Cantor Fitzgerald & Co v Yes Bank Limited

This appeal concerned the construction of the definition of “Financing” in an engagement letter between Cantor Fitzgerald & Co and YES Bank: whether the adjective “private” in the phrase “private placement, offering or other sale of equity instruments” qualified only “placement” or also qualified “offering or other sale”. The Court of Appeal agreed with the judge below that, read in its contractual context and having regard to the factual matrix, the parties intended “Financing” to be limited to private forms of equity financing rather than public offers such as the further public offer (FPO) that closed in July 2020. Key contractual provisions relied on included clause 1 (the definition of Financing and the special treatment of Qualified Institutional Placements), clause 5 (post-engagement rights), Annex A (the definition of "Investor" and references to private placement memoranda) and the completed Schedule I. The court applied orthodox principles of contractual interpretation: ascertain the objective meaning of the language in its context and against the relevant factual background; surrounding circumstances supported the judge’s construction because an FPO was not a viable route in December 2019 and Cantor’s role was that of an offshore adviser for private fundraising. Consequently the FPO was not within the defined “Financing” and Cantor’s entitlement was limited accordingly.

This was an appeal from the Commercial Court (Bright J, [2023] EWHC 745 (Comm)). Cantor Fitzgerald & Co (a New York-based broker-dealer) had been engaged by YES Bank (an Indian bank) under an Engagement Letter (17 December 2019, amended 24 February 2020) to act as financial advisor, placement agent and arranger in connection with a defined “Financing”, in return for a retainer and a 2% fee on funds raised from Investors listed in Schedule I. After the Reserve Bank of India intervened in early March 2020, YES Bank was recapitalised by a consortium led by SBI and then completed a further public offer (FPO) in July 2020. Cantor claimed a 2% fee on amounts subscribed in the FPO by three scheduled investors; YES Bank contended that the Engagement Letter covered only private forms of fundraising so Cantor’s entitlement was limited to the retainer.

Nature of the claim/application: claim for contractual fees (2% of funds raised from listed Investors) alleged to arise under the Engagement Letter.

Issues framed by the court: (i) Whether the adjective “private” in the definition of “Financing” qualified only “placement” or also “offering or other sale of equity instruments”; (ii) whether the FPO of July 2020 fell within the defined “Financing”; (iii) subsidiary issues including the effect of the Investor residency exclusion in Annex A and the contents of Schedule I, and alternative claims (implied term / unjust enrichment) which were not pursued on this appeal.

Court’s reasoning: the court first considered ordinary meaning and grammatical principles, recognising the natural tendency for an initial adjective to qualify a following list but noting there is no absolute grammatical rule. The Court of Appeal accepted the judge’s provisional view that, on ordinary meaning, “private” qualified all three items in the list but emphasised that the text must be read in its commercial and contractual context. The specific treatment of Qualified Institutional Placements (QIPs) in clause 1 and the delineation of Cantor’s offshore, advisory role where SEBI registration would otherwise be required were significant. Clause 5 and Annex A (including the defined term “Memorandum” and paragraph I’s limitation of services which would amount to “issue management” under the SEBI (Merchant Bankers) Regulations) buttressed YES Bank’s construction. The factual matrix (urgent need for private capital in December 2019, the impracticability of an FPO at that stage, Cantor’s role as a source of offshore capital introductions) also supported the interpretation limited to private fundraising. The court therefore concluded that the FPO of July 2020 did not come within the Engagement Letter’s definition of “Financing”. The appeal was dismissed.

The appeal is dismissed. The Court of Appeal held that, on an objective construction of the Engagement Letter taking account of ordinary meaning, the internal drafting context and the factual matrix, the word “private” limited the scope of “Financing” to private forms of equity fundraising and therefore the public FPO in July 2020 was not within the defined term; clause 1’s special treatment of QIPs, clause 5, Annex A and Schedule I supported that construction.

Appeal from the Commercial Court (Mr Justice Bright) [2023] EWHC 745 (Comm) to the Court of Appeal, judgment delivered [2024] EWCA Civ 695.