Does limitation apply to unfair prejudice petitions? It does now.

Where did we stand on limitation before Zedra?
It had been widely thought by practitioners that the Limitation Act 1980 (the “Limitation Act”) did not apply to unfair prejudice petitions, so that claims could be brought based on conduct going back years, or even decades.  I vividly remember reviewing a petition around 5 years ago which started with the words “Back in 1971…”

In defending a petition, practitioners might raise an equitable limitation defence (or laches: remember that?) but these were often afterthoughts, rarely pursued, and did not make their way into summary judgment applications very often.

The Court of Appeal has now held that previous assumptions are wrong, and that the Limitation Act applies to a petition for unfair prejudice under s.994 of the Companies Act 2006.  Limitation in s.994 petitions is suddenly an issue to be fought over.

What time limit now applies to unfair prejudice petitions?
It’s not so easy to tell now. The Limitation Act sets out different deadlines to bring claims depending upon the type of claim brought.

In Zedra, it was held that a petition complaining that the affairs of a company had been conducted in an unfairly prejudicial manner, was in principle, an “action upon a specialty”, with a 12-year limitation period.  But it also recognised that not all unfair prejudice petitions are the same: each is based on different underlying facts.

What this meant on the facts of Zedra was that because the claim was based on an alleged unlawful exclusion from a bonus share issue, this was an action to recover a sum recoverable by virtue of an enactment, section 9 of the Limitation Act applied, and along with it, a 6-year limitation period.  The claim was therefore time-barred.

What does this mean in practice?
In short, a lot more attention will be paid to limitation when drafting and defending unfair prejudice petitions.

There will be a lot more claims brought based on ongoing prejudice.  Zedra does not seem to affect the fact that a petitioner can say that the unfair prejudice is ongoing to date, to try to avoid the limitation problem altogether.

And for those who like a bit of Old French, laches lives on.  Even if the limitation period has not expired, delay can still be relied upon to defeat a petition, where that delay amounts to waiver of the act complained of, or if the result would be unjust.  Zedra doesn’t seem to affect the underlying point that claims of historic misconduct are frowned upon, even if they fall within the strict limitation period.

Long live laches…

Our Disputes team has extensive experience bringing and defending petitions for unfair prejudice under s.994 of the Companies Act 2006. From previously advising a billionaire owner of a media outlet on an unfair prejudice petition arising from a minority stake in a TV network, and defending a reported unfair prejudice claim arising from the breakdown of a former motor racing team / property investment business, to currently providing legal and strategic advice to a global risk management company specialising in security and travel amidst a brewing shareholders’ dispute which stemmed from allegations of one director/shareholder’s sexual misconduct in the workplace and a consequent opportunistic coup d’état (to carry on the Old French theme). If you need advice, please get in touch.