Thomas Crema v Cenkos Securities Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Aikens,Lord Justice Hughes |
| Judgment Date | 20 January 2011 |
| Neutral Citation | [2010] EWCA Civ 1444,[2011] EWCA Civ 10 |
| Docket Number | Case No: A3/2010/0674 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 January 2011 |
[2010] EWCA Civ 1444
Mr Jonathan Hirst QC (Deputy Judge)
Before: The Chancellor of the High Court
Lord Justice Hughes
and
Lord Justice Aikens
Case No: A3/2010/0674
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION (COMERCIAL COURT)
Mr Hugo Page QC (instructed by De Cruz Solicitors, London) for the Appellant
Mr Orlando Gledhill (instructed by Herbert Smith LLP, London) for the Respondent
Hearing dates: 3 rd and 4 th November 2010
Lord Justice Aikens:
Synopsis of the case.
This appeal from an order dated 16 May 2010 of Mr Jonathan Hirst QC, sitting as a Deputy High Court Judge in the Commercial Court, concerns the basis on which the appellant (“Mr Crema”) and the respondent (“Cenkos”) agreed that Mr Crema would be paid a fee for acting as a sub-broker for Cenkos in raising funds for a venture capital company called Green Park Ventures (“GPV”) in 2007–2008. Cenkos is a large, well-established stockbroker and corporate finance adviser based in the City of London. It is well-known for specialising in raising capital for small and mid-cap companies. Cenkos engaged Mr Crema, who has worked as an investment banker in the City for 20 years, as a “sub-broker” to find investors who would be prepared to finance a project of GPV's to refine low quality used cooking and vegetable oils for use as bio-diesel. It is accepted that there were two contracts concerning commission. First, there was a contract between Cenkos and GPV. Secondly, there was a contract between Cenkos and Mr Crema. It is accepted, moreover, that Mr Crema's fee was eventually agreed as 70% of Cenkos’ final commission payable by GPV, which was fixed at 7% of the total of £18 million raised for GPV.
It is not in dispute that Mr Crema's fee would be payable after GPV received the total funds from the investors, which in the event was on 12 June 2008. It was always accepted that Mr Crema introduced Elettra Sviluppo SrL who invested £2 million in GPV on 22 February 2008. The judge found that Mr Crema was also instrumental in introducing BlueCrest Capital Management Ltd (“BlueCrest”) to GPV and that BlueCrest paid £16 million to GPV in two tranches: £11 million on 1 April 2008 and £5 million on 12 June 2008. 1 That conclusion is not appealed. It is also agreed that it is Cenkos, not GPV, that is liable to pay Mr Crema his fee.
The only dispute is whether Mr Crema became entitled to be paid his commission by Cenkos only upon the total brokerage fee being actually received by Cenkos from GPV, or whether he became entitled to payment of his commission by Cenkos even if Cenkos itself had not received payment of the commission from GPV. This problem has arisen because GPV refused to pay Cenkos any commission, even though GPV received, on time, all the £18 million funds raised through Mr Crema as sub-broker for Cenkos. GPV then collapsed into insolvent administration in 2009, albeit after Cenkos had started proceedings against it in attempt to recover the commission Cenkos said was due.
The total fee claimed by Mr Crema is £882,000. He also claims interest on that sum.
There was a six day trial before Mr Hirst QC. The judge heard oral evidence from Mr Crema and Mr Joe Nally, who was the Head of Natural Resources in Cenkos from 2007 to 2009. The judge found them both to be honest witnesses but he concluded that neither was entirely reliable. He considered both tended to exaggerate and that Mr Crema was inclined to a degree of wishful thinking. 2
The judge also heard “expert evidence” from Mr Glenn Cooper, on behalf of Mr Crema, and Mr Adam Hart on behalf of Cenkos. Mr Cooper and Mr Hart gave evidence on the general industry practice in the City of London on when a sub-broker would be paid his commission by a broker when the sub-broker had been instrumental in raising finance for a client of the broker. Neither witness suggested that there was a settled “trade custom” in the sense of an invariable, certain and notorious usage, such as could imply a term into a contract, provided that it was not inconsistent with an express term. However, the judge accepted that when a broker and a sub-broker are involved in raising finance for a client on a commission basis then there is a general market practice or understanding in the City of London that a sub-broker is not paid until the broker receives payment from the client. Moreover, the judge accepted the evidence that if a sub-broker were paid in advance of receipt of the fee by the broker, that would be regarded as an “indulgence”; it would be most unlikely to occur unless the broker was certain that he would receive payment from the client fairly shortly. 3
There were discussions between Mr Crema and Cenkos about the terms on which Mr Crema would be paid his commission by Cenkos from October 2007 until 13 March 2008. The judge analysed them and reached the following main conclusions. First, that a contract between Mr Crema and Cenkos was concluded on 25 October 2007. Secondly, its terms evolved as a result of the discussions between the parties over the period from 25 October 2007 until Cenkos sent Mr Crema a letter dated 11 March 2008. Thirdly, that the terms of that letter were themselves modified as a result of a telephone conversation between Mr Crema and Mr Nally on 13 March 2008.
