Alegro Capital LLP ("Alegro") a corporate finance advisory firm, entered into a non-exclusive agreement with Allproperty Media Pte Ltd ("Allproperty"), an online estate agency business seeking capital investment. The agreement outlined the role which Alegro would play in securing an injection of capital into Allproperty and the circumstances in which it would be entitled to a success fee in the event of introducing an investor.  The success fee to which Alegro would be entitled was 3.5% of Capital Raised.

Relevant definitions in the agreement were as follows.

  • 'Capital Raised' was defined as "the total capital provided to the Company (Allproperty) by Investors that have been introduced to the Company by Alegro directly or indirectly (including but not limited to any equity, debt and mezzanine capital) and transferred to, or for the benefit of, the Company at the closing of the Transaction and any subsequent instalments received by the Company."
  • 'Transaction' was defined as follows: "Pursuant to our recent discussion, we are pleased to confirm the arrangements under which Alegro is engaged by you, Allproperty (the "Company") as your non-exclusive financial adviser in connection with a possible capital raise (the "Capital Raise") from external investors (the "Investors")" (the "Transaction").
  • The Investors (as defined above) were listed in the appendix to the agreement.  The appendix was headed as "Alegro Introduced Investors" and was preceded by the words "The following companies, including any affiliated companies such as shareholders, subsidiaries or group companies, are defined as Alegro Introduced Investors".

Deutsche Telekom was one of the companies listed in the appendix. Alegro approached it for investment but to no avail.  Independently, Allproperty secured an investment from ISG, a subsidiary of Deutsche Telekom, which purchased shares in the Company for $18 million.  Related to the ISG transaction, Mr Meluish of Allproperty paid $36 million to the Company's existing shareholders to repurchase existing shares – the arrangements resulted in ISG owning 41% of the share capital.

Alegro claimed a success fee in relation to Capital Raised by reference to both the $18 million investment by ISG and the $36 million in respect of the share repurchase.  The success fee was claimed in respect of the $18 million investment on the basis that ISG was a subsidiary of one of the parties listed in the appendix to the agreement, such that a success fee was payable irrespective of the fact that Alegro had not been involved with the approach to ISG.  The success fee was claimed in respect of the $36 million for a number of reasons, including that Capital Raised meant total capital provided, not part of it, and that "to the Company" must include shareholders and not be confined to "merely the artificial limited company meaning".  Further it was argued that "transferred to or for the benefit of the Company" would include monies paid to existing shareholders as part of a global transaction for which the Company derived benefit.  The argument put forward was that ISG would not have invested without acquiring sufficient shares from existing controllers, giving it a substantial shareholding.

Allproperty submitted that the claim turned on a simple issue of construction and that the issue was whether the $36 million paid was part of the total capital provided to the Company and transferred to or for the benefit of the Company, or whether it was paid to the shareholders for their benefit alone.  Allproperty denied that a success fee was payable in respect of either amount.

Alegro applied for summary judgment in respect of the success fee on the $18 million investment by ISG.  Master Leslie found that the terms of the contract, looked at objectively, in particular the wording in the appendix, demonstrated that Alegro was entitled to the success fee.  The success fee in respect of that sum was subsequently paid.

The recent judgment dealt with whether the $36 million paid to the Company's existing shareholders should be taken into account in calculating the "Capital Raised" for the purposes of the success fee.  Alegro claimed that the terms of the agreement entitled them to a success fee based upon any capital paid by an investor, whether to the Company or its shareholders.  This was disputed by Allproperty.

Foskett J considered the definition of Capital Raised and in particular reference to capital being provided to the Company – specifically defined in the agreement as Allproperty Media Pte Ltd.  He considered that if the parties had intended the expression "the Company" to include a reference to shareholders, they would have defined it as such. This was a commercial contract concluded between experienced commercial parties. The concept of the shareholders of a company being distinct from the company itself was such an established concept in English law it was inevitable that any reasonable person reading the agreement by reference to English law would see that distinction maintained by the words used in the letter. The terms here were sufficiently clear and unambiguous to deny the Claimant the relief it sought – namely the success fee being calculated by reference to the $36 million as well as the $18 million.


In giving his Judgment, Foskett J reiterated the current law on interpretation of contracts: the starting point must be whether, in the first instance, the provision of the agreement under consideration is capable of interpretation such that, applying the natural and ordinary meaning of its words, a "reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract" (ICS v West Bromwich Building Society) would understand its meaning. If so, that is effectively the end of the matter unless the court is satisfied that, as drafted, the provision flouts business common sense.  If the provision flouts business common sense, then it would be necessary for the court to consider such material as is properly admissible under established principles, to endeavour to give effect to the presumed intention of the parties. Here, the agreement did not 'flout common business sense' and it was not necessary to look beyond the terms of the engagement letter itself.

Foskett J stated that the dispute in this case arose as a consequence of not sorting out the fine print of the agreement sufficiently in the commercial haste that gave rise to it and there was a lesson to be learned, namely in effecting clear and unambiguous drafting.