{"id":10469,"date":"2026-09-08T16:10:59","date_gmt":"2026-09-08T16:10:59","guid":{"rendered":"https:\/\/rfblegal.co.uk\/?post_type=insight&p=10469"},"modified":"2026-09-08T16:11:00","modified_gmt":"2026-09-08T16:11:00","slug":"going-where-no-deadlocked-offshore-company-has-been-before-isle-of-man-company-refused-wind-up-by-court","status":"publish","type":"insight","link":"https:\/\/rfblegal.co.uk\/it\/approfondimenti\/going-where-no-deadlocked-offshore-company-has-been-before-isle-of-man-company-refused-wind-up-by-court\/","title":{"rendered":"Going Where No Deadlocked Offshore Company Has Been Before: Isle of Man Company Refused Wind-Up by Court"},"content":{"rendered":"\n

Going Where No Deadlocked Offshore Company Has Been Before – It is not Just and Equitable to Wind-Up where there is \u201can industrial scale of lying to the Courts and sustained financially by plundering the Company\u2019s liquid assets\u201d<\/strong> <\/p>\n\n\n\n

Ronald Fletcher Baker were successfully instructed by Lake Limited in opposing what appears to be the first contested contributory Winding-Up Petition on just and equitable grounds. The recent Judgment, which has attracted a lot of judicial comment, relates to a particularly unusual and striking set of findings. The heart of the matter boils down to two brothers in deadlock over their offshore Isle of Man property company.\u00a0<\/p>\n\n\n\n

Background Facts <\/h2>\n\n\n\n

Apple Properties Limited (\u201cApple\u201d) is a company incorporated in the Isle of Man in 1995. Between 1995 and 2020, they acquired 11 properties in South West London, worth at least \u00a35m. Apple was intended to be used as an Isle of Man vehicle for two brothers, Habib and Shafe in equal beneficial shares. Thereafter, Habib solely dealt with a succession of IOM corporate service providers (\u201cCSP\u201d), who provided nominee shareholders to hold the Company\u2019s shares. The two issued shares were held by two CSP provided nominee shareholders, Lake Limited (for Shafe) and Harbour Limited (for Habib).\u00a0\u00a0<\/p>\n\n\n\n

In around 2020, Shafe asked his brother Habib to formally record his 50% beneficial ownership of Apple. Habib responded confirming he would do this, but instead, filed false filings at the Isle of Man Companies Register, causing Shafe to be removed as a director and took positive actions to entirely block Shafe from all involvement in Apple including to remove him as a signatory from the Company\u2019s only bank account.\u00a0\u00a0<\/p>\n\n\n\n

Habib then incorporated Century 22 Estate Management Limited, and began a swift crusade of transferring the rental income of approximately \u00a3200,000 per year derived from Apple\u2019s properties to Century 22. Shafe was also extremely concerned that the circa \u00a3460,000 held in Apple\u2019s bank account was at risk of dissipation. He therefore brought an application in the UK to freeze the Company bank account due to the risk of dissipation. His Honour, Judge Zacaroli (as he then was), refused the application due to the application being brought by Shafe himself and a perceived lack of risk of dissipation.\u00a0\u00a0<\/p>\n\n\n\n

Shafe, later in December 2020, brought proceedings in the Isle of Man, seeking a declaration to confirm his 50% beneficial interest in Apple, and for injunctive relief to be provided with key documents to allow him to discover what had happened in the intervening years. Habib continued to entirely dispute his brother’s interest at all.\u00a0\u00a0<\/p>\n\n\n\n

In what is a uniquely scathing Judgment, His Honour, Acting Deemster Gough, in the IOM, made several findings regarding the actions and credibility as a witness of Habib and his son Omar:\u00a0<\/p>\n\n\n\n

\n

\u201cThere is a legal maxim \u201cfalsus in uno; falsus in omnibus\u201d which broadly means that if a person lies in one thing it may be assumed he lies in other things as well. The doctrine does not need to be deployed in this judgment because I would hardly know where to start with Habib\u2019s lies.\u201d<\/em> <\/p>\n<\/blockquote>\n\n\n\n

These serious findings led Acting Deemster Gough to report his Judgment to the Attorney General in the IOM to consider any criminal action:  <\/p>\n\n\n\n

