ON APPEAL FROM THE HIGH COURT OF JUSTICE
3534 of 2010,  EWHC 3111 (Ch)
IN THE MATTER OF THE FOOTBALL ASSOCIATION PREMIER LEAGUE LTD
AND IN THE MATTER OF THE COMPANIES ACT 2006
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LONGMORE
LORD JUSTICE PATTEN
| FULHAM FOOTBALL CLUB (1987) LIMITED
|- and -
|SIR DAVID RICHARDS
THE FOOTBALL ASSOCIATION PREMIER LEAGUE LIMITED
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Mr Richard Snowden QC and Mr James Potts (instructed by Brabners Chaffe Street LLP) for the 1st Respondent
Mr Ian Mill QC and Mr Andrew Hunter (instructed by DLA Piper UK LLP) for the 2nd Respondent
Hearing dates : 8th and 9th June 2011
THE HEARING WAS IN PRIVATE
Crown Copyright ©
Lord Justice Patten :
"the statutory rights conferred on shareholders to apply for relief at any stage are, in my judgment, inalienable and cannot be diminished or removed by contract or otherwise".
The FAPL Rules
"Membership of the League shall constitute an agreement in writing between the Company and Clubs and between each Club for the purposes of section 5 of [the AA 1996] in the following terms:
2.1 to submit all disputes which arise between them (including in the case of a Relegated Club any dispute between it and a Club or the Company the cause of action of which arose while the Relegated Club was a member of the League), whether arising out of these Rules or otherwise, to final and binding arbitration in accordance with the provisions of the Act and this Section of these Rules;
2.2 that the seat of each such arbitration shall be in England and Wales;
2.3 that the issues in each such arbitration shall be decided in accordance with English law;
2.4. that no other system or mode of arbitration will be invoked to resolve any such dispute."
"3.2 disputes arising from the exercise of the Board's discretion ("Board Disputes");
3.3 other disputes arising from these Rules or otherwise."
The FA Rules
"1. (a) Subject to Rule K1(b), K1(c) and K1(d) below, any dispute or difference between any two or more Participants (which shall include, for the purposes of this section of the Rules, The Association) including but not limited to a dispute arising out of or in connection with (including any question regarding the existence or validity of):
(i) the Rules and regulations of The Association which are in force from time to time;
(ii) the rules and regulations of an Affiliated Association or Competition which are in force from time to time;
shall be referred to and finally resolved by arbitration under these Rules.
(c) Rule K1(a) shall not apply to any dispute or difference which falls to be resolved pursuant to any rules from time to time in force of any Affiliated Association or Competition.
(e) The parties agree that the powers of the court under pages 44, 45 and 69 of the Arbitration Act 1996 are excluded and shall not apply to any arbitration commenced under these Rules".
The provisions of this Part are founded on the following principles, and shall be construed accordingly—
(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this Part."
"is embodied in a general principle concerned with the manner of resolving arbitrations, and not with the permissible subject-matter of arbitrations, it is not aimed at questions of 'arbitrability'."
"(1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.
(2) An application may be made notwithstanding that the matter is to be referred to arbitration only after the exhaustion of other dispute resolution procedures.
(3) An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim.
(4) On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.
(5) If the court refuses to stay the legal proceedings, any provision that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings."
"the operation of any rule of law consistent with the provisions of this Part, in particular, any rule of law as to—
(a) matters which are not capable of settlement by arbitration;
"English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not. The general principle is, we submit, that any dispute or claim concerning legal rights which can be the subject of an enforceable award, is capable of being settled by arbitration. This principle must be understood, however, subject to certain reservations.
First, certain types of dispute are resolved by methods which are not properly called arbitration. These are discussed in Chapter 2, ante.
