Energy Venture Partners Ltd v Malabu Oil and Gas Ltd

A contractual success-fee mechanism may be varied by subsequent agreement or conduct where the parties objectively abandon the original method for calculating remuneration. In that event, the court may imply an agreement or term requiring payment of a reasonable contractual fee, provided the claimant would otherwise have earned remuneration under the agreement.

The court must distinguish that contractual assessment from a restitutionary quantum meruit, where the focus is the objective value of the defendant’s benefit. A transaction may qualify as a contractual disposal even though its structure changes, provided it is substantially the same commercial transaction and results from the introduced investor or acquirer.

Energy Venture Partners Ltd claimed fees from Malabu Oil and Gas Ltd in connection with the disposal of Malabu’s interest in Nigerian oil prospecting licence OPL 245. EVP relied on a written exclusivity agreement, an alleged oral agreement for a fixed fee of US$200 million, and alternatively an implied entitlement to a reasonable fee or restitutionary quantum meruit.

Malabu alleged forgery, fraud, termination or abandonment of the agreement, circumvention, and conflict of interest arising from an alleged secret commission arrangement. The principal issues were whether the agreement was binding, whether the 29 April 2011 transaction was within its scope, and what fee was payable.

1. Written agreement. The parties concluded the EVP Exclusivity Agreement in January 2010. Malabu’s allegations of forgery, lack of consensus, agency and fraud were rejected.
2. Fixed fee. Although US$200 million was repeatedly discussed, EVP failed to prove a contractually binding agreement for that fixed sum.
3. Continuation and scope. The agreement was not terminated or abandoned. In the absence of written termination, the mandate continued. The 29 April 2011 transaction qualified as a disposal under the agreement. Its different structure, involving the Federal Government as an intermediary and settlement of historic disputes, did not alter its commercial substance. It was materially the transaction developed through the investor introduced by EVP.
4. Implied remuneration. The parties’ conduct showed that they had agreed not to operate the contractual Agreed Malabu Price mechanism, while continuing their contractual relationship on the basis that EVP would receive a fee. An implied agreement, alternatively an implied term, therefore required payment of a reasonable contractual fee if EVP would otherwise have earned commission.
5. Assessment. A contractual reasonable-fee assessment concerns what the parties would objectively have regarded as reasonable, having regard to all the circumstances. It differs from restitutionary quantum meruit, which measures the defendant’s objective benefit. Relevant factors included the work performed, the complexity and risks of the transaction, Malabu’s financial and reputational position, urgency, the parties’ negotiations and comparable remuneration. The reasonable fee was 8.5% of US$1.3 billion, namely US$110.5 million. Alternatively, it was US$100 million.
6. Secret commission. Even assuming a binding agreement with ILC, clause 3.3 entitled EVP to retain remuneration from third parties. No fiduciary or contractual bar to recovery arose. Malabu’s counterclaim was dismissed.