In Thg Plc v Zedra Trust Company (Jersey) Limited [2024] EWCA Civ 158, the Court of Appeal has confirmed that unfair prejudice petitions brought under section 994 of the Companies Act 2006 (the “Companies Act”) are subject to limitation periods.
Facts
Until now it has been readily accepted by Courts and practitioners that unfair prejudice petitions were not subject to a limitation period under the Limitation Act 1980 (the “Limitation Act”) and that the equitable doctrine of laches (an equitable defence that can be asserted where a claimant has delayed asserting their rights and is no longer entitled to bring an equitable claim) did not strictly apply to the statutory remedies under the Companies Act. The Court in Thg Plc acknowledged that it had been “undoubtedly received wisdom that no limitation period applies to” unfair prejudice petitions. However, this had not actually been an issue that has been argued before and determined by the Courts, although it was a point that was assumed to be correct and had been referred to in obiter in various judgments.
Notwithstanding the above, the Court has always maintained a wide discretion under the Companies Act to make “such order as it thinks fit” in respect of unfair prejudice petitions. It had been readily accepted before Thg Plc that an unjustified delay in bringing an action can be evidence that the petitioner has ‘acquiesced’ i.e. accepted the behavior on which the complaint is founded. In those circumstances the Court has always maintained the right not to hear the claim where it would be unfair to do so.
However, the decision in Thg Plc now confirms that the Limitation Act does apply to unfair prejudice petitions. The limitation period is calculated by reference to the remedy sought and is either (i) 6 years under section 9 of the Limitation Act 1980 where the claim is for compensation or monetary relief or (ii) in all other cases 12 years under section 8 of the Limitation Act 1980, calculated from the date on which the cause of action accrued.
It is a common remedy in unfair prejudice petitions for a share buy-out to be ordered. The Judgment clarified that those claims do not amount to claims for monetary relief as there is no entitlement to money until the share transfer is executed. As such, where the relief claimed is a buy-out order, petitioners will have 12 years in which to bring a claim.
Section 32 of the Limitation Act will apply to unfair prejudice claims and will operate to suspend the running of time for the purposes of calculating the limitation period in circumstances of ‘concealment’. This is particularly important in unfair prejudice claims where, quite often, a basis for bringing a claim is exclusion from management and can involve the concealment of information relating to the company and its affairs.
Analysis
There is no doubt that Thg Plc is a groundbreaking, and it would be fair to say, unexpected decision which will cause waves throughout this area of legal practice. Given the significance of the decision, we would not be surprised if the issue was subject to appeal to the Supreme Court.
As the limitation period is remedy dependent it is possible that a single claim could be subject to both limitation periods and careful thought will need to be given to the remedies sought in any petition.
The application of a limitation period to unfair prejudice claims is particularly in important given that many petitions rely on a course of conduct, sometimes over a significant period of time, which cumulatively amounts to unfair prejudice. It is our view that the limitation period could only sensibly begin to run once there had been sufficient cumulative events to demonstrate a case of unfair prejudice. However, this will be an issue to be determined by the Court. Where unfairly prejudicial conduct is continuing this may also give a petitioning party scope to overcome any limitation defence. This is an issue that will undoubtedly be the subject of further judicial scrutiny.
If you would like to discuss any aspect of this article or require any further information or advice, please contact Jade Salton-Brooks on jkb@blasermills.co.uk.