Second, the types of remedies which the arbitrator can award are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state. For example, he cannot impose a fine or a term of imprisonment, commit a person for contempt or issue a writ of subpoena; nor can he make an award which is binding on third parties or affects the public at large, such as a judgment in rem against a ship, an assessment of the rateable value of land, a divorce decree, a winding-up order or a decision that an agreement is exempt from the competition rules of the EEC under Article 85(3) of the Treaty of Rome. It would be wrong, however, to draw from this any general rule that criminal, admiralty, family or company matters cannot be referred to arbitration; indeed, examples of each of these types of dispute being referred to arbitration are to be found in the reported cases."
"Although the better view is that the Convention imposes limits on Contracting States' applications of the non-arbitrability doctrine, the types of claims that are non-arbitrable differ from nation to nation. Among other things, classic examples of non-arbitrable subjects include certain disputes concerning consumer claims; criminal offenses; labor or employment grievances; intellectual property; and domestic relations.
The types of disputes which are non-arbitrable nonetheless almost always arise from a common set of considerations. The non-arbitrability doctrine rests on the notion that some matters so pervasively involve public rights, or interests of third parties, which are the subjects of uniquely governmental authority, that agreements to resolve such disputes by "private" arbitration should not be given effect".
"(1) A member of a company may apply to the court by petition for an order under this Part on the ground—
(a) that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or
(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial."
"(1) If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.
(2) Without prejudice to the generality of subsection (1), the court's order may—
(a) regulate the conduct of the company's affairs in the future;
(b) require the company—
(i) to refrain from doing or continuing an act complained of, or
(ii) to do an act that the petitioner has complained it has omitted to do;
(c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct;
(d) require the company not to make any, or any specified, alterations in its articles without the leave of the court;
(e) provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company's capital accordingly."
"The purpose of bankruptcy proceedings, on the other hand, is not to determine or establish the existence of rights, but to provide a mechanism of collective execution against the property of the debtor by creditors whose rights are admitted or established. That mechanism may vary in its details. For example, in personal bankruptcy in England, the assets of the bankrupt are vested in a trustee for realisation and distribution to creditors. So the mechanism operates by divesting the bankrupt of his property. In corporate insolvency, on the other hand, the insolvent company continues to be owner of its property but holds it in trust for the creditors in accordance with the provisions of the Insolvency Act 1986: see Ayerst v C & K (Construction) Ltd  AC 167. In the case of personal bankruptcy, the bankrupt may afterwards be discharged from liability for his pre-bankruptcy debts. In the case of corporate insolvency, there is no provision for discharge. The company remains liable but when all its assets have been distributed, there is nothing more against which the liability can be enforced: see Wight v Eckhardt Marine GmbH  1 AC 147, 155-156. At that point, the company is usually dissolved."
"If the petition is presented by members of the company as contributories on the ground that it is just and equitable that the company should be wound up, the court, if it is of opinion—
(a) that the petitioners are entitled to relief either by winding up the company or by some other means, and
(b) that in the absence of any other remedy it would be just and equitable that the company should be wound up,
shall make a winding-up order; but this does not apply if the court is also of the opinion both that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy."
"In the case of section 459, the background has the following two features. First, a company is an association of persons for an economic purpose, usually entered into with legal advice and some degree of formality. The terms of the association are contained in the articles of association and sometimes in collateral agreements between the shareholders. Thus the manner in which the affairs of the company may be conducted is closely regulated by rules to which the shareholders have agreed. Secondly, company law has developed seamlessly from the law of partnership, which was treated by equity, like the Roman societas, as a contract of good faith. One of the traditional roles of equity, as a separate jurisdiction, was to restrain the exercise of strict legal rights in certain relationships in which it considered that this would be contrary to good faith. These principles have, with appropriate modification, been carried over into company law.
The first of these two features leads to the conclusion that a member of a company will not ordinarily be entitled to complain of unfairness unless there has been some breach of the terms on which he agreed that the affairs of the company should be conducted. But the second leads to the conclusion that there will be cases in which equitable considerations make it unfair for those conducting the affairs of the company to rely upon their strict legal powers. Thus unfairness may consist in a breach of the rules or in using the rules in a manner which equity would regard as contrary to good faith."
