The Court of Appeal has considered for the second time in a year in what circumstances the court should make a limitation direction when restoring a company to the register.

In December 2015 the Court of Appeal in Hawkes v County Leasing[1] held that in a case where a limitation period expired while the company was dissolved, the court had to ask itself:

  • whether, had it not been dissolved, the claimant company (or any assignee of the cause of action) would have started the relevant proceedings within the applicable limitation period; and, if so,
  • whether it would be just to provide that opportunity, after the event, by a limitation direction.

In a judgment handed down on 24 January 2017 the Court of Appeal in Davy v Pickering[2] considered whether Mr Davy would have started proceedings against a dissolved company before the expiry of a limitation deadline in June 2012. Mr Davy allegedly received negligent advice from the company in 2001, before its dissolution in March 2012.

The Court of Appeal in Davy v Pickering followed and applied the test fixed in Hawkes v County Leasing. The first relevant question was therefore what would have happened if the company had not been struck off. The Court of Appeal had some sympathy for Mr Davy as the company’s directors had failed to tell him of the company’s proposed dissolution. Mr Davy’s only evidence was that if he had known of the company’s proposed dissolution he would have objected to it. The Court of Appeal held it was not therefore possible for the court to decide that Mr Davy would have issued proceedings against the company during its dissolution and before the expiry of the limitation deadline in June 2012.

The Court could not find a causative link between the company being dissolved and Mr Davy’s failure to bring proceedings within the applicable limitation period. The first limb of the test in Hawkes v County Leasing was not met, the appeal succeeded and the limitation direction set aside.

After judicial uncertainty about when and on what basis it should make limitation directions, these two recent Court of Appeal decisions help to set up a clear line of authority for the correct test it should apply. Crucially, any application for a limitation direction must include evidence that, but for the fact the company in question had been struck off and dissolved, proceedings would have been issued within the relevant limitation period. In the words of Briggs LJ in Hawkes v County Leasing, the Courts when deciding such applications will be concerned “with probabilities, not possibilities”.

[1] County Leasing Asset Management Ltd and others [2015] EWCA Civ 1251

[2] Davy v Pickering and others [2017] EWCA Civ 30

 

For further information please contact corporate recovery associate, Alex Thompson at alex.thompson@gateleyplc.com 


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.