Consultant’s success fee not dependent on proving success
A public company has been ordered to pay a consultant a commission fee, despite there being no evidence that he contributed to the success of a special business project.
In January 2013, one of the company’s shareholders had publicly criticised the board and ordered a meeting with the intention of ousting the chairman.
The company hired a consultant to oversee the discussions. His brief was to end the shareholder’s campaign and resolve the situation by reducing his shares to less than 5%.
If this was achieved then the consultant would be paid a success fee. The meeting took place in March 2013, and the shareholder’s campaign was ended. However, he kept all his shares so no fee was payable at that point.
The consultant stopped working for the company in May 2013.
At the end of 2013, the company was subject to a takeover bid and the shareholder sold all of his shares. At this point, the consultant claimed he was entitled to his success fee. The company refused, stating that the success had been achieved months after he had gone.
The High Court ruled in favour of the consultant. It pointed out that it was extremely difficult to measure how much the consultant had contributed to the successful outcome for the company.
To set a precedent that consultants need to prove their right to a success fee would run the risk of future valid claims failing because of a lack of proof.
Please contact Jon Alvarez if you would like more information about the issues raised in this article.