"I should make it clear that the parallel I have drawn between the notion of "just and equitable" as explained by Lord Wilberforce in In re Westbourne Galleries Ltd and the notion of fairness in s.459 does not mean that conduct will not be unfair unless it would have justified an order to wind up the company. There was such a requirement in s.210 of the Companies Act 1948 but it was not repeated in s.459. As Mummery J observed in In re A Company (No. 00314 of 1989), ex p Estate Acquisition and Development Ltd  BCLC 154,  BCC 221, page 161 of the former report the grant of one remedy will not necessarily require proof of conduct which would have justified a different remedy:
"Under sections 459 to 461 the court is not . . . faced with a death sentence decision dependent on establishing just and equitable grounds for such a decision. The court is more in the position of a medical practitioner presented with a patient who is alleged to be suffering from one or more ailments which can be treated by an appropriate remedy applied during the course of the continuing life of the company."
The parallel is not in the conduct which the court will treat as justifying a particular remedy but in the principles upon which it decides that the conduct is unjust, inequitable or unfair."
" As to s 9, it is common ground that there are some disputes which are not susceptible to arbitration and that section 9 does not apply to such disputes. There is a tension here between reserving matters of public interest to the courts and the public interest in the encouragement of arbitration. In A Best Floor Sanding Party Ltd v Skyer Australia Party Ltd  VSC 170, Judge Warren held that the right of a contributory to apply to the court for a winding up order could not be limited by agreement and refused to stay a winding up petition because it did not fall within the scope of the discretionary provisions of section 53 of the Commercial Arbitrations Act 1984.
 I find her reasoning compelling and I can see no difference in principle for this purpose between a winding up petition and a petition under s 459. If the right to petition to wind up conferred on every single shareholder is a condition of incorporation under the Companies Act 1985, then so in my judgment is the right to petition for relief for unfair prejudice. In Re Magi Capital Partners LLP  EWHC 2790 (Ch), leading counsel, probably with the Australian authority in mind, conceded that a limited liability partnership was a creature of statute and that it was not possible to exclude the statutory right to apply to have the statutory entity wound up by the court. The Companies Court has jurisdiction to wind up a company or limited liability partnership, and the same court has supervisory powers, designed to give protection to shareholders by enabling them to apply to the court for special relief. In effect, the court controls by statute the creation and extinction of the company, and it also attends to it during midlife crises.
 The statutory rights conferred on shareholders to apply for relief at any stage are, in my judgment, inalienable and cannot be diminished or removed by contract or otherwise."
"If during the continuance of the association or at any time afterwards any dispute, difference or question shall arise between the parties or their legal personal representatives touching the association or the accounts or transactions thereof or the value of the share of a party in the assets of the association or the dissolution or winding up thereof or the construction meaning or effect of these presents or anything herein contained or the rights and liabilities of the associates or their representatives under these presents or otherwise in relation to the premises then every such dispute difference or question subject as otherwise herein expressly provided shall be referred in the first instance to the President for the time being of the Law Institute of Victoria and if within the period of fourteen days from the referral of the matter concerned as aforesaid the parties do not agree to abide by the solution proposed by the President for the time being of the Law Institute of Victoria then the same shall be referred to arbitration in accordance with the Arbitration Act 1959 or any statutory modification or re-enactment thereof for the time being in force (emphasis added)".
"The issue as to whether parties associated with a company can enter into an agreement that the statutory rights and powers under the Corporations Law, in particular, the winding up power under s.462 be referred to arbitration does not appear to have been the subject of consideration by the courts."
