Bright Asset Ltd v Lewis

The Court of Appeal dismissed the appellant's challenge to a county court judgment that success fees were payable under a consultancy agreement dated 9 August 2006. The court interpreted the agreement in a commercial, purposive manner, taking into account the admissible factual matrix. It held that the term "debt" in the agreement was not confined to loans advanceable to Hi-Gear Leisure plc (HG) but extended to funding for a successor vehicle (Cool Brands Ltd, CB) and to forms of asset-based funding such as an invoice discounting facility (IDF). The court also held that a deferred purchase price agreed as instalments constituted "debt" for the purposes of the success fee calculation and that there was no double counting when separate tranches of credit existed. The judge's approach to admissible background facts was accepted as limited to matters reasonably available to both parties and relevant to commercial purpose.

This was an appeal from a county court decision (HHJ Birtles QC, 5 May 2010) awarding Bright Asset Ltd success fees under a consultancy letter dated 9 August 2006. Bright Asset had provided consultancy services to Mr Simon Lewis in relation to his interests in Hi-Gear Leisure plc and sought success fees calculated by reference to the "aggregate replacement and new debt committed". After HG entered administration its business and assets were sold to Cool Brands Ltd (CB), and CB obtained an invoice discounting facility (IDF) and agreed a deferred purchase price to HG's administrators.

The nature of the claim: the respondent sought to recover success fees calculated by reference to three components: a £100,000 loan from Consortium Partners Ltd, an £800,000 deferred purchase price payable to the administrators, and a £2m IDF obtained by CB.

Issues framed:

• Whether the index "debt committed" included indebtedness of the acquiring vehicle (CB) and not only that of HG (the "which obligor?" issue).
• If so, whether the term "debt" included an invoice discounting facility (the "IDF" issue) and whether a deferred purchase price payable by instalments was "debt" for the purposes of the agreement (the "deferred purchase price" issue).

Court's reasoning and decision: the court applied commercial construction principles and the admissible factual matrix. It concluded the agreement contemplated that HSBC's exit might occur via an insolvency process and sale of the business, so the consultancy was directed to Mr Lewis's interest in the business rather than to HG exclusively. The wording that Bright Asset would "target and canvas new debt providers" was not limited to providers to HG. The expression "incumbent debt provider" and an express exclusion for certain asset-based lending in clause 4 indicated that "debt" was used broadly to include asset-based funding such as IDF. The qualifying word "committed" showed funds need not be disbursed upfront. The court accepted that the £2m IDF and the £800,000 deferred purchase price were separate items of funding and therefore both fell within the index debt committed. The appeal was dismissed.

Appeal dismissed. The agreement was interpreted commercially and in the light of the admissible factual matrix. "Debt" in the consultancy letter included funding provided to a successor vehicle (CB) as well as asset-based funding such as an invoice discounting facility and a deferred purchase price payable by instalments; thus the success fees were properly calculated on the £100,000 loan, the £800,000 deferred purchase price and the £2m IDF.

On appeal from the Mayor's and City of London County Court (HHJ Birtles QC), judgment given 5 May 2010. Appeal heard in the Court of Appeal (Civil Division) resulting in [2011] EWCA Civ 122, judgment 17 February 2011.