One would have thought that sophisticated financial professionals engaged in high value deals would have the sense to get their agreements recorded in writing by a professional. However, that is sadly not universal practice and a High Court case illustrated the kind of disputes to which such failures can give rise.
The sole director of a corporate finance company claimed to have provided advice to a private equity firm which was instrumental in the firm’s successful acquisition of a takeover target for £16 million. He claimed that a senior representative of the private equity firm had orally agreed – during a drinks reception at an art gallery – that his firm would receive a £1 million fee if the deal went ahead. The private equity firm denied that any fee agreement had been reached or that the director had provided any services of value in connection with the acquisition.
In rejecting the corporate finance company’s claim, the Court noted that the director had persuaded himself that he had a legal right to remuneration, which he felt that he deserved. However, there was no contemporary documentary evidence that a fee agreement had been concluded. It was, amongst other things, implausible that such an important deal would have been reached during a drinks reception, or that the private equity firm’s representative would have agreed to such a substantial fee without any attempt at negotiation.
The Court accepted that the private equity firm had been enriched by the director’s efforts on its behalf. However, in the absence of a fee agreement, he had acted at his own risk and that enrichment could thus not be viewed as unjust. The Court also found that the services provided by the director in connection with the acquisition were modest, assessing their value at £25,600.