Fulham Football Club Ltd v Cabra Estates plc: CA 1994

Fulham, as lessees of Craven Cottage, agreed with CABRA, a developer, who had applied for planning permission to redevelop the ground, shortly before a public inquiry which had been set up to consider the planning application; and also a proposal by the local authority (which Fulham FC had supported) for the making of a compulsory purchase order of the ground. Fulham were to receive payment from CABRA in return not providing witnesses or written material in support of the CPO. If called upon to do so, they were to write in support of the planning application.
Held: Directors of a company may have power make a contract which fetters their discretion in any event. Neil LJ said: ‘It is trite law that directors are under a duty to act bona fide in the interests of their company. However, it does not follow from that proposition that directors can never make a contract by which they bind themselves to the future exercise of their powers in a particular manner, even though the contract taken as a whole is manifestly for the benefit of the company. Such a rule could well prevent companies from entering into contracts which were commercially beneficial to them.’
‘The principle which underlies both the law of contempt of court and the rules governing the immunity of witnesses from suit, however, is that, as a matter of public policy, the court will prevent and, if necessary punish, conduct which interferes with the proper administration of justice. Thus, ‘any contract which has a tendency to affect the due administration of justice is contrary to public policy’: see Halsbury’s Laws of England. In any individual case therefore the question is: has the act impugned interfered with, or will it interfere with, the due administration of justice? It is not sufficient merely to pose the question: is the effect of the agreement that a party or a witness may be prevented from putting forward a particular contention in court or before a tribunal? It is necessary to take a broad view of the public interest and, where necessary, seek to achieve a balance between countervailing public policy considerations. Thus in the present case there is the public interest in allowing business to be transacted freely and in holding commercial men to their bargains.
There are many circumstances where parties can properly and legally reach agreements as to the future course of legal proceedings. The law favours rather than disapproves of the compromise of a civil action, and the court will intervene to prevent a party pursuing a legal remedy in breach of a valid compromise. . .
The court will consider the facts of each case. But where, as here, a commercial agreement relating to land has been entered into between parties as arm’s, length and one party agrees in return for a very substantial payment to support the other party’s applications for planning permission we can see no rule of public policy which renders such an agreement illegal or unenforceable. This does not mean of course that a witness could be prevented by agreement from giving evidence on subpoena, because this could involve an interference with the course of justice. But we are satisfied that on the facts of this case the covenantors cannot rely on any rule of public policy which would enable them to ignore the provisions in . . the letter of undertaking and to volunteer to oppose [Cabra’s] application. Nor can we find any ground of public policy which could be invoked to prevent the first plaintiffs and the club writing a letter to the Secretary of State and the planning authority in strict accordance with . . the letter of undertaking stating that ‘the Companies’ support the planning application and are in favour of it being granted. We see no objection to the inclusion of a sentence in the letter to the effect that it is written in accordance with the letter of undertaking.’
Neil LJ
[1994] 1 BCLC 363
England and Wales
CitedThorby v Goldberg 29-Jul-1964
(High Court of Australia) If, when a contract is negotiated on behalf of a company, the directors bona fide think it in the interests of the company as a whole that the transaction should be entered into and carried into effect they may bind . .

Cited by:
CitedBonham v Crow and others CA 13-Dec-2001
The petitioner complained of unfair prejudice in the way the company had been operated, and sought an order that his shares be bought out. However the judge found that the net value of the company was negative and the shares worthless. The judge had . .
CitedBarrett v Universal-Island Records Ltd and others ChD 15-May-2006
The claimant was entitled to share in the copyright royalties of Bob Marley and the Wailers, and claimed payment from the defendants. The defendants said that the matters had already been settled and that the claim was an abuse of process, and also . .
CitedAustralia and New Zealand Banking Group Ltd v Compagnie Noga D’Importation Et D’Exportation Sa and Another ComC 21-Feb-2007
Non-payment of bills of exchange – construction of settlement agreement. It was said that the compromise agreement ws unenforceable as being against public policy in restraining one party.
Held: The restraint ‘does not affect the course of . .

These lists may be incomplete.
Updated: 09 April 2021; Ref: scu.241636