Fenchurch Advisory Partners LLP v AA Ltd (formerly AA Plc)
| Jurisdiction | England & Wales |
| Judge | Sean O'Sullivan |
| Judgment Date | 24 January 2023 |
| Neutral Citation | [2023] EWHC 108 (Comm) |
| Docket Number | Case No: LM-2021-000034 |
| Court | Queen's Bench Division (Commercial Court) |
[2023] EWHC 108 (Comm)
Sean O'Sullivan KC (sitting as a Deputy High Court Judge)
Case No: LM-2021-000034
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
LONDON CIRCUIT COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Andrew Ayres KC and Edward Meuli (instructed by NORTON ROSE FULBRIGHT LLP) for the CLAIMANT
Matthew Parker KC (instructed by REYNOLDS PORTER CHAMBERLAIN LLP) for the DEFENDANT
Hearing dates: 28 November – 2 December 2022; 7 December 2022
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:30 on Tuesday 24 th January 2023.
Sean O'Sullivan KC (sitting as a Deputy High Court Judge):
A Introduction
This is a claim for fees brought by an investment banking and corporate finance advisory firm, Fenchurch Advisory Partners LLP (“Fenchurch”), in respect of advice and assistance it provided in relation to “Project Zodiac”, which was a potential sale of the insurance division of the well-known breakdown recovery service, AA plc (now AA Limited) (“the AA”).
One complicating factor is that, while the terms for the engagement of Fenchurch by the AA were extensively negotiated, no engagement letter was ever signed for Project Zodiac. Another is that the sale of the AA's insurance division did not ultimately materialise.
Although there are a myriad of sub-issues and points of disagreement between the parties, there seem to me to be three key areas of dispute, namely: (a) whether a binding contract was agreed; (b) if so, whether the AA's obligation to pay what is described as a “success” fee was triggered; and (c) if there was no binding contract on those terms, was there an implied contract or does Fenchurch have a restitutionary claim and, if so, to what sums is it entitled?
I will comment briefly on the witnesses whose evidence I heard, then deal in detail with the facts, before turning to the specific issues under those three heads. It may assist with reading this judgment if I provide an index:
Contents
B The witnesses
| A Introduction | 2 |
| B The witnesses | 5 |
| B.1 Factual witnesses | 5 |
| B.2 Expert witnesses | 7 |
| C Disclosure | 8 |
| D The facts | 8 |
| D.1 The background | 9 |
| D.2 Project Renault | 9 |
| D.3 The birth of Project Zodiac | 10 |
| D.4 First draft of the EL | 11 |
| D.5 Initial exchanges about fee structure | 12 |
| D.6 Work done by Fenchurch | 13 |
| D.7 Delay to discussions about fees | 13 |
| D.8 Further exchange about fees | 14 |
| D.9 Approval for continuation of work on Project Zodiac | 15 |
| D.10 Negotiations over Fenchurch's EL in summer 2019 | 16 |
| D.11 Further discussions in October 2019 | 18 |
| D.12 AA Board November meeting | 22 |
| D.13 Agreement on fee construct | 23 |
| D.14 Further discussions about the EL | 26 |
| D.15 Involvement of Evercore | 26 |
| D.16 New CFO at the AA | 26 |
| D.17 AA's January Board meeting | 27 |
| D.18 Events after January 2020 | 29 |
| E Was a binding agreement reached on the terms of the draft EL? | 31 |
| E.1 The law in relation to contractual formation | 31 |
| (a) Generally | 31 |
| (b) The importance of “offer and acceptance” | 35 |
| E.2 The parties' arguments in outline | 36 |
| (a) Fenchurch's case | 36 |
| (b) The AA's case | 37 |
| E.3 Discussion | 37 |
| (a) Points remaining to be agreed? | 37 |
| (b) Binding agreement, with details left over? | 40 |
| E.4 Postscript(1): Lack of authority/ subject to board approval | 43 |
| (a) The law | 43 |
| (b) Fenchurch's case | 43 |
| (c) The AA's case | 44 |
| (d) Discussion | 44 |
| E.5 Postscript (2): Estoppel? | 45 |
| F Was the “public offer” trigger engaged? | 46 |
| F.1 Construing the public offer trigger | 46 |
| (a) Basic principles | 46 |
| (b) Fenchurch's case | 46 |
| (c) The AA's case | 47 |
| (d) Discussion | 47 |
| F.2 Was Project Zodiac “aborted” by the public offer? | 49 |
| (a) Fenchurch's case | 49 |
| (b) The AA's case | 49 |
| (c) Discussion | 50 |
| F.3 Conclusion | 51 |
| G Implied contract/ claim in restitution | 51 |
| G.1 Implied contract | 52 |
| (a) Fenchurch's case | 52 |
| (b) The AA's case | 52 |
| (c) The law | 52 |
| (d) Discussion | 53 |
| (e) Conclusion | 54 |
| G.2 Restitution: liability | 54 |
| (a) The law | 54 |
| (b) Unjust: acceptance of risk? | 56 |
| (c) Did the AA receive a benefit? | 57 |
| (d) Conclusion | 59 |
| G.3 Restitution: quantum | 59 |
| (a) The law | 59 |
| (b) Fenchurch's case | 61 |
| (c) The AA's case | 62 |
| (d) Expert evidence | 63 |
| (e) Discussion | 66 |
| (f) Conclusion | 69 |
| H Disposition | 69 |
Over the course of 5 days, I heard from 10 witnesses: 8 witnesses of fact and 2 experts.
