Vasco Investment Managers Ltd v Morgan Stanley Australia Ltd [2014] VSC 455

Vasco Investment Managers Ltd v Morgan Stanley Australia Ltd [2014] VSC 455 - VSC 2014 case summary — Zoe

[198]

Further to your request please refer below to our proposed fees and terms of engagement for the proposed Orchard transaction.

Engagement consists of:

Deal sourcing

Deal Structuring

Negotiating with stakeholders

Due diligence

Ongoing advisory role on successful conclusion of the deal

We note that we have already used our knowledge and intellectual property to undertake points 1 and 2 above. We believe if the deal is concluded successfully the work we have performed to date would have been crucial in that successful conclusion. In noting this we are fully aware that any payment for this work will only be made if the transaction proceeds.

Given our knowledge of the company, its assets, funds and debt facilities we believe it will be essential for us to be an integral part of the due diligence team if the transaction proceeds to that stage, Due diligence would of course include a thorough review of all relevant documentation, meetings with stakeholders, etc. in order for sufficient comfort to be gained that the strategy as proposed will yield the forecast returns in our modelling. Payment for this part of the engagement would be set upon commencing due diligence and would be subject to a break fee payable by the company so would be an at risk costs of MS.

The ongoing advisory role would be subject to the final structure of the transaction.

Our proposed fees and indicative structure thereof is as follows:

*Deal origination/sourcing - 'finder's fee' that can be rolled into the profit share as part of our 'co-investment' into the transaction.

*Due Diligence - our standard Vasco charge-out rates are $350 per hour subject to a minimum of 50K. Payment to be made as a cash fee.

*Success fee - fee of 65 bps of capital subject to minimum of 500K payable only on successful conclusion of deal. You mentioned before that this is most likely to be paid in shares / units in management company or as profit share upon achieving certain KPIs/hurdles. Could you please explain how you think this will work? As proposed by you previously we are amenable to an incentive subject to meeting ongoing KPIs being applied to this proportion of the fee.

*Ongoing advisory role - TBD subject to confirmation of the scope of the role. This fee however would probably be payable out of Orchards post-transaction.

We acknowledge your previous advice that we are still some way from concluding the transaction and do not wish to distract ourselves with side negotiations on our fees. However we believe some clarity on this matter at this stage would be beneficial as we will get more pressed for time if the transaction proceeds. It would also assist us in our discussions with stakeholders if we had a formal appointment as your representative.

Would you please consider and revert at your earliest convenience.

[448]

'[I]n the case where the services are of such [a] kind that it is difficult or impossible to assess the number of hours involved or to itemise the precise services, the court is entitled to make a global assessment or to reduce or increase the remuneration which can be proved with some certainty in order to reflect the fair and reasonable value'.[73]
Where it is customary, in a particular industry, for the services to be recompensed on a commission basis, calculated on an event the court may have regard to what is a reasonable commission and apply it, if appropriate, subject to adjustment where the relationship has been terminated before the service provider has completed the tasks which produced the event.[74]
Further, adopting the principles referred to by the Court of Appeal[75] in Sopov v Kane Constructions Pty Ltd (No 2),[76] in a situation where a quantum meruit claim arises where an existing concluded contract has been terminated, given that 'the quantum meruit remedy rests on the fiction of the contract's having ceased to exist ab initio, that contract can have no "continuing influence" when the value of the work is being assessed on a quantum meruit.'[77] In such a situation the quantum meruit remedy ignores the bargain which the parties struck, and ignores the rights accrued under the contract up to the date of termination.[78] The contract price is relevant on a quantum meruit, but not because of any 'continuing influence' of the contract. The price is merely a piece of evidence, showing what value the parties attributed - at a particular time - to the work which the claimant was agreeing to perform.[79] It may be taken into account as relevant evidence in the body of evidence to be considered by the court in assessing a reasonable sum. However, it needs to be born in mind that the contract price is struck prospectively, based on the parties' expectations of the future course of events. A quantum meruit, on the other hand, is assessed with the benefit of hindsight, on the basis of the events which actually happened.[80]
1. As the New South Wales Court of Appeal observed in Renard Constructions v Minister for Public Works,[81] there is no conceptual difficulty in the notion that the 'fair and reasonable' value of the benefit conferred may exceed any price for which the service provider contractually agreed to provide the services or carry out the works in question.[82] Restitutionary liability is independent of contract.
2. It is well-established that the value of the services or work done can be proved by evidence of costs actually and fairly and reasonably incurred.[83] But proof of the appropriate quantum is not confined to such evidence.
3. Restitution may also include an entitlement to a margin for profit and overhead.[84] As stated by the Court of Appeal in Sopov, the existence of the entitlement to a profit margin is consistent with the restitutionary objective of measuring the value of any benefit conferred. The inclusion of a margin for profit and overhead means that the calculation approximates the replacement cost of the work or services and is an appropriate index of value to ascertain what it would have cost the principal to have had this work or the services carried out by another in comparable circumstances.[85]

At a glance

Court

Decision date

Before

Source

Judgment (588 paragraphs)

Parties

Cases Cited (30)