Cavendish Corporate Finance LLP v KIMS Property Company Ltd & Anor

A commission under an agency agreement is payable only where the agent’s services were the effective cause of the transaction, subject to the contract’s proper construction. Specific amended provisions may displace more general provisions in the original agreement. Commercial purpose and admissible background may assist construction, but pre-contractual negotiations cannot be used to support detailed interpretation. A representation is assessed objectively in context. An ambiguous statement may not be relied upon, and reliance requires proof that the contract would not have been made without the representation.

Cavendish claimed a success fee and damages from KIMS arising from finance obtained for a hospital development. Cavendish had introduced Vinci Investments Ltd, but Vinci later withdrew and Magnetar provided the finance after being introduced by StormHarbour, which had been engaged by Vinci. The parties had amended Cavendish’s engagement, including its exclusivity and replacement-investor provisions.

The issues included construction of the amended agreement, rescission for alleged misrepresentation, the effect of any rescission on novation, whether the Magnetar finance resulted from the Cavendish exercise, and whether any exclusivity breach caused loss.

1. Construction of the amended agreement. The September Agreement entitled Cavendish to a commission if Vinci was replaced by an investor listed in the appendix or subsequently introduced by Cavendish. If neither occurred, Cavendish could not return to the original agreement and ask whether the investment resulted from the Cavendish exercise. Magnetar was neither listed nor introduced by Cavendish. The claim under the amended agreement therefore failed.
2. Pre-contractual negotiations. The court applied the caution expressed in Widows Fund and Life Assurance Society v BGC International [2011] EWHC 729 (Ch). Negotiations may assist in identifying an objective commercial purpose, but cannot support detailed construction. The relevant commercial context independently supported KIMS’s interpretation.
3. Misrepresentation. The statement that the parties were proceeding on the assumption that Vinci would invest £28 million at financial close was a representation of fact. The statement that KIMS had no control over whom Vinci might contact was too ambiguous to amount to the alleged representation. KIMS believed both that Vinci would provide the full sum if necessary and that a non-Vinci solution was highly unlikely. Cavendish did not rely on the alleged representations. The court applied the objective approach described in Raiffeisen Zentralbank Osterreich AG v The Royal Bank of Scotland Plc [2010] EWHC 1392 (Comm) and Cassa di Risparmio della Repubblica di San Marino SpA v Barclays Bank Ltd [2011] EWHC 484 (Comm).
4. Novation. Although unnecessary to the result, the court held that the novation from Nome to KIMS was complete when KIMS confirmed it in June 2011. Rescission of the later September Agreement would not have reversed that novation.
5. Effective cause and exclusivity. Applying the agency principle cited from Foxtons v Bicknell [2008] EWCA Civ 419 (CA), the Magnetar finance was not the result of the Cavendish exercise. The lender introduced by Cavendish provided no finance, while another broker introduced Magnetar and KIMS paid that broker’s fee. The amended agreement also terminated the post-termination exclusivity provisions. The claims for a success fee, rescission and damages were dismissed.