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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Corporate Development Partners Llc v E-Relationship Marketing Ltd [2007] EWHC 436 (Ch) (09 March 2007) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2007/436.html Cite as: [2007] EWHC 436 (Ch), [2009] BCC 295

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
CaseNo:HC06C01110

		Royal Courts of Justice Strand. London. WC2A 2LL
		09/03/2007

MR JUSTICE RIMER :

Introduction

1. This is the claimant's application for summary judgment under CPR Part 24. It is for the payment of fees amounting to at least £42,745 plus VAT and interest. The claimant also asks for a disclosure order directed at enabling it to quantify its claim more precisely. The fees are said to be due under an agreement dated 17 February 2005. The agreement is admitted, but the defence is that its relevant provisions are unenforceable because they infringe the "financial assistance" provisions in section 151 of the Companies Act 1985. The claimant is Corporate Development Partners LLC ("CDP") and appeared by Mr Ghaffar. The defendant is E-Relationship Marketing Limited ("E-RM") and appeared by Mr Barker.

The story

2. CDP is a Delaware company that also carries on business in England. It provides management consultancy services and advises companies on domestic and cross-border business development strategies. Its clients are typically companies that are looking to grow by acquisition, joint venture or strategic alliance. It effects introductions to its clients of potential targets. It uses a fee structure under which the client pays it a monthly fee but with the bulk of its return being in the nature of a contingent "success" fee, success being the entry by the client into a transaction with a party introduced by CDP. E-RM supplies digital direct marketing technology and services. This is a fragmented market, with many small players providing a range of services.
3. Contact between CDP and E-RM dates from September 2004, when Andrew Littell (CDP's managing director) spoke to Mike Williams (E-RM's Chief Executive Officer). Mr Littell explained what CDP did and Mr Williams displayed interest. Mr Littell sent Mr Williams an email explaining CDP's fee structure and services (which included identifying and approaching potential acquisition targets) and indicating he already had in mind two potential targets for E-RM, although he did not name them.
4. Email contact between CDP and E-RM continued and led to their signing of an agreement on 20 December 2004 ("the December agreement"). It is not this agreement upon which CDP sues, but I should summarise it. It was headed "Corporate Development Program Proposal for [E-RM]". The first two pages were largely devoted to an explanation of how CDP operates, and included an explanation of its programme for E-RM under several headings. The first was "A Profile of Our Method", which described CDP's function as working "as an extension of your management …." The second was "Defining the Acquisition Criteria" under which CDP was to "define with you the activity-related, market-related, and company-related characteristics to be sought in an acquisition." Subsequent headings were "Conducting the Search", "Making the Approach" (which provided that CDP would not reveal E-RM's identity to any identified business until that business had indicated an interest in pursuing the type of transaction or agreement that E-RM had in mind) and "The Screening Process". The last heading recognised that:

"During the course of this program it is quite possible that independent of our efforts other companies or their representatives will contact you with an interest in acquisition, divestiture, merger, joint venture, license agreement or financing transaction. To maximize the likelihood of a successful outcome CDP will handle the screening and preliminary evaluation of each contact or inquiry and assist in the administrative and logistical aspects of keeping the negotiating process moving." (My emphasis)

5. The agreement then identified the "Transaction Advice" that CDP could provide. Then it turned to fees. The first element, in clause (1), was a monthly fee of £2,500 plus VAT, commencing on 5 January 2005, with the engagement being terminable by either side on 30 days' notice after the first month. E-RM was also required to pay CDP's out of pocket expenses. The second element, in clause (2), was headed "Contingent Transaction Fees". This was the forerunner of the provision in the later February 2005 agreement upon which CDP does sue and which has given rise to all the trouble. It provided in the first paragraph:

"The contingent portion of your obligation is the Transaction Fee which is paid in connection with each completed strategic acquisition, merger, joint venture or divestiture (any one of which is defined as a 'Transaction') that involves E-RM and any company which we have contacted on your behalf or which was referred to us for handling by E-RM (any one of which is defined as a 'CDP Prospect')."

