Unfair prejudice remedies: Is limitation dead?

Описание: In THG Plc v Zedra Trust Company, the UK Supreme Court, by 4-1, overturned the Court of Appeal and held that no statutory limitation period applies to unfair prejudice petitions under section 994 of the Companies Act 2006 (the CA).

Relevant legal provisions

Section 994 of the CA allows a shareholder in a company to petition to the court for a remedy on grounds that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or some of its members, or that an actual or proposed act or omission of the company is or would be unfairly prejudicial. If unfairly prejudicial conduct is established, the court may grant a variety of relief that it thinks fit pursuant to section 996 of the CA, including the payment of compensation.

Meanwhile, the Limitation Act of 1980 (the 1980 Act) governs time limits for bringing proceedings in a court of law. Section 8 of the 1980 Act provides that unless an action for which a shorter period of limitation is prescribed elsewhere in the Act, "[a]n action upon a speciality shall not be brought after the expiration of twelve years from the date on which the cause of action accrued."

Under Section 9 of the 1980 Act, "An action to recover any sum recoverable by virtue of any enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued."

Finally, Section 36 of the 1980 Act disapplies the limitation periods in sections 8 and 9 for "any claim for specific performance of a contract or for an injunction or for other equitable relief", except where the court applies such time limit by analogy in limited circumstances.

Background

Zedra acquired a 13.2% stake in THG plc in 2011 when it was a private company under the name of The Hut Group Ltd. In 2019, Zadra filed a petition to the court under section 994 of the CA, alleging that the conduct of THG's affairs was unfairly prejudicial to it in a number of respects.

In 2022, Zadra sought to amend its petition to include an allegation that it was unfairly prejudiced by being excluded from a bonus issue of shares made more than six years earlier to some shareholders, seeking equitable compensation for its alleged loss.

THG opposed the amendment, arguing that it was "an action to recover any sum recoverable by virtue of any enactment" and therefore time-barred by section 9 of the 1980 Act.

The High Court held that the 1980 Act does not impose any limitation period to petitions under section 994 of the CA and as such, the amendment was not time-barred and should be allowed.

On appeal, the Court of Appeal ruled that all petitions under section 994 of the CA are subject to a 12-year limitation period under section 8 of the 1980 Act and that claims for monetary relief under section 994 are subject to a six-year limitation period under section 9. As the only remedy Zedra sought was compensation, its claim fell within section 9 and was therefore time-barred.

Zedra appealed to the Supreme Court, arguing that neither section 8 nor 9 of the 1980 Act applied to an unfair prejudice petition.

Judgment

In a 4-1 majority decision, the Supreme Court allowed Zedra's appeal, holding that a claim under section 994 is neither an "action upon a speciality" under section 8 of the Limitation Act, nor an "action to recover any sum recoverable by virtue of any enactment" under section 9 of the Act.

The central issue in this case on appeal is whether any limitation period applies to unfair prejudice petitions under section 994 of the CA.

The Supreme Court decided that:

Under section 8 of the 1980 Act, "an action upon a speciality" is, in essence, an action to enforce an obligation which is created by a deed or a statute. Section 994 of the CA, however, does not create any obligations but merely provides for remedies and rights of petition if there is or has been unfair prejudice in the conduct of a company's affairs. Hence, a claim under section 994 is not an acti...