Success fee payable to New York broker-dealer under mandate on Polish real estate deal – commercial common sense prevails

Success fees are prone to disputes.  James Wingfield, Rebecca Wyke and Jim Fairlie acted for New York broker-dealer and specialist investment bank Xtellus Capital Partners Inc in successfully obtaining a EUR 1.8m judgment in the English courts against DL Invest Group PM SA, the operating company in a Polish real estate group.  The case concerned a success fee due to Xtellus, triggered by the raising of EUR 143m of debt finance by DL Invest Group, with Xtellus' advice and assistance. 

The judgment found overwhelmingly in favour of Xtellus.  The judge found that key DL Invest Group witnesses were dishonest, "had come to court to argue [their] case rather than to tell the truth" and that their evidence in part "bordered on the outrageous".  Other DL Invest Group witnesses were keen to follow the lead of a key witness and "support his views without any real regard for the facts."  Further, the judge found that their trial witness statements were non-compliant with the court rules (CPR PD 57AC), with the result that it was impossible to understand which of the many disclosed documents each had considered when preparing their witness statements and whether they had considered documents that had not been disclosed. 

DL Invest Group raised every conceivable defence to the claim for the success fee and were unsuccessful on each: 

1. The mandate providing for the success fee was addressed to "DL Invest Group".  They argued that the correct counterparty to the mandate was not the Defendant, being the operating company in the DL Invest group, but rather a separate entity with a negative balance sheet.  Shortly after the initial letter of claim, that separate entity changed its name to include the words "DL Invest Group"; previously it had an unrelated name.  The court found that the evidence was "overwhelming" that the Defendant was the contracting party and that the change of name of the other entity was made in order to bolster an "obviously weak argument" that it was the contracting party. 
2. The second issue was whether the Defendant was bound by the terms of the mandate.  DL Invest Group argued that nobody with authority entered into the mandate.  The court applied English law to the question of apparent or ostensible authority, as the governing law of the mandate.  The court found that the individual held out as the Chairman and CEO of the Defendant, and who signed the mandate, had ostensible authority and that there was nothing to put Xtellus on notice of the need to question that authority.  The court agreed that, absent more, there was no general duty of inquiry when dealing with a company via a person believed to act as an officer of the company.  Polish law applied to the separate question of actual authority.  Under Polish law the Defendant could be bound by a "Prokurist" (proxy) acting alone.  The court found that the Defendant in any event plainly ratified the mandate, through the actions of the Prokurist after the mandate was entered into. 
3. Thirdly, DL Invest Group argued that the trigger event for the success fee did not occur, because the lending and borrowing entities were not those referred to in the mandate (financing was provided by Macquarie Euro Ltd rather than "Macquarie Capital" and it was provided to another group entity and not the Defendant).  On these contractual interpretation arguments, the court found that an informed bystander, applying commercial common sense, would have understood that Xtellus was entitled to the success fee. 
4. Lastly, against the weight of documentary and witness evidence, DL Invest argued that Xtellus had not performed adequate services to earn the success fee.  The court found that Xtellus played a vital role in securing the financing and was "easily satisfied" that it provided the necessary services. 

Xtellus was awarded the EUR 1.8m success fee claimed, plus interest.  As a result of, amongst other issues, the above referred findings on the dishonesty of key witnesses, the judge sanctioned DL Invest Group for their conduct in the proceedings by awarding Xtellus indemnity costs, the highest level of costs recovery. 

Xtellus Capital Partners Inc v DL Invest Group PM SA [2025] EWHC 1989 (Comm)