Macquarie Capital (Europe) Ltd v Nordsee Offshore Meg I GmbH
| Jurisdiction | England & Wales |
| Judge | Mr Justice Butcher |
| Judgment Date | 28 June 2019 |
| Neutral Citation | [2019] EWHC 1655 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000486 |
| Date | 28 June 2019 |
[2019] EWHC 1655 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Butcher
Case No: CL-2017-000486
Daniel Toledano QC, Nehali Shah and Henry Hoskins (instructed by Travers Smith LLP) for the Claimant
Andrew Spink QC and Matthew Watson (instructed by Enyo Law LLP) for the Defendant
Hearing dates: 1, 2, 7, 8 and 10 May 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This action involves a claim by the Claimant, Macquarie Capital (Europe) Ltd (“MCEL”) for fees. The Defendant, Nordsee Offshore MEG I GmbH (“NOMEG”), denies that any fees are payable.
MCEL is an investment banking firm that provides financial advisory services, including as to mergers and acquisitions, restructuring, debt structuring and project finance. It is incorporated in England. It is part of the Macquarie group of companies, a global provider of banking, financial, advisory, investment and fund management services.
NOMEG was incorporated in Germany on 23 June 2009. Its shareholders are and have at all material times been Windreich AG (“Windreich”) 1 and FC Windenergy GmbH (“Windenergy”), which is wholly owned by Windreich. The Windreich group was founded in Germany in about 1999 by Willi Balz. Its business involved the design, construction, operation and sale of onshore and offshore windfarms.
Chronology
Most of the facts giving rise to the present dispute were entirely uncontentious. The following is a summary of the main events.
On 31 August 2009, NOMEG obtained a permit from the German Federal Maritime and Hydrographic Agency (the Bundesamt für Seeschifffahrt und Hydrographie or “BSH”). That permit approved “the installation and operation of 80 wind turbine generators including subsystems in the area of the German Exclusive Economic Zone in the North Sea” in accordance with detailed conditions set out in the permit. At that stage the permit envisaged use of wind turbine generators with a rotor diameter of 116m. On 23 May 2011, TenneT TSO GmbH (“TenneT”), a German Transmission Systems Operator or “TSO” 2, granted NOMEG an unconditional grid connexion commitment.
A project was developed by Windreich which initially envisaged that NOMEG would enter into engineering, procurement and construction (or “EPC”) contracts with multiple suppliers. By about summer 2012 Windreich favoured having most of the EPC contracts under a “turnkey” arrangement, with a consortium consisting of Areva Wind GmbH (“Areva”) (as turbine supplier), and Hochtief Solutions AG (“Hochtief”) (for the “Balance of Plant”). Under this proposed arrangement, the consortium would be responsible for sub-contractors.
By 2012, consideration was also being given by Windreich to securing finance for the project. During the summer of 2012, Deutsche Bank, which had been mandated to raise debt for the project, contacted MCEL as a potential equity investor, but MCEL was not at that point interested in an equity investment.
Windreich had engaged other advisers in relation to the financing of the project. One of these was Fraser Finance LLP (“FF”) appointed by an engagement letter dated 15 October 2012. MCEL was contacted in September 2012 through FF. Windreich and MCEL entered into a Non-Disclosure Agreement signed on 23 October 2012 in relation to “the offshore wind farm project MEG I”. By a side letter to the 15 October 2012 engagement letter, MCEL was appointed to act jointly with FF as co-financial advisers in relation to the “Offshore Wind Farm MEG I in German North Sea”.
On 17 December 2012, however, Windreich notified FF and MCEL that their joint finance-raising mandate was at an end. Windreich was hoping that an equity commitment from MCEL might attract other investors. On 21 December 2012, MCEL informed Windreich that internal approval had been given for it to underwrite 30% or €250 million of the necessary equity finance at financial close of the project.
These discussions led Windreich and Macquarie Capital Group Ltd (“MCGL”), MCEL's parent company, to sign an indicative and non-binding term sheet (“the first term sheet”) on or about 3 January 2013. The first term sheet stated, amongst other things:
(1) That MCGL or affiliates (defined as ‘Macquarie’) would be appointed to manage an equity raising process targeting new equity investors to provide up to €720 million “for the construction of MEG I”, and as debt advisor to the equity consortium “to review on an ongoing basis the proposed structure and terms of the project finance debt providers with a view to ensuring the optimum capital structure and market terms and conditions on terms to be separately agreed, reflecting market conditions.”