"13. The application to stay the winding up application on the basis of an arbitration agreement between the joint venture parties raises a fundamental principle of corporations law. To state the very obvious, a company is a corporation in the common law sense formed by registration under Part 2A.2 of the Corporations Law or under corresponding earlier legislation. In the words of Ford, Austin & Ramsay in Ford's Principles of Corporations Law (at p.1061): "a corporation (or body corporate in the common law sense) is a legal device by which legal rights, powers, privileges, immunities, duties, liabilities and disabilities may be attributed to a fictional entity equated for many purposes to a natural person ... The fictional entity acquires rights and liabilities by the acts of persons behind it." Upon incorporation, the Corporations Law applies to the new entity. Its company directors and management are subject to regulation under the Corporations Law. The Corporations Law contains provisions relating to the company's constitution, general meetings of members, management of the company, the company's dealings with other parties, the company's financing, the handling of its affairs when it is subject to a financial crisis and, most significantly for present purposes, its winding up and dissolution. The Corporations Law controls by statutory force the creation and demise of the company; it oversees the birth, the life and death of the company. Such matters cannot and ought not be subject to private contractual arrangement.
15. Throughout Chapter 5 of the Corporations Law there exists a statutory structure setting out the manner in which applications for the winding up of a company are to be made, the persons or parties who are permitted under the Law to make an application for the winding up of a company and, most significantly, the effect of a winding up order on creditors and contributories. A major aspect of the control by the court of the winding up of a company is the fact that the court appoints an official liquidator to be liquidator of the company. In this respect the Corporations Law sets out the powers and duties of a liquidator or a provisional liquidator of the company in the course of the winding up of that company. Indeed, the order of the court for the winding up of the company does not in effect wind up that company. Rather, the effect of the court order is that it directs that the process of liquidating the assets of the company and the winding up of its affairs should begin (see Re Crust 'n' Crumbs Bakers (Wholesale Pty Ltd) (1992) 2 Qd R 76, 78; (1991 5 ACSR 70). Upon a court ordering a winding up and so long as the winding up of the company remains unterminated no further order can be made by a court with respect to that company (see Commonwealth v. Emanuel Projects Pty Ltd (1996) 21 ACSR 36; Dewina Trading Sdn Bhd v. Ion International Pty Ltd (1996) 141 ALR 317; 22 ACSR 352).
18. The application by A.B. Floor to stay the winding up application strikes at the very heart of the corporation structure enshrined in the Corporations Law. The arbitration clause in the joint venture agreement is null and void insofar as it purports to subject the parties to an arbitration with respect to the dissolution or winding up of the company. The provision is null and void because it has the effect of obviating the statutory regime for the winding up of a company. More so, the arbitration clause, if adhered to, would frustrate the contributory, Skyer Australia in its efforts to seek relief from the court under the winding up provisions of the Law. In essence, the arbitration clause in the joint venture agreement is contrary to the provisions of the Corporations Law and cannot be applied."
"44. The concept of non-arbitrability is a cornerstone of the process of arbitration. It allows the courts to refuse to enforce an otherwise valid arbitration agreement on policy grounds. That said, we accept 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.
45. A distinction should be drawn between disputes involving an insolvent company that stem from its pre-insolvency rights and obligations, and those that arise only upon the onset of insolvency due to the operation of the insolvency regime. Many of the statutory provisions in the insolvency regime are in place to recoup for the benefit of the company's creditors losses caused by the misfeasance and/or malfeasance of its former management. This is especially true of the avoidance and wrongful trading provisions. This objective could be compromised if a company's pre-insolvency management had the ability to restrict the avenues by which the company's creditors could enforce the very statutory remedies which were meant to protect them against the company's management. It is a not unimportant consideration that some of these remedies may include claims against former management who would not be parties to any arbitration agreement. The need to avoid different findings by different adjudicators is another reason why a collective enforcement procedure is clearly in the wider public interest.
46. We, therefore, are of the opinion that the insolvency regime's objective of facilitating claims by a company's creditors against the company and its pre-insolvency management overrides the freedom of the company's pre-insolvency management to choose the forum where such disputes are to be heard. The courts should treat disputes arising from the operation of the statutory provisions of the insolvency regime per se as non-arbitrable even if the parties expressly included them within the scope of the arbitration agreement."
