Parties who agree to arbitrate should be held to their bargain

A contract to acquire land for £93m is worth fighting for. So it will surprise no one that the company that was hoping to buy the land has appealed to the court for help in its battle to rescue the contract in question. Bridgehouse (Bradford No. 2) Ltd v BAE Systems plc [2020] EWCA Civ 759 is the sequel to litigation last year. The buyer was a company that had been incorporated specifically in order to acquire the land. But the seller had served a notice terminating the contract on the ground that an event of default had occurred: the company had ceased to exist when its name was struck from the register of companies because it had failed to file its accounts and returns. In the proceedings that followed, the company argued that its restoration to the register had deprived the termination notice of efficacy because section 1028(1) of the Companies Act 2006 deems a company that is restored to the register to have continued in existence. But the High Court rejected the company’s claim: see Bridgehouse (Bradford No. 2) Ltd v BAE Systems plc [2019] EWHC 1768 (Comm); [2019] PLSCS 162. So the company launched new proceedings seeking a court order requiring the seller to enter into a further agreement with it on exactly the same terms – arguing that section 1028(3) enables the court to put the company, and others, in the same position (as nearly as may be) as before. But the parties’ original contract included an arbitration clause and the seller asked for a stay so that the case could be referred to arbitration instead. The High Court granted the stay. So the company asked the Court of Appeal to intervene – possibly because it feared that the reference would be a procedural “dead end”, thanks to previous arbitration between the parties regarding its section 1028(1) claim. The company argued that the parties’ dispute did not arise out of the provisions of the parties’ contract. It was asking for post-termination statutory relief. But the Court of Appeal noted that it is common for arbitrations to concern contracts that have been brought to an end, for example by repudiation or frustration, and the fact that the company was seeking statutory relief did not mean that the dispute did not arise out of the provisions of the parties’ contract as well. Furthermore, Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40 confirms the presumption that parties with arbitration clauses in their agreements intend any disputes arising out of their relationship to be dealt with accordingly, unless their contract states otherwise. Was the case susceptible to arbitration? The Court of Appeal accepted that some applications – for example, to wind up a company – are incapable of being arbitrated. But this was a conclusion of last resort; agreements to arbitrate should be respected. The company also argued that section 1028(3) engages public policy considerations and tasks “the court” with granting relief. But the court ruled that this did not prevent a reference to arbitration, or mean that an arbitrator, to whom a dispute is properly referred, does not have similar powers: Fulham Football Club (1987) Ltd v Richards [2011] EWCA Civ 855. Furthermore, although section 1028(3) applications might affect third parties, who would not be bound by the outcome of an arbitration, cases involving third parties were likely to be exceptional. And the problem did not arise here because the seller had not contracted to sell the land to anyone else. Allyson Colby, property law consultant