(2) In the event that “MEG1” was capable of Financial Close except for the quantum of Construction Equity required, “It is Macquarie's intention to subscribe an amount of equity up to the lower of EUR 250 million or 30% of the equity value of MEG1 at Financial Close…”, subject to a number of conditions.
(3) “Macquarie” would receive 2% of all Construction or Sponsor Equity “raised with respect to MEG1, whether such investment is provided by Macquarie or other investors”, and debt advisory fees of 0.5% of “all debt project finance raised with respect to MEG1”.
(4) Provision was made for Construction Equity (up to €600 million), Sponsor Equity, Sponsor Performance Bonus, and Capital raise process.
(5) The terms were said to be for “discussion purposes only and do not contain any legally binding provisions.”
MCGL and Windreich entered into a further term sheet (“the second term sheet”) on 18 January 2013. This was in similar terms to the first term sheet, but with certain amendments, including:
(1) There was a reduction in the back-stop equity subscription to the lower of €216 million or 30% of the equity value of MEGI at Financial Close.
(2) A statement that the backstop equity subscription was subject to approval by the Principal Investment Committee and Executive Committee and amendment to certain conditions.
(3) Agreement that the second term sheet was confidential and could not be disclosed, save that partial disclosure to certain parties, including the proposed construction consortium, was permitted.
(4) The removal of the wording regarding the terms being for discussion purposes and non-binding and its replacement with a provision that “The Equity raising advisory, Debt raising advisory and Back-stop equity subscription terms above will only become legally binding upon entry into definitive legal agreements at the appropriate point in the transaction as relevant for each term.”
On the same day, 18 January 2013, MCEL and Windreich entered into an Engagement Agreement. The Engagement Agreement comprised an Engagement Letter, which was signed on behalf of MCEL and of Windreich, and MCEL's Standard Terms of Engagement. The Standard Terms of Engagement were incorporated into the Engagement Agreement by the third paragraph and clause 8 of the Engagement Letter.
The terms of this Engagement Agreement are at the heart of the dispute between the parties, and I will set out the most relevant of those terms in due course.
After the conclusion of the Engagement Agreement, difficulties were caused to the finance-raising process by a number of matters. In particular, first, on 5 March 2013, the German public prosecutor carried out an unannounced dawn raid on Windreich's offices. The allegations related to Windreich's financial management and accounting practices. Secondly, there was a suspension of the public trading of Windreich's bonds because of unpaid interest.
By letters of 1 March and 19 March 2013, MCEL warned that as a result of these recent developments “a capital raising is now extremely unlikely under the currently proposed project structure”, and recommended that that structure should be amended to ring fence the project company from the Windreich group. MCEL worked on the ring-fencing proposals. But progress was slowed because of the situation regarding Windreich.
In June 2013, Windreich, MCEL and NOMEG entered into a novation agreement by which NOMEG assumed all Windreich's rights and obligations to MCEL under the Engagement Agreement.
In August 2013, Bank Sarasin applied to the German courts to put Windreich into insolvency. However, on 5 September 2013, Windreich filed for self-administered insolvency. Windreich's CEO, Willi Balz, resigned on or about 9 September 2013, and was succeeded by Werner Heer, whose background was in restructuring distressed and insolvent energy projects. On 1 December 2013, Windreich entered regular insolvency, and as a result Windreich and all the companies in the group it owned came under the control of an insolvency administrator, Holger Blümle from the firm Schultze & Braun. Mr Blümle had to realise assets for the benefit of Windreich's creditors, and Schultze & Braun considered that the best way of realising value from NOMEG was to try and bring the windfarm project to financial close, which would see Windreich's shares sold and cash generated.
By the end of January 2014, a Memorandum of Understanding (“MOU”) had been entered into regarding the acquisition of NOMEG and the provision of funding for the offshore wind project between a proposed equity consortium consisting of MCGL, Arcus Infrastructure Services LLP (“Arcus”), State General Reserve Fund of the Sultanate of Oman, Areva, and CEE Clean Economic Energy AG. A subsequent MOU effective as of 10 March 2014...
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...resort or, as Lord Denning MR once put it, a “counsel of despair”’”: Macquarie Capital (Europe) Ltd v Nordsee Offshore MEG I GmbH [2019] EWHC 1655 (Comm), per Butcher J at [94]. • “The object of the court is to do justice between the parties, and the court will do its best, if satisfied th......