High Court Finds Investment Bank Entitled To Success Fee Under Mandate Executed By Company's Agent Acting With Apparent Authority

The High Court has found in favour of an investment bank in its claim against a company for the payment of a success fee due under a mandate, finding that the company's agent had apparent/ostensible authority to bind it: Xtellus Capital Partners Inc v DL Invest Group PM SA [2025] EWHC 1989 (Comm).

This is the latest decision in a line of cases addressing the scope and effect of apparent/ostensible authority (see our previous blog posts here) and considering the recoverability of success fees (see our previous blog posts).

The decision will be of interest to financial institutions as it provides a good case study of the requirements to establish apparent authority. It reaffirms the principle from Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 that apparent authority arises where a principal represents, through words or conduct, that an agent has authority to act on its behalf, and the counterparty relies on that representation. On the facts of the present case, the court placed particular weight on communications from the Polish company's Head of Legal, which implicitly accepted that the contract would be executed by the agent in question. Specifically, the Head of Legal made changes to the contract prepared by the investment bank, which provided for the contract to be executed by the agent, but did not mention or change the intended signatory on behalf of the company. The court found that this was a plain representation on behalf of the company that the agent had authority to bind it. While this could raise concerns for legal teams, the Head of Legal had actual authority to bind the company under Polish law, even when acting alone. This is in line with Freeman, which confirms that a representation made as to an agent's authority to act, must be made by a person who has "actual" authority to manage the business of the company – which included the Head of Legal on the facts of this case.

The decision also reflects the guidance in Law Debenture Trust Corp. v Ukraine [2023] UKSC 11 (see our blog post), which clarified that a party is generally entitled to assume that the person they are dealing with has the authority they appear to have – unless the circumstances are such that a reasonable person in their position would have investigated that authority, and they failed to do so. In particular, the court emphasised that there is no general duty of inquiry "where one deals with a company via a person that one believes acts as an officer of the company". Here, the court found there was nothing at all to put the investment bank on notice of the need to question the agent's authority, and so the company was bound by the terms of the contract.

The decision is also of interest for its treatment of success fee arrangements. It highlights that allegations regarding the sufficiency of the investment bank's work were irrelevant to the court's construction of the contract. The mandate did not require a minimum threshold of work or output for the success fee to be payable; the only requirement was that the contractual conditions for payment were satisfied. This reinforces the importance of precise drafting in engagement letters and mandates.

The company has applied to the Court of Appeal for permission to appeal.

We consider the decision in more detail below.

Background

In 2021, a US broker-dealer and specialist investment bank (the Investment Bank), was engaged by a Polish company, DL Invest Group PM SA (DL), to assist in raising up to EUR 200 million in debt finance for its Polish real estate investment group. The engagement letter (the Mandate) provided for a success fee of 1.25% of any financing raised, including post-termination financings with named "Potential Investors" (Macquarie Capital and VTB), within 18 months of termination. The Mandate was executed by Mr Leszczyński, the CEO and Chairman of DL in July 2021, and was governed by English law.

The Mandate was terminated in August 2022. Shortly thereafter, Macquarie Euro Limited (part of the Macquarie group) provided financing of over EUR 143 million to an SPV within DL's group. The Investment Bank subsequently issued an invoice to DL requesting payment of its success fee, claiming EUR 1.79 million plus interest under the Mandate. DL refused to pay, leading the Investment Bank to commence proceedings.

In its defence, DL argued that: (a) it was not a party to the Mandate, and the correct counterparty was another entity (CCI); (b) if DL was the correct counterparty, Mr Leszczyński had no power to bind it; (c) if DL was bound by the Mandate, the obligation to pay was not triggered; and (d) in any case, the Investment Bank did not do enough to earn the success fee.

Decision

The High Court found in favour of the Investment Bank on the basis that there was a binding contract in place between the parties under which DL's obligation to pay the success fee had been validly triggered. The key issues which will be of interest to financial institutions are set out below.

Apparent authority of Mr Leszczyński to bind DL

Having found that DL was the correct counterparty to the Mandate (as per Hamid v Francis Bradshaw [2013] EWCA Civ 470), the court held that DL was bound by the Mandate on the basis of Mr Leszczyński's apparent authority.

The court noted that, while the issue of actual authority is governed by the law that governs the relationship between the principal and agent (ie Polish law), whether Mr Leszczyński had apparent authority must be determined by the law of the contract (ie English law). As Mr Leszczyński had no actual authority to bind DL, the main issue was therefore whether he had apparent authority. Referring to Freeman, the court set out the key requirements for establishing apparent authority, as follows:

1. there was a representation by the company to the contractor that the agent had authority to enter the contract on its behalf;
2. the representation was made by a person or persons who had "actual" authority to manage the business of the company;
3. the contractor was induced by such representation to enter into the contract, ie he relied upon it; and
4. under its memorandum or articles of association the company had capacity either to: (i) enter into the contract; or (ii) to delegate authority to enter into the contract to the agent.

