African Minerals Ltd v Renaissance Capital Ltd

This appeal, by African Minerals Ltd (“AML”), the Defendant, and this cross appeal, by Renaissance Capital Ltd (“Renaissance”), the Claimant, concern the claim by Renaissance against AML for a fee alleged to be payable in relation to a transaction known as the Shandong Transaction under an engagement agreement dated 7 August 2008 as amended by an agreement dated 7 April 2009. Field J held that in the events that occurred Renaissance was entitled to payment by AML of the sum of $29,907,000 plus interest in relation to that transaction. AML contends that Renaissance’s claim should have been rejected.

Renaissance contends that the Judge erred in his determination of the sum due, and should have awarded it the sum of $93.75 million plus interest. Its cross appeal seeks judgment in this sum. As is evident, it only arises if AML’s appeal is dismissed, and not if it succeeds. Having heard the submissions of counsel on behalf of AML and Renaissance in relation to AML’s appeal, we stated that it was unnecessary to hear submissions on Renaissance’s cross appeal.

The Judge made orders for the payment by AML to Renaissance of other moneys, claimed under other agreements and/or in relation to other transactions, which are not the subject of appeal. He also made decisions on allegations of estoppel, which similarly are not the subject of appeal. I shall therefore confine my judgment to the issues on this appeal and cross appeal, and to the facts relevant to the resolution of those issues.

As will be seen, the appeal concerns a straightforward question of construction of the amended engagement letter, referred to before the Judge as the ATA. It follows that the recital of the facts can be much abbreviated. I take them from the judgment.

The parties

Renaissance is the UK regulated arm of Renaissance Capital, an investment bank which originated in Russia. AML is a company formerly listed on AIM which at all material times owned through subsidiary companies rights to develop and exploit mineral assets in Sierra Leone, including in particular a very large iron ore deposit at Tonkolili and a smaller iron ore deposit at Marampa.

The Chairman of AML is Mr Frank Timis who has had a successful entrepreneurial career founding and developing natural resources companies with assets in Australia, and North and West Africa, and elsewhere.

AML held its interest in the Tonkolili deposit and the related infrastructure (a railway and a port and a power facility) through three wholly owned Bermudian subsidiaries, respectively, Tonkolili Iron Ore Limited (“TIO”), African Railway & Port Services Limited (“ARPS”) and African Power Limited (“AP”) (together “the Bermudian subsidiaries”). Each of the Bermudian subsidiaries had Sierra Leone subsidiaries, respectively Tonkolili Iron Ore (SL) Ltd (“TIOSL”), African Railway & Port Services (SL) Limited (“ARPSSL”) and African Power (SL) Limited (“APSL”). TIOSL owned and operated the mine; ARPSSL owned and operated rail and port assets; and APSL owned and operated power generation assets. The latter two companies were referred to as “the infrastructure companies”, and the Sierra Leone companies collectively were “the project companies”.

The Agreements

On 28 May 2008, Renaissance and AML entered into what has become known as the Umbrella Agreement (“the UA”). Under this agreement, Renaissance was appointed exclusive financial adviser to AML for 24 months (“the Engagement Period”) and a further 12 months (“the Tailing Period”) following the end of the Engagement Period, in connection with 3 different defined types of transaction: “M&A Transaction”, “Alternative Transaction” and “Change of Control Proposal”. In consideration for Renaissance’s services AML agreed to pay it “fees equal to those customarily received by major international investment banking firms for similar services at such a time”.

On 7 August 2008, Renaissance and AML entered into an agreement, in an engagement letter, referred to in the judgment as the Tonkolili Agreement and as the TA, relating to TIO. I shall similarly refer to it as the TA. Its provisions included the following:

1.

The Client [AML] hereby engages Renaissance as its exclusive financial adviser in connection with any proposed Sale (as defined below) of the Tonkolili Iron Ore Company (collectively, including any successor entities that may be formed for the purposes of the transactions described herein, the “Company”) to one or more financial or strategic investors, (each a “Purchaser”). The proposed Sale is currently envisioned to be conducted in two phases, as follows:

a.

