Bridgehouse (Bradford No 2) Ltd v BAE Systems plc

The Court of Appeal dismissed the appellant's challenge to a stay of its court claim for relief under section 1028(3) of the Companies Act 2006. The court held that clause 19.1(a) of the contract, which provides for arbitration of "any dispute ... arising out of the provisions of this agreement", encompassed BB2's application for directions under section 1028(3) because the application arose out of BAE's reliance on the contractual termination right in clause 20. The court further held that applications under section 1028(3) (and, by parity, section 1032(3)) are in principle capable of being determined in arbitration and are not excluded by the Companies Act 2006 or by public policy. The appeal was therefore dismissed and the stay under section 9 of the Arbitration Act 1996 upheld.

The appellant, Bridgehouse (Bradford No. 2) Limited (BB2), sought directions under section 1028(3) of the Companies Act 2006 after it had been administratively struck off the register and was later restored. The respondent, BAE Systems plc, had served notice to determine the contract between the parties following the striking off. The contract contained an arbitration clause (clause 19.1(a)) and an express termination right on the company being struck off (clauses 20.1–20.3). An arbitrator had previously found that BAE’s termination was valid. BB2 reserved its right to apply to the court under section 1028(3) for directions restoring the parties to the position as if the company had not been dissolved.

The procedural history included an arbitration award (14 June 2018), an appeal under section 69 of the Arbitration Act dismissed by Cockerill J ([2019] EWHC 675 (Ch)) and refusals of permission to appeal (including Hamblen LJ on 14 November 2019). BB2 issued a Chancery Division claim (3 August 2018) for relief under section 1028(3). BAE applied for a stay under section 9 of the Arbitration Act 1996 and the Deputy Judge granted the stay. BB2 appealed to the Court of Appeal.

The issues before the Court of Appeal were (i) whether clause 19.1(a) applied to BB2’s claim for section 1028(3) relief and (ii) whether such applications are in any event incapable of being determined by arbitration. The court applied the modern, pro‑arbitration approach to clause construction (Fiona Trust) and concluded that the dispute about section 1028(3) relief "arose out of the provisions of" the contract because the relief was sought only because of BAE’s invocation of the contractual termination right. On arbitrability the court considered whether the Companies Act 2006 or public policy precluded arbitration of section 1028(3) applications. It concluded that the statute’s reference to "the court" did not, expressly or by implication, oust arbitration, and that public policy did not require exclusion: unlike winding up or restoration applications, section 1028(3) relief is normally an essentially private remedy and does not affect company status. The court distinguished cases where the insolvency regime or status matters made disputes non‑arbitrable and relied on authority holding internal company disputes and analogous statutory remedies to be arbitrable (for example Fulham Football Club and Wealands).

Outcome: the appeal was dismissed; the stay under section 9 of the Arbitration Act 1996 was upheld and the dispute as to section 1028(3) relief is for arbitration.

Appeal dismissed. The Court of Appeal held that clause 19.1(a) of the contract covered BB2's application for directions under section 1028(3) of the Companies Act 2006 because the dispute arose out of the contract provisions, and that applications under section 1028(3) (and section 1032(3)) are capable of being determined by an arbitrator; accordingly the stay under section 9 of the Arbitration Act 1996 was properly granted.

This was an appeal to the Court of Appeal from the Deputy Judge of the Chancery Division (Isaacs QC) who ordered a stay under section 9 of the Arbitration Act 1996 ([2019] EWHC 675 (Ch)). The underlying dispute had earlier been the subject of arbitration (award dated 14 June 2018) and an appeal under section 69 was dismissed by Cockerill J (11 July 2019). Permission to appeal that decision was refused (Hamblen LJ, 14 November 2019). The present appeal arose from the refusal of the court below to proceed with BB2’s s.1028(3) claim instead of referring it to arbitration; the Court of Appeal dismissed the appeal on 16 June 2020 ([2020] EWCA Civ 759).