Smith v White Knight Laundry Ltd

An order under section 651(1) of the Companies Act 1985 declaring a company’s dissolution void restores its corporate existence retrospectively. A cause of action against the company therefore accrues when it would have accrued had the dissolution never occurred.

The court may attach terms adjusting the limitation consequences. A direction excluding the period of dissolution is equivalent in effect to relief under section 33 of the Limitation Act 1980. Such a direction should ordinarily be made only after potential opponents, including insurers, have received notice and where all relevant evidence is available and section 33 relief is bound to be granted.

The claimant brought personal injury and fatal accident claims alleging that her late husband had contracted fatal mesothelioma through occupational exposure to asbestos. The defendant company had been dissolved before the alleged cause of action accrued. It was subsequently restored to the register by an order which also directed that the period of dissolution should not count for limitation purposes.

His Honour Judge Pryor QC, sitting in the Queen’s Bench Division, upheld a direction for the trial of limitation as a preliminary issue and set aside the limitation direction in the restoration order. The claimant appealed. The principal questions were whether restoration caused the claim to accrue retrospectively and whether the limitation direction had properly been set aside.

1. Appeal dismissed. The restoration order caused the claimant’s cause of action to accrue on the date when it would have accrued had the company not been dissolved. The limitation questions therefore remained suitable for determination as preliminary issues.

2. Section 651(1) of the Companies Act 1985 permits the court to declare a dissolution void on such terms as it thinks fit. The power to direct that the period of dissolution should not count for limitation purposes derives from subsection (1). Section 651(6) preserves that power rather than conferring it.

3. A declaration that dissolution was void restores the company’s corporate existence from the date of dissolution. The Court applied Re C W Dixon Ltd and explained Morris v Harris. The latter distinguishes retrospective restoration of corporate existence from validation of purported corporate activity undertaken while the company did not exist. Accrual of a cause of action requires corporate existence, not corporate activity.

4. Subject to the section 651 direction, the claim was brought outside the three-year period under section 12(2) of the Limitation Act 1980. It was also potentially open to the company to contend under section 12(1) that the deceased’s own claim had become barred before his death. The claimant would therefore need relief under section 33.

5. The section 651 direction placed the claimant in the same position as a successful applicant under section 33. Justice required it to be set aside because the company’s insurers had received no notice of the restoration application and had not been heard on limitation. The available material did not establish that section 33 relief was bound to succeed. That question belonged at first instance, with all interested parties and evidence before the court.

6. As guidance for future cases, a section 651 direction in aid of a prospective personal injury claimant should not normally be made unless all expected opponents, including insurers, have received notice. The court should also possess all evidence relevant to section 33 and be satisfied that an application under that section would be bound to succeed. Otherwise, the claimant should ordinarily be left to apply separately under section 33.

1. Court of Appeal: Dismissed the claimant’s appeal and upheld the procedural course taken by His Honour Judge Pryor QC. The limitation issues remained to be tried as preliminary issues.

2. Queen’s Bench Division: His Honour Judge Pryor QC dismissed the claimant’s appeal from Master Ungley, upheld the direction for a preliminary limitation issue and set aside the section 651 limitation direction contained in the restoration order.

3. Companies Court: Mr Registrar Buckley declared the company’s dissolution void and directed that the period of dissolution should not count for limitation purposes.