11 September 1992 1

Times Law Reports

Court of Appeal

Fulham Football Club Ltd and Others

v.

Cabra Estates plc

Before Lord Justice Neill, Lord Justice Balcombe and Lord Justice Steyn

Public enquiry - agreement not to give evidence - whether enforceable

Enquiry agreement not illegal

There was no rule of public policy whereby a football club could ignore the undertakings given by its
directors not to give evidence at a local council enquiry concerning a compulsory purchase order
and no rule of public policy rendered such an agreement illegal or unenforceable.

The Court of Appeal so held in a reserved judgment when allowing the appeal of Cabra Estates plc
against the order made by Mr Justice Chadwick ((The Times July 1) in accordance with his decision
given on June 19, 1992, granting Fulham Football Club Ltd and its shareholders and directors,
James William Hill, William Arthur Muddyman, Ruxley Holdings Ltd, Thomas Wilson and Cecil Albert
Frederick Swain, a declaration that they were entitled to give evidence to a public enquiry
concerning a compulsory purchase order, contrary to certain undertakings they had given in an
agreement under seal.

Mr Anthony Scrivener, QC and Mr Timothy Dutton for Cabra Estates; Mr Ian Hunter, QC and Mr
Joseph Smouha for Fulham Football Club and others.

LORD JUSTICE NEILL , giving the judgment of the court, said that the case concerned the future
use and development of the football ground and surrounding land known as Craven Cottage
in Fulham, the home of Fulham Football Club.
On February 10, 1989 the freehold owners of the site, Vicenza Developments Ltd who were a
subsidiary of Cabra Estates Ltd, made an application to the local planning authority, Hammersmith
and Fulham London Borough Council, for planning permission to develop the site for residential
purposes.
On February 24, 1989 the council made planning applications for an alternative development of the
site and on May 3, 1989 the council issued a complusory purchase order for the site.

In due course the secretary of state ordered a public enquiry which was due to commence on
January 30, 1990. On January 28, 1990 Vicenza and Cabra made an agreement in writing
with Fulham Football Club, its shareholders and directors as to the possible future development of
the site and on that same date the shareholders and directors entered into a letter of undertaking
with Cabra Estates in which they covenanted, inter alia, not to provide witnesses to give evidence in
support of the council's compulsory purchase order at the enquiry and not to object to the planning
application made by Cabra.

At the conclusion of the enquiry, the inspector in due course reported to the secretary of state who,
on November 2, 1990, announced his agreement with the inspector and decided not to confirm the
compulsory purchase order nor to grant the associated planning permissions sought by the council.

Vicenza then made fresh aplications for planning permission and submitted them to the council but
the applications were refused and Vicenza appealed. A further local public enquiry was ordered,
which began on June 2, 1992.

By that time, however, Fulham Football Club and its shareholders and directors had had a change of
heart and stated that they

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Times Law Fulham Football Club Ltd and Others v Cabra Estates
Reports plc

could not give their support to Vicenza's application. Cabra's solicitors stated that the undertakings
entered into included a provision requiring support.

By a writ dated June 8, 1992 Fulham Football Club and its directors sought a declaration that its
shareholders and directors would be entitled to give or to procure evidence to the enquiry which they
considered to be in the best interest of Fulham.

Mr Justice Chadwick concluded that to enforce the obligation in the letter of undertaking would be
contrary to public policy but rejected Cabra's arguments based on the fiduciary duties of the
covenantors as directors of the football club. Accordingly, he granted the declaration sought.
It was common ground between the parties that proceedings before a planning inspector were
proceedings to which section 2 of the Witnesses (Public Inquiries) Protection Act 1892 applied and it
was conceded by the football club that section 2 would not invalidate any restriction on such
activities as writing letters of protest to the local planning authority or organising public meetings to
challenge a planning application.

No covenant or undertaking could lawfully require a covenantor to give false evidence nor could a
covenant or undertaking prevent a witness from attending to give evidence in response to a
subpoena.

On the other hand, there could be no valid objection on the ground of public policy to a covenant
whereby a party to a commercial transaction which involved the disposition of land undertook to
support, and to refrain from opposing, planning applications by the other party for the development
of the land.

The 1892 Act had the effect of extending the law of contempt of court so as to include some conduct
which hitherto would have amounted to a breach of parliamentary privilege. At the same time the law
of contempt was applied to enquiries as defined by section 1 of the 1892 Act, which included
enquiries "pursuant to any statutory authority".

The principle which underlay both the law of contempt of court and the rules governing the immunity
of witnesses from suit, however, was that, as a matter of public policy, the court would prevent and,
if necessary, punish, conduct which interfered with the proper administration of justice.

In any individual case therefore the question was: had the act impugned interfered with, or would it
interfere with, the due administration of justice? It was not sufficient merely to pose the question:
was the effect of the agreement that a party or a witness might be prevented from putting forward a
particular contention in court or before a tribunal?

It was 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 was the
public interest in allowing business to be transacted freely and in holding commercial men to their
bargains.

There were many circumstances where parties could properly and legally reach agreements as to
the future course of legal proceedings. The court would consider the facts of each case. But where,
as in the present
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Times Law Fulham Football Club Ltd and Others v Cabra Estates
Reports plc

case, a commercial agreement which related to land had been entered into between parties at arms'
length and one party agreed in return for substantial payments to support the other party's
applications for planning permission, there was no rule of pulblic policy which rendered such an
agreement illegal or unenforceable.

That did not of course mean that a witness could be prevented by agreement from giving evidence
on subpoena, because that would involve an interference with the course of justice. But on the facts
of the present case, the covenantors could not rely on any rule of public policy which would enable
them to ignore the paragraphs of the letter of undertaking and to volunteer to oppose Vicenza's
application.

It was trite law that directors were under a duty to act bona fide in the interests of their company.
However, it did not follow that directors could never make a contract by which they bound
themselves to the future exercise of their powers in a particular manner, even though the contract
taken as a whole was manifestly for the benefit of the company.

The true rule was stated by the High Court of Australia in Thorby v Goldberg ((1964) 112 CLR 597):
"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 themselves by the contract to do whatever is necessary to effectuate it."

In the present case, the undertakings given by the directors were part of the contractual
arrangements made on January 28, 1990 which conferred substantial benefits on the club. It could
not be said in those circumstances that the directors improperly fettered the future exercise of their
discretion.

The court were referred to two English cases at first instance ( Rackham v Peck Foods Ltd (1977)
([1990] BCLC 895) and John Crowther Group v Carpets International ([1990] BCLC 460)) where in
each the court held that an undertaking by directors to use their best endeavours to ensure that their
shareholders should approve a particular deal by the company was unenforceable.

In neither case was Thorby v Goldberg cited. It might be that those decisions could be justified on
their own facts but they should not be read as laying down a general proposition that directors could
never bind themselves as to the future exercise of their fiduciary powers. If those decisions could be
so read then they would be wrong.

Solicitors: Lovell White Durrant; Frere Cholmeley.

11/09/1992 Times Law Reports