Pickering & Ors v Davy [2017] EWCA Civ 30

[2017] EWCA Civ 30

Case No A3/2015/1432

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue CARDIFF DISTRICT REGISTRY

HIS HONOUR JUDGE KEYSER QC

3CF30187

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 24 January 2017

Before

LORD JUSTICE LONGMORE

LORD JUSTICE LEWISON

LORD JUSTICE DAVID RICHARDS

Between

(1) Brian Michael PickeringAppellants

(2) Ann Dolores PickeringAppellant

(3) 1000654 LimitedAppellant

Graham Frank DavyRespondent

Guy Adams (instructed by Capital Law LLP) for Appellants

Seb Oram (instructed by Clarke Willmott LLP) for Respondent

Hearing Hearing date: 13 October 2016

Judgment Approved

LORD JUSTICE DAVID RICHARDS :

Introduction

[1]This appeal concerns the directions and provisions the court may make when restoring a company to the register of companies. The power to do so arises under section 1032(3) of the Companies Act 2006 whereby the court “may give such directions and make such provisions as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register”. A direction may prevent a limitation period from running during all or part of the period in which the company was dissolved. This is the second case in a year in which this court has considered such a direction. In County Leasing Asset Management Ltd v Hawkes

[2015] EWCA Civ 1251

(County Leasing), the direction had been made at first instance in favour of the company while, in the present case, it was made in favour of a claimant against the company. County Leasing was decided after the order was made in the present case.

[2]The order under appeal was made by His Honour Judge Keyser QC, sitting as a Judge of the High Court. Heather Moor & Edgecomb Limited (the company) had been voluntarily struck off the register of companies on the application of its sole director, Mrs Ann Pickering, the second appellant. It was restored to the register by an order of District Judge James on the application of Graham Frank Davy, the respondent to this appeal, but the district judge adjourned consideration of the directions and provisions, if any, to be made under section 1032(3). On Mr Davy’s application, opposed by the company and its principal shareholders, Mr and Mrs Pickering, (together, the appellants), the judge gave two directions:

“(1) The period between 20 March 2012 (being the date of the striking off of the Company) and 1 July 2014 (being the date of the Restoration Order) is not to count for the purposes of any enactment, including the Limitation Act 1980, as to the time within which proceedings against the Company must be brought by the Claimant [the limitation direction]; (2) If the Claimant shall petition for the winding up of the Company within 14 days from the date that this paragraph comes into effect, the petition shall be deemed to have been presented on 20 March 2012 [the petition direction] ,and”

The petition direction does not, by the terms of the order, come into effect until this appeal is determined.

The facts

[3]The company was formed in 1971 and at all relevant times until 2010 its only directors were Mr and Mrs Pickering. They, together with the corporate trustee of their pension fund, were its only shareholders. The company carried on business as an independent financial advisor, with Mr Pickering providing advice to clients and being authorised to do so, while Mrs Pickering provided administrative services.

[4]Mr Davy was until 2001 employed by British Airways as a senior flight engineer officer. Shortly after leaving British Airways, he took advice from the company and thereafter he ceased to be a member of the British Airways pension scheme, transferring £610,398 out of the scheme and into a personal pension plan. This has proved to be an expensive mistake. In December 2012 the Financial Services Compensation Scheme (the FSCS) estimated his loss at £617,507. Mr Davy alleges that he acted on the advice given by Mr Pickering on behalf of the company and that such advice was negligent. The company denies both allegations.

[5]In June 2010, before any intimation of a claim by Mr Davy, Mr and Mrs Pickering caused the company to sell its client list and to cease business. There was no evidence below as to the consideration paid for the sale or what became of it. Very soon thereafter, on 21 June 2010, the company transferred, apparently for no consideration, its freehold property to Mr and Mrs Pickering and their pension trustee. An entry on the Land Registry title states that the value of the property as at 26 May 2010 was between £200,001 and £500,000, although the company’s accounts for the year ended 31 January 2011 (the 2011 accounts) showed its value, after depreciation, as about £575,000. The balance sheet in those accounts showed, after the disposals in June 2010, an accumulated deficit on profit and loss account of £242,201, paid-up share capital and share premium account of £146,000 and an overall deficit of £96,201.