A Sale, representing 20% of the outstanding shares of the Company, expected to take place in 2008 (herein “Phase One”). The target Consideration (as defined below) of Phase One that Renaissance shall attempt to achieve is not less than US$250 million; provided always that any fees payable hereunder shall not be conditional on such target being met; and,

b.

A subsequent Sale, representing either 29% of the outstanding shares of the Company, or 80% of the outstanding shares of the Company (at the election of the Client), expected to take place in 2009 (herein “Phase Two”).

For the purposes of this Agreement,

(a)

…

(b)

A “Sale” shall mean any transaction or series or combination of transactions regardless of the structure or form of such transaction, other than in the ordinary course of trade or business, whereby, directly or indirectly, control of or an interest in the Company or any of its businesses, revenues, income or assets, or those of any of its subsidiary companies, is transferred, directly or indirectly, for consideration, including, without limitation, a sale or exchange of capital stock (whether primary or secondary) or assets, a merger or consolidation, a tender or exchange offer, a leveraged buy-out, the formation of a joint venture, minority investment or partnership, or any similar transaction.

(c)

“Consideration’’ shall mean the gross value of all cash, securities and other property paid by an acquiring party to a disposing party or parties in connection with the Sale or the gross value of all cash, securities and assets contributed by the parties in the case of a Sale that takes the form of a joint venture or strategic partnership. The value of any such securities (whether debt or equity) or other property shall be determined as follows: (1) where the securities are freely tradable in an established public market, the value will be determined on the basis of the last market closing price prior to the entering into of an agreement for such Sale; and (2) where the securities are not freely tradable or have no established public market, or if the consideration utilised consists of property other than securities, the value shall be the fair market value thereof. “Consideration” shall also be deemed to include the aggregate principal amount of any indebtedness for money borrowed, any unfunded pension liabilities, guarantees assumed, and any other financial liability by the acquirer in connection with a Sale, either contractually or by operation of law. If the Consideration to be paid is computed in any currency other than US Dollars then the value of such currency shall, for the purposes hereof, be converted into US Dollars at the prevailing exchange rate on the date or dates on which such Consideration is paid.

(d)

“Completion” of Phase One shall be deemed to have occurred on the date of receipt of any Consideration pursuant to a definitive agreement for the Sale under Phase One. “Completion” of Phase Two shall be deemed to have occurred on the date of receipt of any Consideration pursuant to a definitive agreement for the Sale under Phase Two.

2.

(a) Subject to clause 2(c) below, Renaissance hereby accepts the engagement described in clause 1 above and in that regard agrees to:

i.

develop with the Client and present to the Client a list of prospective Purchasers;

ii.

assist the Client with necessary analysis of the business and financial conditions of the Company;

iii.

advise with respect to the structuring of the Sale;

iv.

advise on the proposed purchase price and other terms and conditions of the Sale;

v.

advise on and assist in negotiations and related strategy concerning the Sale;

vi.

co-ordinate and assist the Client’s other professional advisers in the preparation and negotiation of related documentation; and

vii.

provide any other advice, service or assistance that may be reasonably requested by the Client of Renaissance in its capacity as exclusive financial adviser in relation to the Sale

(b)

…

(c)

…

3.

…

4.

(a) The term of Renaissance’s engagement to conduct Phase One, hereunder (the “Phase One Term”) shall extend from the Commencement Date until the earlier of Completion and 6 months after the Commencement Date, unless extended by mutual written consent. The term of Renaissance’s engagement to conduct Phase Two, hereunder (the “Phase Two Term”) shall extend from the Completion of Phase One until the earlier of Completion of Phase Two and 12 months after the Completion of Phase One, unless extended by mutual written consent. Either party may terminate this Agreement at any time, with or without cause, by giving to the other party at least 10 days’ prior written notice. Notwithstanding the termination or expiration of this Agreement, clauses 3(b), 4, 5, 6(b), 7 to 9 (inclusive) and 11 to 14 (inclusive) shall remain in full force and effect. It is expressly agreed that following the expiration or termination of this Agreement, Renaissance will continue to be entitled to receive fees that have accrued prior to such expiration or termination but are unpaid, as well as reimbursement for expenses. It is further agreed that if any Sale similar in nature to Phase One is consummated within 6 months after the Commencement date of the Phase One Term, or if a definitive sale agreement is entered into with a party that Renaissance was in discussions with and has introduced to the Client during the period of the Phase One Term or within 6 months after the Commencement date of the Phase One Term which results in the Sale similar in nature to Phase One, Renaissance shall be entitled to its full Phase One Base Fee as described below. It is further agreed that if any Sale similar in nature to Phase Two is consummated within 12 months after the Completion date of Phase One, or if a definitive sale agreement is entered into with a party that Renaissance was in discussions with and has introduced to the Client during the period of the Phase One Term or Phase Two Term within 12 months after the Completion date of Phase One which results in the Sale similar in nature to Phase Two, Renaissance shall be entitled to its full Phase Two Success Fee as described below. Renaissance and the Client agree that the term of the mandate for both Phase One and Phase Two may be extended, entirely at the discretion of the Client, where any delay in the Sale process has been outside of the control of Renaissance.