\n

\u201cI have to say that I have never come across a case where defendants supported by family members have colluded to invent a narrative designed solely to defeat a claim and which narrative I find, almost in its entirety, to be false. In the remarkable circumstances of this case I have no alternative other than to refer this judgment to HM Attorney General so that he may consider whether the evidence of the Bush Defendants and Adam needs to be investigated further\u201d<\/em> <\/p>\n<\/blockquote>\n\n\n\n

The order resulting from the IOM Judgment was to declare that Shafe was indeed a 50% beneficial owner of Apple, to reinstate the directorship, and to award a series of injunctions to provide documents in effect to allow Shafe to have visibility of what had happened to Apple, plus a costs order of \u00a3250,000 on account, to be assessed at a later date.\u00a0\u00a0<\/p>\n\n\n\n

Following this Judgment, no payment was made and a dispute arose as to whether any documents had been provided in accordance with the injunction orders. Shafe felt unable to undertake his duties as director of Apple without sight of these documents.  <\/p>\n\n\n\n

As Shafe remained concerned regarding the monies held in Apple\u2019s bank account, given the Judgment, he managed to request HSBC themselves place a freeze on monies leaving the account. Unfortunately, this was applied too late and despite Zacaroli J finding of a lack of risk of dissipation, Shafe discovered that the account had gone from circa \u00a3460,000 to \u00a31,000.  <\/p>\n\n\n\n

RFB were instructed to register the IOM Judgment in England, which was opposed by Habib, leading to a further \u00a310,000 costs order being granted in Shafe\u2019s favour. In attempts to place charges over properties owned by Habib, he produced trust Deeds claiming the beneficial ownership of the properties was in Habib\u2019s wife\u2019s name.\u00a0\u00a0<\/p>\n\n\n\n

Following the IOM Judgment, Shafe effected a change in his nominee shareholding company from Harbour Limited to APL Holdco Limited.  <\/p>\n\n\n\n

The Petition <\/h2>\n\n\n\n

It is against this background that Habib, via his nominee shareholder company APL Holdco, brought this Winding-Up Petition on just & equitable grounds, as a contributory, relying upon a breakdown of a relationship of mutual trust and confidence between Habib and Shafe and also functional deadlock.\u00a0\u00a0<\/p>\n\n\n\n

It is an extremely unusual situation and to the author\u2019s knowledge the first instance of the \u2018innocent\u2019 party seeking to oppose a Winding-Up Petition. Usually, the innocent party seeks the Petition to allow for a liquidator to gather and divide the company assets. However, in this instance, Shafe was concerned that a liquidator would not be in a better position to fully investigate the affairs, since his exclusion has prevented him from bringing a derivative action in the IOM.\u00a0\u00a0<\/p>\n\n\n\n

The grounds of opposition raised were:<\/p>\n\n\n\n

    \n
  1. The deadlock or breakdown in trust and confidence was the fault of Habib, to be attributed to APL Holdco <\/li>\n\n\n\n
  2. Shafe had been put in a position where he could not discharge his duties as director by the actions of Habib and Omar in withholding information and their breach of injunctions granted in the IOM Order <\/li>\n\n\n\n
  3. Relief should be denied for lack of clean hands <\/li>\n\n\n\n
  4. The Petition was brought for collateral purposes.\u00a0<\/li>\n<\/ol>\n\n\n\n

    Main Legal Issues <\/h2>\n\n\n\n

    There were several legal principles at play. It was accepted that the Court had jurisdiction to make an Order to wind up the IOM company, Apple, as an unregistered company under S.220 of the Insolvency Act 1986<\/a>, and that Re Real Estate Development Co<\/em> [1991] BCLC 210 <\/a>established a three stage test:<\/p>\n\n\n\n

      \n
    1. Sufficient connection with England <\/li>\n\n\n\n
    2. Reasonable possibility of benefit accruing to Petitioner<\/li>\n\n\n\n
    3. Person(s) interested in the distribution amenable to the Court\u2019s jurisdiction.\u00a0\u00a0<\/li>\n<\/ol>\n\n\n\n

      However, the parties were at issue as to Re Real Estate being a creditor petition rather than a contributory petition, and therefore as to the extent to which the circumstances surrounding the Petition came into play.<\/p>\n\n\n\n