[6]Mr Pickering resigned as a director of the company on 15 July 2010, leaving Mrs Pickering as the sole director and secretary.

[7]Mr Davy says that he first became aware of a possible claim against the company on 19 July 2011 during a visit by a representative of the firm that had bought the company’s client list. I should mention here that Mr Davy relies on this for the purpose of an extension of the limitation period applicable to his claim against the company under section 14A of the Limitation Act 1980. If well-founded, he does not need the limitation direction, but he sought and obtained it in case the company succeeds in showing that time began to run from an earlier date.

[8]Within a week or so, Mr Davy had made a complaint to the Financial Ombudsman Service (the FOS) which wrote to the company on 28 July 2011, notifying it of the complaint and requesting a final response within eight weeks. Although the evidence filed on behalf of the appellants denied that Mrs Pickering had any knowledge at the time of this complaint, a file note of the FOS records that she telephoned the FOS on 4 August 2011 asking for details of its conversation with Mr Davy. By a letter dated 21 September 2011 to Mr Davy, Mr Pickering on behalf of the company acknowledged receipt of the FOS’s letter and stated that “We are looking into the matter which does entail going back 10 years in our files which are in ‘deep freeze’. I will respond as soon as I can.”

[9]Mr Pickering wrote again to Mr Davy on 18 October 2011, informing him that all the relevant files had been recovered and asking him to state his grounds for making a complaint. On 26 October 2011 the FOS wrote to Mr Pickering, enclosing a copy of Mr Davy’s complaint form and requesting documents, a full statement of the company’s case and any evidence that the company wished the FOS to take into account. There is no evidence of any response to that letter.

[10]On 17 November 2011, Mrs Pickering on behalf of the company applied to the registrar of companies for the company to be struck off the register of companies pursuant to section 1003 of the Companies Act 2006.Under section 1006, the company was obliged to give notice to any creditor of the company, defined by section 1011 to include a contingent or prospective creditor. No notice was given to Mr Davy who remained unaware of the steps being taken to strike the company off the register.

[11]The company was struck off the register of companies and notice was published on 20 March 2012 whereupon the company dissolved by virtue of section 1003(5).

[12]On 12 April 2012, the FOS, evidently unaware of the dissolution of the company, wrote again to Mr Pickering at the company, again requesting a response to Mr Davy’s complaint and any other comments or evidence that he wished the FOS to consider. The letter referred to the acknowledgement dated 21 September 2011 and requested a reply as soon as possible and in any event by 26 April 2012. Mrs Pickering replied by a letter dated 27 April 2012, informing the FOS that the company had been struck off the register.

[13]Mr Davy became aware of the striking-off in early May 2012. By then the FOS investigator had told Mr Davy that he thought he would be in line for the maximum award that it could direct, of £100,000. The FOS’s remit was to direct or recommend the payment of compensation, but with the dissolution of the company its function was at an end. Accordingly, Mr Davy submitted a claim to the FSCS which acknowledged receipt by a letter dated 27 June 2012.

[14]Mr Davy was informed that it would take about six months to establish the eligibility of the claim and assess any compensation. In December 2012 compensation was assessed in the sum of £617,507.42 and he was offered the statutory maximum of £50,000. He accepted the offer in February 2013.

[15]The evidence does not disclose any further relevant activity on Mr Davy’s part until October 2013 when the FSCS re-assigned to him his claim for compensation, which had been assigned to the FSCS as a standard term of the payment of compensation to him. At about this time Mr Davy was exploring the possibility of taking steps to restore the company to the register.

[16]By this time Mr Davy had also inspected the company’s accounts filed at Companies House and had discovered from them the transfer of the company’s freehold property to its shareholders in June 2010.

[17]On 28 November 2013 Mr Davy, acting in person, issued the application for the restoration of the company to the register. He made a witness statement in support of it on 18 November 2013 in which he stated:

“The sole reason it is sought to restore the name of the Company to the Register of Companies is so that the investigation by the Financial Ombudsman for mis-selling of a personal pension can be resumed and any recommendation for compensation to be paid to Mr Graham Davy can be authorised.”

[18]The appellants filed evidence in opposition to the application. Mr Davy instructed solicitors and in March 2014 he made a witness statement, drafted by his solicitors, in which he gave notice of the limitation and petition directions that he would be seeking. He stated that he intended to issue proceedings for damages and to present a winding-up petition.