5.

(a) As compensation for the services to be rendered by Renaissance hereunder the Client shall pay Renaissance a fee (the “Fee”) as follows …

(i)

At the completion of Phase One…

(ii)

…

(iii)

At the completion of Phase Two …

(b)

…

(c)

The Fee shall become due and payable to Renaissance within 10 (ten) business days from Completion.

(d)

In the event the size and/or the structure of the Sale changes from that currently envisaged, the Client agrees to negotiate in good faith such changes to this Agreement as may be necessary to reflect an alternative fee structure based on Renaissance’s reasonable assessment of fees customary for transactions of similar structure and size.

6.

The Client shall:

(a)

…

(b)

without prejudice to clause 7 below, reimburse Renaissance, upon written demand and on completion of the Sale, in respect of all its out-of-pocket expenses incurred in connection with or arising from this engagement.…

14.

…

(c)

This Agreement represents the whole agreement between the parties relating to the matters referred to herein and supersedes all previous agreements and understandings between them in such specific connection and may not be amended or modified except in writing and signed by the duly authorised officers of the Client and Renaissance.

Following the execution of the TA, Renaissance did a great deal of work to progress a transaction for the raising of a large amount of capital. This work included contributing to and assisting in the formulation of an operational development plan of the Tonkolili mine and associated infrastructure and producing a financial model, specific to the operational development plan, for use, inter alia, in evaluating different operational scenarios including the mine, rail, port and power projects. In addition, there were frequent meetings and operational workshops with AML personnel.

The TA’s term expired on 7 February 2009, at which point no capital raising transaction had been agreed.

On 8 April 2009, a further letter agreement was signed on behalf of Renaissance and AML. The Judge referred to it as the ATA, and so shall I. It is under this agreement that Renaissance contends that its fee became payable. The letter had been prepared the previous day, and was dated 7 April 2009, but nothing turns on this. It was addressed to Mr Timis. It was as follows:

This letter agreement confirms, with effect from 7 February 2009, the agreement by [AML] or any of its affiliates (the “Client”) and Renaissance Capital Limited (“Renaissance”) to amend the engagement letter (the “Engagement Letter”) entered into by the Client and Renaissance on 7 August 2008 appointing Renaissance as financial advisor in connection with a proposed Sale of the [TIO], or any successor entities formed for the purposes of the Sale.

1.

The parties hereby agree to the following amendments to the Engagement Letter:

(a)

Renaissance’s engagement may result in a single transaction or a series of transactions, each representing a Sale, and that the terms “Phase One” and “Phase Two” are no longer relevant to the engagement.

Therefore, the second sentence of clause 1 shall be deleted in its entirety.

(b)

Clause 1 (d) shall be amended to read, in its entirety, as follows:

‘“Completion” shall be deemed to have occurred on the date of receipt of any Consideration pursuant to a definitive agreement for any Sale. In the case of a series of transactions representing a Sale, ‘Completion’ shall be deemed to have occurred on the date of receipt of any Consideration pursuant to a definitive agreement for any single transaction in the series’.

