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Directors beware - UK Supreme Court reinforces no statutory limitation period for unfair prejudice claims
The UK Supreme Court has delivered a landmark ruling that confirms that past corporate conduct can continue to be challenged under unfair prejudice petitions for an indefinite period. The ruling overturns a 2024 judgment in the Court of Appeal and brings England & Wales back in line with the position broadly adopted in Hong Kong. Despite the lack of a fixed time bar, unreasonable delay may still affect a petitioner’s chance of success in ultimately obtaining relief.
Share and share alike
The appellant, Zedra Trust Company (Jersey) Ltd, was a minority shareholder in THG plc (the company). In 2019, Zedra brought an unfair prejudice petition against the company concerning multiple complaints about the company’s former and current directors’ conduct.
Zedra applied to amend the petition to include an additional allegation that Zedra had been unfairly excluded from a bonus share issue in July 2016 which caused it to lose out in shares that it would otherwise have sold in the company’s 2020 IPO. Zedra alleged the directors had breached their duty to act lawfully, in good faith, for proper purposes and fairly between shareholders when exercising their power to allot shares. Zedra sought an order requiring the directors to pay equitable compensation for its loss which is estimated at around £2 million (HK$21 million).
The company opposed the amendment, arguing that any claim from the complaint in 2016 was effectively time-barred under the statutory limitation period under the Limitation Act 1980 (LA) because more than six years had passed.
The High Court allowed the amendment, stating that no limitation period applied to petitions under s. 994 Companies Act 2006 (CA) because “unfairly prejudicial conduct is not a cause of action, but a complaint” and the remedy was at the discretion of the court. The company appealed to the Court of Appeal which allowed the appeal, finding that the right to go to court under s. 994 was created solely by statute and was, as a result, an “action upon a speciality” to which a 12-year limitation period would normally apply.
Time bar barred
On 25 February 2026, the UK Supreme Court in THC Plc v Zedra Trust Company (Jersey) Ltd [2026] UKSC 6 confirmed that shareholders bringing unfair prejudice petitions under s. 994 CA are not subject to any statutory limitation period under LA. Restoring 40 years of received wisdom, the ruling overturned the Court of Appeal decision that unfair prejudice petitions are subject to the statutory limitation periods in the LA.
The fundamental question before the Supreme Court was one of interpretation, namely whether unfair prejudice petitions are subject to limitation periods because they are captured under the types of “actions” governed by ss. 8 or 9 LA.
By a majority of 4-1 (with Lord Burrows dissenting), the Supreme Court held that a claim under s. 994 was neither an “action upon a specialty” (a claim to enforce an obligation created by deed or formal instrument) under s. 8 (to which a 12-year limitation period applied), nor a monetary claim (to which a 6-year limitation period applied) under s. 9. Therefore, no limitation period applied to unfair prejudice claims under s. 994.
Lord Burrows, in the minority, found that an unfair prejudice petition did fall under s. 8 since the cause of action only existed because of the statute, which he characterized as the “specialty”. He argued there were strong policy reasons that favored the imposition of time limits, as they protect defendants against outdated claims and the risk that helpful evidence may be lost in the meantime.
The Hong Kong position
The newly restored position in England & Wales mirrors the position in Hong Kong. The Limitation Ordinance (Cap 347) contains no statutory limitation period for bringing an unfair prejudice petition. Instead, ss. 724 to 726 set out who may petition and available remedies.
The 2004 Hong Kong Court of Final Appeal case Re Chime Corp Ltd (2004) 7 HKCFAR 546 highlighted the breadth of the statutory jurisdiction. The CFA held that unfair prejudice petitions invoke a flexible power designed to remedy conduct that is unfair to minority shareholders. The court retains a discretion to refuse relief where there has been inexcusable delay that makes it unjust for the court to interview.
In the 2023 Court of First Instance case Re Promising Securities Company Limited [2023] HKCFI 3367, the court again emphasized how wide and flexible the unfair prejudice remedy is, in that case making a buy-out order against non-shareholders of the company.
Time waits for no-one
Limitation periods are a statutory creation unknown to common law. However, they importantly protect defendants from stale claims and provide an incentive for parties to act relatively quickly once they become aware of prejudicial conduct.
Even if there is no strict limitation period in play, Hong Kong courts may take into consideration any significant delay in bringing a claim on the part of a partitioner.If there was deliberate concealment of the wrongdoing, time may not start to run until it is discovered, or could have been discovered, by the petitioner.
As for directors and majority shareholders, they should recognize that they cannot rely merely on the expiry of six-year and 12-year limitation periods to safeguard themselves from possible claims from minority shareholders who feel they have been unfairly wronged.
This article is made available by Chaudhry Solicitors as general information and should not be relied upon as legal advice. For further information, please email the authors or contact your usual Chaudhry Solicitors contact.
