The options for terminating contracts which are no longer needed should be kept under review or there could be a price to be paid. This article examines an interesting approach from the High Court to the well-known principles of contractual interpretation in Macquarie Capital v Nordsee.(1)


Macquarie Capital (Europe) Ltd had been engaged by Nordsee Offshore MEG I GmbH (NOMEG), a subsidiary of the Windreich Group, to raise equity and debt finance for the installation and operation of a proposed wind farm in the German exclusive economic zone in the North Sea.

The 2013 engagement agreement made reference to the 'project' (the wind farm development) and termed the raising of finances for the project the 'transaction'. Under the terms of the engagement agreement, NOMEG had to pay completion and debt advisory fees to Macquarie if the transaction was completed, irrespective of whether Macquarie had been responsible for raising the finances, provided that the engagement agreement had not been terminated more than 12 months before completion of the transaction.

A number of difficulties occurred and various aspects of the wind farm development changed, including the timing and structure of the finance and details of the wind farm development (eg, the turbines to be used and the identity of the plant supplier). However, the engagement agreement was never terminated. The finance raising process was completed in 2016 and although it had contributed little to the final form of the development and finance raising process, Macquarie sought payment of fees under the engagement agreement. NOMEG denied any liability.


The key point of dispute between the parties was whether the wind farm development and associated financing which had ultimately been concluded fell within the definition of 'the transaction' as defined in the engagement agreement.

NOMEG argued that the definitions of 'project' and 'transaction' in the engagement agreement should be construed narrowly, such that the financial close in August 2016 did not fall within the scope of the transaction. This was on the basis that there had been such substantial changes to both the wind farm development and the finance structure that it no longer fell within the definition of a 'project'. The judge disagreed and found that, although there were "numerous aspects of the potential wind farm project under consideration" at the time that the engagement agreement had been entered into, the agreement specified no particular aspects as being necessary constituents of the wind farm development for the purpose of the agreement.

Conversely, Macquarie argued that the changes to the wind farm development did not take it beyond the contemplation of the parties upon entering into the engagement agreement and thus the development and associated financing as completed still fell within the scope of the transaction, as defined.

High Court decision

The High Court found that, at the time of the engagement agreement, there had been:

  • flexibility in relation to the raising of finances (including its timing and structure);
  • the capital and corporate structures; and
  • the wind farm development itself.

This corresponded with Macquarie's position that various aspects of the intended development had not been "set in stone" at the time of the contract and "were capable of significant change".

The court criticised the definitions of project and transaction as being "unclear" and "unhelpful". Adopting a textual approach to the language used to define the terms and considering the engagement agreement as a whole, the term 'project' meant the wind farm project in which NOMEG was involved at the time of entry into the engagement agreement. The term 'transaction' referred to an equity and debt-raising process in relation to the project in broad terms.

In reaching its decision, the High Court set out the following well-known principles of contractual interpretation under English law as summarised in Lukoil Asia Pacific PTE Ltd v Ocean Tankers (PTE) Ltd:(2)

  • The court must ascertain the "objective meaning" of the language used in the agreement.
  • The court must consider the contract as a whole, as well as the wider context.
  • If there are two possible constructions, the court should adopt the construction consistent with business common sense.

In this case, commercial common sense favoured an interpretation of the engagement agreement which entitled Macquarie to its fees, notwithstanding the significant changes to the way in which the proposed wind farm development had been brought about. The court held that, without such an interpretation, Macquarie might be incentivised to advise in a way that would ensure it would be entitled to its fees.

For these reasons, the High Court held that Macquarie's wider interpretation of the defined terms in the engagement agreement was the correct approach. As a result, the High Court held that NOMEG was liable for Macquarie's fees (amounting to €16 million plus interest).


Had NOMEG terminated the engagement agreement earlier, it might have avoided payment to Macquarie. It goes without saying that clearer drafting could also have helped.

The application of the now well-established principles of contractual interpretation in any given case remains tricky, particularly where defined terms provide for flexibility. As a result, while parties should strive for clarity in drafting, they should also give particular consideration to possible options for terminating contracts when they are no longer needed.


(1) [2019] EWHC 1655 (Comm).

(2) [2018] EWHC 163 (Comm).

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