In Cantor Fitzgerald & Co v YES Bank Limited [2024] EWCA Civ 695 the Court of Appeal has dismissed Cantor’s appeal and upheld the finding of Bright J that Cantor was not entitled 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 Bright J had 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…”.

As a matter of ordinary language, the Court of Appeal agreed with the judge that the natural assumption is that an adjective or determiner at the start of a list of nouns qualifies them all (at [36]). The word “private” would therefore naturally be expected to also govern “offering” and “other sale” (and therefore not include an FPO). Although this was not a firm grammatical rule, it was notable that the parties did nothing to counter it (at [37]).

YES Bank’s interpretation was also found to be supported by the contractual context. For example, it was a strong indicator that the parties had made specific provision for Cantor’s role in relation to any Qualified Institutional Placement (QIP) — which reflected the fact Cantor’s role would be limited by the applicable Indian regulations — but had not done so in relation to an FPO (at [46]). Falk LJ (with whom Sir Julian Flaux, Chancellor of the High Court, and Popplewell LJ agreed) found further support for YES Bank’s position in various other clauses of the engagement letter.

The factual matrix was also supportive of YES Bank’s interpretation. As the judge had found, an FPO was not a realistic possibility when the contract was agreed. The focus was on non-public fundraising from new sources, specifically Cantor’s client list (at [55]). As Falk LJ put it, “the language of the contract does not suggest that any form of public offer was contemplated as being in the mix of possibility for which the parties contracted” (at [56]).

An interesting point arose as to whether the opening words of the clause containing the critical definition of a Financing — “We have been advised by the Company that it contemplates …” — opened the door to the admissibility of pre-contractual negotiations and subjective intentions. However, Falk LJ considered this debate to be better resolved in a case where it would make a difference to the result.

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.