Limitation Periods And Unfair Prejudice Petitions
Author: Sam Evans
Key Contact: Aisha Wardell
On 23/02/2024, the Court of Appeal handed down judgment in the case of THG PLC & Others v Zedra Trust Company (Jersey) Limited, details of which can be found here.
Contrary to previous assumptions, the court decided that unfair prejudice petitions under section 994 of the Companies Act 2006 (“CA 2006”) were subject to limitation periods under the Limitation Act 1980 (“LA 1980”). This has been considered a surprising development by some practitioners and was described by Lewison LJ, who gave the leading judgment, as overturning “over 40 years’ received wisdom”.
The background
The petition in question was presented on 7 January 2019 by Zedra. The relevant respondents were THG PLC (“the company”) and 14 former or current directors of the company. The petition alleged that the directors were in breach of their statutory duties and that their actions had resulted in a dilution of Zedra’s shareholding. Zedra also sought to amend its petition to require the directors of the company to pay them compensation for losses allegedly suffered as a result of being excluded from a bonus share issue (meaning that Zedra had lost the right to additional shares, which it would have sold).
The appeal in question was uniquely concerned with the issue of whether any limitation period applies to a petition under section 994 of CA 2006 and, if so, what the appropriate period would be. In an earlier judgment of the High Court dated 18 January 2023, Fancourt J held that there was no limitation period for such petitions.
The judgment
The Court of Appeal held in paragraph 74 that, in principle, unfair prejudice petitions are subject to the limitation period set out in section 8(1) of LA 1980. This section provides that “(1) An action upon a specialty shall not be brought after the expiration of twelve years from the date on which the cause of action accrued.”
However, in the case of the specific application before the court, it concluded that a shorter limitation period of six years under section 9 of the LA 1980 actually applied as the relief sought was for monetary compensation. Therefore, the court concluded that the amendment to the petition should not have been allowed due to the time limits.
In deciding this case, the Court explicitly stated that it was not subject to the earlier Court of Appeal judgment in the case of Bailey v Cherry Hill Skip Hire (“Cherry Hill”). This was because, to quote Lewison LJ, “what the court did in [Cherry Hill] was to decide the case in accordance with received wisdom, without questioning whether that received wisdom was correct”.
Comment
This judgment is undoubtedly a significant and surprising development for commercial litigators and has challenged the conventional wisdom of some in the legal profession.
Moving forward, aggrieved shareholders will need to consider these time limits when deciding whether to pursue an unfair prejudice claim, particularly in circumstances where monetary compensation is sought as part of the relief.
In any event, prompt action is always recommended in any dispute to ensure you do not fall foul of any statutory time bars under the Limitation Act and to ensure that evidence and documents are preserved.
If you are a shareholder and believe you have been unfairly prejudiced, then please contact Acuity Law’s Litigation & Dispute Resolution team.