6. The agreement then explained, in paragraphs (2)(a) to (d), the computation of the transaction fee, the method and timing of its payment and so on. It is unnecessary to say more than that the fee was to be the aggregate of 5% on the first £1m, 4% on the next £1m, 3% on the next, 2% on the next and 1% on the balance of the transaction value. By clause 2(c) E-RM agreed to provide CDP "with a copy of the closing documents, including the Contract of Purchase and Sale, prior to the closing date and to notify CDP at least one week in advance as to the time and place of closing." This related to the documents effecting a transaction upon which a fee would be payable. There then followed a page or so of further provisions which are not material to the present issue.
7. Following the signing of the December agreement, CDP commenced working for E-RM, the initial phase of its work being focused on listing possible target companies. On 11 January 2005 Mr Littell forwarded to Mr Williams an email he had received from Paul Cook on 21 December 2004 to the effect that Mr Cook wanted to sell his 25% stake in Red Eye International Limited ("Red Eye"). Mr Littell's message to Mr Williams was that he was not sure if E-RM already knew Red Eye but thought the matter might be of interest. Mr Williams was interested, and Mr Littell had a meeting with Brian Fenwick-Smith, the chairman of Red Eye, on 12 January 2005. In the meantime, Mr Williams had authorised Mr Littell to disclose E-RM's identity to Mr Fenwick-Smith. The outcome of that meeting, as Mr Littell reported to E-RM on the same day, was that Red Eye was "open to discussing being acquired – or potentially playing a role in a larger online marketing services roll-up" and "open to exploring a deal with E-RM further (e.g. meeting, phone call, etc)." Mr Williams continued to be interested, as he conveyed by his emailed reply to Mr Littell of 13 January 2005.
8. So far the contemplation had been that E-RM might acquire Red Eye. But on 14 January 2005 Mr Littell received an email from Mr Fenwick-Smith to the effect that a search he had done on E-RM led him to conclude that "unless [it] has had a huge increase in capital and a huge increase in profits, its appetite is much bigger than its stomach!" Mr Fenwick-Smith could not, therefore, see that E-RM could hope to acquire Red Eye – but he still "would very much like to talk to them, but about them joining Red Eye, not the other way round." So by then the nature of any possible commercial link had, or may have, changed: Red Eye was claiming to view E-RM as a possible target, although these were still early days. Mr Littell forwarded Mr Fenwick-Smith's email to Mr Williams, who retained an interest in Red Eye. He emailed Mr Fenwick-Smith directly on the same day, 14 January, saying that he "would be more than happy to discuss with you any/many ideas in the pursuit of our mutual benefit including deals that work whichever way round they are constructed." So Mr Williams was keen to discuss the possibility of an association with Red Eye, including an acquisition of E-RM. But nothing firm had yet been proposed: there had not even been a meeting between the two companies.
9. During the rest of January 2005 Mr Littell heard nothing further from E-RM regarding Red Eye. He worked on other avenues that might be of interest to E-RM and set up meetings for them with two other companies, with the first taking place on 25 January 2005. On 27 January 2005 Mr Littell attended a scheduled meeting at E-RM's offices to present them with his findings and recommendations. He identified various potential targets, and E-RM asked for their turnover details. Red Eye was mentioned at the meeting as another possible prospect or target.
10. Mr Littell sent Mr Williams an email on 31 January 2005, the PS to which asked if there was "any headway with Red Eye?" The response, on the same day, was that E-RM was meeting Mr Fenwick-Smith on 1 February 2005. Mr Littell had been unaware of such communication as there had in the meantime been between E-RM and Red Eye. E-RM and Red Eye duly held their meeting on 1 February 2005, of which Mr Littell was told nothing at the time. The outcome was that Red Eye made a "subject to contract" offer to E-RM's shareholders to buy their E-RM shares for about £1.6m. During the afternoon of 3 February 2005 there was an exchange of emails between Mr Williams and Mr Fenwick-Smith by which an agreement in principle appears to have been reached that the price would be about £1.7m, plus £300,000 to Mr Williams and Mr Sewell (another E-RM director) as compensation for loss of office. Mr Fenwick-Smith's evidence is that there was still no binding agreement at that stage, but that Red Eye's offer was a serious one.
11. On 3 February 2005 Mr Sewell telephoned Mr Littell to tell him that Red Eye had made an offer for E-RM and indicating that, in the light of this, E-RM wished to re-negotiate CDP's fees, an expression of wish that did not impress Mr Littell. Mr Sewell followed that with an email timed at 12.06 pm on the same day (before the email exchange between Mr Williams and Mr Fenwick-Smith just referred to). Its essence was that Red Eye had made an offer to purchase E-RM for about £1.6m, which Mr Sewell explained differed from the "one or more purchases that was envisaged at the time the [December] agreement was drawn up …." His proposal was that CDP should accept a transaction fee of 50% of the level provided for by the December agreement. Assuming the price remained at £1.6m, this would be a fee of £37,000 rather than £74,000. By a further email of the same day Mr Sewell explained that to continue with the CDP agreement for two more months would involve incurring further fees of at least £5,000 which:

"… would directly impact on the purchase price with Red Eye as it is contingent on not exceeding our negative net assets position per budget and as our work with you was unbudgeted it is coming straight off our PBT. … In an ideal world what we would like the outcome to be is that you agree to reduce fees as proposed and that we put on hold the ongoing program until either the Red Eye deal goes away or happens. … If it goes away we would then restart and pay at least the £5K retainer for the next two months."

12. Mr Littell's response, on the same day, was that he needed time to think about E-RM's proposal but "would be far more amenable to reducing fees if I felt the program was still going forward." E-RM was not prepared to give CDP any time and on 4 February 2005 it gave notice terminating the December agreement, adding that "we are more than happy to discuss further with you next week, and assuming that we can come to an agreement we can reinstate the agreement."
13. Negotiations followed between E-RM and CDP, which I regard it as unnecessary to detail. I doubt if they are relevant to the issue I have to decide. What they led to was a new agreement dated 17 February 2005 between CDP and E-RM ("the February agreement"). It is this agreement upon which CDP sues. Save for the terms of CDP's remuneration and the inclusion of a new clause (8), its material provisions followed the form of the December agreement identically. As for those terms, the monthly fee of £2,500 remained the same, but it was now to be paid for a minimum period of two months commencing on 22 February 2005, after which the agreement could be terminated by either side on 30 days' notice. The more material change was in relation to the "Contingent Transaction Fee", still clause (2). The explanation of this fee was in the same terms as that in the December agreement, and paragraph (2)(a) then detailed the computation of the "Transaction Fee" in identical terms. The key provision was in the next, and new, paragraph, also unhelpfully lettered (a). It reads:

"(a) Red Eye International Limited (or its parent company Red Eye International Holdings PLC) are collectively referred to as Red Eye ('Red Eye'). Red Eye is a CDP Prospect. A Transaction Fee involving any CDP Prospect will be computed according to Clause 2(a) above with the exception of Red Eye. The Red Eye Transaction Fee ('Red Eye Transaction Fee') is computed upon the closing of each Transaction involving E-RM and Red Eye and is equal to the aggregate of: 2.5% on the first £1 million, 2.0% on the next £1 million, 1.5% on the next £1 million, 1.0% on the next £1 million, and 0.5% on the balance of the Transaction Value. The Transaction Value is based on any amounts paid or committed for stock or assets (including all operating and intangible assets necessary to the operation of the entity to which the Transaction applies without regard to the exact legal ownership of the said assets), plus the value of any interest-bearing debt and non-interest-bearing long-term liabilities assumed by the buyer and any current assets retained by the seller as part of the consideration. The Red Eye Transaction Fee shall never be less than £25,000 plus VAT ('Minimum Fee')."

