Benedetti v Sawiris & Ors

A restitutionary quantum meruit for requested services ordinarily measures the recipient’s benefit objectively, by the market price which a reasonable person in the recipient’s position would have paid. An unaccepted offer exceeding that value cannot substitute for the market measure merely because it reveals the recipient’s willingness to be generous.

Free acceptance requires a genuine opportunity to reject the services while continuing with the relevant activity. Knowledge of the services, coupled only with a choice to abandon the entire transaction, is insufficient. An innocent third-party beneficiary is not liable where the services were requested by, and supplied on the expectation of payment from, another person and conferred no separate incontrovertible benefit which it would be unjust to retain.

The High Court awarded Mr Benedetti €75.1 million on a quantum meruit for facilitating the respondents’ acquisition of an investment in Wind Telecommunicazioni SpA. The award was made jointly against Mr Sawiris, Cylo Investments Ltd, April Holding and OS Holding: [2009] EWHC 1330 (Ch).

Mr Benedetti appealed, contending principally that an earlier Acquisition Agreement required remuneration by reference to an equity participation and that the award should have been greater. Mr Sawiris and Cylo challenged the use of an unaccepted €75.1 million offer instead of the market value of the services. April Holding and OS Holding denied liability because they had neither requested nor freely accepted the services.

The central questions concerned the proper valuation of services in restitution, the relevance of prior agreements and subsequent offers, liability of third-party beneficiaries, the treatment of an overlapping brokerage payment, and the orders for interest and costs.

1. Disposition. Mr Benedetti’s appeals concerning the amount of the quantum meruit, liability and costs were dismissed. The respondents’ appeals were allowed in part. The award was reduced from €75.1 million to €14.52 million, and April Holding and OS Holding were released from liability. By a majority, Rimer and Etherton LJJ held that the appeal concerning statutory interest should be allowed, with further submissions required because they differed about the appropriate period.

2. Valuation of services. Arden LJ held that the court must determine the reasonable value of the services. Prior agreements and communications may be relevant, but their weight depends on the circumstances. The Acquisition Agreement contemplated a fundamentally different acquisition structure and had been abandoned as a basis for remuneration. It provided no useful template for the award. Etherton LJ emphasised that a restitutionary quantum meruit reverses the defendant’s objectively valued gain. Where a market exists, the measure is ordinarily the amount a reasonable person in the defendant’s position would have paid.

3. Unaccepted offer. All three Lord Justices concluded that the €75.1 million offer could not replace the established market value. Arden LJ held that it was neither agreed nor shown to measure the market value. Etherton LJ held that generosity or a personal willingness to pay more does not increase the objective value of the benefit. The market value was €36.3 million. After allowing for services remunerated under the Revised Brokerage Agreement, the recoverable balance was €14.52 million.

4. Third-party recipients. Per Arden LJ, with whom Etherton and Rimer LJJ agreed, free acceptance requires an opportunity to reject the services while proceeding with the activity from which the benefit arises. April Holding and OS Holding could not invest without receiving the benefit of services already supplied. Their ability to abandon the investment altogether was insufficient. Nor was there an incontrovertible benefit justifying liability: the services were requested by Mr Sawiris, who was liable to pay, and were not a separate item of value or a saving of expenditure in the companies’ hands.

5. Interest and costs. The court agreed that interest under section 35A of the Senior Courts Act 1981 is compensatory and should not be used to penalise litigation conduct. Rimer and Etherton LJJ held that the judge had erred in withholding interest, although the period remained to be determined. The order requiring Mr Benedetti to pay the defendants’ costs was upheld because he had failed on the major issues at trial.

• Court of Appeal (Civil Division): The respondents’ appeals were allowed in part. The quantum meruit was reduced to €14.52 million and the order against April Holding and OS Holding was set aside. Mr Benedetti’s costs appeal was dismissed, but his interest appeal was allowed by a majority, subject to further submissions: [2010] EWCA Civ 1427.
• High Court, Chancery Division: Patten J awarded Mr Benedetti €75.1 million on a quantum meruit against the respondents jointly, with interest from the date of judgment, and ordered him to pay the defendants’ costs: [2009] EWHC 1330 (Ch).