Statutory provisions

[19]The statutory scheme for striking companies off the register of companies, and for restoring them to the register, is now contained in Part 31 of the Companies Act 2006.

[20]So far as relevant to the present case, a company may apply to the registrar under section 1003 for its name to be struck off the register. The registrar must publish notice of the application in the Gazette and may not strike off the company for three months (reduced to two months since the events of the present case). The notice must invite any person to show cause why the company should not be struck off. In addition, the company must give a copy of the application to (among others) any creditor of the company (section 1006). “Creditor” is defined to include a contingent or prospective creditor. Companies may also be struck off for failure to respond to notices from the registrar. Once struck off, the company is dissolved and ceases to exist as a legal entity. It follows that no steps may be taken by or against it and it can incur no liabilities. Its property vests by statute in the Crown. A company in liquidation will also be dissolved under the Insolvency Act 1986 once its liquidation is complete.

[21]As the judge pointed out, in previous Companies Acts there were two distinct regimes, one for restoring companies that had been struck off the register and the other for declaring void the dissolution of a company. The first of these powers was exercisable within twenty years after the striking-off and the second within two years after dissolution. The effect of the two orders was different, as were the powers of the court to give ancillary directions.

[22]These separate regimes were unified by the Companies Act 2006. Whether a company has been struck off the register or dissolved, an application may be made to the court under section 1029 to restore the company to the register, by (among others) any person with a potential legal claim against the company or any person who was a creditor of the company at the time of its striking off or dissolution. Save where the application is made to enable proceedings for damages for personal injury to be brought against the company, the application must be made within six years after the striking-off or dissolution. The power to restore a company to the register is discretionary and, subject to two specific cases, the court may make an order if it considers it just to do so (section 1031).

[23]The provision of central importance in this case is section 1032, dealing with the effect of an order for restoration to the register. Section 1032(1) and (3) provide:

“(1) The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register. (3) The court may give directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register.”

[24]It has long been established that the provision now contained in section 1032(3) does not qualify or cut down the effect of section 1032(1), but enables the court to make additional provision: see Tyman’s Ltd v Craven

[1952] 2 QB 100

. It is clear from section 1030(3) that such additional provision may in particular include a direction that “the period between the dissolution (or striking off) of the company and the making of the order is not to count for the purposes of” any limitation period.

The judgment below

[25]In a careful and well-reasoned judgment,

the judge observed at [30] that the discretion under section 1032(3) is wide and continued:

“It is confined only by the touchstone of justice (“as seems just”) and by the express purpose that the directions must serve (“placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register”).”

[26]By way of illustration of the court’s approach to the exercise of the discretion, the judge cited passages from the judgments of Megarry J in Re Lindsay Bowman Ltd

[1969] 1 WLR 1443

and Sir Raymond Evershed MR in Tyman’s Ltd v Craven.

[27]The judge recorded that counsel for the respondents to the application (now the appellants) accepted that the court had jurisdiction to make both the limitation direction and the petition direction. He observed that the directions were closely linked, because the petition direction was the only route by which there would be assets available to meet any judgment against the company, by reason of a liquidator’s right to bring proceedings under sections 238 or 239 of the Insolvency Act 1986 in respect of transactions occurring within two years before the commencement of a liquidation. Whether that is entirely correct, it is certainly true to say that the prospect of available assets is enhanced by the petition direction.

[28]The judge analysed the judgment of Jonathan Parker LJ in Regent Leisuretime Ltd v NatWest Finance Ltd

[2003] BCC 587

, which concerned a limitation direction in favour of the company. The judge rejected the submission, based on that case, that any limitation direction, even in favour of a third party, would be made only in exceptional circumstances, but he said at [37]:

“Nonetheless, I consider that Mr Adams is correct to submit that the logic of Jonathan Parker LJ’s dictum requires that, in the case of third-party creditors as in that of the company itself, one have proper regard to the regime in the Limitation Act 1980. The dictum makes clear that any limitation direction, if it has any effect, will tend to override the statutory limitation regime. The fact that this result may be more readily justified by considerations of common fairness when the interests of third parties are concerned does not detract from the need to show proper grounds why such a direction should be made. The dictum of Megarry J in Re Lindsay Bowman Limited (above) also makes clear that a limitation direction must be justified in each case and is not a matter of routine.”

