Capital Trust Investment Limited v Radio Design AB & Ors

An application for shares submitted to a company’s placing agent may constitute an offer to the company where the form and surrounding transaction show that purpose. The company becomes party to the contractual terms, including an arbitration clause, when it accepts the offer by allotment.

A broadly expressed arbitration clause covering disputes arising out of the application encompasses claims for deceit and negligent misrepresentation inducing that application. Unlike a general release, such a clause supplies a forum for future disputes and is not confined to claims known when it was made.

Under section 9(3) of the Arbitration Act 1996, a conditional application for summary judgment does not amount to a step in proceedings where it is expressly advanced only if the stay application fails.

CTIL alleged that it had been induced by fraudulent and negligent misrepresentations to subscribe for preference shares in Radio Design. It sued Radio Design and other defendants for damages.

The subscription application, signed by CTIL and submitted to Radio Design’s placing agent, contained a Swedish-law and Stockholm arbitration clause. After Radio Design allotted the shares, it sought a stay under section 9 of the Arbitration Act 1996.

Master Bowman granted the stay. Jacob J dismissed CTIL’s appeal. CTIL appealed to the Court of Appeal, contending that Radio Design was not a party to the arbitration agreement, that the misrepresentation claims fell outside it, and that Radio Design had lost its right to a stay by conditionally seeking summary judgment.

1. Appeal dismissed. The court upheld the stay of CTIL’s action against Radio Design under section 9(4) of the Arbitration Act 1996.

2. The application form was, objectively and in its commercial setting, an irrevocable offer to Radio Design to subscribe for its shares. Enskilda received that offer as Radio Design’s placing agent, while also acting as CTIL’s agent to sign the Swedish subscription list and as principal for the escrow arrangements. Those additional roles did not displace the form’s express purpose as an application to Radio Design.

   Radio Design accepted the offer when the shares were allotted to CTIL. A contract then arose on the form’s terms, including the applicable-law and arbitration clause. The contractual acknowledgments concerning the confidential information memorandum also supported that conclusion.

3. The clause requiring arbitration of any dispute arising out of the application extended to CTIL’s claims for damages for deceit and negligent misrepresentation. Construing the agreement objectively as a whole, the court distinguished the cautious approach to unknown claims in a general release in BCCI v Ali, [2001] UKHL 8. An arbitration clause is machinery for resolving future disputes. The parties were likely to intend one tribunal to decide contractual and misrepresentation claims arising from the subscription.

4. Radio Design had not taken a step in the proceedings within section 9(3). Its summary-judgment application was expressly conditional upon the failure of its stay application. It therefore did not affirm the appropriateness of court determination or elect to abandon arbitration. Radio Design consistently maintained that the action should be stayed.

5. The order staying the action remained in force. Radio Design was awarded the costs of the appeal, subject to detailed assessment if not agreed.

• Court of Appeal (Civil Division): dismissed CTIL’s appeal and upheld the stay: [2002] EWCA Civ 135.
• High Court, Chancery Division: Jacob J dismissed CTIL’s appeal from the master’s order on 16 February 2001.
• Master: Master Bowman stayed the proceedings against Radio Design under section 9(4) of the Arbitration Act 1996 on 27 June 2000.