Bexbes LLP v George & Ors

Where a contractual success fee depends on comparing an initial offer with the consideration under a completed transaction, the comparison should be made consistently and on a like-for-like basis. Unless the contract requires a more elaborate valuation, contingent payments should generally be taken at face value as part of the consideration. The assessment should be made by reference to the effective dates of the offer and transaction, without using after-acquired knowledge. Payments are excluded where the buyer has not assumed responsibility for them, even if they were taken into account in negotiating the transaction. The court should favour a straightforward calculation capable of being made promptly after completion.

Bexbes LLP claimed further remuneration under an engagement letter concerning the sale of the Beers’ shares in Mike Beer Transport Ltd and related property. The fee depended on the increase between Online’s first offer and the consideration ultimately obtained. The parties disputed the valuation of contingent goodwill payments, employment-related performance payments, property, deferred consideration, transaction-delay payments, professional fees, a mortgage swap fee and pension payments for key managers. The central issue was how the engagement letter required the first offer and the completed disposal to be valued and compared.

1. Contractual approach. Applying the principles stated by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, the engagement letter required a consistent comparison of the consideration under the first offer and the final transaction. Like should be compared with like. The parties intended a straightforward calculation that could be made promptly after the sale, rather than a sophisticated or delayed valuation exercise.
2. Valuation of contingent consideration. Contingent goodwill payments under the first offer were included at their full face value. The engagement letter contemplated a hypothetical sale contract, expressly included earn-out and profit-sharing arrangements, and provided no mechanism for discounting contingencies. The same approach applied to the further deferred consideration under the disposal, which was valued at the maximum potentially payable amount of £300,000. The assessment was made at the relevant effective dates, without relying on after-acquired knowledge.
3. Other components. The performance-sharing element of Mr Beer’s proposed remuneration was employment-related and was not consideration for the sale. The property formed part of the first offer at an agreed valuation of £3 million. The £21,000 payment included in the initial consideration was part of the consideration. PFA’s fees, the mortgage swap fee and the pension payments for key managers were excluded because Online had not assumed responsibility for them; Mr and Mrs Beer or MBT had borne those liabilities.
4. Disposition. The first offer amounted to £4,029,540 and the disposal consideration to £4,350,540, producing an increase of £321,000. Bexbes was entitled to £57,780, being 18 per cent of that increase, in addition to the £45,000 already paid, together with interest to be agreed.

First-instance judgment. No prior appellate decision is stated in the judgment.