(c)

Clause 4 (a), shall be amended to read in its entirety, as follows:

“Either party may terminate this Agreement at any time, with or without cause, by giving to the other party at least 10 days’ prior written notice. Notwithstanding the termination of this Agreement, clauses 3(b), 4, 5, 6(b), 7 to 9 (inclusive) and 11 to 14 (inclusive) shall remain in full force and effect. It is expressly agreed that following the termination by either party of this Agreement, Renaissance will continue to be entitled to receive fees that have accrued prior to the termination but which are unpaid, as well as reimbursement for expenses. It is further agreed that if any Sale is consummated within one (1) year of the date of any termination by the Client, Renaissance shall be entitled to the fees as set out in clause 5.”

(d)

Clause 5(a) shall be amended to read, in its entirety, as follows:

As compensation for the services rendered by Renaissance hereunder the Client shall pay Renaissance a fee (the “Fee”), net of any value added tax, withholding tax or similar tax if applicable. Where 100% of the Company is sold in a Sale, the Fee shall be calculated as a percentage of the Consideration as follows:

Except as otherwise stated herein, the terms, conditions, obligations, representations and agreements of the parties in the Engagement Letter [the TA] shall continue to apply, and shall apply to this letter agreement and shall be incorporated herein. The parties agree that terms not defined in this letter agreement shall have the definition given to them in the Engagement Letter. This letter agreement shall be governed by and construed in accordance with laws of England.

As will be seen, the crucial, indeed the only, question on AML’s appeal concerns the meaning of the words “if any Sale is consummated” in clause 4(a) of the amended agreement.

Subsequent Events

On 1 June 2009, AML concluded a Consulting Services Agreement (“the MEI Agreement”) with a Singapore company, Metal Exchange International Pte Ltd (“MEI”) which provided that MEI would seek principal investors from the Far East and that if it introduced investors who subscribed for new shares in AML or acquired 100% of “the Tonkolili Project” it would be paid a fee of 3.5% of the total consideration paid.

AML negotiated with Shandong Iron & Steel Group Company Limited (“SGC”) for the sale of a stake in the Tonkolili project and a long term off-take agreement at discounted prices. SGC had been introduced to AML by Mr Poon of MEI.

On 8 July 2010, SGC and AML signed an initial Memorandum of Understanding (“MOU”) which contemplated a Subscription Agreement under which SGC would acquire a 25% stake in TIO, ARPS and AP in 3 stages for a total consideration of $1.5 billion and an off-take agreement for 10 million tons per year of iron ore from the Tonkolili mine at prices below a benchmark FOB price.

By letter dated 2 September 2010, AML gave notice of termination of the UA (the term of which had in fact already expired) and the ATA effective from 13 September 2010.

On 15 September 2010, AML and SGC executed a restated and amended MOU. This and the first MOU contemplated a subscription agreement and off-take agreement to be concluded simultaneously, with both being subject to Chinese Government and regulatory approvals and satisfactory due diligence.

On 29 July 2011, AML and SGC signed the following agreements in relation to the proposed Shandong Transaction:

The Shandong Subscription Agreement included a number of conditions precedent to completion. They included:

Pursuant to the Shandong Subscription Agreement, “Completion” would occur on the “Completion Date”, being “3 Business Days following the day on which the last of the Conditions is satisfied or waived in accordance with this Agreement (save for any Condition which, by its nature, may only be satisfied on the Completion Date), being in any event no later than the Long Stop Date” (31 December 2011).

In fact, the satisfaction of the Conditions took longer than initially anticipated and the parties agreed to extend the Long Stop Date to the end of March 2012.

It was because it was anticipated that a definitive off-take agreement would take some considerable time to finalise that the parties executed the Framework Off-take Agreement. This agreement set out the principles to govern the definitive Off-take Agreement and was intended to constitute a contractual document that could be submitted for preliminary review to the National Development and Reform Commission (“NDRC”), together with the Shandong Subscription Agreement and the shareholders’ Agreement. Thus, in addition to stipulating for samples of iron ore to be provided for analysis, the Framework Off-take Agreement provided that the types and quantities of iron ore products to be the subject of the final agreement were to be as set out in Schedule 1 and specified the principles applicable to the negotiation of a pricing mechanism and the agreed benchmark price calculation methodology.

