Bridgehouse (Bradford No. 2) Ltd v BAE Systems Plc

An arbitration clause covering disputes arising out of an agreement is presumed to extend to every dispute arising from the parties’ relationship unless clear language excludes a question from the arbitrator’s jurisdiction.

A statutory power conferred on “the court” is not, for that reason alone, incapable of exercise by an arbitrator. Non-arbitrability requires an express or implied statutory prohibition or a compelling public policy safeguard. The possibility that relief could affect third parties, or that an arbitrator cannot grant every remedy available to a court, may limit the relief obtainable but does not necessarily render the underlying dispute non-arbitrable.

Applications for just restorative directions under sections 1028(3) and 1032(3) of the Companies Act 2006 are generally arbitrable because they ordinarily concern private rights and do not affect corporate status.

The appellant company was struck off the register and dissolved. The respondent then exercised a contractual right to terminate an agreement for the sale of land. Following the company’s administrative restoration, an arbitrator determined that the agreement had been validly terminated.

The company subsequently sought relief under section 1028(3) of the Companies Act 2006, asking the court to invalidate the termination or require a replacement agreement. The respondent obtained a stay under section 9 of the Arbitration Act 1996. The Deputy Judge held in [2019] EWHC 675 (Ch) that the claim fell within the arbitration clause and was capable of settlement by arbitration.

The appeal raised two questions: whether the statutory claim arose out of the contractual provisions, and whether an application under section 1028(3) was inherently non-arbitrable.

1. Appeal dismissed. Newey LJ gave the leading judgment. Males LJ agreed and supplied additional reasons. Phillips LJ agreed with both judgments.

2. The claim fell within the clause referring disputes “arising out of the provisions” of the agreement to arbitration. The need for statutory relief arose directly from the respondent’s exercise of its contractual termination right. Neither the prior termination of the contract nor the statutory source of the remedy severed that connection. Applying Fiona Trust, the clause was presumed to cover disputes arising from the parties’ relationship because the contract did not clearly exclude applications under section 1028(3) of the Companies Act 2006.

3. The arbitrability inquiry had two limbs: whether the statute prohibited arbitration, expressly or by implication, and whether public policy required exclusive judicial determination. The Companies Act 2006 contained no such prohibition. The reference in section 1028(3) to “the court” did not imply that an arbitrator could not exercise a comparable power.

4. Party autonomy is an important starting point under section 1(b) of the Arbitration Act 1996. A commercial choice to arbitrate should be respected unless compelling statutory or public policy reasons require otherwise. Although winding up and restoration to the register concern status and lie within the court’s exclusive province, directions under sections 1028(3) and 1032(3) do not affect corporate status. Such applications ordinarily concern private rights and are comparable to arbitrable unfair-prejudice disputes.

5. The possibility that directions could affect third parties did not render the subject matter inherently non-arbitrable. It could instead restrict the relief available in arbitration. Likewise, an arbitrator’s inability to grant every remedy obtainable from a court, or procedural complexity arising from parallel proceedings, does not ordinarily defeat the agreement to arbitrate.

6. The relief sought was within an arbitrator’s powers under section 48 of the Arbitration Act 1996. Applications under both sections 1028(3) and 1032(3) were therefore susceptible to arbitration. Any limitation issue, finality of the earlier award or other obstacle caused by the company’s failure to raise its claim earlier went to the claim’s viability, not its arbitrability.

1. Court of Appeal (Civil Division): The appeal was dismissed. The order staying the section 1028(3) claim under section 9 of the Arbitration Act 1996 was upheld: [2020] EWCA Civ 759 .
2. High Court, Chancery Division: A Deputy Judge held that the claim fell within the arbitration clause, was arbitrable and should be stayed: [2019] EWHC 675 (Ch).