"Unfair prejudice petitions are not mentioned in the 1980 Act. It is undoubtedly received wisdom that no limitation period applies to them."
So said Lewison LJ at the beginning of a judgment which cuts through that established wisdom. Holding that unfair prejudice petitions are subject to the provisions of the Limitation Act 1980 (the Limitation Act), the Court of Appeal has swept away the views of numerous Supreme Court, Court of Appeal and High Court judges, multiple practitioners' texts, and the Law Commission.
The Case
In THG Plc v Zedra Trust Company (Jersey) Ltd [2024] EWCA Civ 158 the Court of Appeal was asked to decide whether, as a matter of principle, any limitation period applies to unfair prejudice petitions brought under section 994 of the Companies Act 2006 (section 994). Giving the leading judgment in a unanimous decision, Lewison LJ held that the Limitation Act does apply to such claims. Furthermore, the remedy sought by the petitioner dictates the precise limitation period that applies.
Section 8(1) of the Limitation Act
The Court of Appeal first considered whether unfair prejudice petitions fall under section 8(1) of the Limitation Act.
Section 8 imposes a twelve-year limitation period on "an action upon a specialty". A "specialty" is a somewhat archaic term, encompassing obligations arising under either statute or deeds. Lewison LJ held that a shareholder's right to bring a petition is created by section 994, and no other equivalent right exists in equity or in common law. On that basis, he was satisfied that an unfair prejudice petition is "an action upon a specialty", and therefore that the twelve-year limitation period under section 8 of the Limitation Act applies.
Could any other limitation period apply?
Under section 8(2) of the Limitation Act, this twelve-year limitation period can be displaced by a shorter limitation period prescribed by another part of the Limitation Act. Accordingly, having determined that section 8(1) applies by virtue of the cause of action the petitioning shareholder has, Lewison LJ proceeded to consider whether a shorter limitation period might apply as a result of the remedy sought by the petitioner.
It was accepted that where a statutory provision enables a court to make an order for either monetary or non-monetary relief, it is also necessary to look at what is actually being claimed in the proceedings. As such, different limitation periods might apply to different petitioners depending on the relief sought. In this case, the petitioner's claim was for monetary compensation. On that basis, the Court held that the shorter, six-year, limitation period under section 9 of the Limitation Act (which applies to actions for sums recoverable by statute) applied.
A helpful point considered in the judgment was the characterisation of the "usual" relief granted in unfair prejudice petitions: that the majority shareholders buy the minority shareholding of the petitioner. Lewison LJ confirmed that such an order is analogous to an order for specific performance, rather than a money judgment. Accordingly, a twelve-year limitation period would apply to petitions claiming that form of relief.
Comment
This surprising, but precisely reasoned, judgment represents a significant departure from the long-held view that the Limitation Act does not apply to unfair prejudice petitions. As such, it is highly likely to be subject to an appeal to the Supreme Court. Indeed, just months prior to this decision, in Smith v RBS, the Supreme Court identified unfair prejudice petitions as one of the types of claim which are not subject to any statutory limitation period.
Further practical questions also remain, which may not be dealt with even by the Supreme Court. In particular, as identified by Lewison LJ, and Snowden LJ in his concurring judgment, it is unclear whether, if a twelve-year limitation period applies, a court could summarily dismiss a claim on grounds of delay despite the claim being brought within the limitation period. It is also unclear how the analysis in this judgment - that the remedy sought by the petitioner may give rise to a shorter limitation period - can be reconciled with the fact that the judge has discretion as to the remedy ultimately ordered in a successful unfair prejudice petition.
This significant appellate decision on the application of the Limitation Act follows other recent judgments on limitation by the Supreme Court – see this firm's articles on Smith v RBS and Potter v Canada Square.