Heads of terms for the Off-take Agreement setting out the core commercial terms were signed on 14 December 2011 and the definitive Off-take Agreement was executed on 28 March 2012. Under this agreement, SGC was entitled to purchase 2 million tons of ore per year from the Tonkolili mine down to 2013, and thereafter 10 million tons per year at prices discounted by reference to an FOB benchmark. The agreement also gave SGC a put option for the sale of its 25% interest in TIOSL, ARPSSL and APSL at fair market value without requiring SGC to relinquish its rights to purchase the agreed quantities of iron ore at the agreed prices if Mr Timis ceased to be a director of AML.

By 30 March 2012, the requisite government and regulatory approvalshad been obtained. The parties agreed to waive the requirement of approval in respect of guarantees under the Shandong Subscription Agreement. The Shandong Transaction completed on 2 April 2012 when the funds due from SGC were received by AML.

On 17 April 2012, Renaissance sent an invoice of the same date to AML requesting payment of a fee under the ATA in the sum of $93.75 million in respect of the Shandong Transaction. It was not paid.

It is common ground that Renaissance’s claim depends on the Shandong Transaction having been “consummated”, within the meaning of the ATA, by 13 September 2011, i.e., within 1 year of the termination of the ATA Ad: see clause 4(a).

As at that date, the Shandong Transaction had not been completed. The Shandong Subscription Agreement, the shareholders’ agreements, and the Framework for an Off-take Agreement had been entered into, but completion of the Subscription Agreement was subject to unsatisfied conditions precedent. The shareholders’ agreements depended on completion of the Shangdong Subscription Agreement. The Framework for an Off-take Agreement was expressed to be binding, but required the parties to negotiate and to agree the terms of an Off-take Agreement. The conditions precedent under the Shandong Subscription Agreement were not satisfied until after 13 September 2011.

AML contends that in order for a sale to be “consummated” within the meaning of the TA and the ATA, it must be completed. Alternatively, as a fall-back argument, it contends that a sale is not consummated until all the conditions precedent under the contract for sale have been satisfied or waived. On either interpretation, nothing is due to Renaissance.

Renaissance contends that the Shandong Transaction was consummated when all, or all of the material terms of the transaction were agreed. This was at the latest when the Shandong Subscription Agreement was entered into. Its submissions were helpfully and accurately summarised by the Judge:

159.

Mr Brindle submitted that the parties having used the word “Completion” (as defined) as the trigger for payment, the presumption must be that they intended “consummated” to mean something else, the more so since the concept of “completion” of transactions is well known and well understood in the world of commerce, and yet completion was not specified as a trigger event in the tail. Further, if “consummation” means something different than completion, consummation must arise earlier, not later than completion and the obvious pre-completion stage intended was when agreement was reached on the transaction.

160.

It is true that the definition of Sale in the ATA is “any transaction … whereby directly or indirectly control of or an interest in the Company or any of its businesses, … or assets … is transferred …for consideration …”, but this definition must implicitly include all the elements that occur along the way to completion, including agreement because in different places in the TA and ATA there are express and implicit references to an agreement for a sale (see e.g. the definitions of Consideration and Sale and clause 2 (iii) and (iv)).

161.

In Mr Brindle’s submission, most commercial people will know when a deal has been agreed, as is exemplified by the AIM rules that require an announcement “as soon as the terms of any substantial transaction are agreed,” notwithstanding that no definitive sale agreement has yet been executed.

162.

The reason “consummation” rather than “agreement” or the execution of a definitive agreement was chosen is because the definition of “Sale” includes “tender or exchange offer”, with result that the TA and the ATA cover both private sales and public takeovers. In a non-hostile public takeover there is in a sense an “agreement” between the offeror and the board of the offeree, but this is documented in a publicly announced offer document rather than a contract; strictly, what is happening is the recommendation of a binding offer by the board to shareholders, followed by individual contracts of sale between the shareholders who accept the offer and the offeror.

163.

In cases of private sales, there will almost always be a definitive agreement before completion and there will usually be agreement on all material terms before this step. Thus, in these cases consummation will have definitely occurred on the execution of a definitive agreement and may have occurred beforehand. The definition of Completion should not be read over prescriptively because it is a “deeming provision”. Where there is a public offer for shares completion occurs for the purposes of the TA and ATA in the ordinary way by mutual performance, regardless of the absence of a definitive agreement.

