Court of Appeal upholds the arbitrability of unfair prejudice petitions

05 Sep 2011 | by Caroline Sweeney

In Fulham Football Club (1987) Limited v Sir David Richards, The Football Association Premier League Limited  [2011] EWCA Civ 855, the Court of Appeal held that unfair prejudice petitions under section 994 of the Companies Act 2006 may be referred to arbitration and that, accordingly, Mr Justice Vos had been correct to order a stay pursuant to section 9 of the Arbitration Act 1996 (“the 1996 Act”) of  Fulham FC’s petition. This is the first judgment at appellate level in this jurisdiction to examine the concept of “arbitrability”.

The underlying dispute between Fulham FC, on the one hand, and Sir David Richards and the Football Association Premier League Ltd (“the FAPL”), on the other, relates to the involvement of Sir David in the transfer of Peter Crouch from Portsmouth FC to Tottenham Hotspur FC in July 2009. Fulham FC alleges: first, that Sir David’s involvement in that transfer was in breach of his company law duties, the Football Association Rules, the Agents Regulations (under the FA Rules) and the FAPL’s Articles of Association;  and, secondly, that the FAPL has conducted itself to the prejudice of some part of its members, including Fulham FC,  in carrying out and accepting the conclusions of an inadequate investigation and in failing to provide any assurance that Sir David’s conduct would not be repeated.

In December 2010, Vos J held: that previous High Court authority to the effect that unfair prejudice petitions were non-arbitrable (Exeter City AFC Ltd v Football Conference Ltd [2004] 1 WLR 2910) had been wrongly decided; that Sir David and the FAPL were entitled to a stay under section 9 of the 1996 Act, there being two separate arbitration agreements covering the subject matter of the dispute underlying the petition; and that the stay applications raised an important point of law such that his judgment ought to be made publicly available ([2011] Ch. 208). The judge also granted Fulham FC permission to appeal.

The Court of Appeal dismissed Fulham FC’s appeal, holding for reasons different from those of Vos J that there ought to be stay under section 9. The Court of Appeal reasoned as follows:

i. that s. 1(b) of the 1996 Act requires that restrictions on arbitrability be strictly limited to “only…such safeguards as are necessary in the public interest” (Patten LJ dissenting and holding this provision to apply only to restrictions on the method chosen to resolve arbitrable disputes);

ii. that whether or not the dispute is arbitrable does not turn on the relief sought or on the particular facts of the case but on whether s. 994 petitions in general attract “a degree of state intervention and public interest such as to make it inappropriate for disposal by anything other than judicial process“;

iii. that neither the relevant statutory provisions nor public policy require that s. 994 petitions be held to be incapable of arbitration; and

iv. that an arbitration clause would be unenforceable “insofar as it included within the scope of the reference the question of whether the company should be wound up“, but that this did not preclude the arbitration of “the dispute between shareholders or the company which forms the grounds upon which such relief may be sought“, with the parties then able to seek relief from the Court on the basis of the arbitrator’s findings.

Paul Harris QC  represented Fulham FC.