Pickering & Ors v Davy

A limitation direction under section 1032(3) of the Companies Act 2006 requires a clear causal link between dissolution and the failure to commence proceedings in time. The applicant must show, on the balance of probabilities, that proceedings would have been brought within the limitation period if the company had not been dissolved. A mere lost opportunity in which proceedings might have been brought is insufficient. The words “as nearly as may be” recognise practical limits on restoration; they do not lower that causative requirement. Only after the statutory purpose is met does the court decide whether the direction seems just. The exceptional-case consideration applicable to directions favouring a company does not automatically apply to a third-party claimant.

The respondent alleged that the company had negligently advised him to transfer his pension benefits. While his complaint was being pursued through the Financial Ombudsman Service, the company was voluntarily struck off without notice to him as a contingent creditor.

A district judge restored the company to the register. His Honour Judge Keyser QC then directed that the dissolution period should not count for limitation purposes and that a winding-up petition presented within 14 days should be deemed presented on the date of dissolution. The company and its principal shareholders appealed.

The central issue was whether a small lost opportunity to establish the claim and commence proceedings or present a petition fulfilled the statutory purpose in section 1032(3) of the Companies Act 2006.

1. Appeal allowed unanimously. Lord Justice David Richards, with whom Lord Justice Lewison and Lord Justice Longmore agreed, set aside both the limitation direction and the petition direction.

2. Section 1032(1) of the Companies Act 2006 deems a restored company to have continued in existence. Section 1032(3) permits additional directions, but only to place the company and other persons, so far as practicable, in the position they would have occupied absent dissolution. The court must first decide whether that statutory purpose is met and only then whether the direction seems just.

3. For a limitation direction, the necessary causal condition is that, on the balance of probabilities, the claimant would have commenced proceedings in time had the company not been dissolved. The court is concerned with what would probably have happened, not with a possibility or a small window of opportunity. The phrase “as nearly as may be” does not relax that requirement.

4. The evidence did not show that the respondent would probably have instructed solicitors, investigated the company’s disposals, established his claim, issued proceedings or presented a petition before the relevant date. His post-dissolution conduct instead made that conclusion speculative. The directions would therefore have put him in a better position than if dissolution had not occurred.

5. The exceptional circumstances relevant to a limitation direction sought by a company do not impose a corresponding threshold on a third-party claimant. The theoretical possibility of issuing invalid proceedings against a dissolved company and seeking later validation was also no reason to refuse an otherwise justified direction.

6. Obiter, the court accepted that section 1032(3) gives jurisdiction for a petition direction, but endorsed the view that it must be exercised with extreme caution. Such a direction has far-reaching consequences and affected persons will ordinarily require notice and an opportunity to be heard.

• Court of Appeal (Civil Division): Allowed the appeal and set aside the limitation and petition directions: [2017] EWCA Civ 30 .
• High Court of Justice, Chancery Division, Cardiff District Registry: His Honour Judge Keyser QC granted the limitation direction and petition direction under section 1032(3) of the Companies Act 2006.
• District Judge James: Restored the company to the register and adjourned the question of ancillary directions.