[29]The core of the judge’s reasoning is at [39]-[43].

[30]At [39] he recorded the submission for Mr Davy that dissolution of the company deprived Mr Davy both of the period from dissolution to restoration during which a claim could have been issued and of the period from March to June 2012 during which a winding-up petition could have been presented within two years after the disposal of the company’s assets in June 2010.

[31]At [40] the judge recorded Mr Oram’s submission on behalf of Mr Davy that “what mattered was not whether Mr Davy would have petitioned for the winding up of the Company but whether he had been deprived of the opportunity to do so, and that it was no objection to the directions that they would put Mr Davy in a better position than he would have been in if the Company had not been dissolved.”

[32]The judge said that he accepted these submissions but significant caveats which were necessary because Mr Oram’s submissions came close to suggesting that, in exercising the statutory discretion under section 1032(3) “the touchstone of justice could cut loose of its moorings in the statutory purpose”.

[33]As to the first submission, it was better not to superimpose any additional test on the statutory provision. While the courts had not made it a requirement that it be shown that the party gaining the benefit of a limitation direction would otherwise have commenced proceedings within the limitation period, the mere loss of a period when a claim could have been commenced did not establish a right to a limitation direction.

[34]As to the second submission, the decision of Roxburgh J in Re Donald Kenyon Ltd

[1956] 1 WLR 1397

“provides a neat illustration of the correct approach to directions that might put the recipient of the limitation direction in a better position than it would ever have occupied.” However, the discretion was confined to achieving its express purpose and it was not the case that “the discretion may, untrammelled by that purpose, be used generally as a means for achieving some kind of justice merely because Mr Davy has suffered losses and Mr and Mrs Pickering would otherwise avoid compensating him.”

[35]At [43],

the judge concluded that it was right to make both the limitation and the petition directions:

“Consideration of what is required to place persons in the same position, as nearly as may be, as if the Company had not been dissolved or struck off the register is made more difficult, particularly in a case such as the present, by the unavoidable element of the counterfactual that is involved. It does seem to me, however, that Mr Oram is correct to say that there was a window of opportunity, if only a small one, in which Mr Davy might have established the merits of his claim to the satisfaction of the FOS and been able to present the petition that he now seeks to present and bring the claim that would underpin such a petition. It is quite impossible to know whether he would have achieved those steps; that impossibility, however, arises out of the conduct of Mr and Mrs Pickering in bringing about the dissolution of the Company. If justice requires that the effects of the striking-off of the Company be undone by restoring to Mr Davy his lost opportunity, the risk that his position will be improved over what it might have been – perhaps because he is better able to take advantage of the opportunity – seems to me to be the price of seeking the best attainable equation of positions under section 1032(3).”

The principal issue

[36]Thus the judge identified “a window of opportunity, if only a small one, in which Mr Davy might have established the merits of his claim to the satisfaction of the FOS and been able to present the petition that he now seeks to present and bring the claim that would underpin such a petition”.

[37]The principal issue on this appeal is essentially whether, as a matter of law, that is a sufficient basis on which to have made the directions.

[38]The main grounds of appeal are directed to the express statutory purpose of a direction under section 1032(3) and what the applicant must show in that respect before the court can consider the justice of giving a particular direction. The appellants submit that the judge was wrong to hold that the relevant question was whether the applicant had been deprived of the opportunity of bringing proceedings or presenting a winding-up petition, but rather whether the applicant had changed his position by reasonably abstaining from taking such steps as a result of the company’s dissolution. The direction should not put the applicant in a substantially different position than he would have been in if the company had not been struck off the register.

[39]The judge was right, in my view, to emphasise that the discretion conferred by section 1032(3) is not unlimited but must be exercised only for its stated purpose (“for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register”) and, assuming a direction would meet that purpose, only if such direction “seems just”.

[40]In the context of an application for a limitation direction, the issue is the requisite degree of likelihood that a claimant would in fact have issued proceedings if the company had not been struck off the register. If it can be seen that the claimant would not have done so, then a limitation direction is not needed to place him in the same position as if the company had not been struck off. Quite the reverse: a limitation direction would place him in a position that he would not otherwise have been in and would confer an unwarranted benefit on him.

