Roundshield Partners LLP v Ciudad Real International Airport SL & Ors

A contractual requirement that expenses are to be agreed by a sponsor acting reasonably ordinarily requires advance agreement. The expenses must be identified with sufficient detail to enable the sponsor to assess whether agreement should reasonably be given. A general acknowledgement that reasonable expenses will be paid is insufficient.

Expenses incurred without the required approval are not recoverable, even if they were reasonably incurred. Approved expenses remain subject to proof of reasonableness. A company officer is not personally liable for inducing breach merely because he acted for the company; the tort requires knowledge of the contractual breach and an intention to induce it.

Roundshield Partners LLP claimed reimbursement from companies involved in the proposed acquisition and financing of a Spanish airport. The claim arose under a binding expenses provision in a term sheet for a proposed €70 million loan, although the loan and transaction were never completed.

The principal disputes concerned whether the expenses required advance approval, whether approval had been obtained for six categories of professional fees, whether the sums were reasonable, whether the principal individual defendant was liable in tort for inducing breach of contract, and whether Roundshield could recover invoices addressed to an affiliate.

1. Advance approval. The phrase requiring Fund Expenses to be agreed by the Sponsor acting reasonably imposed an additional requirement beyond the Sponsor’s obligation to pay reasonable expenses. It required agreement in advance. The expenses had to be identified with sufficient detail to permit a reasonable decision to approve or withhold approval.
2. Application to the expenses. The Sidley fees were not sufficiently notified or agreed. Uria’s instruction and €110,000 cap were approved initially, but further approval was required as the work continued; fees incurred after 18 January 2018 were not approved. Ogier’s initial budget of €5,000–€6,000 was approved, but later increases were not. Kroll, Savills and Aura were instructed without the required approval and were irrecoverable.
3. Reasonableness. Recoverable expenses also had to be reasonable, with the burden of proof on Roundshield. The court assessed €80,000 as reasonable for Uria’s fees up to 18 January 2018 and €6,000 as reasonable for Ogier. A €50,000 payment already made had to be credited.
4. Inducing breach. Applying the elements identified in OBG Ltd v Allan [2008] 1 AC 1, the claim against Mr Arribas failed. The evidence did not establish the necessary knowledge and intention, and the claim in substance relied on acts performed in his corporate capacity.
5. Entitlement to sue. Roundshield could recover the approved Ogier fees although the invoices were addressed to an affiliate. The term sheet defined the Fund to include Roundshield and its affiliates, and Roundshield was entitled to collect the sums.
6. Judgment was entered for Roundshield only for the recoverable Uria and Ogier fees, subject to the €50,000 credit. The parties were invited to agree the order, including interest and costs.