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Defining unfair prejudice and the relevant provisions of the Limitation Act
The ability of a member of a company to present a petition alleging unfair prejudice is created by statute. The relevant statute now being the Companies Act 2006.
Section 994 of Companies Act 2006 provides:
(1) A member of a company may apply to the court by petition for an order under this Part on the ground–
(a) 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 of some part of its members (including at least himself), or
(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.
Limitation periods are defined under s.1 of the Limitation Act 1980. They are ordinary time limits that a potential claimant must commence their action within, and are of different lengths depending on the type of action being pursued. Failing to commence a claim within the relevant defined limitation period can lead to the claim being time-barred. Additionally, there are also various grounds under the provisions of the Limitation Act to extend or exclude these standard limits.
Prior to Zedra, it was assumed that the Limitation Act did not apply to claims for relief from unfair prejudice under s.994 of the Companies Act. The limitation periods considered for the purposes of Zedra were:
- Section 8 of the Limitation Act 1980 – in claims concerning “actions on a specialty”, there is a limitation period of 12 years.
- Section 9 of the Limitation Act 1980 – in claims concerning “actions to recover a sum recoverable by virtue of an enactment”, there is a limitation period of 6 years.
Background to Zedra
In 2019, Zedra presented an unfair prejudice petition against the respondents, The Hut Group Limited (THG) and its directors. It was alleged that the Respondents were conducting the company’s affairs in an unfairly prejudicial manner to the interest of the petitioner.
The allegations of unfair prejudice, which fell into three categories, were initially struck out or dismissed. Zedra appealed and applied to amend its petition. Zedra succeeded in amending its petition to include a claim for payment of money. The loss and damage Zedra claimed was the additional amount which it would have realised on THG’s IPO in September 2020.
THG appealed the judgment of Fancourt J on the amendment application to the Court of Appeal on the basis that the relief sought in the petition (buy out) was statute barred and the amendment should therefore be denied.
Court of Appeal decision
The issue for the Court of Appeal was whether, in principle, any limitation period applies to an unfair prejudice petition under s.994 of the Companies Act 2006.
On 23 February 2024, the Court of Appeal overturned Fancourt J and allowed partial strike out of the petition, on the basis that a limitation period of 12 years applied and the amended claim was time-barred. This decision overturned more than 40 years of “received wisdom”, reflected in earlier decisions of the High Court and the Court of Appeal and all the leading practitioner textbooks.
Supreme Court decision
Zedra subsequently appealed to the Supreme Court, which on 25 February 2026 overturned the decision of the Court of Appeal. It restored the previous position that limitation periods do not apply to s.994 petitions. The reasoning was chiefly based on a historical analysis of the true meaning of the rarely encountered “action upon a specialty”, which the Court of Appeal had found unfair prejudice petitions to be a specie of and therefore subject to a 12 year limitation under s.8 Limitation Act 1980. The Supreme Court has found that a discretionary power to award relief founded on the statute is not an “action upon a specialty” and therefore neither s.8 or s.9 of the Limitation Act 1980 applies. It also seemed to condone that such a relief is also not strictly equitable in nature.
Lord Burrows dissented but raised some interesting points regarding the consequences of delay which bear future consideration by the courts.
Practical impact of the decision
Following the ruling, there are some important points to consider when contemplating an unfair prejudice petition, regardless of the fact that they are not subject to any limitation periods under statute.
Unjustified delay
While there is no limitation period, the judgment emphasised that the court could still “take account of unjustified delay by the claimant which has an adverse effect on a respondent or other persons when exercising its discretion to grant or refuse a particular remedy or any remedy”. In our view however this is unlikely to extend to an outright strike out of the petition save in the most extreme of cases and is more likely to sound in some restriction to the compensatory award.
This position reaffirms the previous cases of Re Edwardian Group [2018] EWHC 1715 and Robert Morris v Elite Motors Bodyshop Limited & Anor [2024] EWHC 1173 (Ch).
In Re Edwardian, the court established that it would consider two main issues: (1) whether the delay was justified, and (2) whether the delay prejudiced or irretrievably changed the position of the respondent. The court established a relatively high threshold that would need to be reached before a delay could lead to the strike out of an application.
Morris placed further importance on the second criterion. In Morris, the claimant justified their delay on the basis of serious health problems and unavailability of counsel. The court, while acknowledging these submissions, established that the application may still have been struck out had it not been issued sufficiently in advance of the relevant upcoming hearing to not prejudice the position of the respondent. In Andrew Bailey v Cherry Hill Skip Hire v others [2022] EWCA Civ 531, some of the complaints occurred between 12 and 19 years before the petition was issued and ultimately not denied. The position is clear that acting as soon as reasonably practicable is remains essential to maximising the extent of the remedy available in any unfair prejudice claim.
O’Neill v Phillips offers
The importance of an ‘O’Neill v Phillips offer’, established by O’Neill v Philips [1999] UKHL 24, remains remains a paradigm example of where conduct or delay can result in the strike out of an unfair prejudice petition. A potential respondent can try to prevent the need for an application by making a genuine offer to buy out the minority shareholder’s shares for a given price, or to engage in a fair process to do so. The offer must be deemed to be fair, with a valuation often determined by an independent advisor, made in good time, and be made on an open basis.
If a claimant still attempts to make an application after receiving an offer fulfilling the above criteria, the application will likely be struck out. O’Neil v Phillips offers should be considered by parties in a potential unfair prejudice claim.
Conclusion
The key takeaway is that there is no strict statutory limitation which applies to unfair prejudice petitions.
While statutory limitation periods will not apply, the court retains discretion to strike out or restrict a petition where there has been unreasonable delayed.
For more information about any of the issues covered in this update, or if you are a shareholder facing this claim, then please get in touch with one of our Commercial Litigation Solicitors.
