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28 Oct 2019

Corporate Finance: asking for advice is not the same as agreeing to pay for it

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In this case, the Court examined the proper approach to quantum meruit claims. The Claimant, Moorgate Capital, provided boutique corporate finance advice. It alleged that it entered into an oral agreement with the Defendant (H.I.G.) in relation to a potential acquisition. The main term of the alleged agreement was that if the acquisition went ahead, H.I.G. would pay to Moorgate the sum of £1,000,000. In the alternative (assuming the Court did not find an oral agreement existed), Moorgate claimed payment by way of quantum meruit on the grounds of unjust enrichment for the services it provided.

The Court ruled against the existence of an oral agreement, and in a detailed analysis of quantum meruit claims, made the following points:

  • For an unjust enrichment claim to succeed, three factors must be present: 1) the existence of enrichment; 2) the existence of an "unjust" factor; and 3) a value to any enrichment; and
  • In deciding whether or not a situation is "unjust", the Court confirmed there is no general right to payment (even for requested services) in the absence of a contract. The right to payment on a quantum meruit basis will only arise in certain circumstances.
  • Factors relevant to that right arising include:
  • Whether services of that nature are generally provided free of charge;
  • The nature of the benefit received; and
  • The risks incurred in the provision of the services.

Here, the Court concluded that there was no substantial risk undertaken, the services provided were modest, and there was no obvious reason for the Court to conclude that the parties (both sophisticated, commercial entities) expected payment to be made without a contract.

Stephenson Harwood comment

This case is a stark reminder of the importance of documenting contractual agreements for the provision of services (ideally before delivery of the services commences). Without documentary evidence, a service provider cannot assume they will be paid – even where their services have been requested and provided.

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