Shareholder disputes often feel like divorces; messy, emotional and with both sides pointing fingers. When commercial relationships break down, accusations of bad faith or poor conduct tend to fly in both directions. But what happens when neither party has behaved entirely impeccably? Can the courts still be asked to step in and provide relief?
One line of defence frequently raised against a winding-up petition is that the petitioner has not come to court with “clean hands”. In other words, if the shareholder seeking to wind up the company has themselves contributed to the breakdown of trust, should they still be entitled to rely on the equitable jurisdiction of the court? This very point arose in the recent decision of Dosanjh v Balendran [2025] EWHC 507 (Ch).
The case illustrates how the court approaches shareholder fallouts in quasi-partnership companies and in particular, what it takes to persuade a judge that winding up is the only just and equitable outcome. Three themes emerge as central to the decision:
- The role of trust and confidence in a quasi-partnership.
- Whether there is a functional deadlock in the company’s management.
- The reasonableness of seeking a winding-up order rather than an alternative remedy.
Whilst each of these points was examined in detail, what is striking is the court’s recognition of commercial reality: in private companies with few shareholders, just as in personal relationships, it is rare for one party to bear all the blame. The judgment therefore offers an important reminder that the equitable jurisdiction is concerned not just with apportioning fault, but with determining whether the company can continue to operate fairly and effectively. If not, whether winding up is the only viable remedy.
Material facts
Mr Parminder Dosanjh, the petitioner, and Mr Vallipuram Balendran, the first respondent, were both shareholders and directors of Webb Estate Developments Limited, a property management and development company.
The dispute between them stemmed initially from the treatment of monthly payments of £7,000 each, drawn from the company. Mr Dosanjh maintained that these payments were repayments of directors’ loans, while Mr Balendran contended they were reimbursements of expenses.
This disagreement soon escalated into a wider dispute over the company’s financial reporting. From 2020 onwards, the parties were unable to agree on the company’s accounts, with each filing separate and contradictory versions without the approval of the other.
Tensions grew around proposals to sell company-owned properties. Arguments were presented by Counsel for the petitioner, that Mr Balendran had failed to be transparent about his own personal interests, further damaging the trust between the directors.
By the time of trial, both sides accepted that confidence and trust between them had broken down. In his defence, however, Mr Balendran argued that Mr Dosanjh should be denied equitable relief on the basis that he had not come to court with “clean hands.” This argument focused on Mr Dosanjh’s unauthorised filing of company accounts, which the respondent said demonstrated misconduct sufficient to bar the remedy of winding up.
Although various potential solutions, including a demerger, had been explored, negotiations failed. The company meanwhile faced mounting financial pressures from bank loans and local authority liabilities, compounding the internal deadlock.
The legal framework
The jurisdiction to wind up a company on “just and equitable” grounds is found in section 122(1)(g) of the Insolvency Act 1986 (IA). Under section 125 IA 1986, the court must consider whether an alternative remedy is available and whether the petitioner is acting reasonably in seeking the remedy of winding up.
Case law has established important boundaries around this discretion. In Re Fulham Football Club (1987), the court stressed that winding up is a remedy of last resort. More recently, in Chu v Lau [2020], the Privy Council confirmed that winding up may be justified where there is a breakdown of trust and confidence in a quasi-partnership, even if both parties have contributed to the breakdown. The roots of this approach can be traced back to the nineteenth-century with cases such as Harrison v Tennant (1856), Pease v Hewitt (1862) and Atwood v Maude (1868), all of which recognised that dissolution may be appropriate even where neither side is blameless.
The Court’s reasoning in Dosanjh
In Dosanjh v Balendran, the court found that the company’s internal communications, particularly email exchanges, provided clear evidence of a complete breakdown of trust between the directors.
The judge acknowledged that both parties had engaged in conduct which undermined the relationship. However, the key question was not whether either director was “innocent,” but whether the company could realistically continue to function in the interests of all concerned. On the facts, the answer was no.
The respondent’s argument that the petitioner should be denied relief because he lacked “clean hands” was rejected. The court held that equitable relief may still be granted even where the petitioner has himself acted imperfectly if the wider circumstances make continued co-management of the company untenable.
Conclusion
The decision in Dosanjh v Balendran illustrates the court’s pragmatic approach to shareholder disputes in quasi-partnership companies. In business relationships, as in personal ones, it is rare for one party alone to bear the blame when trust breaks down. The real question for the court is whether the company can continue to function fairly and effectively. Where it cannot, winding up may be the only just and equitable outcome, even if both sides are at fault.
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