In Seymour Pierce Limited v Grandtop International Holdings Limited [2010] EWHC 676 (QB) Mr Justice Eady upheld a “tail-gunner” clause in a financial adviser’s engagement letter and awarded a success fee to the financial adviser after its former client completed a takeover of Birmingham City Football Club (with a different adviser) and even though its original retainer had been terminated.

The case provides a useful reminder to both corporate financial advisers and companies to review engagement letters to ensure that the parties’ legal rights are clear and protected.


Grandtop International Holdings Limited (Grandtop), a listed trading group based in Hong Kong, wanted to acquire Birmingham City Football Club (Birmingham City FC). Grandtop signed an engagement letter with Seymour Pierce Limited (Seymour Pierce) on 25 June 2007 which set out the terms and conditions on which Seymour Pierce would act as Grandtop’s financial adviser in relation to an offer for the entire issued share capital of, or cash investment in, Birmingham City FC. Although a recommended takeover offer was originally envisaged, Grandtop subsequently decided to conduct a two-stage acquisition, whereby it would privately purchase 29.9 per cent of the shares of Birmingham City FC, to be followed within six months by a public offer for the remainder.

Engagement letter

The engagement letter was stated to continue, unless terminated by the parties in accordance with its terms, “until the Transaction becomes unconditional in all respects, lapses or is withdrawn”. Seymour Pierce was to be paid a success fee of £2.2 million when the offer was declared unconditional as to acceptances. It was recognised that the engagement letter governed the contractual relations between the parties, even though it had been drafted with a single offer in mind.

The engagement letter also contained the following clause: “In the event the engagement pursuant to this letter of engagement is terminated by the Company and an Offer for the Target is declared or becomes wholly unconditional as the result of any offer made by or in association with the Company within a period of 12 months after the effective date of termination the Company shall pay to Seymour Pierce the Success Fee in full.”

Termination of the engagement letter

The 29.9 per cent share purchase was completed by 17 July 2007. After further negotiations, on 20 December 2007 Birmingham City FC issued an RNS announcement that discussions with Grandtop had ended as they did not think Grandtop would purchase the entire share capital of the club. However, negotiations with Birmingham City FC continued and Grandtop continued to keep Seymour Pierce involved to an extent in relation to Birmingham City FC during 2008.

However, on 20 May 2009, Grandtop sent Seymour Pierce a letter stating that the engagement letter had automatically terminated following the RNS announcement on 20 December 2007. Seymour Pierce rejected this claim but took Grandtop’s letter to be a notice of termination of the engagement letter (with effect from 21 August 2009).

Grandtop instructed new financial advisers and made an offer to purchase Birmingham City FC which was accepted on 21 August 2009, becoming unconditional at the end of September 2009. Seymour Pierce was not instructed in connection with that offer, although contact still remained between Grandtop and Seymour Pierce in July and August 2009 in connection with Birmingham City FC.

Seymour Pierce sought summary judgment in respect of its claim for the £2.2 million success fee under its engagement letter.

The parties’ arguments

Grandtop argued that:

  • the first proposed offer in 2007 with which Seymour Pierce was involved was withdrawn or lapsed with the RNS announcement issued by Birmingham City FC in December 2007, thus bringing the engagement to an end. As the subsequent acquisition went unconditional more than a year later, no success fee was payable;
  • the second offer in 2009, with which Seymour Pierce was not involved, differed from the first offer and did not fall within the definition of “Offer” or “Transaction” in the engagement letter; and
  • Seymour Pierce was not the, or an effective, cause of the success of the second offer in 2009.

Seymour Pierce argued that:

  • the engagement letter continued until 20 May 2009 and that the success fee was payable as Grandtop’s 2009 offer became unconditional four months later (ie within 12 months of termination of the engagement letter); and
  • in order to determine whether the “Transaction” referred to in the engagement letter had lapsed or been withdrawn, it was necessary to look to the Takeover Code. Under the Takeover Code, “withdrawal” and “lapse” both refer to a public offer, and as the 2007 offer was a private offer, accordingly it could not be said to have been withdrawn or lapsed following the RNS announcement in December 2007.


Summary judgment was granted to Seymour Pierce although the parties agreed that some sums would be deducted from the £2.2 million success fee in respect of fees payable by Seymour Pierce.

The court held that the first offer in 2007 had not been withdrawn or lapsed, for to give certainty to those words, the engagement letter should be construed in accordance with the terminology of the Takeover Code (which naturally had a large impact on the acquisition), which seemed to accord with the parties’ intentions.

The court also dismissed Grandtop’s argument that the there was no requirement to pay the success fee as the successful offer was on different terms from the offer contemplated under Seymour Pierce's engagement letter. This was because the clause in the engagement letter contemplated a success fee being paid following “any offer” becoming wholly unconditional within 12 months of termination of the engagement letter.

The court was not influenced by the fact that Seymour Pierce was not “the, or an effective, cause” of the successful second offer as the engagement letter did not provide that it had to be. There was no need to imply such a term to give business efficacy to the contract. The court found that the clause was comprehensible without any implied terms and gave effect to the clause’s literal wording.

It should also be noted that, after it was decided to make the acquisition in two stages, there was a disagreement between the parties as to whether a pro rata share of the success fee was due following the first stage private purchase. This was not provided for in the engagement letter, which contemplated a single transaction. Ultimately, Seymour Pierce yielded on this point, but it is worth considering when drafting such clauses.

Grandtop is currently seeking permission to appeal to the Court of Appeal.

Practical steps

To provide greater certainty over the application of “tail-gunner clauses” in engagement letters, it is recommended that:

  • They should not be treated as “boiler plate” clauses, but should be tailored to take into account the particular transaction.
  • The transaction to which the clause applies should be clearly understood and expressed in the engagement letter.
  • There should be a clear understanding of what constitutes a successful transaction warranting the success fee, which should be reflected in the clause.
  • The engagement letter should be clear both as to the termination events (expiration, termination, breach) and as to the person who needs to perform them.