THG PLC & Ors v Zedra Trust Company (Jersey) Ltd

Factual and Procedural Background

The appeal concerns whether a limitation period applies to a petition under section 994 of the Companies Act 2006 alleging unfairly prejudicial conduct in a company's affairs, and if so, what that period is. The petition was presented on 7 January 2019 against Company A and several individual directors, with the number of directors involved later reduced. The petition initially contained multiple complaints, most of which were struck out or dismissed, except an amendment allowed in December 2022 alleging wrongful exclusion from a bonus share issue in July 2016. The petitioner claims that the directors breached statutory duties by acting in bad faith to prejudice its interests as a minority shareholder, resulting in dilution of shareholding and loss of potential compensation. The main relief sought is equitable compensation. The judge below rejected a limitation defence and held that relief is discretionary and delay is a relevant factor to be assessed at trial, relying on a prior Court of Appeal decision.

Legal Issues Presented

1. Whether there is a limitation period applicable to petitions under section 994 of the Companies Act 2006 alleging unfair prejudice.
2. If a limitation period applies, what the applicable period is.
3. Whether the court's discretion to grant relief under section 996 is affected by delay or limitation periods.
4. Whether amendments to petitions raising new claims are subject to limitation rules and procedural restrictions.
5. Whether section 8 or section 9 of the Limitation Act 1980 applies to claims under section 994.
6. Whether section 21(3) of the Limitation Act 1980 applies to such claims, or whether it applies by analogy.
7. Whether prior case law, especially Cherry Hill Skip Hire, is binding on these issues.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by identifying the statutory nature of unfair prejudice petitions under section 994 of the Companies Act 2006, explaining that the remedy is statutory and not founded in common law or equity, though equitable principles inform the interpretation of unfairness. It noted that the relief under section 996 is discretionary and wide-ranging, including compensation, although compensation is not expressly listed.

The court reviewed the public policy underpinning limitation periods, emphasizing the importance of preventing stale claims to ensure justice and judicial efficiency. It examined prior case law treating delay in unfair prejudice petitions as a matter of court discretion rather than a strict limitation period, but found no authority explicitly deciding the existence or length of a limitation period for such petitions.

After analyzing the Cherry Hill Skip Hire decision, the court concluded that the assumption of no limitation period in that case was a concession and not binding precedent. It held that the question of limitation must be considered afresh.

The court found that petitions initiating proceedings in court fall within the definition of "action" under the Limitation Act 1980 and therefore can be subject to statutory limitation periods. It held that section 8 of the Limitation Act, providing a twelve-year limitation for actions on a specialty, applies to petitions under section 994, as these are statutory claims without common law equivalents.

The court rejected the argument that time only runs once the petition is found well-founded, reasoning that limitation periods must begin to run when the cause of action accrues, i.e., when the unfairly prejudicial conduct occurs or ends.

It then considered whether section 9, which imposes a six-year limitation for claims to recover sums recoverable by statute, applies. The court concluded that where the only relief sought is monetary compensation under section 996, section 9 applies, limiting the claim to six years from the accrual of the cause of action.

The court distinguished between monetary and non-monetary relief, noting that claims for orders such as share buy-outs do not constitute claims for recovery of money and thus are not subject to section 9. It accepted the "look and see" approach to determine which limitation period applies based on the relief claimed.

The court rejected the application of section 21(3) of the Limitation Act 1980 to the petitioner’s claim, as this section applies only to beneficiaries of trusts, and shareholders are not beneficiaries in relation to directors’ fiduciary duties owed to the company.

Regarding amendments to petitions, the court held that statutory provisions and Civil Procedure Rules apply, requiring that new claims raised by amendment after limitation periods have expired must arise out of the same or substantially the same facts, or else permission should be refused. It found the judge below erred in holding he had no power to refuse the amendment on limitation grounds.

Finally, the court allowed the appeal, holding that the amendment seeking to introduce claims barred by the applicable limitation period should not have been permitted.

Holding and Implications

The court ALLOWED the appeal.

The court held that petitions under section 994 of the Companies Act 2006 are subject to limitation periods under the Limitation Act 1980. Specifically, where the relief sought is monetary compensation, a six-year limitation period under section 9 applies, running from the accrual of the cause of action. For other forms of relief, such as orders to buy out shares, a twelve-year limitation period under section 8 applies. The court also clarified that amendments introducing new claims outside the limitation period should not be permitted unless they meet procedural requirements.

This decision overturns the longstanding assumption that no limitation period applies to unfair prejudice petitions and establishes statutory limitation periods as applicable, with the consequence that stale claims can be barred by limitation. However, it leaves open the court’s discretion to refuse relief on grounds of delay or acquiescence even within the limitation period. The ruling does not set new precedent on the exercise of discretion regarding delay but clarifies the statutory framework for limitation periods in unfair prejudice claims.