The received wisdom for 40 years has been that the Limitation Act 1980 simply does not apply to unfair prejudice petitions. This has frequently been assumed by the courts at all levels. It is stated to be the law in all the leading practitioners’ works.
On Friday, the Court of Appeal held that this received wisdom was wrong.
The decision
In Thg Plc v Zedra Trust Company (Jersey) Limited [2024] EWCA Civ 158, the Court of Appeal held that the Limitation Act 1980 applies to a petition for unfair prejudice under s.994 of the Companies Act 2006.
The principal judgment was given by Lewison LJ with whom Arnold and Snowden LJJ agreed.
The appeal was from the grant of the Petitioner’s application to amend the petition. The respondents resisted that amendment on the basis that the claim was time barred under the 1980 Act.
The Court of Appeal held that a petition complaining that the affairs of a company have been conducted in an unfairly prejudicial manner is in principle an action upon a speciality. Pursuant to s8 of the 1980 Act, such an action has a 12-year limitation period unless a shorter period is specified [72].
As if this was not enough to send shockwaves through the company law world, the Court then proceeded to hold that – on the facts – an even shorter limitation period indeed applied.
The particular claim in issue was that the Petitioner had been unlawfully excluded from a bonus share issue. The Petitioner had claimed equitable compensation for the loss allegedly suffered as a result of such exclusion.
The Court of Appeal held that: (a) such a claim amounted to an action to recover a sum recoverable by virtue of an enactment; (b) section 9 of the 1980 Act therefore applied and hence no petition could be brought more than 6 years from the date on which the cause of action accrued [129].
On the facts, this meant that the Petitioner’s claim was barred by limitation. Permission to amend therefore should have been refused.
Analysis
In deciding that the 1980 Act applies, the Court recognised that it was overturning 40 years of received wisdom.
As it recorded, the assumed inapplicability of the 1980 Act was reflected in dicta in numerous decisions at first instance as well as by the Court of Appeal and Supreme Court. Such was also the position assumed in all the leading practitioner texts and by the Law Commission.
On any view, therefore, this is a ground-breaking decision which will cause significant reverberations in this field. There must also be a substantial prospect of the case now proceeding to the Supreme Court.
The impact on decision will repay careful consideration in any unfair prejudice case where allegations relate to conduct occurring 6 or more years ago.
In any such case, Practitioners will need to give careful thought about how to frame the petition. As the Court acknowledged, the result of its decision may well be that some forms of relief might be time-barred and some not [123].
In reaching its decision, the Court referred to discussion in argument about whether a share buy-out order – the normal relief granted – would also be caught by s.9 of the 1980 Act. Lewison LJ opined that such a claim would not be for the recovery of money and hence would not be caught by s.9. Accordingly, the 12-year limitation period would usually apply [124] – [125]. Future cases will need to determine definitively whether Lewison LJ’s dicta are correct in this regard.
Practitioners will also need to consider the extent to which it can be alleged that the unfair prejudice is continuing and, if so, whether this may overcome what would otherwise be a limitation problem.
There are dicta in the case to the effect that the limitation periods will not prove problematic where the alleged unfairly prejudicial conduct is continuing: – see [77] and [120].
Finally, even where the limitation period has not expired, delay may be relied upon to seek to defeat the petition (for example where it amounts to acquiescence or otherwise means that it would not be just to grant the relief sought). In Thg, the Court stressed that stale claims of historic misconduct were to be discouraged, even if within the limitation period, and that in a clear case summary judgment could be granted in respect of such claims ([126] and [162]).
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David Lascelles specialises in shareholder and share sale disputes. He is recognised as a tier 1 practitioner in company law by Legal 500 2024 independent guide to the legal profession who record market commentary on David as being ‘Exceptionally bright, even amongst very sharp peers, he has a unique blend of street smarts and book smarts, which makes him a formidable barrister and a delight to work with.”
