The Court of Appeal has allowed an appeal against a limitation order (providing for the restoration to the register of a dissolved company, C, and the suspension of the limitation period during dissolution) and provided guidance on how judicial discretion should be exercised when making such an order.
Shortly before being placed into administration C entered into a sale and leaseback arrangement. C later went into liquidation; however, the purchase price in respect of the sale was not received before the company was dissolved, over four years later.
Just before the expiry of the primary limitation period for the claim for the purchase price the company's sole director/shareholder applied for the company to be restored to the register and for an assignment of the claim. It was not disputed that the claim had real prospects of success.
The company was restored to the register and a new liquidator assigned the claim to the company's sole director/shareholder. Primary limitation had expired around two years before the assignment and one year before the restoration order was made.
The Court of Appeal unanimously set aside the limitation direction and the appeal was allowed. The Court held that the Court's discretion to make a limitation order under section 1032 of the Companies Act 2006 should only be exercised in exceptional circumstances and the burden of proof in demonstrating that this was an exceptional circumstance was not satisfied.
There is helpful guidance here about how judges should exercise their discretion in deciding whether to grant a limitation order/limitation directions. They should consider:
- whether proceedings would have been commenced in time had the company not been dissolved; and
- whether it is just for the company to avoid the consequences of the Limitation Act 1980.
In this case, the Court of Appeal found that putting the company and all interested parties in the position which they would have been in if there had been no dissolution would probably not have led to the claims being pursued in time.
County Leasing Asset Management Limited and others v Hawkes  EWCA Civ 1251