14. The effect of that was, therefore, to halve the transaction fee payable in respect of a Red Eye transaction as compared with the fee which would have been payable under the December agreement and which would also be payable in respect of any transaction concluded with any other entity that CDP introduced under the February agreement. It is not necessary to refer to most of the rest of the agreement, which followed the form of the December agreement, including the provision for the production by E-RM of the documents relating to the closing of any transaction. I should, however, refer to the new clause (8) which provided that the February agreement superseded and replaced the December agreement, which CDP and E-RM agreed was of no further force or effect.
15. Looking at the matter as at the beginning of February 2005, it is clear that, had the Red Eye overtures matured into an acquisition of E-RM, E-RM would in principle (but subject to its present defence) have been liable to pay CDP a transaction fee computed in accordance with clause (2)(a) of the December agreement: it is agreed that such an acquisition would have been a "divestiture" and so one of the types of "Transaction" identified in clause (2) as entitling CDP to a transaction fee. I infer that is also how E-RM viewed the position. In particular, E-RM's termination of the December agreement on 4 February 2005 could not and would not have got it off that particular hook; and I also infer that E-RM was wise to that. The February agreement represented, however, a re-negotiation of the December agreement, with the inclusion of a special term relating to the fee payable in respect of any transaction that might subsequently be concluded with Red Eye.
16. Anticipating the outcome of the story, a relevant transaction was later concluded with Red Eye, and CDP's claim is brought under the February agreement for payment of the appropriate transaction fee. As mentioned, clause (8) of the February agreement discharged the December agreement; and, under the February agreement, E-RM assumed (inter alia) a commitment to pay a Red Eye transaction fee at the new, reduced, rate should any relevant transaction result from the introduction to Red Eye that CDP had made some five weeks earlier. It is, I consider, of importance that the February agreement did not simply purport to vary the terms of the December agreement, and provide that any claim for a Red Eye transaction fee under that agreement would be half what it provided. The way the parties instead chose to deal with the matter was to discharge the pre-existing commitment under the December agreement and to treat the Red Eye introduction as giving rise to a brand new contingent liability on the part of E-RM under the February agreement.
17. Following the February agreement, CDP continued to work for E-RM in the identification of possible targets. E-RM, for its part, repeated its request of 27 January 2005 for the turnover details of possible targets. The evidence proves a good deal of activity by CDP in relation to exploring matters with such targets; and it also proves activity on the part of E-RM which was consistent with the view that it was interested in the avenues that CDP was pursuing for it. On 4 April 2005, however, CDP gave notice terminating the February agreement, but requiring CDP to continue working for it during the 30-day notice period. E-RM's conduct down to then was, and had been, inconsistent with any suggestion that it had either concluded, or was close to concluding, any deal with Red Eye. In fact, negotiations had continued between E-RM and Red Eye since the beginning of February 2005 and heads of terms were finally agreed in June 2005, following which the parties engaged in the preparation of legal documentation, an exercise which appears to have occupied a further three months. E-RM provided Red Eye with a copy of the February agreement in July 2005. That was the first that Red Eye learnt of it.
18. On 15 September 2005 Mr Williams left a voicemail message for Mr Littell to the effect that he needed to discuss the Red Eye situation urgently. The two spoke about it a day or so later, when Mr Littell learnt that a deal had been struck in principle between E-RM and Red Eye but that E-RM had a problem with paying CDP any contingent transaction fee under the February agreement because it had been advised that the agreement was, in this respect, illegal. Mr Williams did, however, offer a payment of £12,500 to "null and void" the obligation to pay any such fee, an offer which Mr Littell rejected, he having become even more disenchanted with E-RM's commercial integrity.
19. On 30 September 2005 Red Eye entered into two agreements with E-RM's shareholders to purchase all E-RM's issued shares. Mr Fenwick-Smith's evidence is that the total price paid was £1,657,250 for the shares and £230,000 to Mr Williams and Mr Sewell for compensation for loss of office.
20. On 5 October 2005 Mr Redding of E-RM wrote to Mr Littell advising him of Red Eye's acquisition of E-RM. He asserted that the clause in the February agreement entitling CDP to payment in consequence of that acquisition amounted to the provision of financial assistance by E-RM for the purchase of its shares. He said E-RM's lawyers had advised that such assistance was unlawful and that the relevant part of the agreement was unenforceable. In the circumstances E-RM could not and would not pay any transaction fee to CDP. The response was a letter before action dated 28 October 2005 from Finers Stephens Innocent LLP on behalf of CDP, pointing out that a transaction with Red Eye was expressly catered for in the February agreement and claiming that the fee was properly payable. They said CDP was entitled to disclosure of the transaction documents in order to quantify the fee, but that CDP knew that the transaction value exceeded £1.93m, so that it was entitled to at least £43,600 plus VAT and interest. They rejected the financial assistance argument, saying that CDP provided no services in relation to the acquisition of E-RM's shares. Wedlake Bell, for E-RM, sent a long letter in response on 4 November 2005.
21. No agreement was reached and CDP issued its claim form in the Mayor's and City of London Court on 13 December 2005. That court transferred the proceedings to the Chancery Division on 23 February 2006 and on 24 April 2006 CDP issued its CPR Part 24 claim for summary judgment.

Sections 151 to 153 of the Companies Act 1985

22. Sections 151 to 153 of the Companies Act 1985 (in Chapter VI, headed "Financial assistance by a company for acquisition of its own shares") provide, so far as material, as follows:

"151 Financial assistance generally prohibited

(1) Subject to the following provisions of this Chapter, where a person is acquiring or is proposing to acquire shares in a company, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place.

(2) Subject to those provisions, where a person has acquired shares in a company and any liability has been incurred (by that or any other person), for the purpose of that acquisition, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.