[41]This was recognised by the judge at [41] and it is not suggested on behalf of Mr Davy that he was wrong.

[42]At the time of the hearing before the judge, there had been little authoritative guidance on the circumstances in which a direction should be made in favour of a third party, as opposed to in favour of the company itself.

[43]In Tyman’s Ltd v Craven at page 111, Sir Raymond Evershed MR accepted the submission of counsel as to circumstances in which the power might be exercised, being that “the company, as well as third parties, might well have abstainedfrom taking those steps – a step in an action, or the exercise of some contractual right - for which the proper time might in the meantime have expired” (emphasis added). He continued that the discretion was intended to “give to the court, where justice requires and the general words [now section 1032(1)] would or might not themselves suffice, the power to put both the company and third parties in the same position as they would have occupied in such cases if the dissolution of the company had not intervened” [emphasis added]. Both the Master of the Rolls and Hodson LJ, citing Lord Sumner in Morris v Harris

[1927] AC 252

, said it was designed to achieve an “as you were” position. These were obiter comments but they suggest that attention should be directed to what might well in fact have been the position if the company had not been struck off.

[44]It appears that the first case in which a limitation direction was given was Re Donald Kenyon Ltd. The circumstances were very unusual and Roxburgh J gave a limitation direction on the grounds that “common fairness” and “common justice” required it. There was an unexpected surplus on the realisation of property that had been charged by the company, arising some years after it had ceased trading and been struck off the register. All creditors’ claims had become time-barred. The members of the company applied for the restoration of the company to the register so as to be able to claim the surplus, to which, but for the limitation direction, they would be solely entitled. In deciding, on his own initiative, to give a limitation direction, the judge did not consider whether creditors would in fact have issued proceedings within the applicable limitation periods if the company had not been struck off. In fact, it was clear that they would not have done so, because at no time during any limitation period did the company have any assets or any apparent prospect of receiving any assets.

[45]Re Lindsay Bowman Ltd was not concerned with a limitation direction but with whether a direction should be made in favour of a third party, preserving his rights against the directors and others as if the company had not been restored to the register. Megarry J had no difficulty in holding that such a direction would fall outside the express purpose of the power to give directions. In an obiter comment on the circumstances in which a direction might be made, he said at page 603 as regards a limitation direction, after referring to Re Donald Kenyon Ltd:

“If a creditor had six years in which to sue the company, and his time ran out after the company had been defunct for five years, he would have had only one year in which he could effectually have sued the company. He may justly say that he ought not to have been deprived of five years. He cannot have the precise five years which he has lost, but he can be given five other years by way of replacement. This will put him “in the same position as nearly as he may be as if the name of the company had not been struck off”.”

[46]These were the authorities available to the judge but, as earlier mentioned, this court has since decided County Leasing. Although it concerned a limitation direction in favour of the company, Briggs LJ (with whom Jackson and King LJJ agreed) analysed the application of section 1032(3) to directions in favour of third parties as well as the company.

[47]At [30] Briggs LJ analysed the purpose of a direction under section 1032(3) as it applies to a limitation direction in favour of the company:

“The starting point for the achievement of this purpose in relation to limitation is to recognise that time would have run against the company if it had not been dissolved in exactly the same way as it did in fact run, while it was dissolved. In a case such as the present where a limitation period expires while the company is in fact dissolved, the court must therefore ask itself whether, had it not been dissolved, the company (or any assignee of the cause of action) would have commenced the relevant proceedings within time which, ex hypothesi, continued to run against the company. Putting it another way, the question is whether the dissolution of the company was the real cause of its being disabled from pursuing its claim. If, had it not been dissolved, the court concludes that it would probably have failed to pursue its claim in time anyway then the causative prerequisite implied in the language of section 1032(3) seems to me to be missing.”

