Benedetti & Anor v Sawiris & Ors

A pre-contractual understanding does not create an equity where the parties intended their legal relationship to be governed by a later, professionally drafted contract. The court will not imply terms merely because they appear reasonable or would make the transaction fairer. The question is what the instrument, read as a whole against its background, would reasonably be understood to mean.

Where the parties subsequently adopt a materially different acquisition structure and do not amend the contract, the original agreement may cease to have contractual effect. A Pallant v Morgan equity cannot be used to re-model an enforceable contractual bargain. A quantum meruit is assessed principally by market value, but the parties’ negotiations may provide evidence of value. Payments already received for the same services must be credited.

The claimants sought shares in Weather Investments II or equivalent remuneration following the acquisition of Wind Telecomunicazioni by a consortium associated with the defendants. The principal claim relied on an Acquisition Agreement under which Mr Sawiris and Mr Benedetti were to acquire Wind through Rain Investments, with the initial share capital divided two-thirds and one-third.

The acquisition was instead completed through a substantially different structure involving Weather I, Weather II, Weather Italy, the Holding Companies, Enel and a controlling interest in Orascom. The claimants alleged that the Acquisition Agreement had been varied, or that the defendants held shares on constructive trust under a prior understanding. Alternative claims alleged breach of contract, fiduciary duty and entitlement to a quantum meruit.

The central issues were whether the original agreement applied to the new structure, whether it had been varied or abandoned, whether a constructive trust arose, and what reasonable remuneration was due.

1. Contractual claim. The claim for one-third of the shares in Weather II failed. The Acquisition Agreement defined “Rain” as Rain Investments S.p.A. and contained no provision extending that definition to a later acquisition vehicle. Clause 7.3.1 protected Mr Benedetti by prohibiting acquisition of Wind other than through Rain; it did not require the court to rewrite the agreement so that Weather II and the Holding Companies became parties.
2. Implied terms and variation. Applying the approach in Attorney General of Belize v Belize Telecom Ltd and Liverpool City Council v Irwin, the question was what the agreement, read as a whole against the relevant background, would reasonably be understood to mean. No implication was necessary. The later structure involved Wind, Orascom, Enel, Weather Italy and different investors. Treating the agreement as applying to that structure would substantially rewrite the bargain.
3. Abandonment. The parties’ conduct showed that Rain ceased to be the acquisition vehicle and that the original contractual structure was never restored. Mr Benedetti participated in and signed the arrangements using Weather Italy and Weather II without asserting clause 7.3.1. The agreement had therefore ceased to have contractual effect, or any breach had been waived.
4. Constructive trust. The alleged pre-contractual understanding was not proved. In any event, the Acquisition Agreement was intended to be conclusive of the parties’ rights. Equity could not be used to create a different bargain or revive a prior understanding after the agreement had been abandoned. The reasoning in Cobbe v Yeoman’s Row Management Ltd and Banner Homes Group plc v Luff Developments Ltd supported that conclusion.
5. Quantum meruit. The claimant was entitled to reasonable remuneration for services actually performed. Market value was the starting point, and the later negotiations could be considered as evidence of the value placed on the services. The court rejected an equity-based remuneration model as atypical for the services performed, but accepted that Mr Sawiris’s offer of €75.1 million was genuine evidence of value. The €67 million brokerage payment was not deducted again because the €75.1 million figure was assessed as an additional payment.
6. Disposition. The contractual, equitable, fiduciary-duty, proprietary and knowing-receipt claims were dismissed. Judgment was entered against all defendants for €75.1 million with interest.