164.

As for AML’s alternative argument that consummation means not only agreement but also the satisfaction of all conditions precedent to performance, this meaning would bring consummation so close to completion that, the choice having been made against completion being the trigger, the parties cannot have intended the word to have this meaning.

The Judge accepted the submissions of Mr Brindle QC on behalf of Renaissance:

170.

In my judgment, the words “if any Sale is consummated” in clause 4 (a) of the ATA mean if the terms of an agreement for a sale, or the main terms thereof, are agreed, for the reasons advanced by Mr Brindle. As Diplock LJ said in observed in Prestcold (Central) Ltd v Minister of Labour [1969] 1 WLR 89 at 97B (CA):

[T]he habit of a legal draftsman is to eschew synonyms. He uses the same words throughout the document to express the same thing or concept and consequently if he uses different words the presumption is that he means a different thing or concept.

171.

In the instant case there is on AML’s case synonymity at two levels: (i) Completion (as defined) is used in several places within the agreement; and (ii) outside the agreement, the concept of completion of an executory sale agreement by mutual performance is well known in commercial circles and would have been well known to Renaissance and AML. The presumption that “consummation” had a different meaning from “Completion” is therefore a strong one here and in my opinion it is not displaced by any of Mr Adam’s submissions, attractively presented as they were. In particular:

(1)

I am doubtful that Mr Adam’s building-block submission that Completion is the fee entitlement trigger during the main term is correct, but even if it is, I think that the use of a different word than Completion in the relevant part of clause 4 (a) in the ATA shows that the parties did not intend that the fee entitlement trigger should be the same in the tail period as during the main term. It would, after all, have been simplicity itself for the word Completion to have been used, but instead the unusual word “consummated” was adopted.

(2)

I agree with Mr Brindle that all the elements of a sale, including agreement, are necessarily included in the definition of Sale and thus this definition does not point to “consummated” meaning “Completion” rather than agreement.

(3)

Mr Adam’s submission contrasting “consummated” and “definitive agreement” where Renaissance has introduced the buyer in clause 4 of the original TA was not a strong one, given the excision of the definitive agreement provision where Renaissance has introduced the buyer from clause 4 in the ATA.

172.

If, as I hold to be the case, consummation has a different meaning from Completion, I think that it must mean something that occurs prior to completion, and the only realistic candidate is agreement, whether or not the agreement is subject to any conditions precedent. Consistent with the presumption against synonymity, I do not think consummation means the execution of a definitive agreement and I agree with Mr Brindle that “consummated” was likely to have been chosen over “definitive agreement” having regard to the inclusion of “tender or exchange offer” in the definition of Sale, which is a boiler plate provision.

173.

In my opinion, in the great majority of cases it will be readily apparent from a practical commercial point of view when all the terms or the main terms of a deal have been agreed. As Mr Brindle submitted, this approach is strongly supported by the requirement in the AIM rules that there be an announcement as soon as the terms of any substantial transaction are agreed, whether or not a definitive agreement has been executed.

I regret that I am unable to accept the Judge’s construction of the ATA, or his reasons for accepting it.

“Consummated” is an ordinary word of the English language. As both sides accepted, it is not a legal word of art. It has no technical meaning. But it has a meaning. To consummate, means, as the Judge set out in a footnote, “to bring to completion; to accomplish, fulfil, complete, finish”. Its most common use is in relation to marriage. A marriage is not consummated when the couple become engaged, even if their engagement is legally binding (and actions for breach of promise of marriage were once common). A marriage is not consummated when the couple’s wedding ceremony takes place.

In order to determine when something is consummated, it is necessary to ask what it is that has to be consummated. In this case it is the Sale. The natural meaning of the words “if any Sale is consummated” is “if any Sale is completed”, i.e., the relevant interest is transferred pursuant to an agreement for a Sale within the wide contractual definition. In my judgment, to say that a Sale is consummated when an agreement for a sale is made, let alone when the major terms of a sale are agreed, is inconsistent with the contractual language.