(3) If a company acts in contravention of this section, it is liable to a fine, and every officer of it who is in default is liable to imprisonment or a fine, or both.

152 Definitions for this Chapter

(1) In this Chapter -

(a) 'financial assistance' means –

(i) financial assistance given by way of gift,

(ii) financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier's own neglect or default, or by way of release or waiver,

(iii) financial assistance given by way of a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when in accordance with the agreement any obligation of another party to the agreement remains unfulfilled, or by way of the novation of, or the assignment of rights arising under, a loan or such other agreement, or

(iv) any other financial assistance given by a company the net assets of which are thereby reduced to a material extent or which has no net assets; …

153 Transactions not prohibited by s 151

(1) Section 151(1) does not prohibit a company from giving financial assistance for the purpose of an acquisition of shares in it or its holding company if –

(a) the company's principal purpose in giving that assistance is not to give it for the purpose of any such acquisition, or the giving of the assistance for that purpose is but an incidental part of some larger purpose of the company, and

(b) the assistance is given in good faith in the interests of the company. …

The issue

23. The issue is whether (i) E-RM's commitment under the February agreement to pay CDP a transaction fee if it thereafter concluded a "transaction" with Red Eye of the nature which it did conclude – namely, a transaction under which Red Eye acquired E-RM's issued shares - amounted to the unlawful giving of financial assistance by E-RM for the purpose of that acquisition; or (ii) the payment itself, if made, would constitute the giving of such assistance. There is no dispute that the payment, if made, would materially reduce E-RM's net assets. A "transaction" was defined in the February agreement (as in the December agreement) as a "completed strategic acquisition, merger, joint venture or divestiture …" and it is agreed that the Red Eye acquisition of E-RM was a "divestiture" under that agreement.
24. CDP's case is that the section 151 argument is mistaken. The payment claimed under the February agreement is, Mr Ghaffar submitted, no more than part of the consideration payable by E-RM to CDP for the overall corporate development services that CDP agreed to provide E-RM as described in the narrative to the agreement. Those services were exclusively in the nature of searching for, and introducing E-RM to, targets for possible acquisition by E-RM. The remuneration provisions, of which clause (2) formed part, simply defined what E-RM was to pay CDP by way of reward for those services, namely (i) a monthly fee of £2,500 and (ii) an enhanced fee linked to the value of any transaction of various defined types that E-RM might effect with any target that CDP introduced. Those transaction types admittedly included a "divestiture", but it was not the purpose of the February agreement, any more than it had been of the December agreement, that CDP should look for, or introduce, companies that might wish to acquire E-RM. Moreover, at the time of the February agreement (i) CDP had already introduced Red Eye to E-RM and had so introduced it as a possible target for acquisition, not as a possible acquirer, although Red Eye itself then decided that that might be a possibility; (ii) CDP thereafter did nothing by way of negotiation of the takeover terms, nor did it even assist in them; and (iii) it therefore cannot sensibly be said that the purpose of the transaction fee for which E-RM assumed a commitment in February 2005 was to assist the acquisition that was later effected. It was merely part of CDP's reward for making the earlier introduction: it was not a reward for effecting, or for assisting in, the particular transaction that was negotiated. The payment itself, or the commitment to make it, did not assist the acquisition of E-RM. It may be that it was that acquisition that triggered the obligation to pay but it cannot be said that the assumption of the payment obligation was for the purpose of that acquisition. It followed that section 151 was not in point. If that was wrong, Mr Ghaffar submitted that this was a case in which E-RM's principal purpose in its transaction with CDP was the identification of targets for acquisition by E-RM, and the commitment to pay a transaction fee on the occurrence of a "divestiture" was merely an incidental element of E-RM's larger, or principal, purpose. In those circumstances, section 153 provided an answer to any section 151 defence.
25. For E-RM, Mr Barker emphasised that, since CDP is suing solely on the February agreement, the court should disregard the prior December agreement, which it superseded. I do not question that the court must focus on the February agreement, although that focus highlights that the payment commitment that CDP claims to enforce was entered into on 17 February 2005, whereas CDP had effected the Red Eye introduction some five weeks earlier. Mr Barker took no point, however, that the commitment was unsupported by consideration, and I consider that he was correct not to do so since there was plenty of consideration to support it. He disagreed with Mr Ghaffar's submission that the remuneration provisions in clause (2) should be regarded simply as a reward in the nature of a success fee for the introduction of a potential target for acquisition by E-RM, but not for the introduction of such a target that then acquired E-RM. He said it was not open to CDP to advance that argument, since its whole case was that the February agreement did entitle it to a success fee on such a "divestiture". It must therefore have been at least part of the purpose of the February agreement that it extended to the introduction of an entity that acquired E-RM; and CDP's introduction of Red Eye in January 2005 facilitated, or smoothed the path towards, just such an acquisition. It followed that E-RM's subsequent assumption of the payment commitment in clause (2) of the February agreement was by way of a reward for such introduction, or facilitation, and itself facilitated – or assisted in – the acquisition of E-RM. At the time of the February agreement, Red Eye was already "proposing" to acquire E-RM, and so the case fell squarely within section 151(1). Mr Barker submitted that there can be no question of the "larger purpose" defence in section 153(1) providing an answer: an acquisition of E-RM was one of the possible outcomes envisaged by the February agreement.

