GB - Edmond De Rothschild Securities (UK) Ltd v Exillon Energy Plc

Judgment

Mr Justice Males :

Introduction

The issue for determination on this application for summary judgment is whether the claimant’s right to payment of a “success fee” under the terms of an Engagement Letter dated 25 January 2013 by which it agreed to provide services to the defendant is conditional on proof that its activities were an effective cause of the success in question being achieved.

The circumstances in which this issue arises are not in dispute and can be stated briefly as set out below. The issue is one of construction of the Engagement Letter. Neither party suggested that any additional background evidence would be relevant. Although the issue arises on an application by the claimant for summary judgment, the parties agreed that I am in a position to and should decide the issue one way or the other.

The facts

The claimant (“Rothschild”) is an English company which provides corporate advisory services.

The defendant Exillon is an energy company registered in the Isle of Man and listed on the London Stock Exchange. It has oil producing interests in Russia.

In January 2013 Exillon had a shareholder called Worldview Capital Management, with a shareholding of about 12%. Worldview had made public criticisms of the board of Exillon and had indicated its intention to requisition an extraordinary general meeting to remove the chairman of the board from office and to appoint three of its own nominees to the board.

The board of Exillon regarded the activity of Worldview as disruptive and engaged Rothschild to assist it in dealing with the situation, both in relation to the forthcoming EGM and more generally. In summary, Rothschild’s task was to “develop and implement a strategy to persuade Worldview to agree to withdraw from activism against Exillon”.

Rothschild was to be paid a retainer for its services at the rate of US $50,000 per month together with a success fee of US $500,000 (less any monthly payments received) if certain events occurred, one of which was that Worldview reduced its shareholding in Exillon below 5%.

Rothschild provided services to Exillon in early 2013 including the preparation of some shareholder circulars.

The EGM took place on 19 March 2013 and the Worldview motions were resoundingly defeated. Thereafter Rothschild continued to provide some services, but ceased to carry out any such work in about May 2013. It has been paid its retainer for four months, a total of US $200,000.

Although there appears to have been