The case of THG v Zedra Trust Company (Jersey) Ltd has been keenly watched by lawyers across the UK. It is of particular importance because in 2024, the Court of Appeal reversed over 40 years of established law relating to whether there was a time limit on bringing an action under section 994 of the Companies Act 2006, otherwise known as an unfair prejudice petition.
What is an Unfair Prejudice Petition for UK Shareholders?
A petition for unfair prejudice may be brought when a shareholder of a company (usually a minority shareholder) is treated unfairly by those in control of the company, resulting in financial loss. Examples of unfairly prejudicial conduct include being left out of important decisions that affect the company, receiving less than other shareholders in a dividend distribution, or having shares diluted without consent. The usual remedy for such a claim is for the petitioning shareholder’s shares to be bought out by either the majority shareholder(s) or the company itself, although there are other options available to the court as to what can be awarded.
Is There a Time Limit for Bringing an Unfair Prejudice Claim?
The Court of Appeal in this case decided that there should be a time limit (referred to as limitation) on how long a person has to bring an unfair prejudice petition. Up until then, the courts generally allowed unfair prejudice petitions to be brought in relation to conduct that occurred several years previously. As such, a 6 or 12-year limitation period from the date that the conduct complained of occurred was applied as it was decided that such claims fell under either sections 8 or 9 of the Limitation Act 1980, depending on whether the petitioner was only seeking payment of money or other remedies.
How did the Supreme Court Change the Law on Limitation Periods for Unfair Prejudice Petitions?
However, the decision was appealed by Zedra, and the case was recently heard by the Supreme Court. The Supreme Court concluded (by a majority of 4-1) that the Court of Appeal’s decision was wrong on the basis of the interpretation of the wording of sections 8 and 9 of the Limitation Act 1980 and ultimately it was decided that neither of these sections created a limitation period that would apply to unfair prejudice petitions.
Why did one Supreme Court Judge Disagree on Limitation for Unfair Prejudice Claims?
The judge who disagreed with the majority decision of the Supreme Court did so on the basis that other claims in which the courts have discretion as to the remedy that is awarded (as they do in unfair prejudice petitions) are subject to limitation periods, so unfair prejudice petitions should be no different. He also commented that having no limitation period creates uncertainty for potential defendants or third parties, who could have a claim brought against them for actions or conduct dating back a long time. However, despite this, following the Supreme Court’s decision, the law has reverted to the position prior to the Zedra case and there is now no limitation period for unfair prejudice claims.
When Should you Seek Legal Advice About a Shareholder Dispute in the UK?
Despite the above, the court can still place sanctions on a party that delays in bringing a claim, so it is always advisable to seek legal advice at the earliest opportunity to avoid criticism from the court. If you have shares in a company and you believe you may have been unfairly prejudiced, our specialist team of expert lawyers can help. You can contact the team here.
This article was co-written by Gemma Mittel, associate and Richard Slater, partner in our Commercial Dispute Resolution team.