Company – Arbitration – Termination notice – Parties entering into agreement for sale of properties – Appellant struck off companies register – Respondent terminating agreement – Appellant being restored to register and seeking order that termination of no effect under section 1028(3) of Insolvency Act 1986 – Court ordering stay for case to be referred to arbitration – Appellant appealing – Whether arbitration clause extending to relief under section 1028 – Appeal dismissed
The parties entered into an agreement for the sale of properties, known as Hawarden Airfield, Broughton, and Filton Main Site, Bristol, for the sum of £93m. The agreement contained an arbitration clause and a termination clause. The latter gave the respondent power to terminate the agreement if the appellant suffered an “event of default”, including being struck off the companies register.
The appellant was struck off on 31 May 2016 for failure to comply with filing requirements. On 2 June, the respondent served a notice of termination. The appellant was restored to the register on 28 July. It challenged the validity of the termination, relying on section 1028(1) of the Companies Act 2006, which provided that a company which had been administratively restored to the register was deemed to have continued in existence as if it had not been struck off.
Arbitration proceedings under clause 19.1(a) of the contract determined that the contract had been validly terminated. The arbitrator rejected the appellant’s contention that any effective termination had to be reassessed retrospectively as a result of the appellant’s restoration to the register under section 1028(1) of the 2006 Act. The arbitrator took the view that section 1028(1) did not serve to undo an action taken by a party to the contract in the period between striking off and restoration.
The appellant issued proceedings for an order under section 1028(3) of the 1986 Act that the termination was of no effect. However, as the original contract included an arbitration clause, the respondent applied for a stay so that the case could be referred to arbitration. The court granted that application. The appellant appealed.
Held: The appeal was dismissed.
(1) Clause 19.1(a) of the contract was expressed to apply if “any dispute arises between the parties to this agreement arising out of the provisions of this agreement”. The judge was right that clause 19.1(a) applied to the appellant’s claim for relief under section 1028(3). The dispute between the parties as to whether relief should be granted under section 1028(3) could aptly be described as “arising out of the provisions of” the contract. The question whether there should be such relief was intimately connected with, for example, the effect of section 1028(1), which was admittedly within the arbitrator’s remit. Although it had been established that the contract was validly terminated according to its terms, that could not be determinative. It was common for arbitrations to be concerned with contracts that had already been brought to an end. The fact that the present dispute related to whether relief should be given pursuant to a statute did not mean that it did not also arise out of the provisions of the contract. Furthermore, there was no question of the contract making it clear that questions as to relief under section 1028(3) were intended to be excluded from the arbitrator’s jurisdiction, which suggested that clause 19.1(a) should be presumed to apply: Fiona Trust and Holding Corp v Privalov [2007] UKHL 40; [2007] 4 All ER 951 applied.
(2) When considering the arbitrability of applications for relief under section 1028(3) of the 2006 Act, it was necessary to consider both whether the 2006 Act prohibited the reference to arbitration of such matters and whether arbitration was precluded by public policy considerations. The 2006 Act did not itself, either expressly or by implication, prohibit reference to arbitration of matters arising on an application for relief under section 1028(3). The fact that a statutory power, which a court would not have at common law apart from the statutory provision, was given to the court did not mean that an arbitrator, to whom a dispute was properly agreed to be referred, did not have a similar power: Fulham Football Club (1987) Ltd v Richards [2011] EWCA Civ 855; [2012] Ch 333 applied.
(3) As regards public policy, it was of significance that the parties chose to enter into an arbitration agreement which applied to the appellant’s claim for relief under section 1028(3) of the 2006 Act which was founded on, among others, the principle that the parties should be free to agree how their disputes were resolved, subject only to such safeguards as were necessary in the public interest. A winding-up order lay within the exclusive jurisdiction of the court. There was no question, either, of an application for restoration to the register under section 1029 of the 2006 Act being susceptible to arbitration. Such matters did not merely involve private disputes but status and potentially had implications far beyond the company and any particular counterparty.
Unlike a winding-up order or restoration to the register, relief pursuant to section 1028(3) or section 1032(3) did not affect status and an application for such relief would normally be an essentially private matter, affecting nobody but the company and one or more specific individuals or entities. Disputes as to whether there should be relief under section 1028(3) or section 1032(3) could be compared with the essentially internal disputes which were the subject of unfair prejudice petitions under section 994 and which were arbitrable. Relief under section 1028(3) or section 1032(3) was no more a class remedy than was relief pursuant to an unfair prejudice petition. Nor could it be said that the issues raised by such applications were obviously unsuited to an arbitrator. An application for relief under those provisions required consideration of what (if any) directions and provisions were just for placing the company and all other persons in the same position (as nearly as might be) as if the company had not been dissolved or struck off the register. Accordingly, applications for relief under section 1028(3) of the 2006 Act were susceptible to arbitration.
David Lord QC and Sebastian Kokelaar (instructed by Richard Slade and Company plc) appeared for the appellant; Fiona Parkin QC and Patrick Harty (instructed by Ashurst LLP) appeared for the respondent.
Eileen O’Grady, barrister
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