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Corporate Consultants Win $300,000 Success Fee

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

Corporate consultants who assisted a company in seeing off a shareholder rebellion have won the right to a $300,000 success fee after a judge rejected arguments that they had done nothing to deserve such an unwarranted windfall.

The consultants had been paid $50,000 a month to advise the company on how best to deal with a shareholder who had made public criticisms of the board and had indicated its intention to convene an extraordinary general meeting with the objective of removing the company’s chairman from office. In the event, the shareholders’ motion was resoundingly defeated.

Under the terms of an appointment letter, the consultants were entitled to a success fee if the rebel shareholder reduced its shareholding in the company from 12 per cent to below 5 per cent. That event occurred some months after the consultants’ role in advising the company had effectively ceased.

The company argued that the shareholder had disposed of its shares as a result of a favourable price that had arisen in the context of a takeover bid. It was submitted that the consultants had contributed nothing to the desired outcome.

However, in upholding the consultants’ claim, the Court found that they did not need to show that their advice had been an ‘effective cause’ of the shareholder selling its shares. The consultants’ interpretation of the appointment letter made business common sense and its success fee could not be viewed as a windfall.

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