Are you running out of time?
1 May 2024
If you want to bring court action against someone there is usually a time limit within which you must commence such action. For most cases, the answer as to how long you have is contained within the Limitation Act 1980 (“the Limitation Act”).
For the last 40 years, one exception to this has been if you are a minority shareholder and you wish to bring an action for Unfair Prejudice pursuant to s994 of the Companies Act 2006. This is a specific type of claim (petition) that can be brought by a member of a company if they believe that they have been unfairly treated and/or that their rights have been disregarded by the company and/or the other shareholders.
It has been understood that the Limitation Act does not apply to these kinds of claims and that, technically, there is therefore no time limit within which they must be brought. It has, however, been the case that a Respondent to a petition can rely on any delay in the petitioner presenting the petition as a reason for why the petition should not be successful.
This position was however changed when the Court of Appeal handed down its judgment in the case of Thg PLC v Zedra Trust Company (Jersey) Limited [2024] EWCA Civ 158.
What happened?
On 7 January 2019, Zedra Trust Company (Jersey) Limited (“Zedra”) issued an unfair prejudice petition against Thg PLC (“Thg”) and 14 other named individuals who were, or had been, directors of the company. This original petition made several complaints, all of which were struck out or dismissed.
However, Zedra made an application on 22 June 2022 to re-amend its petition to claim compensation for losses it had suffered after an alleged variation of its dividend rights in July 2016. The High Court, in first instance, allowed Zedra to amend its petition.
Thg appealed this decision as it argued that the claim was time barred under the Limitation Act, as the conduct complained of happened over six years prior to the petition being amended and therefore should not be allowed to proceed.
What did the Court of Appeal decide?
The Court of Appeal had to consider whether the Limitation Act applied to unfair prejudice petitions as it had previously been understood that it did not.
In their judgment, the Court of Appeal decided that the Limitation Act does apply.
The effect of this is that some remedies pursued through an unfair prejudice petition would be bound by a 12-year limitation period starting from the date the cause of action arose, as outlined in section 8 of the Limitation Act. However, in cases seeking only compensation or monetary relief, where a six-year limitation period under section 9 of the Limitation Act is applicable.
On the facts, the Court of Appeal therefore decided that Zendra’s claim was time barred pursuant to the Limitation Act.
The Court of Appeal did acknowledge in its judgment (though this was a general discussion and so is not, currently a definitive statement) that if a claim is for a share buy-out order (which is the normal remedy in these kinds of claims), then this would likely not be caught by Section 9 of the Limitation Act because it is not a claim for compensation. The Court of Appeal suggested that the 12-year limitation period could apply however, there will need to be further case law on this to determine the matter definitively.
Impact
So, what does this mean?
This decision is unlikely to change too much practically when it comes to unfair prejudice petitions. The position previously taken by the courts took account of delay in initiating these proceedings. As such, petitioners were always encouraged to act quickly. This judgment could be seen to be a formalisation of that approach and emphasises to potential petitioners the importance of seeking swift advice and not delaying.
This does not detract from the fact that this is an important decision which reiterates the need for swift action if you, as a shareholder, consider that you have been unfairly prejudiced. This is especially so in circumstances where you are seeking monetary compensation.
Prompt action is always recommended in any dispute scenario to ensure that you do not fall foul of the statutory time bars.
If you have any questions in relation to time bars for bringing actions or if you are a shareholder that has been unfairly prejudiced (or find yourself having to respond to such a petition) please contact Chloe Bird in our Commercial Litigation Team.
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Chloe Bird
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at May 2024.