In the court's view, DL held out Mr Leszczyński as having the apparent authority to contract on its behalf, highlighting the following documents/conduct, in particular:

• Mr Leszczyński's first email to the Investment Bank used the same format as other DL representatives, including the President of the Management Board of DL and the Head of Legal for DL.
• The draft Mandate described Mr Leszczyński as CEO and indicated he would execute the agreement on behalf of DL. While the Mandate was prepared by the Investment Bank, the Head of Legal for DL "adopted" the Mandate, and in making changes to it, accepted that the Mandate would be executed by Mr Leszczyński. The court said that the Head of Legal was plainly representing (on behalf of DL) that Mr Leszczyński had authority to bind DL. As a matter of Polish law, the court held that the Head of Legal (who was the "proxy" for DL) had actual authority to bind DL at the relevant time.
• A corporate presentation sent by the CFO of DL to the Investment Bank in July 2021, referring to Mr Leszczyński as the person in charge and "responsible for strategy, management and supervision" of business and the CEO. As a matter of Polish law, the court held that the joint acts of two management board members together or with the proxy (not necessarily at the same time), was sufficient to bind DL. In the court's view, the presentation was plainly DL's document and could only be understood as a representation by DL that Mr Leszczyński was able to bind it.

The court underlined that a contractor is generally entitled to assume that the person they are dealing with has the authority they appear to have (this is the essence of the doctrine of apparent authority). However, if a reasonable person in the shoes of the contractor would have taken steps to investigate that person's authority, but the contractor has failed to take those steps, the general entitlement falls away (as per Law Debenture Trust Corp). In particular, the court emphasised that there is no general duty of inquiry "where one deals with a company via a person that one believes acts as an officer of the company".

In the present case, there was nothing at all to put the Investment Bank on notice of the need to question Mr Leszczyński's authority. Accordingly, DL was bound by the terms of the Mandate.

Obligation to pay success fee under the Mandate

The court considered and rejected the suggestion that DL's obligation to pay the success fee was not triggered under the Mandate, construing a clause which provided for the circumstances in which the Investment Bank would be entitled to its fee after termination.

DL argued that the fee was not due, because financing was provided by Macquarie Euro Limited (not Macquarie Capital, the entity named as a "potential investor" in the Mandate); and that financing was not provided to DL itself.

Applying the well-established principles on contractual interpretation from Rainy Sky SA & Ors v Kookmin Bank [2011] UKSC 50 and Arnold v Britton & Ors [2015] UKSC 36, the court said that in its view an informed bystander considering when the Mandate was concluded would understand that Macquarie Capital would include Macquarie Euro Limited, a company within the Macquarie group. Commercial common sense made it plain that the words should be read to include any entity within the Macquarie group of companies. Any other approach would require some entities within the Macquarie group to be excluded but no basis for such exclusion had been advanced. Further any such exclusionary approach would be contrary to commercial common sense because it would render the application of two fundamental elements of the Mandate deeply uncertain: when the Investment Bank could expect to be paid and to whom DL would be entitled to approach after the Mandate was terminated.

Additionally, it was satisfied that the Mandate was to be read as creating an obligation to pay if any of the "DL Invest Group" completes (either wholly or in part) financing with one of more of the potential investors. In its view, the SPV was part of the DL group and had "completed" the relevant financing because it executed the final agreement with Macquarie Euro Limited.

Services provided by the Investment Bank

Finally, the court considered and rejected the suggestion that the Investment Bank had not done enough to earn the significant success fee that it was claiming.

The court noted that the Mandate did not impose a minimum threshold of work by reference to hours or output to be met before payment was due. Instead, it referred broadly to the Investment Bank "assisting" DL to raise financing, the provision of "advisory services" and services in "developing and arranging" the finance, Additionally, it provided a non-exhaustive list of services that may be provided.

Based on the documents and the oral evidence, the court said it was clear that the Investment Bank played a vital role in securing the very substantial funding that DL wanted. For example, the Investment Bank had helped analyse financial data provided by DL and passed that on to Macquarie Capital, identified potential funders, discussed proposals from potential funders, and facilitated negotiations. In its view, it was satisfied that the Investment Bank provided services of the type required by the Mandate.

Accordingly, the court found in favour of the Investment Bank on the basis that there was a binding contract in place between the parties under which DL's obligation to pay the success fee was validly triggered.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.