The "received wisdom" for several decades has been that unfair prejudice petitions under section 994 of the Companies Act 2006 are not subject to periods of limitation. However, in the landmark decision of the Court of Appeal (CA) in THG Plc v Zedra Trust Co (Jersey) Ltd [2024] EWCA Civ 158 (handed down on 23 February 2024), unfair prejudice petitions are now said to be subject to statutory limitation periods — although the length of this period will depend on the relief sought.
In THG v Zedra, the relief sought was that directors who had allegedly breached their duties in allotting shares and capitalising profits for an improper purpose should pay equitable compensation to Zedra to redress its loss. In the High Court, Mr Justice Fancourt had felt bound by the ratio of the earlier Court of Appeal decision in Bailey v Cherry Hill Skip Hire Ltd [2022] EWCA Civ 531 in holding that there is no limitation period directly applicable to a section 994 petition.
In allowing the appeal and representing a significant departure from "over 40 years’ received wisdom", wisdom now deemed to be incorrect, the CA held that it was not bound by Cherry Hill. Essentially, an assumption had been made in that case that no limitation period applies to unfair prejudice petitions, without the matter being argued. However, as Lord Justice Lewison explains in THG v Zedra, when that assumption is challenged, it can be seen that there is nothing to support it.
The key takeaways from the leading judgment of Lewison LJ are as follows:
On one final point, while the CA purports to introduce the application of a "bright line limitation period", this may not always mean that this is where the line will be drawn in terms of seeking relief after lengthy delays. While the imposition of a 12-year limitation period will not serve to defeat many complaints, this should not encourage petitioners to advance stale s.994 claims. This is because the courts may not necessarily be discouraged from striking out or summarily dismissing allegations of historical misconduct if it can clearly be seen, at an interim stage, that even though the petition was presented within the applicable limitation period, no reasonable judge could consider that such matters would justify the exercise of discretion to grant the relief sought at trial.
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