Capital Law LLP (Philip Jones and Stacey Birchard) and Guy Adams of St Johns Chambers acted on behalf of the successful Appellants in the above case which saw the Court of Appeal set aside two directions, a limitation and petition direction, which the lower court had ordered in favour of a third party, Mr. Davy (the Claimant) against the Company.
The case, which was the second in 2016 to consider the limitation direction, provides welcome clarity on the exercise of the discretion under s1032 (2) of the Companies Act 2006, which provides that: “The court may give directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register.”
In the Court of Appeal, Lord Justice David Richardson confirmed that the discretion is not unlimited “but must be exercised only for its stated purpose (“for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register”) and, assuming a direction would meet that purpose, only if such direction, “seems just”.
With consideration of the authorities, including the analysis of Lord Justice Briggs in County Leasing Asset Management Ltd v Hawkes (“County Leasing”), Lord Justice David Richardson confirmed that “the making of a limitation direction requires a clear causative link between the dissolution of the company and the failure to commence the proceedings in question.”
He also confirmed that the purpose to be served by such a direction is the same whether it is in favour of the company or a third party, which was unclear from the case of County Leasing. However, he commented that even if the purpose test is satisfied, directions may not be readily made in favour of a company, as they would be in favour of third parties, because it may not “seem just” to make such directions. As a result, we now appear to have a two stage test: (1) does the direction satisfy the statutory purpose; (2) If so, does such a direction “seem just”?
When a person had a claim against a company which had been struck off the register of companies but subsequently restored to the register, a direction that the period when the company had been struck off did not count for limitation purposes would not be made unless there was a likelihood that proceedings would have been issued if the company had not been struck off.