Bridgehouse (Bradford No.2) v BAE Systems Plc

Factual and Procedural Background

This appeal arises from an arbitration award dated 14 June 2018 made by an arbitrator pursuant to an arbitration clause in a contract ("the Agreement") between two companies, referred to here as Company A and Company B. Company A agreed to purchase two properties from Company B’s subsidiary for a sum of 93 million, with completion scheduled between January 2020 and July 2022.

Company A was incorporated solely to enter into this Agreement and had no assets other than its contractual rights. The Agreement included a termination clause allowing Company B to terminate if Company A suffered an "Event of Default," including being struck off the Companies Register or dissolved.

Company A failed to comply with statutory filing obligations, leading the Registrar of Companies to issue strike off notices. Despite some initial intervention preventing dissolution, Company A was ultimately struck off and dissolved on 31 May 2016. Company B, upon learning of this, served a termination notice under the Agreement.

Company A was subsequently restored to the Companies Register by administrative restoration under the Companies Act 2006. Company A challenged the validity of Company B’s termination notice, leading to arbitration proceedings. The arbitrator held that the termination was valid and not undone by the restoration.

Company A appealed the arbitrator’s award by agreement with Company B. Concurrently, Company A initiated court proceedings seeking relief under section 1028(3) of the Companies Act 2006, which allows the court to make orders to place parties in the position as if the company had not been dissolved, in case the appeal failed. Applications to transfer and stay related proceedings were made and decided accordingly.

Legal Issues Presented

1. Whether the arbitrator was correct in concluding that the termination of the Agreement by Company B was not retrospectively undone by the administrative restoration of Company A under section 1028(1) of the Companies Act 2006.
2. Whether the parties can lawfully contract out of the statutory deeming provision in section 1028(1) such that a termination triggered by a company’s striking off remains effective notwithstanding subsequent restoration.
3. Whether an Event of Default arose immediately upon Company A being struck off the register, or only after a reasonable period elapsed without an application for restoration.

Arguments of the Parties

Appellant's Arguments (Company A)

• The deeming provision in section 1028(1) operates retrospectively and generally, undoing the effects of striking off as if it never occurred.
• The statutory language contains no exceptions to this retrospective effect, consistent with the policy to place the company and others as if dissolution had never happened.
• The arbitrator erred by holding that actions taken pursuant to the contract before restoration were immune from the retrospective effect of section 1028(1).
• Any contractual actions dependent on the company’s dissolution must be reassessed and effectively undone following restoration.
• The parties could not contract out of the statutory deeming provision, which is mandatory and of public policy importance.
• Clause 20.2(g) should be interpreted so that an Event of Default arises only after a reasonable period without restoration application, to accommodate the statutory regime.

Respondent's Arguments (Company B)

• Section 1028(1) does not require retrospective reassessment that would invalidate a valid termination of contract effected while the company was dissolved.
• Parliament would not have intended to prohibit contractual termination rights triggered by striking off, and there is no public policy supporting the appellant’s construction.
• The termination clause is a legitimate risk management tool reflecting commercial realities, particularly where a company fails statutory obligations.
• Retrospective invalidation would cause practical difficulties and potential injustice, including exposure to repudiatory breach claims and professional negligence.
• It is permissible to contract out of the statutory deeming provision unless expressly prohibited by statute or public policy, and the parties here effectively did so.
• The Event of Default under clause 20.2(g) arises immediately upon striking off, consistent with the clear contractual language and statutory context.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed statutory interpretation exercise focusing on section 1028(1) of the Companies Act 2006, which provides that a company restored administratively is deemed to have continued in existence as if it had not been dissolved or struck off. The court examined the legislative history, the purpose behind administrative restoration, and the statutory scheme as a whole.

The court emphasized that the deeming provision is broad and retrospective, designed primarily to validate acts of the company during dissolution, protecting third parties who dealt with the company in ignorance of its dissolved status. However, the court identified a critical distinction between direct, automatic consequences of dissolution and secondary consequences arising from independent third-party acts.

Applying this distinction, the court concluded that termination of a contract pursuant to an express contractual right triggered by striking off is not an automatic consequence of dissolution but a deliberate act by the counterparty. Therefore, such termination is not retrospectively undone by restoration under section 1028(1).

The court reviewed relevant case law, noting that prior authorities primarily addressed validation of acts by the dissolved company or automatic consequences, not deliberate third-party contractual terminations. Cases involving repudiation or frustration of contract during dissolution further supported this distinction.

In interpreting the termination clause, the court applied established principles of contractual construction, finding the clause unambiguous in triggering an Event of Default immediately upon striking off, with no room for implying a delay or grace period.

Regarding the possibility of contracting out of section 1028(1), the court held that the statutory deeming provision is a matter of public policy benefiting a wide range of persons and cannot be waived or contracted out by private agreement.

The court also considered practical consequences, acknowledging that allowing restoration to undo terminations made pursuant to contractual rights would create significant commercial uncertainty and risk, undermining the purpose of such clauses and potentially exposing parties and advisors to liability.

Accordingly, the court upheld the arbitrator’s conclusion that the termination was valid and not retrospectively undone by restoration.

Holding and Implications

The appeal is dismissed.

The court held that the termination of the Agreement by Company B pursuant to the termination clause triggered by Company A’s striking off was valid and effective, and that the subsequent administrative restoration of Company A under section 1028(1) of the Companies Act 2006 did not retrospectively undo that termination.

It was further held that an Event of Default arose immediately upon Company A being struck off the register, consistent with the clear contractual language.

The court confirmed that the statutory deeming provision in section 1028(1) cannot be contracted out of by private agreement, as it serves a public policy purpose affecting multiple parties beyond the contracting companies.

This decision affirms the enforceability of contractual termination rights triggered by a company’s striking off and provides clarity on the limited retrospective effect of administrative restoration. No new precedent was established beyond confirming the application of existing statutory interpretation principles and case law to the particular facts of this appeal.