Restoring companies to the register:

Guidance on the ‘limitation direction'

Publication April 2016


The ability to restore a dissolved company to the register can be a useful tool for a party seeking relief after wrongful conduct comes to light. In County Leasing Asset Management Limited and Others v Mark Glenn Hawkes [2015] EWCA Civ 1251 the Court of Appeal has provided guidance on the principles applicable to the Court’s discretion when ordering that the period of a company’s dissolution should not count for limitation purposes. Such an order is often referred to as a ‘limitation direction’.

Background facts

In December 2004, Telerate Limited (the Company) entered into a sale and leaseback arrangement (the Arrangement) arranged by the respondent (Mr Hawkes), the Company’s sole director and shareholder, with a view to salvaging the Company’s business before an impending winding up petition initiated by HMRC.

Mr Hawkes was assisted in structuring the transaction by Mr Cook and Mr Kirkpatrick, the third and fth appellants, and arranged to sell the Company’s assets (including a large plot of land) for £225,000 to the second appellant, County Leasing Limited (CLL) of which Mr Kirkpatrick was a director. The intention was that CLL would lease the assets back to two new companies formed by Mr Hawkes, MGP 2 Limited and Quotepool Limited, with their liabilities under the leaseback agreements being guaranteed by Mr Hawkes. County Leasing Asset Management Limited (CLAM) also provided some funding towards the Arrangement. The Arrangement proceeded before the Company was placed into administration in late January 2005.

Of the £225,000 due under the Arrangement, the administrator, Mr Valentine, received only £40,000 and substantial sums appeared to have been paid to, or for the bene t of, Mr Kirkpatrick and Mr Cook. Mr Valentine began investigating the transaction in April 2005, but he was unable to achieve any tangible result for the Company before it was dissolved in April 2009. By that time, Mr Hawkes’ attempt to continue the former business of the Company had failed, and he was made subject to proceedings in the County Court by CLL and CLAM to enforce his guarantees and to claim rental arrears from MGP 2 Limited and Quotepool Limited.

In September 2010, Mr Hawkes applied for the restoration of the Company to the register and in December 2010, just before the expiry of the period in which a claim could be brought, Mr Hawkes applied for a direction that the period for which the Company had been dissolved should not count for limitation purposes. At this point Mr Hawkes had received judgment in the County Court proceedings upholding his defence and counterclaim on the ground that both he and his new companies had entered into the Arrangement in reliance upon misrepresentations for which CLL and CLAM were responsible. 

The restoration order was made in October 2011 and the Company was restored for the purpose of continuing its liquidation under a new liquidator, who assigned any cause of action the Company might have against CLL, CLAM, Mr Kirkpatrick and Mr Cook to Mr Hawkes in September 2012.

First Instance Judgment of Andrews J

At first instance, Andrews J considered that the discretion to direct that the period of dissolution should not count for limitation purposes was ‘an exceptional jurisdiction’ and was one that would always cause prejudice to defendants who were thereby deprived of a defence. Andrews J regarded the merits of the claim as relevant only to the extent that a limitation direction would not be given to allow the pursuit of an obviously unmeritorious claim. Andrews J considered that the dicta of Jonathan Parker LJ in Regent Leisuretime Ltd v Natwest Finance Ltd [2003] EWCA Civ 391 (discussed further below), in which he stated that different considerations would apply to the granting of a limitation direction in favour of the company being restored to the register as compared against a third party creditor, was obiter. Andrews J effectively held that the principles applicable to granting a limitation direction in favour of a restored company were comparable to those applicable to granting a direction in favour of third party creditors and that she was, therefore, able to grant a limitation direction in favour of the Company if appropriate.

Andrews J considered that there was sufficient evidence to raise concern over the independence of Mr Valentine in not pursuing claims against the appellants. The evidence at first instance, for example, suggested that Mr Valentine had either received threats from Mr Cook or that there had been ‘an over-cosy relationship between them’. As such, Andrews J held that based on the evidence in the case, there was a danger that Mr Valentine had taken decisions for improper motives and that to deny a direction in the terms sought would be to allow an injustice to be done to the Company. On this basis, Andrews J granted Mr Hawkes’ application for an order that the period of dissolution should not count for limitation purposes.

Judgment of the Court of Appeal

The Court of Appeal reversed the first instance decision of Andrews J. Briggs LJ considered that there were a number of ‘serious difficulties with the Judge’s approach’ at first instance. Primary among these he considered was Andrews J’s focus on an analysis of the reasons why the Company had not pursued the claims by the time of its dissolution.

Having reviewed the relevant case law, Briggs LJ stated that Jonathan Parker LJ’s decision in the Regent Leisuretime case, on whether discretion could be exercised in the company’s favour, formed part of the ratio of the judgment and was not obiter as held by Andrews J. The result of this is that the Court was bound by Jonathan Parker LJ’s dicta on the exercise of the discretion to make a limitation direction in favour of a company, to the eject that:

  • it may only be exercised in exceptional circumstances
  • its effect is to override the statutory limitation regime
  • fairness will generally require that a company,

like any other claimant faced with a limitation defence, should be left to attempt to meet that defence by recourse to the statutory regime in the Limitation Act 1980.

Briggs LJ considered that the starting point for the achievement of the statutory purpose contained in section 1032(3) Companies Act 2006 is to recognise that time would have run in the same way as if the Company had not been dissolved. The Court must ask whether, had it not been dissolved, the Company would have commenced the relevant proceedings in time. It was, therefore, held that there must be a causative link between the Company’s dissolution and the applicant’s failure to bring proceedings in time.

Briggs LJ commented that the limitation regime exists mainly to serve the public interest in the prohibition of stale claims. He noted that the Company’s dissolution is ‘not some accident which has befallen it...but the consequence of a deliberate decision by the company’s responsible over’.

Briggs LJ, with whom King and Jackson LJJ agreed, allowed the appeal and set aside the limitation direction made by Andrews J on the grounds that there was nothing to suggest that Mr Hawkes would have brought proceedings whether on behalf of the Company or by himself before they became statute-barred.


The Court’s discretion, when restoring a company to the register under section 1032(3) Companies Act 2006, to ‘give such 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’ is not new. Equally, it has long been established that such orders can include a limitation direction.

This case, however, brings welcome practical guidance from the Court of Appeal in an area that has lacked judicial clarification since the Regent Leisuretime case.

As Briggs LJ himself stated in the present case: ‘For my part, a rule requiring the presence of exceptional circumstances does not on its own provide much assistance, beyond making it clear that the burden of demonstrating the existence of such circumstance must lie squarely on the company seeking the limitation direction’. Briggs LJ’s judgment certainly goes some way to laying down concrete principles for parties to apply in such situations.

The approach set out by the Court in light of this reasoning is as follows:

  • The Court must first ask whether the company (or assignee) would have commenced proceedings in time had it not been dissolved.
  • If so, the Court should then consider whether it would be just to provide that opportunity, after the event, by way of a limitation direction.

The Court also makes clear that as the limitation regime does not offer relief in the absence of misconduct, even where the claimant has had difficulties in obtaining funding or in finding a willing assignee to take on the litigation, the discretion available under section 1032(3) Companies Act 2006 should not be used as a substitute to provide this relief.

It is interesting that the Court of Appeal placed some emphasis on the need for a causative link between the Company’s dissolution and the applicant’s failure to bring proceedings in time. From the judgment of Briggs LJ it would appear that the broader principles that have historically been applied by the Court will be replaced by a more rigorous and formalised approach. Those seeking the benefit of a limitation direction should pay heed to the guidance in this case and prepare for their application to be subjected to heightened scrutiny.

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