Zavarco PLC v Tan Sri Syed Mohd Yusof Bin Tun Syed Nasir

A subscriber’s contractual obligation to pay for shares arises when the company is registered and the subscriber becomes the holder of the shares. A call notice is a procedural step concerning enforcement, suspension of membership rights and possible forfeiture; it does not create the underlying obligation or restart limitation. Where forfeited shares are subject to an articles provision preserving liability, that provision does not preserve a debt already barred by limitation unless clear words so provide. A limitation defence may justify reverse summary judgment where the material facts are established. An alleged Henderson v Henderson abuse requires a broad, merits-based assessment and is unsuitable for summary determination where the evidence and the scope of the allegations remain materially disputed.

Zavarco claimed €36 million from a subscriber for unpaid shares acquired on the company’s incorporation. Earlier declaratory proceedings established that the shares were unpaid and that Zavarco was entitled to forfeit them. The shares were subsequently forfeited, and Zavarco issued the present debt claim on 11 October 2018.

The defendant sought reverse summary judgment, contending that the claim was time barred under the Limitation Act 1980. Zavarco argued that liability arose only on forfeiture or, alternatively, only after a demand. It also opposed summary determination of proposed fraud and public-policy defences on issue-estoppel and abuse-of-process grounds. The central issues were when the cause of action accrued and whether the articles preserved liability after limitation had expired.

1. Limitation. The subscriber’s obligation to pay for the shares was an ordinary contractual debt. Under the statutory scheme considered in Zavarco plc v Sidhu, the subscriber became a member and holder of the shares on registration, and the obligation to pay arose at that time. The six-year limitation period therefore began on 29 June 2011, not when a call notice was served.
2. Effect of a call notice. Article 69 presupposed that a specified sum was already payable. Its function was to suspend membership rights and facilitate forfeiture. It did not trigger the obligation to pay, create a new cause of action or restart limitation. No implied loan arose merely because payment had not been made or demanded.
3. Forfeiture and continuing liability. Article 75.3.4 preserved liability for sums payable and liabilities enforceable at the date of forfeiture. Properly construed, it did not resurrect a debt which had already become time barred. Clear words would be required to impose liability for such a debt. The question whether forfeiture would otherwise create a fresh limitation period did not arise.
4. Other defences. The proposed fraud allegations were not subject to issue estoppel because they had not been expressly or necessarily decided in the earlier declaratory proceedings. The alleged Henderson v Henderson abuse required a broad, merits-based assessment of all the circumstances, including the defendant’s knowledge and later evidence. The issue could not properly be determined summarily on the material before the court.
5. The court was satisfied that the claim was time barred and that reverse summary judgment should in principle be entered. However, no final order was made immediately. Zavarco was given until 2 March 2026 to make submissions on whether it should have a further procedural opportunity to advance a factual case concerning the date on which liability accrued. Zavarco’s own summary-judgment application would otherwise be dismissed.

• Supreme Court: In [2025] UKSC 5, the court held that a cause of action does not merge with a declaratory judgment.
• Court of Appeal: In [2021] EWCA Civ 1217, the appeal concerning merger was dismissed.
• High Court: The present court determined that the debt claim was prima facie time barred and that reverse summary judgment should in principle be entered, subject to further submissions on procedure.