Regent Leisuretime Ltd. v Natwest Finance Ltd.

On restoring a company to the register, the court has jurisdiction under section 653(3) of the Companies Act 1985 to suspend limitation in the company’s favour. That power should be exercised only in exceptional circumstances because it overrides the detailed statutory limitation regime.

A person whose rights may be directly prejudiced by a restoration or limitation direction is entitled to seek intervention and to be heard. For section 32(1)(a) of the Limitation Act 1980, an action in deceit is based upon the defendant’s fraud even if negligence is pleaded alternatively. A company discovers fraud when the directors constituting its directing mind know the relevant facts. Receivership does not prevent that knowledge being attributed to the company.

The company was dissolved after being struck off the register. It was subsequently restored under section 653 of the Companies Act 1985 by an order which excluded the period of dissolution from the calculation of limitation for its existing claims. The company then sued the bank for damages arising from fraudulent or negligent misrepresentations connected with a loan transaction.

The bank was joined to the restoration proceedings. HHJ Overend deleted the limitation direction and later entered summary judgment for the bank because the claim was statute-barred. The company appealed both orders.

The Court of Appeal considered whether the restoration court had jurisdiction to suspend limitation in the company’s favour, whether the bank could challenge the without-notice direction, whether that discretion had been exercised correctly, and whether sections 14A or 32 of the Limitation Act 1980 gave the claim a real prospect of defeating the limitation defence.

1. Appeal dismissed unanimously. Jonathan Parker LJ delivered the judgment, with which Keene and Schiemann LJJ agreed. The company’s action was plainly statute-barred and summary judgment for the bank was upheld.

2. Section 653(3) of the Companies Act 1985 confers jurisdiction to suspend limitation during a company’s period of dissolution, including in favour of the restored company. The statutory objective is to restore an “as you were” position as nearly as possible. This can require turning the limitation clock back to the date of dissolution. The power is not confined to protecting creditors.

3. A prospective defendant whose rights may be directly prejudiced by a limitation direction is entitled to seek intervention and to be heard. The proposition that only the restored company may apply to set aside or modify a restoration order was rejected. The authorities concerning intervention under section 653(2B) and limitation directions under section 651 supported the application of natural justice to section 653(3).

4. Although jurisdiction existed, a limitation direction in favour of a restored company should be made only in exceptional circumstances. Such a direction completely overrides the detailed regime in the Limitation Act 1980. Ordinarily, the company should meet a limitation defence through that statutory regime like any other claimant. No exceptional circumstances justified the direction here, so its deletion was proper.

5. The company suffered any loss resulting from its reliance on the pleaded misrepresentation when it completed the transaction. The lender-valuation authorities were materially different because a valuer’s duty concerns loss caused by deficient security, which may arise later. Subject to statutory postponement, the six-year period therefore began on completion.

6. Section 14A did not assist the negligence claim because the company, through its directors, knew the material facts more than three years before proceedings began. A deceit claim is an action based upon the defendant’s fraud under section 32(1)(a), notwithstanding an alternative negligence claim. However, the directors had instructed lawyers to plead the relevant fraud more than six years before the company commenced proceedings. Their knowledge was the company’s knowledge. Receivership might have restricted their practical ability to litigate, but it did not continue concealment once they knew the relevant facts.

1. Court of Appeal (Civil Division): The appeal was dismissed by [2003] EWCA Civ 391. The deletion of the limitation direction and summary judgment for the bank were upheld.
2. Plymouth County Court: On 7 May 2002 HHJ Overend deleted the limitation direction made upon restoration. On 12 July 2002 he granted the bank summary judgment because the company’s claim was statute-barred.
3. District Judge: On 19 April 2001 District Judge Walker restored the company to the register and directed that limitation should not run during the period of dissolution.