Court of Appeal decides s994 petitions are subject to a statutory limitation period

For 40 years the legal world had thought that unfair prejudice petitions were not subject to any statutory limitation period. It turns out judges, distinguished academic commentators, two Law Commission Reports and, most recently, Lord Leggatt in paragraph 58 of his speech in Smith v Royal Bank of Scotland plc [2023] UKSC 34, were wrong. Last Friday 23 February the Court of Appeal decided to overturn 40 years of “received wisdom”: THG Plc v Zedra Trust Company (Jersey) Ltd [2024] EWCA Civ 158. A copy of the decision can be found here.

The outcome will certainly surprise many who practise in this space. Not least because as recently as 2022, in paragraph 36 of its decision in Cherry Hill Skip Hire Ltd [2002] EWCA Civ 531 the Court of Appeal explicitly approved the first instance decision of Fancourt J In Re Edwardian Group Ltd [2019] 1 BCLC 171 which stated that no statutory limitation period applied to s994 petitions. By a strange quirk of fate, the silent majority in Cherry Hill (Lewison and Snowden LJJ) were two of the Lord Justices hearing this appeal (the other, Arnold LJ, had granted THG permission to appeal the first instance decision of…Fancourt J).

In the end the Court of Appeal decided that, while the absence of a statutory limitation period was part of the ratio of the Court of Appeal’s decision in Cherry Hill, it was not bound by that ratio because it proceeded on assumption, not argument: [47]-[64]. The Court of Appeal went on to hold that unfair prejudice petitions are “an action upon a specialty”, and therefore generally subject to a limitation period of 12 years under section 8 of the Limitation Act: [68]-[78]. But that Zedra’s claim, being one for compensation in respect of a share issue more than six years ago, was “an action to recover any sum recoverable by virtue of any enactment”, and therefore statute-barred under section 9 of the Limitation Act, which prescribes a limitation period of six years from the date on which the cause of action accrued: [87]-[130].

The decision raises many questions and will undoubtedly impact how unfair prejudice petitions are brought, and what relief (monetary or non-monetary) is sought by petitioners, in the future, so as to avoid falling foul of limitation. One anomaly raised by the decision is that a claim for compensation falls within section 9, but a claim for a sum of money in respect of a share buyout order does not: see [124]-[125]. According to the Court of Appeal, therefore, a claim for that type of relief is an action on a specialty, and therefore subject to a 12 year limitation period under section 8. Another anomaly, if the Limitation Act generally applies, is how (if at all) section 32 can be relied on to postpone the running of time: [38]. A third anomaly is whether a court can now (as it could previously) strike out a claim on the ground of delay, if it is brought within the 12 year statutory limitation period: see [126] (Lewison LJ) and [162] (Snowden LJ). Snowden LJ stated that “the precise implications of our decision in this respect will need to be worked out in a future case in which it matters”.

Watch this space.

George McPherson, led by Paul Chaisty KC, acted for Zedra, the respondent to the appeal.

George was instructed by Joel Heap, Lyndsay Crowder-Barton and Sam Pringle of DWF LLP.