[2010] EWHC 1883 (Comm)

Stephen Hofmeyr Q.C. and N.G. Casey; David Allen Q.C. acted for the 1st and 2nd Defendants respectively. Were the defendant yacht brokers the “effective cause” of the sale of the super yacht Darius by Petersham Holdings Limited (“Petersham”) to Paragon International Limited, the corporate vehicle of the Al Futtaim family of the UAE? If the answer to the question is “yes”, what sum is the first defendant (“Edmiston & Co”) entitled to be paid by way of commission.

CASE BRIEFING Boris Berezovsky & another v Edmiston & Company Limited & another On 26 July 2010, Mr Justice Field handed down Judgment in the above matter. The dispute arose out of the sale of a luxury yacht, the DARIUS (“the Yacht”) while she was still under construction. The Yacht was being built for Mr Berezovsky at the Lürssen shipyard in Germany. Mr Berezovsky was, however, unable to meet the instalments of the purchase price as they fell due. He therefore instructed Edmiston & Company Limited (“Edmiston & Co”), a yacht brokerage, to find a buyer for the Yacht. There was no written brokerage agreement. Edmiston & Co in turn instructed Merle Wood & Associates Incorporated (“Merle Wood Inc”) as sub-brokers on the transaction. Merle Wood Inc identified an Emirati family, the Al Futtaims, as potential purchasers of the Yacht. Merle Wood Inc provided the Al Futtaims with information about the Yacht through the captain of one of their other vessels. Following receipt of this information, the Al Futtaims (unbeknownst to Edmiston & Co and Merle Wood Inc) approached the Lürssen yard directly to make enquiries about the Yacht. In the event, they purchased the Yacht for €240 million. Two principal questions arose for decision: (a) was Edmiston & Co entitled to commission on the sale; and (b) if it was, what was the appropriate rate of commission? Stephen Hofmeyr Q.C. and N.G. Casey acted for Edmiston & Co. An entitlement to commission? It was common ground between all the parties that, in order to establish an entitlement to commission, Edmiston would have to show that it had been an “effective cause” of the sale of the Yacht. Mr Berezovsky contended that the actions of Edmiston (through the offices of Merle Wood Inc) were not an effective cause of the sale. He relied on the fact that neither Edmiston nor Merle Wood Inc had elicited a firm offer from the Al Futtaims or been involved in the price negotiations. The Judge rejected these submissions. He held that Merle Wood Inc’s approach to the Al Futtaims had sparked the Al Futtaims’ interest in the Yacht; and that no subsequent event had broken the chain of causation between that initial approach and the ultimate purchase of the Yacht. The fact that Edmiston & Co had not been involved in the negotiations did not affect its right to commission. On this last point, the Judge referred to Allan v Leo Lines [1957] 1 Lloyd’s Rep. 127. In that case, which turned on very similar facts, Devlin J had remarked that: “[i]f a broker effects an introduction and is willing to go on with the usual business negotiation, it hardly lies in the mouth of an owner who takes it out of his hands to say that he has made no further contribution”. Echoing that language, Field J observed that: “The introductory role played by [Merle Wood Inc] through Captain Wrigley was … an extremely valuable one. Edmiston would have expected to have been involved in the negotiations that resulted from the introduction. They were prevented from doing so by Mr Berezovsky for the reasons I have set out above. But as Devlin J observed, in these circumstances it can hardly lie in the mouth of Mr Berezovsky to contend that their lack of involvement in the negotiations disentitles them from a commission, the negotiations being the direct result of [Merle Wood Inc]’s introduction.” The rate of commission There was some dispute between the parties as to whether or not a rate of commission had been agreed. The Judge found that when Edmiston & Co was instructed by Mr Berezovsky, it had indicated that a commission rate of 2.5% would be acceptable if the Yacht were to sell for more than €300 million. He also found that the reasonable expectation of all concerned was that if the Yacht sold for a lower sum, the commission rate would increase. Against that background, he found that the appropriate rate of commission on a sale at €240 million was 3% (which yielded a sum of €7.2 million).