- April 29, 2014
- Posted by: Josiah Hincks Solicitors
- Category: Litigation Updates
A corporate finance company that arranged funding of £28 million for a prestigious construction project – but was later kept in the dark and deliberately side-lined from the deal – has failed to convince the High Court that it is entitled to a £980,000 commission for the work that it put in.
The company had been exclusively engaged by developers to find investors for the project and stood to earn a £15,000 fee and 3.5 per cent commission on finance raised. Following a marketing campaign, it succeeded in introducing an investor (investor one) who offered to put £28 million into the project.
However, the company’s right to exclusivity was later terminated by agreement and, following negotiations between the developers, investor one and others – which were kept secret from the company – investor one withdrew entirely from the deal and was replaced by investor two.
The company claimed that, under the terms of its engagement, it was entitled to its success fee notwithstanding investor one’s withdrawal. It was argued that the company only agreed to the deletion of its exclusive mandate on the basis of the developer’s misrepresentations and that the failure to pay commission amounted to a breach of contract.
The Court found that the company had been kept out of the loop and ‘deliberately side-lined’ by the developers even prior to the termination of its right to exclusivity. However, in dismissing the claim, the Court ruled that there had been no misrepresentations and noted that the company had played no part in introducing investor two to the project.
Although the company had been kept ignorant of matters which it felt it should have been informed about, there was no tenable argument that the developers were under a duty to make full disclosure, or that they were obliged not to promote an outcome that resulted in the company losing its entitlement to a success fee.