THG Plc v Zedra Trust Company (Jersey) Ltd

Answering that question involved consideration of a number of issues, including whether either ss 8 or 9 Limitation Act 1980 applied so as to bar a petition, and whether s 36 Limitation Act disapplied those sections. The Supreme Court’s judgment provides a clear answer to that question; but its approach to some of the case law also has implications for proceedings other than unfair prejudice petitions, in particular cases involving certain claims for relief under the Insolvency Act 1986.

Zedra Trust Company (Jersey) Ltd was a minority shareholder in THG Plc. In 2019 it brought proceedings against THG under s 994 Companies Act 2006 alleging that aspects of the conduct of THG’s affairs had been unfairly prejudicial to its interests. In 2022 Zedra applied to amend its claim to include allegations about share distributions made in July 2016. THG opposed the amendment, arguing that Zedra’s complaint in respect of the distributions was time-barred. Fancourt J allowed Zedra’s amendment, holding that it was not time-barred ([2023] EWHC 65 (Ch)). THG appealed to the Court of Appeal which, relying on Collin v Duke of Westminster [1985] 1 QB 581 and subsequent authority applying it, allowed the appeal, holding that the amendment was time-barred ([2024] EWCA Civ 158). Specifically, the Court of Appeal held that unfair prejudice petitions were generally subject to a 12-year limitation period under s 8 of the 1980 Limitation Act (which provides for a 12- year limitation period for an action upon a specialty), and that claims for monetary relief under s 994 were subject to a six-year limitation period under s 9 of the Act. The Court of Appeal held that, as the only remedy Zedra was seeking was compensation, its claim fell under s 9 so had been time-barred at the relevant time. Zedra appealed to the Supreme Court, arguing that neither s 8 nor s 9 of the 1980 Act applied to unfair prejudice petitions.

Zedra succeeded: by a majority of four to one, the Supreme Court allowing Zedra’s appeal. Lord Hodge and Lord Richards gave the majority judgment with which Lord Briggs and Lord Lloyd-Jones agreed; Lord Burrows delivered a dissenting judgment, supporting the approach taken by the Court of Appeal.

The first question for the Supreme Court was whether a claim under s 994 Companies Act was “an action upon a specialty” under s 8 Limitation Act 1980 and therefore subject to a 12-year limitation period. Answering that question meant that the court had first to determine the meaning of “an action upon a specialty.” After noting that “The meaning of the somewhat archaic words…is not self-evident,” their lordships embarked on a review of English law from the 13^th/14^th centuries to more recent times, including earlier limitation statutes and the work of a Law Reform Committee which had formed the basis of what is now s 8 Limitation Act 1980. They also reviewed case law from other Commonwealth jurisdictions. They concluded, first, that in Collin v Duke of Westminster Oliver LJ had not held that the mere existence of a statutory cause of action was sufficient to bring s 8 of the 1980 Act into play: “We accept the submission of Mr Thompson [leading counsel for the appellant] that the true basis of Oliver LJ’s conclusion was that the Leasehold Reform Act was the source of the rights and obligations which the action was brought to enforce.” They went on:

“In our judgment, it is of the essence of an action upon a specialty that it is an action to enforce an obligation created by a deed or statute. It is unquestionable that prior to the 1939 [Limitation] Act actions upon a specialty were actions to enforce obligations created by a deed or statute, as the cases dealing with the [Civil Procedure] 1833 Act clearly show. There is no basis to suggest that the 1939 Act was designed to change fundamentally the nature of an action upon a specialty, so as to extend it from actions to enforce statutory obligations to embrace all proceedings for which a statute may make provision.”

In other words, an action upon a specialty is, in essence, an action to enforce an obligation which is created by a deed or statute. As s 994 Companies Act 2006 did not create any obligations but provided for remedies if there was or had been unfair prejudice in the conduct of a company’s affairs, a claim under s 994 was not an action upon a specialty.

Lord Hodge and Lord Richards also considered that an action upon a specialty was confined to claims to enforce monetary obligations and that the Court of Appeal’s view in Collin that s 8 applied to the enforcement of non-monetary obligations created by an enactment was wrong, although Lord Lloyd-Jones and Lord Briggs considered that s 8 did extend to the enforcement of non-monetary claims, so that the view taken in Collin on that point had been correct.

The majority holding was, then, that a claim under s 994 was neither “an action upon a specialty” within the meaning of s 8 Limitation Act 1980, nor an “action to recover any sum recoverable by virtue of any enactment” within the meaning of s 9, so no limitation period applied to s 994 petitions.

The majority then went on to disapprove the approach which has been taken by the courts for over half a century to determining whether a claim fell within s 9. They held that cases where it had been applied, including Re Priory Garage (Walthamstow) Ltd [2001] BPIR 144 (on transactions at an undervalue and voidable preferences under ss 238–241 Insolvency Act 1986), Rahman v Sterling Credit Ltd [2001] 1 WLR 496 (on ss 137 and 139 Consumer Credit Act 1974), and Hill v Spread Trustee Co Ltd [2006] EWCA Civ 542 (on transactions defrauding creditors under s 423 Insolvency Act) had been wrongly decided in relation to the provision. Albeit that the majority view may be considered somewhat obiter in relation to Insolvency Act 1986 causes of action, the direction of the Supreme Court’s reasoning would appear to be that claims under ss 238 ff and 423 of that Act should not be subject to a six-year limitation period – or, arguably, even to a 12-year limitation period. As Lord Hodge and Lord Richards put it:

“[W]e consider that section 9 of the 1980 Act does not apply to a petition under section 994, even if it does include a request for monetary relief. We consider that claims under statutory provisions which confer a wide discretion as to remedy are not claims to which section 9 applies. For these reasons also, we consider that Priory Garage, Hill v Spread Trustee and Rahman were wrongly decided as regards section 9 of the 1980 Act.”

Apart, then, from the implications in respect of unfair prejudice petitions brough under sections 994-996 Companies Act 2006, the Supreme Court’s judgment raises issues in relation to insolvency law applications under, perhaps, s 214, 238-241 and 423 Insolvency Act 1986. It also raises wider issues that are likely to be considered in future commercial law cases.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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