Crema v Cenkos Securities Plc

Key legal principles and decision grounds:

The claimant, an investment banker engaged as a sub-broker, sought £882,000 as 70% of a 7% commission alleged payable in respect of investments he introduced. The court applied ordinary principles of contractual construction, the requirement that a sub-broker be the effective cause of an investment to earn commission where there is a risk of multiple claims, and the established tests for implying terms. Evidence of general market practice may be admitted as part of the factual matrix for construing commercial arrangements, but a general market practice falling short of a notorious usage does not automatically supply an implied contractual term.

The judge found (1) the claimant was the effective cause of the BlueCrest investment, (2) however the contract between the claimant and the lead broker entitled the claimant to a share of brokerage only as and when the lead broker received its commission from the client, and (3) the claimant's alternative case that a wide implied contractual term or independent tortious duty should require the broker to take all steps to secure payment failed. As GPV became insolvent and the lead broker received no commission, the claimant had no enforceable entitlement to the claimed fee and the action was dismissed.

Background and parties:

The claimant, Mr Crema, an experienced investment banker working effectively as a freelance sub-broker, was engaged by Cenkos to assist in raising funds for Green Park Ventures Limited (GPV). GPV ultimately received £20 million by way of investments including £16 million from BlueCrest and £2 million from Elettra. The claimant contended he procured £18 million of the fundraising and was entitled to 70% of a 7% fee (i.e. £882,000). Cenkos disputed both the extent of the claimant's role and, critically, contended that the claimant's entitlement depended on Cenkos having received its brokerage from GPV; GPV became insolvent and Cenkos recovered nothing from it.

Nature of the claim and relief sought:

• The claimant sued in contract (and alternatively in tort/for implied terms) for payment of the asserted sub-brokerage and interest.

Issues framed by the court:

1. Whether the claimant was entitled to payment irrespective of whether Cenkos was paid by GPV.
2. Whether the claimant was the effective cause of the BlueCrest investment.
3. Admissibility and effect of city market practice as part of the factual matrix when construing the parties' agreement.
4. Whether any term should be implied that Cenkos would take all reasonable steps to secure payment for both itself and the claimant, or whether a tortious duty was owed.

Court’s reasoning and findings:

The judge examined the documentary record, recorded calls and witness evidence and applied established authorities on contractual construction and implication of terms (including Investors Compensation Scheme, BP Refinery and Attorney-General of Belize). On causation he applied the test whether the agent's actions really brought about the investor-company relationship and held that the claimant had introduced Hutton Collins which led to engagement of AgFe/BlueCrest and that the claimant arranged the first meeting between GPV and BlueCrest; accordingly the claimant was the effective cause of the BlueCrest investment.

On contract construction the court held there was an informal but binding agreement that the claimant would share 70:30 in the brokerage fund to be paid to Cenkos (originally 5%, later 7%). The contemporaneous letters and exchanges indicated the claimant's share was to be a portion of the lead broker's commission. The judge admitted expert evidence about general market practice as part of the factual matrix but held that practice fell short of a binding usage; it nevertheless supported the conclusion that the sub-broker would not normally be paid until the lead broker had itself been paid.

The court rejected the claimant's case that an express or implied contractual term or a tortious duty required Cenkos to take the extensive positive steps pleaded (including insisting on exclusivity, escrow arrangements or advance payment by GPV). The narrower implied obligations the judge would recognise were that Cenkos should take reasonable steps to recover fees and not do anything to prevent payment to the claimant; those findings did not assist the claimant because Cenkos had pursued recovery and did not act to defeat payment. Given GPV's insolvency and the absence of any enforceable right to require payment by Cenkos before it was paid, the claimant’s case failed.

The court therefore dismissed the claimant's action.

The claim is dismissed. The court held that (1) although the claimant was the effective cause of the BlueCrest investment, (2) the contractual arrangement entitled the claimant to a 70% share of the brokerage fund payable to Cenkos (not an absolute independent right to payment), and (3) the claimant failed to establish an implied contractual term or tortious duty that would have required Cenkos to secure payment for him. As Cenkos did not receive commission from GPV before its insolvency, no payment was due to the claimant.