Fourthly, the judge held, at [84], that the “sense” of this letter “and of the earlier letters and discussions” was that the broker and sub-broker, Cenkos and Mr Crema “were in it together”. 4 Mr Hirst's judgment continues:
“Any other arrangement would be rather uncommercial, placing the whole risk of non-payment by GPV on Cenkos. There was an expected fund of brokerage to be received from GPV. They would share in it 70:30 in relation to investments raised by Mr Crema….”. 5
The judge therefore held, fifthly, that Mr Crema was not entitled to be paid his sub-brokerage whether or not Cenkos received payment from GPV. He held that “the contract between Mr Crema and Cenkos entitled him to take a 70% share of the 7% brokerage received from GPV, assuming of course that “his” investors made the expected investments. He had no independent right to payment of brokerage”. 6
The judge said that he had ignored the evidence on market practice in reaching this conclusion, although he said that it strongly supported it. He added that the evidence of market practice suggested that “City practice would be that a clear agreement would be needed if (improbably) a sub-broker was to be entitled to payment of commission irrespective of whether the broker received payment of commission”. 7
Having reached that conclusion, the judge then considered Mr Crema's alternative case. This was that Cenkos was in breach of implied terms of the contract between it and Mr Crema to the effect that Cenkos would take all possible or reasonable steps to ensure that it and Mr Crema would be paid and/or act in this regard as a prudent company would act; alternatively that Cenkos owed Mr Crema a duty of care. Mr Hirst rejected the specific duties that Mr Crema argued must be imposed upon Cenkos by virtue of implied terms in the contract between them. Instead he held that there were two other implied terms to the contract between the parties. The first was that Cenkos would take all reasonable steps to recover the fees due. The second was that Cenkos would do nothing to prevent payment of its fees with the result that Mr Cream was deprived of his fees. 8 However, the judge held that neither of those terms assisted Mr Crema on the facts. He therefore dismissed Mr Crema's claim.
Mr Crema appeals to this court with the permission of Sir Richard Buxton.
The arguments and the Issues on the appeal.
The issues in this case should be short and comparatively simple. They should have been identified first in the pleadings and then refined in the List of Issues. 9 Unfortunately the pleadings served only to confuse things. The Amended Particulars of Claim run to 44 paragraphs in all and plead vast quantities of evidence instead of concentrating on the claimant's case on when and how precisely the contract was concluded, what its express and implied (if any) terms were said to be and the alleged breaches of contract by Cenkos. It is only at paragraph 16 of the Particulars of Claim that it is pleaded that the contract between Mr Crema and Cenkos was one in writing. It is alleged (contrary to Mr Crema's current case) to be “contained in or evidenced by” an email exchange between Mr Crema and Mr Nally on 22 to 23 November 2007 and a letter from Mr Nally to Mr Crema of 25 November 2007. There then follows a prolonged recital of meetings and events between November 2007 until 13 March 2008. It is only at paragraph 39 that the claimant pleads that “in the premises” the sum of £882,000 is “due and owing by Cenkos to Mr Crema under the agreement of March 13, alternatively March 11 2008, alternatively the sum of £900,000 is due and owing under the agreement of 23 November 2007 alternatively 25 November 2007”. The pleading then sets out the alternative case of implied terms and breach of those by Cenkos.
The amended Defence contains 27 paragraphs in all. It does not state Cenkos’ positive case on when and how the contract was made. It does, however, plead that it was agreed and “understood” between the parties that Mr Crema would not receive a fee unless and until Cenkos was paid its fee. It does not identify...
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