Davy v Pickering & Ors

The judge granted two consequential directions under section 1032(3) of the Companies Act 2006 when restoring a dissolved company: (i) a limitation direction that the period between striking off and restoration should not count for the purposes of any enactment governing time limits, and (ii) a petition direction deeming a winding-up petition presented at the time of dissolution if presented within a short period after the order. The court treated the power in section 1032(3) as wide but limited by the statutory purpose of placing parties "in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register". The directions were justified by the claimant's plausible, arguable claim for damages, the effect of the respondents' conduct in procuring dissolution without giving statutorily required notice to a potential creditor, and the loss of a short window in which insolvency procedures might have been effective (including transaction-avoidance remedies in the Insolvency Act 1986). The judge noted unresolved issues of limitation (date of knowledge under section 14A of the Limitation Act 1980) and of whether, if presented, a winding-up petition would succeed and enable recovery under sections 238 and 239 of the Insolvency Act 1986.

Background and procedural posture. The company Heather Moor & Edgecomb Limited was struck off the register on 20 March 2012. The claimant, Mr Graham Davy, applied under Part 31 of the Companies Act 2006 for restoration (a District Judge ordered restoration on 1 July 2014) and sought directions under section 1032(3) consequential on restoration. The claimant asserted a substantial negligent-misadvice claim against the company arising from advice given in 2001 and relied on a date of relevant knowledge of 19 July 2011 for limitation purposes. After restoration the parties agreed a stand-still and the claimant issued proceedings; he nonetheless sought a direction that the period of dissolution should not count for limitation and a direction deeming a winding-up petition to have been presented on 20 March 2012 if presented within 14 days.

Parties and factual matrix. The company had been run by Mr and Mrs Pickering, who together disposed of the business and transferred real property in mid-2010, shortly before Mr Pickering resigned as a director. No run-off insurance was arranged and the claimant asserts that assets were distributed to the Pickering shareholders within two years of dissolution when they had reason to foresee claims such as his might arise. The Financial Ombudsman Service and Financial Services Compensation Scheme were involved and the FSCS made and the claimant accepted a capped compensation payment, with subsequent reassignment of rights to the claimant.

Relief sought and issues framed. (i) The Limitation Direction: that the period between striking off and restoration be disregarded for all enactments, including the Limitation Act 1980; (ii) The Petition Direction: deeming a winding-up petition to be presented at the date of dissolution if presented within 14 days of the directions order. The court had to decide whether to exercise the wide discretion in section 1032(3) to give those directions and whether the circumstances justified overriding the ordinary limitation regime.

Court’s reasoning. The judge reviewed authorities illustrating that limitation directions are permissible where justice so requires, but are not routine. He emphasised that section 1032(3) must be used to place parties "in the same position (as nearly as may be)" as if the company had not been dissolved. Although attention was paid to dicta suggesting limitation directions should be sparingly used, the judge found those dicta did not impose a closed test of "exceptional circumstances" and that the facts here (directors procuring dissolution without giving creditor notice, loss of a practical window to present a petition and to benefit from transaction-avoidance provisions) justified the directions. The judge did not finally determine whether the claimant’s substantive claim would survive a limitation challenge or whether a liquidator could recover under the transaction-avoidance provisions; those remain matters for subsequent proceedings.

The court made both the Limitation Direction and the Petition Direction sought by the claimant under section 1032(3) of the Companies Act 2006 on the basis that those directions were just to place the claimant in the position he would have occupied but for the company’s strike-off and dissolution, in light of the directors’ conduct and the lost opportunity to pursue insolvency remedies. The court adjourned further consideration of the precise terms of the order.