Limitation in cases of Companies in Administration or Liquidation

15 April, 2021

On 14 April 2021 the Court of Appeal handed down judgment in OT Computers Limited (In Liquidation) & Ors v Infineon Technologies AG & Ors [2021] EWCA Civ 501 dealing for the first time with how s.32(1)(b) of the Limitation Act 1980 applies to a company in administration or liquidation. The case concerned a follow-on damages claim by OT Computers (In Liquidation) relating to a cartel to fix the price of computer memory chips (DRAMS). Given the very nature of cartels, it was not in dispute that the wrongdoing had been the subject of deliberate concealment for several years. The Appellants argued that the insolvent status of the company was to be ignored as a subjective characteristic when assessing whether the company could, with reasonable diligence, have discovered the deliberately concealed wrongdoing.

At first instance, this contention was rejected by Mr Justice Foxton [2020] EWHC 415 (Comm) on the basis that Millett LJ’s well-known guidance on s.32(1)(b) of the 1980 Act in Paragon Finance Plc v DB Thakerar & Co did not require the Court to treat a company as still trading when, in fact, it had ceased to trade. The Court of Appeal upheld that first instance decision. In doing so, the Court of Appeal rejected the contention that taking into account the insolvent status of the company amounted to an abandonment of the objective approach to the assessment of reasonable diligence or that it would result in an unduly lenient approach being adopted towards insolvent companies. Whilst the Court of Appeal drew a distinction between a company still trading and one in insolvency for the purposes of determining whether it could with reasonable diligence have discovered the wrongdoing, once the insolvency practitioners became aware of such a potential claim, they would be expected to investigate the claim.

This appellate decision provides welcome clarity to the application of s.32(1)(b). In practical terms, it should ensure that insolvency practitioners can focus on complying with their statutory duties without being required to expend time and costs unnecessarily keeping up to date with the relevant market and trade on the off-chance of discovering a concealed claim.

A link to the judgment can be found here.

Paul McGrath QC, together with David Scannell QC of Brick Court and Stefan Kuppen of Monckton Chambers, represented OT Computers (In Liquidation) instructed by Andrew Bartlett and Penny Combs of Osborne Clarke.