[48]Briggs LJ proceeded to consider at [31] whether it would be just to give a limitation direction even if it would satisfy the statutory purpose: “Even if an applicant for a limitation direction (whether the company or its assignee) can demonstrate that, had the company not been dissolved, the claim probably would have been brought in time, the court must still ask itself whether it would be just to provide that opportunity, after the event, by a limitation direction. In a case such as the present, where the company has been deliberately dissolved by its liquidator at the conclusion of its liquidation, it is, without more, by no means clear why it should be just to provide the company with a further opportunity, to the prejudice of the persons who would thereby be deprived of the limitation defence, and to the detriment in the public interest that stale claims should be prevented. The company’s dissolution is not some accident which has befallen it, like an illness affecting a potential claimant under a disability, but the consequence of a deliberate decision by the company’s responsible officer”.

[49]By way of explanation of his approach to the statutory purpose, Briggs LJ said at [32] that the “need for the court to consider whether, had the company not been dissolved, the claim would have been brought in time, is one which I derive from a simple application of the language of section 1032(3).” After citing from the judgment of Sir Raymond Evershed MR in Tyman’s Ltd v Craven, which he considered to be broadly consistent with a cause-based analysis, Briggs LJ said at [33] that it was “not simply a question of putting back the clock to the date of dissolution, but requires the court to ask what would have happened thereafter, during the period of dissolution, if dissolution had not occurred.”

[50]At [35], Briggs LJ cited the decision of the Outer House of the Court of Session in Whitbread (Hotels) Ltd, Petitioners

[2002] SLT 178

, in which an application was made by creditors for a limitation direction in circumstances where they had taken no steps to pursue their claims against the company during part of the period of its dissolution, while unaware that it had been dissolved. The court refused to make a limitation direction, observing that there was no particular reason why the creditors “should have the consequences of their inactivity…undone.”

[51]In my judgment, the decision in County Leasing establishes that the discretion to make a limitation direction requires a causative link between the dissolution of the company and the failure to commence the proceedings in question. This flows from the express purpose of a direction:

“for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register.”

As those words make clear, no distinction is drawn for these purposes between the company and third parties. The purpose to be served by a direction is the same, whether it is in favour of the company or a third party. As I will later mention, this does not mean that, if the necessary condition for the making of a direction is established, directions will be made as readily in favour of the company as in favour of third parties, but this arises from whether it “seems just” to make a direction.

[52]That the decision in County Leasing has this effect can be seen from the way in which Briggs LJ applied his analysis to the judgment below and the facts of the case.

[53]His first ground of criticism of the judgment below was that the judge had failed to analyse “whether the claims would probably have been pursued, had the Company not been dissolved…before the expiry of the relevant limitation periods.” At [44], Briggs LJ stated that “the court is concerned with probabilities, not possibilities.”

[54]Having on this and other grounds concluded that the exercise by the judge of the discretion could not stand, Briggs LJ considered afresh whether a limitation direction should be made and stated at [46]:

“I begin therefore with the question whether, had Mr Valentine not put the Company into dissolution in April 2009, proceedings would have been brought either by the Company, Mr Hawkes or some other assignee before the expiry of the relevant limitation periods in December 2011.”

[55]At [47], Briggs LJ concluded on this question:

“On the necessarily hypothetical assumption that the company had not been dissolved there is nothing in the evidence to suggest that Mr. Hawkes would have brought about the institution of proceedings, whether on behalf of the Company or by himself after assignment, before they became statute-barred in December 2010. Accordingly, I consider that the application for a limitation direction falls at the first hurdle. Putting the Company and all interested parties in the position which they would have enjoyed if there had been no dissolution would not, probably, have led to these claims being pursued in time.”

[emphasis added]

[56]It is significant that Briggs LJ describes the question of the likelihood of proceedings being issued within the limitation period as “the first hurdle”. Having fallen at that hurdle, there was no basis for making a limitation direction and no cause to go on to consider whether it would be just to do so. Briggs LJ made this clear at [48] by considering that question “on the alternative hypothesis” that proceedings might have been pursued in time.

[57]The judgment of Briggs LJ contains an important qualification. At [36] he said that “a requirement for the court to consider whether proceedings would have been brought in time if the company had not been dissolved is one which, perhaps, ought not to be slavishly applied in every case. It is a good servant, but it may be a poor master.”

