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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Macquarie Capital (Europe) Ltd v Nordsee Offshore Meg I GmbH  EWHC 1655 (Comm) (28 June 2019)
Cite as:  EWHC 1655 (Comm)
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BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Fetter Lane, London, EC4A 1NL
B e f o r e :
| MACQUARIE CAPITAL (EUROPE) LIMITED
|- and -
|NORDSEE OFFSHORE MEG I GMBH
Andrew Spink QC and Matthew Watson (instructed by Enyo Law LLP) for the Defendant
Hearing dates: 1, 2, 7, 8 and 10 May 2019
Crown Copyright ©
Mr Justice Butcher:
(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."
(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."
(1) NOMEG would receive 18,739 shares in Merkur Offshore GmbH (ie 75% less one share). NOMEG would make a contribution to the capital of Merkur Offshore GmbH of certain "project rights" as listed in Annex 1.3 to the ISA. Those rights included the BSH Permit and the 2011 grid connexion commitment. The ISA provided that if the project reached financial close, NOMEG would either sell its shares in Merkur Offshore GmbH to an equity investor or have them redeemed by Merkur Offshore GmbH for a price.
(2) DEME would receive 6251 shares in Merkur Offshore GmbH (ie 25% plus one share). DEME would make cash contributions to the capital of Merkur Offshore GmbH of up to €3 million.
(3) Four contracts would be novated to Merkur Offshore GmbH.
(4) A supervisory board would be created to govern Merkur Offshore GmbH, on which NOMEG was permitted representation (in the event, Mr Heer and Mr Blümle).
The Issue between the Parties as to Fees
The Approach to Construction
"The court's task is to ascertain the objective meaning of the language which the parties have chosen in which to express their agreement. The court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. The court must consider the contract as a whole and, depending on the nature, formality and quality of the drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to the objective meaning of the language used. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other. Interpretation is a unitary exercise; in striking a balance between the indications given by the language and the implications of the competing constructions, the court must consider the quality of the drafting of the clause and it must also be alive to the possibility that one side may have agreed something which with hindsight did not serve his interest; similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms."
The Terms of the Engagement Agreement
[In the Engagement letter]
"We refer to our recent discussions in relation to the Nordsee Offshore MEG I GmbH ('MEG I' or the 'Project') involving managing an equity raising process targeting new equity investors to provide sufficient equity capital for the construction of the Project, and advising the equity consortium on the proposed structure and terms of the project senior debt, including the sale of part or all of the existing equity shares of MEG I (collectively 'the Transaction').
We are pleased to confirm the terms upon which Windreich AG ('Client') has engaged the Macquarie Capital business group of [MCEL] ('Macquarie') to act as Client's exclusive financial adviser in relation to the Transaction ('Engagement').
1. MACQUARIE'S ROLE
Client has engaged Macquarie exclusively to act as its financial adviser in connection with the Transaction. In connection with this Engagement, Macquarie shall provide financial advice and assistance in relation to the Transaction, which may include:
- Developing an equity raise and sale strategy plan and timetable;
- Identifying and assessing potential investors with interest in the Project;
- Engaging with potential investors to conduct due diligence with the aim to securing commitment prior to financial closing of the Project;
- Assisting the Client in the preparation and provision to interested parties of an information memorandum and other information as required;
- Using documentation and financial models prepared by the Client or its advisers to facilitate discussions with potential investors;
- Assisting in managing key aspects of the due diligence process and issues resolution;
- In conjunction with Client's legal advisers, development of terms that apply to incoming investors, and liaising with Client and Client's legal advisor to ensure that terms are satisfactory;
- Dealing with initial expression of interest from prospective investors, including distribution and receipt of confidentiality agreement;
- Assisting Client's legal advisers with negotiating key terms and conditions with potential investors, subject to the Client's overall control, and any other relevant documentation;
- Providing other general financial advice and assistance in relation to the Transaction as may be agreed from time to time.
- Interfacing with Deutsche Bank AG to formalise the project financing structure;
- Reviewing debt terms and pricing received from the project senior lenders and advise Client and the equity consortium on the optimal capital structure achievable;
- Providing such other general advice and assistance in relation to the Transaction as may be agreed from time to time.
In consideration for Macquarie's services as set out in this Engagement Agreement, Client agrees to pay Macquarie the following fees:
a) Completion Fee
In the event a Transaction is completed, a Completion Fee, payable on financial closing of the Transaction, equal to 2.00% of all equity raised or sold as part of the Transaction, irrespective of whether Macquarie was responsible for raising such equity financing. For the avoidance of doubt, 'equity raised or sold' means the amount of equity, mezzanine capital or junior capital committed by any purchaser or transferee, including any shareholder loans or consideration for the existing shares of the Project.
b) Debt Advisory Fee
In the event a Transaction is complete, a Debt Advisory Fee equal to 0.5% of all senior debt raised with respect to the Project, payable on financial close, irrespective of whether Macquarie was responsible for raising such senior debt financing. For the avoidance of doubt, 'senior debt raised' includes the amount of any contingent or stand-by facility committed to the Project.
Client will pay for all reasonable costs, expenses and fees, including but not limited to, legal fees and third party diligence fees incurred by Macquarie in connection with this Project. …
Client confirms that in the event that no Transaction occurs during the period of our engagement but that a Transaction occurs within 18 months of termination of our appointment (unless such termination is a consequence of Fault on the part of Macquarie …) involving a party with whom Macquarie had been in discussions or to whom Macquarie had send (sic) information in connection with the Transaction during the term of its engagement, Macquarie will be entitled to the fees as set out above.
