Blackstar Advisors Ltd v Cheyne Capital International Ltd & Anor

Contractual fee provisions must be construed by identifying the objective meaning of the language read in the context of the agreement as a whole. References to fees which an agreement currently produces do not necessarily create fixed entitlements, particularly where payment is linked to fees actually received and the commercial consequences contradict a fixed percentage of asset value.

A profit-sharing provision directed to future investments does not ordinarily govern an existing investment dealt with in a separate contractual provision. A later agreement discharging payment obligations may also exclude fees after a restructuring where the new structure is outside the defined investment. Estoppel requires an established shared assumption or representation, reliance and sufficient detriment.

Blackstar claimed fees from Cheyne under contractual arrangements governing introductions of investors to Cheyne-managed funds. The principal disputes concerned an ARRCO investment, its later restructuring through a French fund, a Holding Communal investment in a Goldman Sachs note, and an investment by Generali.

Blackstar relied on the Capital Introduction and Fee Sharing Agreement, related letter agreements, contractual estoppel and estoppel by convention. Cheyne disputed the construction of the fee provisions, contending that existing deals were governed by earlier arrangements and that later restructuring ended any entitlement. The court also considered whether particular investments were tailor-made investment programmes and whether fees were calculated gross or net of third-party payments.

1. Contractual construction. Applying Wood v Capita Insurance Services Ltd [2017] AC 1173, the court construed the agreements objectively, considering their language, the agreement as a whole, the admissible factual background and commercial consequences. Pre-contractual negotiations and subjective intentions were inadmissible for that purpose, subject to the recognised limits.
2. ARRCO fees. The references to fees currently produced, together with the link to Cheyne’s receipt of fees, did not create fixed entitlements of 1.39% and 0.54% of NAV. The existing ARRCO investment was governed by the existing-deals provisions and the earlier MOU, under which Cheyne was to pay up to 25% of its fees. The profit-sharing provision applied to new investments, not the completed ARRCO investment. The claim to 100% of Topco fees also failed.
3. Letter agreements and restructuring. The 2008 Letter Agreement discharged Cheyne’s obligations concerning the first ARRCO tranche through the Amortising Note. The 2009 Letter Agreement revived or governed fees only if ARRCO extended the investment through the SDFP structure. The French Restructuring through the FCP was a different structure, so no fees were payable on that structure.
4. Estoppel. Blackstar failed to prove the pleaded representations or common understanding. It also failed to prove reliance. The requirements identified in HMRC v Benchdollar Ltd [2010] 1 All ER 174 were therefore not satisfied.
5. Other investments. The Goldman Sachs Note was not a tailor-made investment programme and fees ceased when the relevant investor ceased to hold the investment. Generali’s investment was governed by the third profit-sharing paragraph. Fees were calculated on the amount received by Cheyne net of payments to JPMorgan.
6. The contractual and estoppel claims therefore failed. The counterclaim did not require determination. Any unresolved quantum under the MOU, Deed of Covenant or Amortising Note was left for agreement or consequential consideration of an inquiry and account.

First-instance judgment in the High Court (Commercial Court). No appellate history is stated in the judgment.