[58]Briggs LJ instanced the decision in Re Donald Kenyon Ltd as an example of a special case which may have called for a different approach, but continued at [37]:

“I must admit to some doubt whether the outcome in the Donald Kenyon case, however subjectively just on its own facts, really did implement the statutory purpose of the discretion now conferred by section 1032(3). But it was not criticised in the Regent Leisuretime case, nor by counsel on this appeal. I would therefore leave the question whether it should be followed to a case where it matters, on the facts.”

[59]I accept that the caution expressed by Briggs LJ as to the standing of Re Donald Kenyon Ltd is sensible, but for my part I find the decision difficult to reconcile with the express statutory purpose of the power now contained in section 1032(3). The order made in that case did not put the parties in the same position as if the company had not been struck off. If it had not been struck off, it is clear that no proceedings would have been issued within the applicable time limits. As a matter of justice, the order in that case seems right. Mr Adams, on behalf of the appellants in the present case, suggested that it is perhaps best understood as the imposition of a condition to the exercise of the court’s discretion to restore the company to the register on the application of the members. Clearly Roxburgh J did not consider that to be the course he was following, but I think it would have been open to him, as a term of acceding to the application, to require an undertaking that the company would not rely on limitation as a defence to the time-barred claims.

[60]The position is therefore that the making of a limitation direction under section 1032(3) requires the applicant to show a clear causal link between the dissolution and the failure to bring proceedings within the applicable limitation period. While Briggs LJ spoke of the court dealing with probabilities, Sir Raymond Evershed MR in Tyman’s Ltd v Craven referred to steps that the company or third parties “might well have abstained from taking” by reason of the dissolution. If there is any real difference in these ways of expressing the right approach, and I doubt if there is, the decision of this court in County Leasing makes clear that it is a test of probability.

[61]Mr Oram submitted that the qualification “as nearly as may be” justified the lower causal link applied by the judge. In my view, those words simply recognise that there will sometimes be a practical limit to the equivalence that can be achieved by a direction or provision in the order.

[62]It follows that I cannot agree with the judge when he held in this case that Mr Davy satisfied the purpose test because “there was a window of opportunity, if only a small one, in which Mr Davy might have established the merits of his claim to the satisfaction of the FOS and been able to present the petition that he now seeks to present and bring the claim that would underpin such a petition.” This is to set the bar too low. A window of opportunity in which a step might have been taken is an insufficient basis for a direction under section 1032(3).

[63]It is therefore necessary for this court, applying the correct test, to consider whether on the undisputed evidence and the facts found by the judge, Mr Davy has satisfied the purpose test. In answer to a question from the court, Mr Oram accepted that the evidence and findings were sufficient to enable this court to decide this issue.

Other grounds of appeal

[64]Before doing so, I should briefly deal with two other grounds of appeal raised by the appellants.

[65]First, it was submitted that the requirement established by this court in Regent Leisuretime Ltd v NatWest Finance Ltd of an exceptional case for a limitation direction in favour of the company applied also to a direction in favour of a third party claimant against the company. I reject this, and agree with the judge’s approach to this submission in his judgment at [35] - [37]. For the reasons given by Jonathan Parker LJ in Regent Leisuretime, there are particular factors relevant to the exercise of the discretion in favour of the company. Most obviously, it was the company itself that brought about its dissolution and so disabled itself from bringing proceedings within the limitation period. These are issues that go not to the purpose test, which I consider to be common to all applications, but to the court’s consideration as to what in the particular circumstances of the case is just.

[66]Secondly, it was submitted that Mr Davy could have either issued proceedings with the company named as the defendant, which would be validated by a subsequent order restoring it to the register, or presented a petition seeking orders to restore the company to the register and to wind it up, and it was therefore inappropriate to make the directions sought. The judge recorded this as tentatively submitted before him but not maintained with vigour. In my judgment, it is a bad argument. As the judge said at [32] “it is inconsistent with the way in which the courts have approached limitation directions since 1952 and… it would threaten to penalise the practically sensible and legally commendable course of not commencing invalid proceedings.”

Should the directions be made on the facts of this case?

[67]I turn to the question whether Mr Davy can show that he probably would have issued proceedings against the company during the period of its dissolution or presented a winding-up petition against the company before the end of June 2012.