      Section 125(2) Insolvency Act 1986<\/a> adds that if a Petition is brought by a contributory, it does not apply that a company should be wound up if it is just and equitable to do so if some other remedy is available to the petitioner and they are acting unreasonably in seeking to wind up instead of pursuing other remedy.\u00a0\u00a0<\/p>\n\n\n\n

      In relation to the cause of the deadlock or breakdown in trust and confidence, the leading case is Lau v Chu<\/em> [2020] UKPC 24,<\/a> which confirmed the earlier decision in Ebrahimi<\/em> that, where both parties are to blame, dissolution of a partnership may be ordered and a petitioner is not barred merely because the deadlock has been caused, to some extent, by their own fault. Re Whitehall Partnership<\/em> [2023] EWHC 596 (Ch) went further, holding that where the Petitioner is solely responsible, the winding up should be refused.<\/p>\n\n\n\n

      Re Whitehall Partnership<\/em> also addressed the collateral purpose or objective, stating that the Court will not grant the remedy of winding up to a contributory if his motive for seeking it is to further some collateral purpose or objective, not related or connected within his shareholding. Shafe relied on an email from the Petitioner\u2019s solicitors stating that the purpose of the Winding-Up Petition was to pay the personal IOM costs order owed to Shafe. It was submitted by the Petitioner that the case of Koza Altin<\/em> was authority, that motive is irrelevant, and that purpose will not be regarded as illegitimate if it is no more than a natural consequence of the action succeeding, nor where there is more than one purpose, then provided one is legitimate, there is no abuse of process.\u00a0\u00a0<\/p>\n\n\n\n

      Finally, there was an issue in relation to the interaction between the exercise of jurisdiction over a foreign company and the just and equitable ground for winding up. The Petitioner submitted that once jurisdiction over a foreign company is established, the Court can then separately consider whether it is just and equitable. Shafe contended it is more closely linked, and a contributory winding up of a solvent company should not be treated the same as a creditor\u2019s petition.\u00a0\u00a0<\/p>\n\n\n\n

      Findings <\/h2>\n\n\n\n

      Deputy Judge Rainey KC made findings as to his assessment of the witnesses before him. He adopted the findings as to the character of Acting Deemster Gough in the IOM Judgment in relation to Habib, and commented:<\/p>\n\n\n\n

      \n

      \u201cAny chance I might have believed<\/em> [Habib], despite the implausibility of it, evaporated with that absurd final answer. In this short passage of evidence Habib was in turn evasive, in my view untruthful, and argumentative. In a nutshell that aptly describes his evidence as a whole<\/em>.\u201d <\/p>\n<\/blockquote>\n\n\n\n

      In turn, he found that Shafe\u2019s answers were truthful.\u00a0<\/p>\n\n\n\n

      In relation to the factual findings, it was held that the monies being depleted from Apple\u2019s bank account amounted to a dissipation of company funds. This was also the case in relation to the rents being diverted to Century 22.  <\/p>\n\n\n\n

      It was rejected that, without further evidential material, Habib was unable to pay towards some of the costs ordered against him, and that his statement during examination, in relation to paying his legal fees for this Petition:<\/p>\n\n\n\n

      \n

      \u201cThat\u2019s a separate thing altogether. Paying your solicitors and barristers and the other, but because you find the funds by borrowing, getting family and friends to help. It\u2019s a completely different thing,\u201d <\/p>\n<\/blockquote>\n\n\n\n

      amounted to \u2018half an admission\u2019.<\/p>\n\n\n\n

      There were competing findings in relation to the various factual back-and-forths concerning the provision of documents pursuant to the IOM Injunctions. Some instances were found not to constitute breaches, while various actions were held not to be in compliance. For example: \u201cit is clear that Habib (and Omar) breached the IOM Order in this respect and that Shafe had to obtain the HSBC statements himself; the fact that he was able to do so thus exposing the dissipation of the Company\u2019s money and the diversion of rental income to Century 22<\/em>.\u201d<\/p>\n\n\n\n

      These factual findings, amongst others not mentioned herein, led the Deputy Judge to the legal conclusion that a Petitioner may be the sole cause of deadlock or breakdown within the meaning of Ebrahimi<\/em>, notwithstanding that the respondent has played some part. He used the following analogy:<\/p>\n\n\n\n

      \n

      \u201can unprovoked assault only become a fight if the victim fights back. It would not be right to regard fighting back as \u201cmisconduct\u201d and while on some level the choice of the victim to defend themselves can be said to \u201ccause\u201d the fight, in my view that does not mean that the aggressor is anything other than the sole cause of the fight.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n

