Privy Council Provides Clarification on the Grounds of a Just and Equitable Winding Up for BVI Quasi-Partnerships: Chu v Lau

In a recent decision, Chu v Lau [2020] UKPC 24 on appeal from the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands) (the "Court of Appeal"), the Judicial Committee of the Privy Council (the "Board") reviewed the law in the British Virgin Islands (the "BVI") surrounding a just and equitable winding up where the company in question is a quasi-partnership.

Upon a review of the case law, and relying heavily on the well-known English authority, Ebrahimi v Westbourne Galleries Ltd (In re Westbourne Galleries Ltd) [1973] AC 360 ("Ebrahimi"), the Board concluded that an irretrievable breakdown in trust and confidence between the participating members may justify a just and equitable winding up, essentially on the same grounds as would justify the dissolution of a true partnership. Further, the dissolution could be ordered even where both parties were to blame for the breakdown, as the operation of the equitable doctrine of clean hands is expressed in this context by the requirement that the applicant should not have been the sole cause of the breakdown in trust and confidence or of the deadlock.

The Board considered that, while it is well-established that winding up is a shareholders' remedy of last resort, that does not mean that winding up is unavailable to members if they have any other remedy.

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