Bridgehouse (Bradford No.2) v BAE Systems Plc

The court determined whether administrative restoration under section 1028(1) Companies Act 2006 retrospectively undoes a prior valid contractual termination effected while the company was dissolved. The Agreement between the parties contained an express termination right (clause 20.1 and clause 20.2(g)) permitting BAE to terminate if the buyer was struck off the register.

The judge held that the deeming provision in section 1028(1) has wide retrospective effect to validate or treat as having occurred acts that would inevitably have flowed from the company's continued existence, but it does not automatically unpick third‑party actions or discretionary steps taken by a counterparty (such as the deliberate exercise of a contractual termination right) which are not the automatic consequence of dissolution.

Applying that analysis, the court upheld the Arbitrator's finding that an Event of Default under clause 20.2(g) arose immediately upon the striking off on 31 May 2016, and that BAE's termination by notice was effective and was not rendered ineffective by BB2's subsequent administrative restoration. The appeal was dismissed.

Background and parties: BAE Systems Plc (BAE) agreed to sell two properties to Bridgehouse (Bradford No.2) Ltd (BB2) under an agreement concluded 20 December 2012. BB2 was a special purpose vehicle owned and controlled by the Ruhans. Clause 20 of the Agreement provided termination rights for BAE if BB2 suffered various Events of Default, including being struck off the register (clause 20.2(g)).

Procedural posture and relief sought: Following BB2's failure to file accounts it was struck off and dissolved on 31 May 2016. BAE served a termination notice on 2 June 2016. BB2 was administratively restored on 28 July 2016. The Arbitrator concluded that an Event of Default arose immediately on striking off and that BAE's termination was valid and not undone by restoration. BB2 appealed the arbitration award under section 69 Arbitration Act 1996; the appeal was by agreement between the parties. BB2 also issued a Part 8 claim seeking directions under section 1028(3) Companies Act 2006 in the alternative, and applications were made about transfer and stay (not determinative in this judgment).

Issues framed by the court:

• Whether section 1028(1) can retrospectively undo a contractual termination effected while the company was dissolved (Issue A4).
• Whether clause 20.2(g) Event of Default arose immediately on striking off or only after a reasonable period without application for restoration (Issue A2).
• Ancillary questions whether parties may contract out of section 1028(1) and whether the Agreement in fact did so.

Court's reasoning: The judge reviewed the statutory scheme (Parts 31 and related provisions of the Companies Act 2006), parliamentary materials on administrative restoration, and authorities stretching back to Tyman’s Ltd v Craven and including Re Lindsay Bowman, Re Priceland, Orchidway, Contract Facilities, Beauchamp Pizza, Joddrell and Hounslow Badminton. The court concluded that:

• Section 1028(1) creates a broad statutory fiction that the restored company is deemed to have continued in existence, and that the fiction operates to validate acts and undo the automatic consequences that would have arisen had the company continued in existence.
• There is a principled distinction between direct or automatic consequences of dissolution (which the deeming fiction will generally undo) and non‑automatic consequences arising from independent or discretionary acts of third parties (for example, a counterparty's deliberate decision to terminate a contract, or a repudiation accepted by the other party).
• The statutory wording (including the power in section 1028(3) to give directions “as nearly as may be” to place parties in the as‑you‑were position), the authorities and considerations of practical consequence support that distinction.

Application to the facts: Clause 20.2(g) plainly triggered an Event of Default upon a company being struck off. That wording does not import any reasonable‑time proviso and the provision sits alongside other clauses that expressly provide cure periods where intended. The judge found that an Event of Default arose immediately on 31 May 2016 and that BAE validly exercised its contractual right to terminate on 2 June 2016. That deliberate act of termination was not an automatic consequence of dissolution and therefore was not retrospectively undone by administrative restoration under section 1028(1).

Outcome: The appeal against the Arbitrator’s award was dismissed and the Arbitrator’s decision upheld.

Appeal dismissed. The court held that although section 1028(1) Companies Act 2006 has broad retrospective effect to validate or treat as having occurred those acts that would inevitably have flowed from the company's continued existence, it does not automatically undo independent or discretionary acts of third parties taken while the company was dissolved. An Event of Default under clause 20.2(g) arose immediately on striking off and BAE's contractual termination was effective and not rendered ineffective by BB2’s later administrative restoration.