Fulham Football Club Ltd and others v.

Cabra Estates Plc

I. Summary:
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.
February 10, 1989, 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 compulsory purchase
order for the site.
1. The first enquiry: In due course the secretary ordered a public enquiry which
was started from January 30, 1990. On January 28, 1990 Vicenza Development
Ltd who were subsidiary of Cabra Estates Ltd 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 also on that day, they entered into a
legally binding agreement with Cabra Estates which involves leaving the
Cottage.
 At the end of the first enquiry, the inspector in due course reported to the
secretary of state who 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.
2. The second enquiry: Vicenza made a new applications for planning and
submitted them to the council but they were refused and Vicenza appealed 
Another further local public enquiry was ordered, began on June 2, 1992.
But by this time, Fulham Football Club and its shareholders changed their
mind and stated that they couldn’t give their support to Vicenza’s
application. //However, Cabra’s solicitor claimed that the undertakings
included a provision requiring support.//
 Justice Chadwick concluded that enforcing the obligation in the
undertakings would contrary with the public policy. Besides, Mr Chadwick
rejected Cabra’s argument based on the fiduciary duties of the covenantors
as directors of the football club.
  The directors of Fulham Football Club were held that they breached the
duty of exercising independent judgement because they had not restricted
the future exercise of their discretion accordingly.
However, 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, 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.
 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.

II. Rules:
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."
- “Bona fide” is the state of mind while doing an act, entering a contract or
transaction where in such activities are done with good intention, without
knowing the defects involved. Bonafide intention is a pre-condition for
validity of a contract.
- 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. 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.
 It could not be said in those circumstances that the directors improperly
fettered the future exercise of their discretion.
III. Judgements:
Football club had football ground on lease. In return for substantial payment,
directors of club agreed not to oppose any future planning applications which
owners of the ground might make. Sought to get out of contract by alleging it was
unlawful fetter of their duty to act in best interests of club in future. Held:
 Performance of a contract is not breach of section 173 CA 2006 if director
exercised independent judgment when entering into the contract;
 It is believed that the contract was for benefit of company at time he
entered it, cannot claim later on that contract stops him acting for benefit of
company;
 Directors entered agreement which substantially benefitted company
 It cannot be said that they improperly fettered their future discretion.
IV. Facts:
1 với 2: 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.
3:
By the time that Vicenza made a fresh applications for planning permission and
submitted them to the council but the applications were refused and Vicenza appealed,
however, Fulham Football Club and its shareholders and directors had had a change
of heart and stated that they could not give their support to Vicenza's application