"… Her Honour's decision was partly based on public policy considerations surrounding the process of winding up a company pursuant to court order. An additional ground seems to have been that a winding up order operates to affect the rights of third parties, not merely the rights of the parties to the arbitration clause.
192. In my opinion, the latter ground is a strongly persuasive one, in keeping with the general observations by Mustill & Boyd. I accept, as well, that public policy considerations operate against referring to arbitration a determination to wind up a company on the grounds upon which a court may order that a company be wound up. However, I would not regard these public policy considerations as preventing parties to a dispute from referring questions to arbitration merely because those questions arise under the Corporations Act. I see nothing special about the Corporations Act that would distinguish it, as a whole, from other legislation such as the http://www.austlii.edu.au/au/legis/cth/consol_act/tpa1974149/Trade Practices Act. This seems to be the position reached by United States courts: see Dean Witter Reynolds Inc v Byrd  USSC 44; 470 US 213 (1985); Shearson Lehman Hutton Inc v Wagoner 944 F 2d 114 (2nd Cir 1991); also Pick v Discover Financial Services Inc 2001 No.Civ.A 00-935-SLR (D) Del Sept 28, 2001.
193. The statutory powers of a Court under the Corporations Act are, generally speaking, comparable to the powers exercised by a court under the general law (the power to make a winding up order being an exception to this proposition). They are generally not special powers to be exercised having regard to specialist public interest criteria.
194. Specifically, the public policy considerations held by Warren J to be applicable to a disputed claim to wind up a company do not seem to me to prevent the parties from referring to arbitration a claim for some merely inter partes relief under the oppression provisions of the Corporations Act, or for access to corporate information under s 247A. However, the "in rem" nature of an order for rectification of the share register of a company may prevent reference of that power to an arbitrator."
"Sect. 79 states the circumstances under which such a company may be dissolved by the Court, and s. 82 states the persons who may petition for a dissolution. Any article contrary to these sections - any article which says that the company is formed on the condition that its life shall not be terminated when any of the circumstances mentioned in s. 79 exist, or which limits the right of a contributory under s. 82 to petition for a winding-up, would be an attempt to enforce on all the shareholders that which is at variance with the statutory conditions, and is invalid. It is no answer to say that the right to petition may be waived by any contributory personally. I do not intend to decide whether a valid contract may or may not be made between the company and an individual shareholder that he shall not petition for the winding up of the company. That point does not arise now. But to say that a company is formed on the condition that its existence shall not be terminated under the circumstances, or on the application of the persons, mentioned in the Act is to say that it is formed contrary to the provisions of the Act, and upon conditions which the Court is bound to ignore."
"The members of an LLP may by unanimous agreement exclude the right contained in subsection (1) either indefinitely or for such period as is specified in the agreement. The agreement must be recorded in writing."
Lord Justice Longmore:
i) Whether the arbitration agreements contained in the FAPL Rules and the FA Rules purport, on their true construction, to refer to arbitration the issues which arise between the parties namely; (i) whether Sir David acted as an agent on behalf of Portsmouth in and about the procurement of Mr Crouch's transfer to Tottenham rather than to Fulham or in any other way in breach of his duties as chairman of the FAPL in relation to that transfer and (ii) whether Sir David's conduct constituted such unfair prejudice on the part of the FAPL as to entitle Fulham to invoke section 994 of the CA 2006;
ii) Whether, if so, the CA 2006 expressly or impliedly prohibits the reference to arbitration of such matters;
iii) Whether, if there is no statutory prohibition of such a reference, public policy of the law of England and Wales prohibits such a reference.
"to submit all disputes which arise between them ..... to final and binding arbitration"
and in the case of the FA and its participants an agreement that
"any dispute or difference between any two or more Participants … shall be referred to and finally resolved by arbitration."
The phrases "all disputes" and "any dispute or difference" mean what they say and must cover the disputes that have arisen between Fulham on the one hand and Sir David and the Premier League on the other.
"the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest".
To the extent therefore that public policy has a part to play it can only be as a "safeguard … necessary in the public interest".
Lord Justice Rix :