ALM referred to what Mustill LJ (as he then was) said in Butlins Ltd v Joyce Hawkin, an unreported case in which judgment was given on 15 November 1989. The facts are irrelevant. He said:

This transfer took place in two stages. The first stage consisted of the execution of a pair of written assignment agreements made on 28 September 1982 in terms to which I shall later refer. It was consummated at the second stage by a conveyance from the vendors to the purchasers on 6 February 1984.….

This was no more than the word “consummated” being used in its normal sense.

Of course, the parties could have agreed that the fee would be earned if an agreement was entered into within the relevant period; but they did not. They used the word “agreement”, and the expression “definitive agreement” in both the TA and the ATA, so they should be taken to have intended something other than an agreement or a definitive agreement.

The argument based on synonymity goes nowhere. On Renaissance’s case, a Sale is consummated when it is agreed, so consummated is used as a synonym for agreement. On AML’s case it means completion of a Sale. Either way, there is a degree of synonymity. It is however, understandable that the parties used a word other than completion, because they had given Completion a special contractual meaning.

The Judge said (para.172) that “if consummation has a different meaning than Completion, it must mean something that occurs prior to completion”. Although it is true that in the second use of “completion” the judge did not use the capital “Completion” which is expressly defined, logically, even on the judge’s own analysis, the contrast only requires that consummation should occur before “Completion”. This, under the terms of the contract, was “deemed to have occurred on the date of receipt of anyConsideration pursuant to a definitive agreement for any Sale”. So completion in the non-defined sense, meaning the transfer of the shares in TIO, might take place either before or after some of the consideration had been received. There is simply no logical reason why a distinction between consummation and “Completion” as defined should compel the conclusion that consummation must mean some event occurring prior to “completion” as generally understood. Yet it was this contrast which caused the judge to conclude that the only realistic candidate was “agreement”.

The Judge’s finding that consummation takes place when the main terms of a deal have been agreed is inconsistent with the contractual language, and introduces a degree of uncertainty. What are the main terms? Renaissance’s and the Judge’s reliance on the requirement of the AIM rules is unhelpful. In the first place, the object of the rules is to prevent a false market in shares. A hostile takeover approach may affect the value of shares in a company, and knowledge of the approach should be made available to the market. It does not follow that such an approach involves any binding agreement. In any event, the relevant AIM rule requires notification “as soon as the terms of any substantial transaction are agreed, disclosing the information specified by Schedule Four”. It is not obvious that this requires notification when “the main terms” of a transaction are agreed. The information listed in Schedule Four is appropriate to a definitive sale agreement, not to an agreement on the main terms of a transaction. In addition, any vagueness in determining when something is to be disclosed to the market may be acceptable, since it may involve a degree of judgment, but such vagueness would be inappropriate in a contractual trigger for a substantial fee.

I entirely accept that the commercial sense of a transaction must be borne in mind when construing any commercial agreement. The less the commercial sense of a construction of an agreement, the greater the need to scrutinise its literal wording and if possible to depart from it to give a commercially sensible interpretation. I accept that it would have made commercial sense for the parties to have agreed that the fee should be paid if a Sale was agreed within the relevant period, provided it was duly completed. Equally, however, it is understandable that they should have made completion of a Sale within that period as the requirement for the payment of the fee. AML’s interpretation does not offend commercial common sense.

In reaching his conclusion, the Judge did not analyse the terms of the original TA. In my judgment he should have done so. Mr Brindle QC accepted that it is legitimate to have regard to the terms of the TA when construing the ATA, but submitted that only limited assistance could be derived from it. I do not agree. This is not a case in which the later agreement replaced the earlier agreement. The earlier agreement was amended, not replaced, and much of it was retained. It is also not a case in which in the relevant respects the parties used different words in their later agreement from those in the original agreement. Of course, if the later agreement uses different words from the original agreement, it is to be presumed that they intended a different meaning (although the possibility that the parties intended to clarify the original provision must be borne in mind). Here, though, the parties retained the words “if any Sale … is consummated within …” in clause 4 of the TA in clause 4(a) of the ATA. The inference that the words have the same meaning in the ATA as in the TA is obvious, and made more obvious by reference to clause 2 of the ATA.

