Unfair Prejudice Petitions - Statutory Limitation Periods Do Apply

• Published date: 28 March 2024
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: Lewis Silkin
• Author: Fraser McKeating and Nicola Thompson

The Court of Appeal ("COA") has recently confirmed that statutory limitation periods under the Limitation Act 1980 ("LA 1980") do in fact apply to unfair prejudice petitions under the Companies Act 2006 ("CA 2006"), despite it having been understood for over 40 years that they did not.

Unfair prejudice

Section 994 CA 2006 provides a mechanism for shareholders to petition for relief from the court if their interests are being unfairly prejudiced. Members of a company can apply to the court for an order if:

• the company's affairs (as to which, see our previous article) are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including, at the very least, the petitioner); or
• an actual or proposed act or omission of the company (or on its behalf) is or would be so prejudicial.

If the petitioner is successful, the court has a wide discretion as to the relief to be granted. A non-exhaustive menu of the possible relief is set out at section 996 CA 2006. Whilst the relief is most commonly an order requiring the purchase of the petitioners' shares by other members, other forms of relief are possible, including the court regulating the conduct of the company's affairs or granting monetary relief.

Limitation - 40 years of convention overturned

It had been commonly accepted that statutory limitation periods under LA 1980 did not apply to unfair prejudice petitions. A number of previous judgments had accepted this, most notably the decision in Bailey v Cherry Hill Skip Hire Ltd [2022] EWCA Civ 531, in which it was stated that "There is no statutory period of limitation applicable to unfair prejudice petitions". All the key legal textbooks on the subject area accepted that this was the position.

Rather than strict limitation periods, the concepts of laches and acquiescence would apply to stale unfair prejudice claims - put simply, the court could use its discretion to strike out claims where the petitioner had waited too long or accepted a certain state of affairs for a lengthy period before petitioning for relief.

Step forward the Court of Appeal in the case of THG Plc & others v Zedra Trust Company (Jersey) Limited [2024] EWCA Civ 158, who have blown this well-established convention away.

The claims advanced in the case had been whittled down to one remaining complaint - that the petitioner, Zedra, had been wrongly excluded from a bonus share issue in July 2016, with the effect...