Bridgehouse (Bradford No.2) v BAE Systems Plc

The deeming effect of restoration to the register is broad, but it is not unlimited. It generally reverses automatic consequences of dissolution and validates acts done by or for the company while it was dissolved. It does not ordinarily undo a third party’s deliberate exercise of an express contractual termination right triggered by the company’s striking off. Such termination is an indirect consequence of dissolution, not an automatic consequence.

Contractual wording identifying striking off as an immediate event of default should be given its natural meaning. The court should not imply a reasonable-period qualification where the contract distinguishes immediate termination events from remediable defaults.

Bridgehouse (Bradford No.2) appealed under section 69 of the Arbitration Act 1996 against an arbitral award concerning the termination of an agreement for the sale of two properties.

The claimant had been struck off and dissolved after failing to comply with filing obligations. The defendant then exercised an express contractual right to terminate where the buyer was struck off, dissolved or ceased to retain its corporate existence. The claimant was subsequently restored administratively to the register.

The appeal concerned whether section 1028(1) of the Companies Act 2006 retrospectively invalidated the termination, whether the parties could contract out of that provision, and whether the event of default arose immediately upon striking off or only after a reasonable period.

1. Appeal dismissed. The arbitral award was upheld. The termination of the agreement remained effective after the claimant’s administrative restoration.
2. Section 1028(1) of the Companies Act 2006 must be construed purposively, having regard to the statutory scheme, the legislative background, the authorities and the consequences of competing constructions. The provision has very wide effect, but section 1028(3), with its reference to placing persons in the same position “as nearly as may be”, shows that an exact “as you were” result cannot be achieved in every case.
3. The authorities principally concerned validation of acts done during dissolution, or automatic consequences flowing directly from dissolution. They did not establish that restoration retrospectively undoes every act by a third party relying on the company’s dissolved status. The distinction is between direct or automatic consequences and secondary consequences requiring a deliberate intervening act.
4. A contractual termination exercised under an express clause is a deliberate act by the counterparty. It does not flow automatically from dissolution. Section 1028(1) therefore did not require the termination to be reassessed or undone.
5. The observations in Orchidway Properties Ltd v Fairlight Commercial Ltd concerning repudiation and frustration were obiter and arose in a materially different context. The licensing decision in Beauchamp Pizza Ltd v Coventry City Council likewise concerned an automatic lapse rather than a third party’s positive act.
6. The alternative question whether the parties could contract out of section 1028(1) was hypothetical. If the provision had operated to undo the termination, the judge would have concluded that its public-policy character prevented contracting out. If that question arose on the assumed hypothesis, clause 20.2(g) would nevertheless have been construed as giving BAE an effective right to terminate upon striking off.
7. Clause 20.2(g) was clear. An event of default arose immediately when the claimant was struck off on 31 May 2016. There was no basis for implying a term requiring a reasonable period to elapse before the right to terminate arose.

Arbitration: The arbitrator held that an event of default arose immediately upon striking off and that the termination was unaffected by subsequent restoration.

High Court (Commercial Court): The appeal under section 69 of the Arbitration Act 1996 was dismissed and the arbitral award upheld.