Macquarie will be appointed as exclusive financial adviser with respect to the Project for a period until at least 30 September 2013 (the 'Exclusivity Period'). In any event, Fees will be payable for a Transaction occurring during a period 12 months following the later of the termination of Macquarie's engagement and the end of the Exclusivity Period, unless such termination is a consequence or (sic) fault on the part of Macquarie …
The Engagement relates to advisory services in relation to the Transaction only. Macquarie and its related bodies corporate provide a broad range of other equity and debt financing services. Should Macquarie assume further responsibilities as the Transaction proceeds, Client will negotiate separate fees in respect of those matters at the time.
[In the Standard Terms of Engagement]
8. OUT-OF-POCKET EXPENSES
Macquarie's reasonable out of pocket expenses incurred in connection with the Engagement will be reimbursed by Client on a monthly basis, regardless of whether the contemplated Transaction is completed.
9. FEES, TAXES AND PAYMENTS
All fees and other amounts payable under this Engagement Agreement shall be paid in Pounds Sterling or such other currency (if any) specified in the Engagement Letter, …
In all cases, if applicable, the total invoiced amount will include VAT calculated in accordance with the relevant legislation.
Payment is due within seven days of receipt of Macquarie's invoice. Overdue amounts will attract interest at Macquarie's standard variable lending rate.
13. TERM AND TERMINATION
The appointment of Macquarie under the Engagement shall commence on the earlier of:
(a) the date of the Engagement Letter; or
(b) the date Macquarie commenced the provision of services for any member of the Client Group in connection with the Transaction.
The Engagement will terminate on financial close of the Transaction.
The Engagement may also be terminated by either Party at any time, by giving written notice to the other Party.
Any notice to terminate the Engagement shall be in writing, signed by or on behalf of the Party giving notice to terminate and shall take effect on receipt by the other Party, unless otherwise specified therein.
Notwithstanding any other provision of the Engagement Agreement, should Client terminate the Engagement, Macquarie shall be entitled to receive or retain any amounts then paid or payable to Macquarie up to the date of termination and out-of-pocket expenses in connection with services rendered to the date of termination.
Should Client terminate the Engagement … Macquarie will be entitled to the full amount of any fee(s) as set out in the Engagement Letter if at any time within the following 12 months Client (or any member of the Client Group) reaches financial close (or enters into an agreement which later reaches financial close) on the Transaction (or a transaction substantially comparable to the Transaction).
If at any time the Engagement is terminated or Client informs Macquarie that it does not intend to proceed with the Transaction, nothing in the Engagement will restrict Macquarie from acting for any person on any matter or transaction similar to the Transaction or involving one or more of the parties to the Transaction …
16. ENTIRE AGREEMENT
This Engagement Agreement constitutes the entire agreement between the Parties relating to the Engagement and the Transaction and the Engagement Agreement supersedes and extinguishes any prior drafts, agreements, undertakings, representations, warranties and arrangements of any nature, whether or not in writing.
17. SPIRIT OF THE ENGAGEMENT
Should any of the matters contemplated by the Engagement Agreement take some presently unanticipated course, which nonetheless is to Client's advantage, the Parties agree to negotiate in good faith a basis of remuneration within the spirit of the Engagement. The Parties agree that should such a negotiation appear necessary, it will be undertaken as soon as practicable and that the revised agreement will be documented in a form similar to the Engagement Agreement.
If Client establishes a Special Purpose Vehicle to act on its behalf in connection with the Transaction, then the Engagement Agreement may be novated to the that Special Purpose Vehicle with the prior consent of Macquarie …
If Client (in this Clause 26, the 'Original Client') forms a consortium in connection with the Transaction with one or more other parties ('Consortium Members'), each Consortium Member may accede to this Engagement Agreement with the prior written consent of Macquarie, provided that each such party executes a copy of the Engagement Agreement in which it undertakes to be bound by all the terms of this Engagement Agreement as if it were a party to it. Following such accession:
(a) the Consortium Member(s) and the Original Client shall jointly be treated as if they were the Client under this Engagement Agreement;
(b) the obligations of, and the scope of service to be provided by Macquarie under this Engagement Agreement shall not be increased over the obligations and scope that would have applied had this Engagement Agreement continued to only be with the Original Client; and
(c) Macquarie's work under this Engagement Agreement shall only deal with a Consortium Member or the Original Client in their capacity as a member of the consortium in connection with the Transaction, and shall not be required to take account of any different interests and objectives in relation to the Transaction or otherwise which any Consortium Member or the Original Client may have.
29. GOVERNING LAW
This Engagement Agreement will be governed by and construed in accordance with the laws of England and Wales.
The "Factual Matrix"
Construction – Language and Terms of the Engagement Agreement
Was the transaction which reached Financial Close a Transaction within the Engagement Agreement?
Conclusion on Entitlement to Fees
"All fees and other amounts payable under this Engagement Agreement shall be paid in Pounds Sterling or such other currency (if any) specified in the Engagement Letter, free and clear of, and without deduction or withholding of any kind, so that the net amount received by Macquarie is the same as the gross amount payable if no withholding or deduction were made."
Note 1 Windreich changed its legal form from Aktiengesellschaft (AG) to Gesellschaft mit beschränkter Haftung (GmbH) on 6 March 2013. [Back] Note 2 TSOs were at the time responsible for establishing grid connexions between windfarms and the German national grid. [Back] Note 3 Amended Defence, paragraphs 12, 23.1. [Back]
Note 1 Windreich changed its legal form from Aktiengesellschaft (AG) to Gesellschaft mit beschränkter Haftung (GmbH) on 6 March 2013. [Back]
Note 2 TSOs were at the time responsible for establishing grid connexions between windfarms and the German national grid. [Back]
Note 3 Amended Defence, paragraphs 12, 23.1. [Back]