L.R. 490) and the standard form order allows the company to make in the ordinary course of business payments in and out of its bank accounts and in the ordinary course of business for proper value dispositions of its property. A contributory's petition on the just and equitable ground, like that in the present case, alleges the solvency of the company and in such circumstances a s.127 order will normally be made ( Re Burton & Deakin Ltd. [1977] 1 W.L.R. 390).

Second, in 1977 every winding up petition had to be advertised in a newspaper in a form which did not distinguish between a creditor's and a contributory's petition (r.28 Companies (Winding Up) Rules 1949) and there was a substantial risk that the reader would assume the company was insolvent. Now the Insolvency Rules 1986 distinguish between a creditor's petition and a contributory's petition and the practice under r.4.23(1)(c) is not to require advertisement of a contributory's petition on the just and equitable ground.

It follows that the likelihood of damage being done to a company through the existence of such a petition is now very much reduced. As for the factor that the dispute is primarily between shareholder and claimant shareholder, subsequent authorities on costs in relation to such petitions have laid emphasis on the fact that the company is a nominal party (see, for example, Re A. & B. C. Chewing Gum Ltd. [1975] 1 W.L.R 579 and Re Hydrosan Ltd. [1991] B.C.C. 19 relating to a petition under s.459 Companies Act 1985). It is hard to see why the Companies Court now should normally refuse to determine such a dispute, even if it does relate to the petitioner's locus standi, if the existence of the petition is not likely to cause substantial damage or inconvenience to the company.

We return to the Judge's reasons for his decision. The Judge's first reason was the damage to the Company caused by the Provisional Liquidator's appointment. We have to say that in a case where there is no evidence to suggest that the reason for the appointment, viz. the risk of dissipation of assets, was not justified, this ground seems to us very surprising. We repeat that Mr. Yousefpour's evidence has not been challenged. Moreover there was clear evidence from the Provisional Liquidator that Mr. Schweininger had made contradictory and "demonstrably untrue" statements to him about the bank accounts of the Company, first denying that it had a bank account in England and denying awareness of bank accounts generally and in Switzerland in particular. Mr. Schweininger now accepts that the Company has a bank account with Credit Suisse in Zurich holding US $12,000 and two bank accounts with Barclays Bank plc in Yeovil holding £4,000. Further, Mrs. Ary and Mr. Schweininger, despite repeated requests by the Provisional Liquidator and despite their statutory duty, have not cooperated with the Provisional Liquidator, in particular in relation to supplying the Company's books and records. It is of course true that the appointment of a provisional liquidator might have far reaching implications for the company concerned (cf. Practice Direction No.3 of 1996 (Companies Court : Provisional Liquidator) The Times, 5 December 1996). But in our opinion it is wrong in principle that, in a case where a provisional liquidator has been appointed on unchallenged evidence as to the jeopardy to the assets of a Company, the appointment should be treated as a significant reason for dismissing the petition and so discharging the provisional liquidator. We cannot see how an effective corresponding safeguard could be put in place if the Petitioner were to seek to litigate the dispute in an ordinary action, as he, of course, has no direct interest in the Company's assets such as might justify an injunction in that action. It is of course true that the Company's main asset in England is the Grange, and whilst it is not likely to disappear in a puff of smoke, there is no reason why it cannot be sold very quickly to a cooperative purchaser.

But the matter does not stop there. The Judge accepted at face value the bare statements of each of the Respondents as to the detriment the Company is suffering. Mr. Schweininger says no more than "The existence of a winding-up petition is having a damaging effect on the Company", whilst Mrs. Ary says "These proceedings are having a very bad effect ... on the business and affairs of the Company. These proceedings and the fact that the Provisional Liquidator has sent so many letters (for example to the Bank, Building Society, our contacts in BVI) is very damaging to the reputation of the Company." No further explanation or particulars of the damage is given. Had there been evidence of the Company continuing to trade, we could understand those bare assertions of damage better. But there is none. Indeed Mr. Schweininger on 24 April 1996 told the Provisional Liquidator that the Company had not traded since about a year before, that there had been no transactions in the U.K., that the Company had only conducted two transactions with a total turnover of about $3.5 million and a very small profit margin and no overall profit, and the Company was dormant and had no activity.

The Judge's second reason was the dispute on the Petitioner's locus standi, the Judge taking into account the change in the Petitioners's stance from that of registered shareholder to that of allottee. The Judge appeared to be taking the view that whilst he could not resolve the dispute, the Petitioner faced more difficulty than did the Respondents. The Judge did not have the further evidence which we have allowed to be adduced, on the strength of which, when coupled with other evidence such as the letter of 26 June 1995, Mr. Joffe has submitted that there is no bona fide dispute. He has drawn attention to the evidence of Mrs. Ary and Mr. Schweininger about the Petitioner's share certificate, which hints that somehow the Petitioner might possibly have caused them unknowingly to sign the certificate and allow the seal to be used without explaining in what circumstances that could have happened. We see considerable force in Mr. Joffe's submission, but whilst we have doubts whether the dispute is bona fide, we are not able to say that there is no substantial dispute on this point. That dispute can only be resolved on oral evidence.

The Judge's third reason was that there were other remedies available in the British Virgin Islands where the share register is situate, and that the Company's main asset in this country was land. Again we respectfully disagree with the Judge in this reason. The question is not whether the British Virgin Islands allow proceedings to rectify the register or to wind up a company on the just and equitable ground. Not surprisingly they do. The question is whether there would be an effective remedy available there to the Petitioner if the petition here were dismissed, given the evidence of the risk of dissipation of assets. The Judge did not address this point. No assets of the Company are known to be situate in the British Virgin Islands and we cannot see how any order of the court would be effective to preserve the known assets once the petition here was struck out, in view of the evidence suggesting that the assets would be removed from this jurisdiction. In our judgment on the evidence before the court the Petitioner would probably be left without an effective remedy if the petition was struck out.

The Judge's fourth reason was that the proposition established by Re J.N.2 Ltd. , that a petitioner should establish his locus standi outside the petition if it was disputed, was a valid point of departure and the other factors did not persuade him to depart from that proposition. Whilst we accept that the Judge could properly have regard to that factor, in our judgment in the light of the procedural changes since 1977 it is not a factor of great weight. More importantly, the rule of practice must, in the light of Claybridge Shipping , yield to the interests of justice when a petitioner would probably be left without an effective remedy if the petition were to be struck out. In our judgment the Judge erred in not so concluding in the present case.

It follows that this court is free to exercise its own discretion. We have no doubt, having regard to all the circumstances, that this is a case where the petition should not be dismissed, notwithstanding the dispute as to the Petitioner's locus standi, but should be allowed to proceed so that the Petitioner is not left without a remedy. It is still open to the Respondents to establish at the hearing of the petition that the Petitioner is not an allottee. Mr. Joffe has not asked us to order a preliminary issue, nor has Mr. Kaye, and we would therefore make no such order. We would allow the appeal and set aside those parts of the Judge's order which dismissed the petition and discharged the Provisional Liquidator.

England and Wales Court of Appeal (Civil Division) Decisions

GOLAM REZA ALIPOUR v. FERESHTEH ARY and ALEXANDER SCHWEININGER [1996] EWCA Civ 1229 (17th December, 1996)

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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Alipour v Ary & Anor [1996] EWCA Civ 1229 (17th December, 1996) URL: http://www.bailii.org/ew/cases/EWCA/Civ/1996/1229.html Cite as: [1997] WLR 534, [1997] 1 WLR 534, [1997] BCC 377, [1996] EWCA Civ 1229