Discussion

26. In my judgment CDP's case is to be preferred, although I do not, with respect, wholly agree with the way in which Mr Ghaffar put it. I find that the February agreement involved no infringement of section 151.
27. In Chaston v. SWP Group plc [2003] 1 BCLC 675, at 686i, Arden LJ identified the general mischief against which section 151 is directed as follows:

"… namely that the resources of the target company and its subsidiaries should not be used directly or indirectly to assist the purchaser financially to make the acquisition. This may prejudice the interests of the creditors of the target or its group, and the interests of any shareholders who do not accept the offer to acquire their shares or to whom the offer is made."

28. In Charterhouse Investment Trust Ltd v. Tempest Diesels Ltd [1986] BCLC 1, at 10, Hoffmann J said:

"There are two elements in the commission of an offence under s 54 [the predecessor of section 151]. The first is the giving of financial assistance and the second is that it should have been given 'for the purpose of or in connection with', in this case, a purchase of shares …. There is no definition of giving financial assistance in the section, although some examples are given. The words have no technical meaning and their frame of reference is in my judgment the language of ordinary commerce. One must examine the commercial realities of the transaction and decide whether it can properly be described as the giving of financial assistance by the company, bearing in mind that the section is a penal one and should not be strained to cover transactions which are not fairly within it."

