“Parties have control over the language they use in a contract”.
In the recent case of Cantor Fitzgerald & Co v YES Bank Ltd [2024] EWCA 695 which concerned an engagement between the two companies , the Court of Appeal had to determine whether an adjective used at the beginning of a list is attached to only one noun in a list or to the entire list.
The Facts
In 2019 YES Bank required capital, so it engaged Cantor to assist. The two parties entered into an engagement letter under which Cantor would identify potential investors in YES Bank from outside of India and Europe in return for a flat retainer fee of $500,000, plus a commission of 2% of funds raised. The engagement letter stated that Cantor was specifically engaged to procure investors in connection with “Financing” – defined as:
“private placement, offering or other sale of equity instruments in any form”.
The issues arose when YES Bank raised capital through a Further Public Offer (FPO) and then refused to pay commission to Cantor. YES Bank's refusal to pay was on the basis that the funds were raised through a “public” offer which did not fall within the definition of “Financing” within the engagement letter, countering Cantor's argument that they were entitled to commission as the adjective “private” only applied to the word “placement” and not the other financing methods listed.
Court of Appeal Judgment
The Court of Appeal upheld the lower court's decision and dismissed Cantor's appeal of the High Court decision, finding that no commission was payable to it (circa $7.5 million). They determined that the word “private” applied to all of the financing methods listed under “Financing” within the engagement letter for the following reasons:
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Construction of the contract
The Court summarised the well-practised principles of constructions that apply in that they must “consider the ordinary meanings of the words used in the context of the contract as a whole and the relevant factual and commercial background” and that the intentions of the parties must be identified through the eyes of a reasonable reader.
Taking into account the specific circumstances and the nature of the list, the Courts determined that the indication was such that the parties intended for the word “private” to qualify all of the items within the list. Unless another adjective or determiner is used before the other items in the list, there is an assumption that an adjective at the beginning of a list qualifies the entirety.
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Context and Intentions
The Court determined that the focus of the parties in relation to the arrangement was on non-public funding as the language of the contract suggested that no form of public offer was contemplated. If they had intended to include private and public sales, they would not have had to refer specifically to “private placements” (as that would have fallen into the concept of “other sale of equity instruments”) and instead could have referred only to “any sale of equity instruments” within the definition without the need for a list.
Ultimately, this case highlights the importance of precise legal drafting to avoid ambiguity within a contract which could be potentially costly. Parties to a contract should clearly lay out their intentions for an arrangement and ensure that these are accurately reflected in the drafting – just because one party says that they will operate a contract in a particular way, does not mean that this will be upheld in practice (or by the courts) if it is not expressly stated within the document. The points raised by this case should be applied to all drafting considerations in all types of contracts.
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