      In determining what conduct could be taken into account, the Deputy Judge found that the conduct he had identified factually was relevant to his assessment of the cause of the breakdown in trust and confidence, the deadlock and the issue of clean hands. As such, it was held that Habib\u2019s actions from the time of excluding Shafe from Apple amounted to the sole cause of the deadlock or breakdown in the relationship.<\/p>\n\n\n\n

      In relation to collateral purpose, the Deputy Judge agreed with the Petitioner that Koza Altin<\/em> meant that motive is irrelevant where there are legitimate purposes. As such, despite a letter from the Petitioner\u2019s solicitors stating that the only reason for the Petition was to satisfy the IOM costs order (which was noted to be a mistake), the existence of legitimate reasons meant that the possible collateral consequences were not relevant here.<\/p>\n\n\n\n

      Assessing Lau<\/em> in relation to alternative remedies, the Deputy Judge found that there was an overlap between the question of unreasonable failure to pursue other remedies and the question of whether it was just and equitable to exercise the Court\u2019s extra-territorial jurisdiction to wind up a foreign company \u2013 particularly on a contributory\u2019s petition \u2013 because \u201cother remedies\u201d include bringing proceedings in the territory of incorporation. On this basis, it was found that the failure to bring a just and equitable winding-up petition in the IOM was a factor for consideration.<\/p>\n\n\n\n

      The failure to pursue a winding up in the Isle of Man was \u201ca fairly obvious piece of forum-shopping\u201d, as it prevented the possibility of counter-actions in relation to the breach of injunctions and non-payment of costs orders.<\/p>\n\n\n\n

      The Deputy Judge clearly set out that the caution to be exercised when winding up a foreign company under Re Real Estate Development Co<\/em> must be \u201cgreatly heightened\u201d where the Petition is a contributory\u2019s Petition. He considered the fact that this was a contributory\u2019s Petition to be highly relevant to the exercise of discretion and a powerful factor pointing against granting the Petition on just and equitable grounds.<\/p>\n\n\n\n

      The Deputy Judge did not hold back in identifying 12 points on which Habib did not come to the Court with clean hands, followed by the finding of an attempt to:<\/p>\n\n\n\n

      \n

      \u201cexclude Shafe entirely from the Company for a period of 4 years, sustained forensically by an industrial scale of lying to the Courts and sustained financially by plundering the Company\u2019s liquid assets, and having lost, seeks immediate winding up on the basis that in vindicating his interest Shafe has obtained a court order creating a deadlock in corporate governance which he (Habib) had regarded as irrelevant for 30 years and which he (Habib) has caused by failure to provide information reasonably required by Shafe in breach of the IOM Order.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n

      As such, overall, Habib had not come to the Court with clean hands given the factual findings, was the sole cause of the deadlock or breakdown in the relationship and, given the heightened caution the Court should apply when exercising its discretion, the Petition was refused as it would not be just and equitable to grant it.<\/p>\n\n\n\n

      Takeaway<\/h3>\n\n\n\n

      In relation to offshore companies, it remains possible to bring winding-up petitions in England in the usual circumstances. However, in what appears to be the first case concerning a contested contributory winding up, it has been held that heightened caution must be exercised by the Court when assessing just and equitable grounds. All circumstances should be taken into account, and the Court will be keenly aware of forum-shopping and alternative remedies that would have been available in relation to the company.<\/p>\n\n\n\n

      As such, members of offshore companies or CSPs should consider the conduct of the parties as a whole to ensure that they can establish that any deadlock or breakdown in the relationship has not been caused solely by the Petitioner before seeking a winding up in England.<\/p>\n\n\n\n

      Ronald Fletcher Baker LLP has a wealth of experience acting for offshore companies, particularly in the Isle of Man, alongside our trusted CSPs and asset managers. We are always happy to assist with what can be, as in this case, long-running and acrimonious disputes.<\/p>\n\n\n\n

      Please contact Ben Frost at b.frost@rfblegal.co.uk<\/a>.<\/p>\n","protected":false},"author":12,"featured_media":10470,"parent":0,"menu_order":0,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[],"tags":[],"class_list":["post-10469","insight","type-insight","status-publish","format-standard","has-post-thumbnail","hentry"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t