29. That passage was cited with approval by the Court of Appeal in Barclays Bank plc v. British & Commonwealth Holdings plc [1996] 1 BCLC 1 and was adopted as a correct approach by the Court of Appeal in Chaston, supra. I must, therefore, identify the commercial realities of the February agreement and guard myself against straining to interpret it as involving the giving of illegal financial assistance if that cannot fairly be regarded as encompassed within it. I must also have regard to the general mischief against which section 151 is directed. The question is whether, as a matter of commercial reality, E-RM's commitment in that agreement to pay CDP a transaction fee if Red Eye were ultimately to acquire E-RM amounted to the provision of any relevant "financial assistance" to anyone, being assistance which, either directly or indirectly, was "for the purpose" of that acquisition; or, to adopt Arden LJ's phrase in Chaston, which "smoothed the path" to that acquisition (see [2003] 1 BCLC 675, at 688i). The answer to that question in any particular case is likely to be fact-sensitive (see Chaston, per Arden LJ, at 689b to c).
30. Turning to the facts, even though the January 2005 introduction of Red Eye preceded the February agreement – and so was not an introduction effected under that agreement – it is agreed that E-RM's commitment in the February agreement to pay CDP a transaction fee in the event of a relevant transaction being concluded with Red Eye was in principle (subject to section 151) a binding commitment by E-RM that was supported by valuable consideration.
31. Where, however, I respectfully depart from Mr Ghaffar is that I do not wholly agree with him that the correct analysis of the February agreement justifies the conclusion that (i) the only service that CDP was agreeing to provide, and was providing, under it comprised the introduction of targets for acquisition by E-RM; and (ii) that all that clause (2) was concerned with was fixing the measure of remuneration for that particular service. I accept that the evidence supports the conclusion that E-RM engaged CDP, both in December 2004 and again in February 2005, in the contemplation that it would introduce it to potential targets for acquisition. But the "transaction" definition in clause (2) of the February agreement expressly envisaged that any such introduction could or might lead to various types of commercial transaction other than a straight acquisition of the target so introduced; and it should also be noted that "The Screening Process" in the body of the February agreement also contemplated that during the currency of the agreement third parties might make approaches to E-RM with various commercial ends in mind (including divestiture), and part of CDP's obligations was so to handle such approaches as "to maximize the likelihood of a successful outcome." If Mr Ghaffar's suggested construction of the February agreement is correct, the limited service that CDP is said to have been required to provide under it was intended to be rewarded by (inter alia) a contingent transaction fee measured by reference to the value of a transaction whose nature fell wholly outside the parties' intentions. That is an improbable basis on which to approach the interpretation of the agreement. The agreement must be read, and interpreted, as a whole, including clause (2). In my judgment, its more natural interpretation is that CDP's function was to bring to E-RM's table parties who were or might be potential targets for acquisition by E-RM, but with the implicit recognition on both sides that any such introduction might in practice lead to one or other of the different types of commercial link identified in clause (2); and part of the function of clause (2) was to reflect that any such transaction was to mark a successful outcome of the original introduction that entitled CDP to a success fee.
32. My main difficulty in this case is, however, in understanding what section 151 has to do with it. CDP introduced Red Eye to E-RM in January 2005. It did not in fact introduce it as a company with ambitions to take over E-RM; it introduced it as a possible target for acquisition by E-RM. In the event, Red Eye quickly realised that that was not a serious possibility and both sides promptly engaged in early discussions about a possible acquisition of E-RM by Red Eye. CDP played no part in those discussions in January. Nor did it play any part in their continuation in early February, which led to Red Eye's "subject to contract" offer to buy E-RM for about £1.6m. CDP and E-RM then entered into the February agreement, following which CDP continued to play a zero role in the continuing negotiations between E-RM and Red Eye which led to the acquisition agreements in September 2005.
33. So far, and apart from the payment commitment in the February agreement, none of that can have involved any infringement of section 151. E-RM's point is, however, that what makes the difference was its commitment in the February agreement to pay CDP a transaction fee if the introduction effected five weeks earlier should later lead to an acquisition of E-RM by Red Eye.
34. I do not accept that it did or should. E-RM's submission was that (i) the January introduction facilitated, or smoothed the path towards, an acquisition of E-RM by Red Eye; (ii) the payment commitment in the February agreement was by way of a reward for that introduction; and therefore (iii) the commitment – or payment if ultimately made – itself facilitated the acquisition and so amounted to the giving of unlawful financial assistance for the purpose of the acquisition. I am prepared for present purposes to assume the correctness of the first two propositions, but the third appears to me to be wrong on the facts. Once the introduction had been effected in January, it was up to E-RM and Red Eye what, if any, commercial association they chose to negotiate, and as it happens they set off down a protracted route towards a takeover of E-RM. At no point after the initial introduction did CDP play any role in those negotiations; and it was no part of E-RM's case that under the February agreement CDP was either required or expected to play any such role.
35. The question is whether E-RM's commitment in the February agreement can be regarded as amounting to "financial assistance … for the purpose" of the acquisition. The giving of "financial assistance" in the present context will usually involve the giving of assistance to the purchaser, whether directly or indirectly. That is expressly not intended to be an exhaustive statement, and Armour Hick Northern Ltd and Others v. Whitehouse and Others [1980] 1 WLR 1520 is an example of a case in which the offending assistance was given to the vendor, although on the facts it was plainly directed at enabling the acquisition to happen. But even giving a broad interpretation to "financial assistance", it appears to me unsound to describe E-RM's commitment to pay a transaction fee to CDP as amounting to relevant "financial assistance … for the purpose" of the acquisition. Since CDP was playing no role in the negotiation of the acquisition – and was neither intended nor required to - the commitment to pay it the transaction fee was not going to, was not intended to and did not in fact assist or advance the acquisition at all. The payment commitment was not a condition of the takeover; it would not serve to reduce Red Eye's acquisition obligations by a single penny; and it was neither intended to, nor did it, smooth the path towards any ultimate acquisition. No doubt the reason for the commitment was because CDP had earlier introduced a party who might thereafter acquire E-RM; and it was intended to be by way of a financial reward to CDP for that introduction. But, for reasons given, the commitment was not entered into "for the purpose" of such an acquisition. It follows, in my judgment, that the assumption of the commitment involved no infringement of section 151.

Result

36. In my judgment there is no substance in E-RM's section 151 point. Mr Barker identified no grounds on which there needs to be a trial of CDP's claim. I hold that CDP is entitled to judgment. I will hear counsel as to the form of the order.