BLACKLION LAW LLP v AMIRA NATURE FOODS LIMITED

In construing a commercial retainer, conditional wording must be read in its contractual and factual context. Where the wording is ambiguous, the court may prefer the construction consistent with business common sense. A fixed fee expressed as payable subject to completion by a stated date may cap the fee for work within that period without making payment wholly contingent on completion.

Terms of business supplied as part of an ongoing solicitor-client relationship may apply to a later retainer unless expressly or necessarily impliedly excluded. A company which elects to pay in shares must take reasonably necessary steps to enable their sale. A director may be liable for procuring the company’s breach where he knows the contractual position and intends the breach, rather than merely foreseeing it.

The claimant law firm sued its former client, Amira Nature Foods Limited, and its chairman and majority shareholder, Karan Chanana. The claim concerned a retainer for legal and transaction-management work on a proposed bond issue known as Project Avatar.

The principal issues were whether a fixed fee of £300,000 was payable only if the bond issue completed by 31 May 2017, whether the agreement should alternatively be rectified, whether the company breached the retainer by failing to make payment or release shares issued to the claimant, whether Mr Chanana procured that breach, and whether contractual interest was payable under the claimant’s Terms of Business.

1. Construction. The words “subject to the completion of the Matter by 31 May 2017” introduced conditionality, but did not clearly identify which part of the preceding clause they qualified. The court therefore considered the factual matrix, the commercial purpose, and business common sense. The claimant’s construction was preferred: the £300,000 fee was fixed for work up to 31 May 2017, while work thereafter could attract further charges. It was not a wholly contingent success fee.
2. Contractual interest. The Terms of Business formed part of the wider solicitor-client contractual relationship and applied to the Avatar Retainer. Nothing in that retainer expressly or necessarily excluded them. Clause 35 therefore entitled the claimant to interest at 1.5% per month from 30 days after the relevant invoices.
3. Rectification. Alternatively, if the defendants’ construction had been correct, the court would have rectified the retainer. The parties had a continuing common intention that the claimant would receive a fixed fee, there was an outward expression of accord, that intention continued at execution, and the wording resulted from mistake. This conclusion was unnecessary to the primary decision.
4. Breach and implied term. Having elected to pay in shares, the company was required to do what was reasonably necessary to enable their sale. Its failure to provide the issuer’s legal authorisation, without which the transfer agent would not release the shares, breached that implied term and the retainer.
5. Procurement of breach. Applying OBG Ltd v Allan, actual knowledge that the conduct will breach the contract and an intention to procure that breach were required. Mr Chanana knew the fee was not contingent and knew that withholding the necessary authorisation or payment would cause the company to breach the retainer. He was therefore liable in tort.
6. Orders. Judgment was entered for £300,000 against the company, with contractual interest. Mr Chanana was ordered to pay £300,000 damages for procuring the breach.