English Court of Appeal: Whether An Application Under Section 1028(3) Of The English Companies Act, 2006 Can Be Stayed Pursuant To Section 9 Of The English Arbitration Act, 1996 On The Ground Of Non-Arbitrability?


Consider a situation where a provision in a statute provides specific powers to the court to grant certain types of reliefs. Will it then be reasonable to infer that such reliefs are outside the realm of arbitrator? This question came up for consideration before the English Court of Appeal in Bridgehouse (Bradford No. 2) Ltd v BAE Systems Plc[1] in terms of Section 1028(3) of the Companies Act, 2006 (‘CA’). This provision empowers the court to issue such directions and make such provision as seems just, post revival of a dissolved or struck off company for placing such a company and all other persons in the same position (as nearly as may be) as if such company had not been dissolved or struck off the register.

In facts of the case, an appeal was filed by BB2 in the Court of Appeal against the decision of English High Court wherein the High Court had concluded that an application by BB2, for relief pursuant to section 1028(3) of CA should be stayed pursuant to section 9 of the Arbitration Act 1996 (‘the 1996 Act’) (Stay of Court Proceedings in Favour of arbitration). The basis of challenge by BB2 was inter alia that the relief under section 1028(3) of CA are not susceptible to arbitration.

While deciding the issue of arbitrability, the Court of Appeal has drawn an analogy to Fulham Football Club (1987) Ltd v Richards[2], where arbitration was held to be available in the context of a petition for relief under section 994 of CA.  In that case, the English Court of Appeal (Rix, Longmore and Patten LJJ) upheld an order staying an unfair prejudice petition presented under section 994 of CA. The petition sought an injunction restraining the first respondent from acting as an unauthorised agent or from participating in negotiations regarding the transfer of players or, in the alternative, an order that the first respondent should cease to be the chairman of the second respondent. It was not disputed that an arbitrator would have power to grant such relief, but the petitioner maintained that unfair prejudice disputes were not arbitrable. The petitioner’s position was essentially that “any unfair prejudice claim under section 994 attracts a degree of state intervention and public interest such as to make it inappropriate for disposal by anything other than judicial process”

In this regard, Longmore LJ[3] specifically observed that the fact that an arbitrator cannot give all the remedies which a court could does not afford any reason for treating an arbitration agreement as of no effect. This dictum demonstrates that the fact that a statutory power is given to “the court” does not mean that an arbitrator does not have a similar power and public policy has a role only as a “safeguard … necessary in the public interest”, which represents a “demanding test”.

Further, the English Court of Appeal relied on a decision of the Singapore Court of Appeal in Larsen Oil and Gas Pte Ltd v Petroprod Ltd[4] wherein V K Rajah JA, while interpreting “presumption of arbitrability” inter alia observed that there is ordinarily a presumption of arbitrability where the words of an arbitration clause are wide enough to embrace a dispute, unless it is shown that parliament intended to preclude the use of arbitration for the particular type of dispute in question (as evidenced by the statute’s text or legislative history), or that there is an inherent conflict between arbitration and the public policy considerations involved in that particular type of dispute.

Similarly, in the dictum of Tomolugen Holdings Ltd v Silica Investors Ltd[5], the Singapore Court of Appeal, while holding that a dispute as to whether relief should be granted under section 216 of the Singapore Companies Act for oppressive or unfairly prejudicial conduct was arbitrable, inter alia observed that “an arbitral tribunal’s inability to grant certain reliefs which may be sought would not in itself render the subject matter of the dispute non-arbitrable”. However, Sundaresh Menon CJ noted that “[t]here are, of course, boundaries to an arbitral tribunal’s power to grant relief even if the parties agree to it”, including “public policy considerations and situations which engage the rights of third parties who are not bound by the arbitration agreement in question”. Their Lordships further added that there will be a measure of procedural complexity whenever a dispute involving some common parties and issues has to be resolved before two different fora by virtue of the fact that only part of the dispute falls within the scope of the applicable arbitration clause”, but said that such procedural difficulties did not render the dispute non-arbitrable.

In light of the above decisions, the English Court of Appeal held that when considering the arbitrability of applications for relief under section 1028(3) of CA, it is necessary to consider both whether the CA prohibits the reference to arbitration of such matters and whether arbitration is precluded by public policy considerations.

So far as the former is concerned, it is clear that CA does not itself, either expressly or by implication, prohibit reference to arbitration of matters arising on an application for relief under section 1028(3) of CA. The fact that section 1028(3) speaks of “the court” granting relief does not carry that implication. Relying on Fulham case, the Court of Appeal observed that “the fact that a statutory power, which a court would not have at common law apart from the statutory provision, is given to the court does not mean that an arbitrator, to whom a dispute is properly agreed to be referred, does not have a similar power”.

In respect of public policy consideration, the Court of Appeal held that like other legislation, these provisions can doubtless be said to have been motivated by public policy considerations, but that is not to say that the grant of relief under them engages the public interest in such a way as to demand determination by the Court rather than an arbitrator. The relief pursuant to section 1028(3) of CA does not affect status and an application for such relief will normally be an essentially private matter, affecting nobody but the company and one or more specific individuals or entities. Thus, disputes as to whether there should be relief under section 1028(3) can be compared with the “essentially internal disputes” which are the subject of unfair prejudice petitions under section 994 and which were held in the Fulham case to be arbitrable.  The Court of Appeal also remarked that it cannot be said that the issues raised by application under section 1028(3) of CA is obviously unsuited to an arbitrator. An application for relief under section 1028(3) requires consideration of what (if any) directions and provision are “just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register”.

Thus, the English Court of Appeal concluded that grant of relief under section 1028(3) would be within the powers of an arbitrator. More so as section 48 of the 1996 Act provides for an arbitrator to have “the same powers as the court … to order a party to do or refrain from doing anything”.

Disclaimer: The views expressed in this post are mine and do not reflect the views of the organisation(s) I am engaged with

[1] [2020] EWCA Civ 759

[2] EWCA Civ 855, [2012] Ch 333

[3] Relied on Société Commerciale de Réassurance v Eras International Ltd (formerly Eras (UK)) [1992] 1 Lloyd’s Rep 570, 610

[4] [2011] SGCA 21, [2011] 3 SLR 414

[5] 2015] SGCA 57, [2016] 1 SLR 373

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