[68]Understandably Mr Davy took his complaint to the FOS, on 28 July 2011. Telephone and written contact followed between the FOS and the company in August to October 2011. Although the FOS stated in its initial letter dated 28 July 2011 that the company should issue a final response within eight weeks, no such response was provided within that time or at all. On 26 October 2011, the FOS requested the company to provide a statement of its case by 9 November 2011. The company did not reply. It was not until 12 April 2012 that the FOS wrote again to the company, probably (as the judge found) because it had received no reply to its previous letter. In early May 2012 the striking off of the company was discovered, which meant that the FOS no longer had a role, and Mr Davy’s complaint was referred to the FSCS.

[69]The question is what would have happened if the company had not been struck off. In answering this hypothetical question, it is appropriate to take account of events before the striking off as well as those after that date. Mrs Pickering started the process for striking off the company in October 2011, but she did not take the step required by section 1006 of notifying Mr Davy as a contingent creditor. If she had done so, it would have alerted Mr Davy to the particular circumstances of the company. The judge accepted Mr Davy’s evidence that he would have objected to the striking-off but would he have done more to pursue his claim and to discover the company’s circumstances than he in fact did?

[70]Notice of the application could have acted as a spur to the FOS to pursue Mr Davy’s complaint against the company with vigour and as a spur to Mr Davy to instruct solicitors and review the options open to him. If he had done so, he or his solicitors might have read the company’s accounts for the year ended 31 January 2011 filed at Companies House and learned of the gratuitous disposal of the company’s freehold property to its shareholders in June 2010. In those circumstances, and with the benefit of legal advice, he would have realised the importance of establishing his claim and presenting a winding-up petition by 21 June 2012.

[71]The problem is that this is no more than speculation as to what might have happened. The only evidence given by Mr Davy is that, if Mrs Pickering had given notice of the application to strike off the company, he would have objected. His conduct after he learned of the striking-off does not suggest that he would have instructed solicitors or otherwise behaved differently. The strong probability is that he would have continued with his complaint with the FOS or transferred his claim to the FSCS.

[72]In my judgment, it is not possible to conclude that he might well have either established a claim or issued proceedings, or presented a winding-up petition, against the company by 21 June 2012. The judge was right when he said that the evidence showed only a small window of opportunity in which Mr Davy might have taken these steps.

[73]I conclude therefore that the judge was wrong to give the limitation and petition directions and the appeal must be allowed.

[74]I do so with some regret, because I consider the conduct of Mr and Mrs Pickering in 2011-2012 in failing to engage properly with the FOS investigation and instead proceeding to strike the company off the register without giving the required notification to Mr Davy as worthy of censure. But, as the judge himself said, the directions sought by Mr Davy cannot, consistently with section 1032(3), be given merely because he has suffered a loss and Mr and Mrs Pickering will otherwise avoid compensating him. Nonetheless, Mr Davy may be able to succeed on his reliance on section 14A of the Limitation Act 1980 and, even without the benefit of a claim under section 238 or 239 of the Insolvency Act 1986, the circumstances in which the client list of the company was disposed of and the freehold property transferred to the shareholders, apparently leaving the company with a deficit, may still be worth investigation by a liquidator.

[75]In the event, it is unnecessary to consider the merits of the petition direction, but it should be noted that this appears to be the first case in which such a direction has been sought or given. I think that the appellants were right to accept that the court had jurisdiction under section 1032(3) to give this direction but I would endorse what Norris J said in the subsequent case of Barclays Bank plc (trading as Barclays Global Payment Acceptance) v Registrar of Companies

[2015] EWHC 2806 (Ch)

at [58] that it is a jurisdiction to be exercised with extreme caution. A winding up order has far-reaching effects on the company, its property, its creditors and members and all those who have dealt with it. For example, it stops all limitation periods on claims against the company, not just the claim at which a limitation direction may be targeted. It may ordinarily be just to enable all persons adversely affected by such a direction to be given notice of the application and the opportunity to be heard, as Norris J observed. In the present case, it might well have been just to give the petition direction, if Mr Davy had satisfied the purpose test. There is no evidence that it would have affected anyone other than Mr Davy and the shareholders who received the company’s freehold property.

[76]However, for the reasons given above, I would allow the appeal and set aside the limitation and petition directions given by the judge below. LORD JUSTICE LEWISON:

[77]I agree.

LORD JUSTICE LONGMORE:

[78]I also agree.