In Cantor Fitzgerald & Co v YES Bank Limited [2023] EWHC 745 (Comm) the Commercial Court (Bright J) has dismissed Cantor’s claim to recover a financing fee in connection with YES Bank’s Further Public Offering (FPO) in India in July 2020.

YES Bank is India’s fourth largest bank and in 2019 was undergoing severe financial problems. By December 2019, YES Bank was facing what the judge described as “an existential crisis”.  

New capital was not raised in time. In March 2020, the Reserve Bank of India intervened by imposing a moratorium and YES Bank was reconstructed under a statutory scheme, which involved the replacement of the entire board of directors and a capital infusion of approximately USD 1.3 billion. YES Bank also wrote down around USD 1 billion of AT1 bonds.

In July 2020 YES Bank successfully raised some USD 2 billion of further capital via an FPO, which included substantial investments by three investors which Cantor said had been included on its list of investors and in respect of which it sought to be paid a 2% fee.

YES Bank denied any liability on the basis that the engagement letter was limited to private forms of financing and did not extend to an FPO. This turned on the proper construction of the term “Financing” in the engagement letter, which was defined as the “… private placement, offering, or other sale of equity instruments in any form…”..

Bright J held, as a matter of the ordinary meaning of the words, “private” modified “offering” and “other sale of equity instruments” and therefore a “Financing” only related to private placements, private offerings and private sales (at [90]). As such, the FPO did not fall within the definition of a Financing and therefore Cantor was not entitled to be paid a financing fee. This conclusion was supported by the background context, which included a finding that at the time that the engagement letter was entered into it was obvious that an FPO was not a possible solution.

Bright J also rejected Cantor’s alternative claims for an implied term and unjust enrichment on the basis that such claims would upset the agreed contractual allegation of risk under the engagement letter.

Although Cantor was successful in claiming interest on the late payment of a non-refundable retainer fee under the engagement letter, the judge held that “this minor success is not enough to make Cantor the overall winner. On the contrary, the reality is that it has lost” (at [159]).

John Taylor KC and Christopher Langley were instructed by Hogan Lovells International LLP (Neil Mirchandani) on behalf of YES Bank.

The full text of the judgment can be found here.