Read the full judgment text of FACV 3/2020 on BabelCite. This Court of Final Appeal judgment was delivered on 21 October 2020 before Chief Justice Ma, Mr Justice Ribeiro PJ, Mr Justice Fok PJ, Mr Justice Cheung PJ and Lord Collins of Mapesbury NPJ.
Civil law – contract – financial advisory agreement – success fee – tail gunner clause – construction – whether clause requires introduction of party or transaction – effective cause – implied term – financial adviser Eminent Investments (Asia Pacific) Limited engaged by Korean listed company DIO Corporation under Financial Advisory Agreement (FAA) dated 10 October 2008 to advise on strategic capital raising and other corporate financing activities – Addendum dated 15 January 2009 expanded the role of the financial adviser – Clause 2 iv) provides for a Transaction Fee of 3% of the total transactional amount upon completion of any transaction for the company – Clause 3 i) is a tail gunner clause providing for fees within two years after termination if the company completes a transaction 'introduced by the Financial Advisor' – Eminent introduced Dentsply International Inc to DIO in April 2009 but Dentsply declined to proceed – FAA terminated on or about 29 January 2010 – in December 2010 DIO and Dentsply announced a deal involving the acquisition of less than 20% of DIO's outstanding shares and KRW56.6 billion worth of convertible bonds – Eminent claimed a Transaction Fee under Clause 3 i) – first issue: whether 'introduced by the Financial Advisor' qualifies the counterparty or the transaction – held: it qualifies the transaction – the words grammatically modify 'a transaction including and not limited to a secondary listing or fund raising with any third parties or receive funds from a financing source' – a secondary listing is itself a transaction, not a person – construction reinforced by the FAA's overall structure (retainer fees, equity research fees, staged payments under Addendum paragraph 1d) conditioning the Transaction Fee on completion of a fundraising transaction – second issue: whether an 'effective cause' requirement should be implied into the FAA – held: no need to imply a term – the proper construction of Clause 3 i) already requires that Eminent introduce the completed transaction – Article 57 of Bowstead & Reynolds on Agency is not a substantive legal rule or presumption but merely an example of the general principle that an agent's entitlement to remuneration depends on the terms of the agency contract – interpretation of contracts is a unitary exercise involving the ordinary meaning of the words, context, purpose, and commercial common sense (per Lord Hodge JSC in Wood v Capita Insurance Services Ltd) – the FAA is a comprehensive advisory agreement, not a simple introduction agreement – Clause 3 i) guards against Eminent being unfairly deprived of a Transaction Fee which it has substantially earned – appeal unanimously dismissed with costs
Legal issues: Construction of Clause 3 i) of the Financial Advisory Agreement · Whether an 'effective cause' requirement should be implied into the FAA
Outcome: Appeal unanimously dismissed with costs
Cited by 12 cases · Cites 3 cases