Defence giant BAE Systems can back out of a £93m property deal because the counterparty to the deal was accidentally, and briefly, struck off the Register of Companies, the Court of Appeal ruled this week.
The case relates to BAE’s Project Bradford in which the company was disposing of a £200m portfolio of property that was surplus to its requirements.
As part of the project, Bridgehouse (Bradford No.2) (BB2), a company set up solely to buy part of the portfolio, agreed in 2012 to buy two properties for £93m.
The sale was set to complete between January 2020 and July 2022.
The contract stated that if BB2 suffered an “event of default” which included, among other things, being struck off the companies register, BAE could cancel the deal.
Which is what it did on 2 June 2016, two days after BB2 accidentally allowed itself to be struck off the register. The company had missed a notice giving it warning that it was to be stuck off if it did not respond. But as it was sent to a firm of solicitors BB2 no longer used, it did not get the message. BB2 applied “for administrative restoration” and was put back on the register on 28 July.
This has led to litigation, with BAE seeking to defend its position and take the dispute to arbitration, and BB2 taking the case to court, arguing that the temporary termination of the company’s entry on the register should be considered to be “of no effect”, because administrative restoration is supposed to put a company back in the same position it would have been if had it not been struck off.
BB2 wanted the court to either rule that the termination was of no effect, or order BAE to enter into a new contract on the same terms as the old one.
In a ruling this week, the court rejected this argument and dismissed the appeal, saying that the dispute was about the terms of a contract not the nature of administrative restoration.
“Even taking a narrow view… the parties’ dispute does arise out of the provisions of the agreement,” Lord Justice Males said in the ruling. “It arises out of the express contractual right for which BAE bargained to terminate the agreement… in the event of BB2 being struck off the register. If successful, BB2’s claim would… deprive BAE of the benefit of that contractual right,” he said.
Bridgehouse (Bradford No. 2) Ltd v BAE Systems plc
Court of Appeal (Newey LJ, Males LK, Phillips LJ) 16 June 2020
Mr David Lord QC and Mr Sebastian Kokelaar (instructed by Richard Slade and Company PLC) for the appellant
Miss Fiona Parkin QC and Mr Patrick Harty (instructed by Ashurst LLP) for the respondent
