Court Of Appeal Rejects Claim For Success Fee Where Contractual Trigger For Payment Had Not Happened

• Published date: 16 May 2023
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Contracts and Commercial Law, Trials & Appeals & Compensation
• Law Firm: Herbert Smith Freehills
• Author: Mr Ben Phillips

The Court of Appeal has found that a party was not entitled to payment of a success fee, or any lesser payment, where the specific event that would trigger payment under the express terms of the contract had not occurred: Contra Holdings Ltd v Bamford [2023] EWCA Civ 374.

As a matter of contractual interpretation, the express terms of the contract made clear the circumstances in which the relevant success fee would be paid, and the factual matrix surrounding the contract did not justify departing from the clear wording. Further, it was commercially absurd to suggest that the success fee provision was in fact a deferred payment clause guaranteeing payment of the fee, given the significant value of the fee. The scale of the fee was more consistent with the position that it would only be paid if the specific event provided for in the contract occurred.

There was also no basis on which to imply terms into the agreement that the success fee would be paid in a wider range of circumstances, or that the claimant would be paid an appropriate rate for services actually performed. Applying Barton v Morris [2023] UKSC 3 (considered here), the court found that such implied terms would be inconsistent with the express terms chosen by the parties.

Like Barton, the Court of Appeal's judgment suggests that where parties have agreed the circumstances in which a payment will be made, it may be difficult to persuade the court that payment is due in other circumstances - though of course each case will turn on its facts. Both decisions highlight the importance of drafting contracts so that they set out in full the circumstances in which a payment will or will not be made, so as to avoid disputes arising.

Background

The claimant ("Contra") entered into a written agreement with the defendant which provided that: (i) Contra would be paid a success fee of '2.6m for services carried out by Richard Bamford ("RB", the chief executive officer of Contra) up to and including a settlement reached on 17 June 2011; (ii) the defendant would brief RB on progress toward implementation of the settlement "and in addition the steps being taken to prepare the JCB Group for sale in 2012 ('Project Crakemarsh')"; (iii) the defendant expected to appoint RB to be his commercial advisor for Project Crakemarsh, on which Contra would ensure RB was available to advise the defendant on an exclusive basis; and (iv) in consideration of those services, Contra would be paid a further success fee on the...