B.1 Factual witnesses
Fenchurch called Duncan Buck, an Executive Vice Chairman of Fenchurch, who was leading the Fenchurch team for the AA's projects, and Brendan Perkins, who was a Director of Fenchurch at the time of the relevant events, and was responsible for much of the work done by Fenchurch on those projects.
The AA called:
7.1. Mark Strickland, who acted as the AA's interim CFO between April and December 2019. He was responsible for negotiating Fenchurch's proposed fees for its engagement until Kevin Dangerfield took over as CFO in January 2020;
7.2. Joseph Lloyd, Head of Legal – Insurance and Financial Services over the relevant period, who was responsible (with Todd Morrissey) for negotiating the legal provisions of the engagement letter;
7.3. Janet Connor, the Managing Director of the AA's insurance business during the relevant period. She managed Project Zodiac on behalf of the AA and chaired the Steering Committee and Working Group for the project;
7.4. Gillian Pritchard (née Purdie), the AA's Director of Finance – Insurance at the relevant time;
7.5. Nadia Hoosen, who was the Chief Legal Officer at the AA and attended board meetings as company secretary; and
7.6. Simon Breakwell, who was the AA's CEO throughout the relevant period.
With perhaps one exception, I formed the view that all of these factual witnesses were doing their best to assist the Court and were reasonably honest and straightforward about their recollection of events in 2019 and 2020. To a very large degree, that meant admitting that they had little or no actual recollection of individual emails, calls, or meetings.
Inevitably, when speaking in more general terms or reconstructing, their memory was affected by the narrative which is imposed by hindsight, especially in the context of a dispute. That tendency was especially evident in their written evidence, and I am dubious about assertions about what the witnesses now believe they thought when reading or writing messages back in 2019. For the most part, the tendency was less pronounced in their oral evidence, where few of the witnesses were really claiming to remember what they thought at the time. Most were willing to make sensible concessions about what was likely to have happened or what they might have thought.
The one exception to the general rule was Mr Breakwell, who did claim to remember what had been said and intended at meetings which took place almost three years ago. His recollection did not always fit with the contemporaneous documents and it was noteworthy, for example, that he supposedly remembered perfectly what other board members had said and meant at one such meeting, but he could not say why he had then left that board meeting (as the notes suggested he had done), or whether he had returned thereafter. When I asked him questions about this same board meeting, I received slightly different answers from those which he gave to Counsel, despite him insisting he remembered the meeting vividly. It seemed to me that he had convinced himself of a particular narrative and was determined to insist on that narrative. I did not find this very helpful and did not feel able to place any real weight on his assertions about the content of these meetings.
In his oral closing, Mr Parker KC mounted something of an attack on the evidence of Mr Buck. For example, he suggested that parts of Mr Buck's written evidence sought to give the impression that the AA had caused delay in the agreement of Fenchurch's terms, but when pressed Mr Buck had accepted that the AA had been waiting for Fenchurch. He was also critical of Mr Buck's answers, when first asked about Fenchurch's compliance manual, to the effect that he should try to adhere to its requirements, rather than being required to comply precisely.
I did not consider these criticisms to be entirely fair. It is true that, as with all of the witnesses, Mr Buck's written evidence occasionally showed signs of being coloured by the dispute. But when asked questions and pressed on the details, he was straightforward and quick to make concessions which were contrary to Fenchurch's case. His answers on the compliance manual seemed to me entirely honest: I suspect that he did think of its contents as representing best practice, rather than something which was always achievable in real life. But when invited to focus on what the manual said, rather than how he thought of it, he quickly accepted that it contained requirements, not mere guidance. It may be right to say that a successful result for Fenchurch would be likely to benefit Mr Buck in terms of future bonus or other remuneration, but, in my judgement, that fact did not prevent him taking his oath seriously or from giving answers unhelpful to Fenchurch's case on a number of occasions.
Be all that as it may, this is not a case in which very much turns on the factual witness evidence. The documentary record is quite full. While there were some meetings...
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