The relevant words of the TA are in clause 4:

It is further agreed that if any Sale similar in nature to Phase One is consummated within 6 months after the Commencement date of the Phase One Term, or if a definitive sale agreement is entered into with a party that Renaissance was in discussions with and has introduced to the Client during the period of the Phase One Term or within 6 months after the Commencement date of the Phase One Term which results in the Sale similar in nature to Phase One, Renaissance shall be entitled to its full Phase One Base Fee as described below.

Similar words were used in relation to Phase Two, and it is unnecessary to consider them separately.

There was a difference between the parties as to whether the words “during the period of the Phase One Term or within 6 months after the Commencement date of the Phase One Term” relate to the date of entry into a definitive sale agreement or to the time when Renaissance was in discussion with or introduced the purchaser. It only makes sense for the words in question to refer to the date of the definitive sale agreement, and in my judgment they do. It makes no sense for the words “during the period of the Phase One Term or within 6 months after the Commencement date of the Phase One Term” to relate to the introduction by Renaissance. Renaissance would have no reason to introduce, and no interest in introducing, an investor to AML after the expiration of the Phase One Term, since their engagement would be at an end and absent some further agreement about commission, Renaissance would not be entitled to anything for effecting the introduction.

Renaissance was to be entitled to its fee if it introduced a purchaser who entered into a definitive sale agreement in the relevant period, if it resulted in a sale, but was only to be entitled to a fee resulting from a Sale to someone unconnected with Renaissance if the sale to that purchaser was actually completed during that period. One would expect Renaissance to have a greater right to its fee (or rather a longer period during which it might be earned) in the case of someone it introduced than in the case of a wholly independent purchaser. Clearly, in the TA, consummation is something other than the entry into a definitive sale agreement. Commercial common sense requires it to involve more, not less. Yet on Renaissance’s case, it means less: agreement on main terms, an agreement less than a definitive agreement.

It is perhaps worth noting that under the TA, after the expiration or termination of the agreement the making of even a definitive sale agreement with a party introduced by Renaissance did not make the fee payable. A fee would be earned only if and when the definitive sale agreement resulted in a sale, i.e., that the agreement was completed. The obvious explanation of the absence in the ATA of the words “which results in [a] Sale” is that they were unnecessary, since consummation occurs only when there is completion of a Sale.

Thus the terms of the TA confirm my view as to the construction of the ATA.

Lastly, the Judge was influenced by his finding that the ATA extended to Sales (as defined) in AML itself, such as a takeover or a purchase or subscription for shares in that company. He pointed to the inclusion of the words “tender or exchange offer” in the definition of Sale. I have considerable difficulty with his finding that AML is to be read into the ATA, but AML has not appealed against that finding, and it is bound by it. Nonetheless, I do not think that this point assists Renaissance. A tender or exchange offer, or a takeover or a subscription, would be said to be consummated when the shares are transferred or issued, not when any agreement is made. Moreover, in the case of a hostile takeover, there would be no previous agreement. Even in the case of an agreed takeover, there would often be no more than a recommendation of the directors to the shareholders that the bid was acceptable. A takeover could be said to be consummated when the shares in the target company are transferred to the acquiring company, so that if “consummated” has the meaning that I favour, it is appropriate to a takeover. The Judge seems to have accepted a submission from Renaissance that “consummated” was used instead of the word “agreed” in order to encompass the takeover situation, when there will usually be no agreement. But this means that there are two meanings to the word; either agreement or, where agreement is not an element in the relevant sale, completion. This cannot be right; there is no reason to give the word this contorted meaning.

For these reasons, I consider that Renaissance did not become entitled to a fee in respect of the Shandong Transaction, since it was not consummated within the period of 1 year of the date of AML’s termination of the ATA. I would allow the appeal and set aside paragraph 1(a) of the Judge’s order.

If my Lord and my Lady agree with my conclusion, it is unnecessary to consider AML’s fall back argument that if consummation would have been satisfied by a definitive or binding agreement for the sale to SCG within the relevant period, there was in fact no such agreement. It is also unnecessary to consider Renaissance’s cross appeal, and I would dismiss it.

I agree.

I also agree.