Stein v Chodiev & Ors

An oral agreement may be immediately binding even though the parties expect later written terms, where their conduct and the evidence show that they intended to be bound. A success fee expressed as a percentage of funds raised is fixed unless the agreement uses words such as “discretionary”, “maximum” or “up to”, or otherwise clearly imports discretion. An entire agreement clause does not ordinarily operate as a full and final settlement of earlier claims. Where an agreed success fee is repudiated before the relevant transaction completes, the claimant may recover damages for the lost fee.

The claimant, a corporate finance professional, claimed remuneration from the first three defendants under an alleged oral agreement made in January 2006. He alleged that the agreement provided for a fixed success fee of 0.5 per cent of funds raised, in addition to salary and a guaranteed bonus, covering both trade finance and an intended IPO.

The defendants denied that any enforceable agreement existed, contended that any bonus was discretionary and limited to trade finance, disputed the contracting parties, and relied on alleged compromises in April 2007 and April 2011. The central issues were whether the oral agreement was binding, the scope and character of the fee, the defendants’ liability, and whether the claims had been settled.

1. Binding oral agreement. The January Term Sheet, the parties’ discussions and their subsequent conduct established an immediately binding oral agreement. It was not subject to contract. The absence of a later signed document did not prevent enforceability.
2. Fixed success fee. The agreed fee was 0.5 per cent of funds raised. It was not discretionary. In the absence of wording such as “discretionary”, “maximum” or “up to”, a success fee expressed as a percentage of money raised was fixed. The guaranteed bonus was deductible from the fee, but the salary retainer was not.
3. Scope and contracting parties. The agreement applied to both the trade finance and the IPO. The First Defendant made the agreement on behalf of himself and the other members of the Trio, with their actual or usual authority. The Fourth Defendant was a communications intermediary, not a principal, guarantor or indemnifier. No company was party to the oral agreement. The claimant could in any event sue as agent for an undisclosed principal.
4. Trade finance. The 0.5 per cent fee applied to the full US$1.48 billion raised. The defendants’ refusal to comply on 1 April 2007 was repudiatory, but the claimant accepted the repudiation only on 13 April. By then the final US$480 million tranche had completed, so the claimant was entitled to the additional US$2.4 million, together with the wrongly deducted US$500,000. The same sum would have been recoverable as damages.
5. IPO. The IPO fee had not accrued when the agreement was repudiated. The claimant therefore recovered damages for the lost 0.5 per cent fee, calculated at US$15.5 million on the US$3.1 billion raised.
6. Compromise. The April 2007 payment and agreement did not constitute full and final settlement. Nor did the April 2011 termination arrangements. An entire agreement clause was insufficient to establish settlement of earlier claims in the circumstances.

Judgment was entered for the claimant against the first, second and third defendants for US$2.9 million and damages of US$15.5 million. The claim against the Fourth Defendant was rejected; the claims against the Fifth and Sixth Defendants had already been dismissed.