Winding up on the just and equitable ground

This is a study of winding up on the just and equitable ground, mainly at the instance of members as contributories. The typical cases are (a) where the object for which the company was formed is impossible of further or any attainment;. and (b) where the petitioner has lost confidence in the controllers or, in the case of a quasi-partnership, in other members. In either case the petitioning contributory seeks to be relieved from his contractual obligation to contribute to the capital of the company or, in the case of a company limited by guarantee, to contribute in the event of its being wound up and in an article in (1964) 27 Modern Law Review 282, 305 Dr.B.H. McPherson suggested that Winding up on the just and equitable ground might amount to little more than the application to that contractual obligation of the doctrines of discharge by frustration and on account of breach. This thesis originally set out to verify that hypothesis, but in the course of study it became apparent that the contractual analysis was an aid to understanding rather than a complete solution to the problems presented by Section 222(1)(h). In the first place, a winding up order is a discretionary equitable remedy, so that the common law doctrines of discharge by frustration and on account of breach are modified by the discretionary considerations applicable to equitable remedies generally and in particular equitable remedies in contract. Secondly, it is submitted, the Court does not apply those doctrines directly or even by analogy. Their apparent application stems from the fact that in the majority of cases they do produce a result which is just and equitable. The Court, looking to those ultimate reasons rather than to any application of common law doctrine, usually comes to the same result - but not always. There are cases where a remedy is granted in the absence of circumstances analogous to frustration or breach as well as cases where an order is refused notwithstanding that those circumstances have been shown to obtain. The main illustration is afforded by the Court's recognition of what Sir Owen Dixon once called "general intention and common understanding among the members". A company may have a great many objects stated in its memorandum and its articles may be in standard form, but if there is an express or implied arrangement among the members that its activities are to be directed to one object only or as to the manner in which its affairs are to be conducted the Court will have regard to that arrangement. If the main object becomes impossible or if the understanding among the members breaks down, although the contract expressed in the memorandum and articles has not been frustrated or breached, it may be just and equitable that the company be wound up. Although the contractual analysis has been retained as an invaluable aid, the thesis is now more than just a verification of the original hypothesis. It covers the field generally but concentrates on those areas where an original contribution seemed possible. The main such area is the concept of general intention and common understanding, which not only requires the contractual analysis to be modified but also that attention be given to problems of enforcement against persons not parties to the arrangement and to the consequences in terms of admissible proof. The law and principles of equity are stated from materials available to me in Melbourne at approximately 30th June, 1973