Court of Appeal Rules on Cantor Fitzgerald & Co vs YES Bank Limited Dispute

Introduction

The Court of Appeal has delivered a significant ruling in the case of Cantor Fitzgerald & Co vs YES Bank Limited, concerning the interpretation of an engagement letter between the parties.

The case revolved around whether the term 'private' in the engagement letter qualified only 'placement' or also 'offering or other sale of equity instruments'. The judgment has implications for financial advisory agreements and capital-raising activities.

Background

In late 2019, YES Bank, facing severe financial difficulties, engaged Cantor Fitzgerald & Co, a US-based financial adviser, to assist in raising capital. The engagement was formalized through an engagement letter dated 17 December 2019, later amended on 24 February 2020.

The engagement letter stipulated Cantor's role in connection with a 'Financing', defined as a 'private placement, offering or other sale of equity instruments'. The dispute arose over whether this definition included a public offer (FPO) completed by YES Bank in July 2020.

High Court Ruling

YES Bank contended that the term 'private' qualified all forms of financing mentioned, thereby excluding the FPO from Cantor's entitlement to a fee. The High Court, led by Mr Justice Bright, agreed with YES Bank, limiting Cantor's entitlement to the retainer fee.

Cantor appealed, arguing that the term 'private' only qualified 'placement' and not 'offering or other sale', thus entitling them to a fee for the FPO.

Court of Appeal Decision

The Court of Appeal, comprising Sir Julian Flaux, Chancellor of the High Court, Lord Justice Popplewell, and Lady Justice Falk, upheld the High Court's decision. The court found that the ordinary meaning of the words used in the engagement letter indicated that 'private' qualified all forms of financing listed.

The court emphasized the importance of the contractual context and the surrounding circumstances at the time of the agreement. It noted that public offers were not a viable option for YES Bank in December 2019, given its financial crisis.

Contractual Context

The court highlighted several contractual provisions supporting YES Bank's interpretation. Clause 1 of the engagement letter explicitly distinguished Cantor's role in a Qualified Institutional Placement (QIP) from other forms of financing, reflecting the regulatory requirements in India.

Additionally, Clause 5(i) contemplated equity financings that did not fall within the defined term 'Financing', further supporting the interpretation that 'private' qualified all forms of financing listed.

Implications

This ruling has significant implications for financial advisory agreements and capital-raising activities. It underscores the importance of clear and precise language in engagement letters and the need to consider the contractual context and surrounding circumstances.

Legal professionals and financial advisers must ensure that engagement letters explicitly define the scope of services and the types of financing covered to avoid similar disputes.

Conclusion

The Court of Appeal's decision in Cantor Fitzgerald & Co vs YES Bank Limited clarifies the interpretation of engagement letters in financial advisory agreements. It serves as a crucial precedent for future cases involving capital-raising activities and the scope of financial advisory services.

Legal representatives: Adrian Beltrami KC and Ravi Jackson (instructed by A&O Shearman) for the Appellant, John Taylor KC and Christopher Langley (instructed by Hogan Lovells International LLP) for the Respondent.

Judicial Panel: Sir Julian Flaux, Chancellor of the High Court, Lord Justice Popplewell, and Lady Justice Falk.

Case Citation Reference: [2024] EWCA Civ 695