H&P Advisory Ltd v Barrick Gold (Holdings) Ltd EWHC 562 (Ch)

Background Fact

In H&P Advisory Ltd v Barrick Gold (Holdings) Ltd EWHC 562 (Ch), the High Court(Business and Property Courts, Chancery Division) examined whether a boutique investment bank, H&P Advisory Ltd ("H&P"), had an enforceable right to a multi-million-dollar success fee allegedly promised by Randgold Resources (now Barrick Gold (Holdings) Ltd) in connection with a proposed merger. The dispute arose in the context of investment banking M&A practice, where firms routinely provide substantial "pitch work" without formal engagement letters, hoping to secure an advisory mandate and a success fee calculated as a percentage of transaction value.

The Dispute – H&P’s Arguments

Oral Agreement: H&P contended it was orally appointed by Randgold's CEO and CFO at meetings in April 2018 - first at Jackson Hole on 13 April and later in London on 24 April - to serve as Randgold's financial adviser for a proposed merger with Barrick, with H&P claiming this verbal appointment entitled it to a success fee of at least USD 10 million, rising to USD 18 million or more, comparable to what rival adviser Michael Klein was paid.

Quantum Meruit (Unjust Enrichment): Alternatively, H&P argued that extensive pitch work, financial modelling, and strategic introductions materially benefitted Randgold by acting as a "go-between" to facilitate discussions and providing detailed financial analysis that helped shape the ultimate nil-premium merger announced on 24 September 2018. H&P insisted it was unjust for Randgold to retain these services without full compensation, particularly after the deal closed, creating what was then the world's largest gold mining group.

Randgold’s Defence

Randgold denied any contractual fee commitment, emphasising that informal pitch work is a well-established industry practice, performed at the bankers' own risk unless a formal engagement letter is signed. Randgold viewed H&P's efforts as standard "courting" behaviour by investment advisers competing withother banks, particularly as Randgold had already engaged other firms including CIBC and Barclays.

Randgold (the defendant) denied any contractual fee commitment, emphasising that informal pitch work is a well-known industry practice, performed at the bankers’ own risk unless a formal engagement letter is signed. Randgold viewed H&P’s efforts as standard “courting” behaviour by investment advisers competing with other banks - especially as Randgold had already engaged other firms like CIBC and Barclays.

Court’s Key Finding

No Enforceable Oral Agreement

The Court rejected H&P's claim that any binding success fee contract arose from meetings in April 2018, finding that Randgold representative’s responses to H&P's fee proposals were too indefinite to constitute unequivocal acceptance, and that no contract of the form pleaded was ever entered into. The Court emphasised the complete absence of any documentary "footprint" - no standard engagement letter, no follow-up email confirming the alleged agreement, and no parallel communications referencing a multi-million-dollar success fee.

Quantum Meruit Judgment of USD 2 Million

‍Quantum meruit is a legal principle derived from the Latin for “as much as he deserves.” It allows a party who has provided valuable services (or goods) to recover reasonable compensation, even if no binding contract was ever formed or if a contract exists but does not cover the services in question. Put differently, when one party confers a benefit on another, and it would be unjust for the recipient to retain that benefit without paying for it, quantum meruit ensures the service provider receives fair payment.

Despite rejecting a formal contract, the Court ruled that H&P conferred substantial value on Randgold by acting as an early-stage "go-between,"facilitating discussions, providing strategic modelling, and effectively "catalysing discussions" that led to the merger, with a basis of understanding established in the conversation between H&P and Randgold’s representative where the latter failed to disabuse H&P of its belief that H&P would be appointed, creating a common basis that subsequently failed. Relying on unjust enrichment principles - specifically failure of basis - the Court found H&P's partial compensation warranted, with failure of basis occurring where "the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself".

Randgold had internally acknowledged a moral or commercial obligation to pay H&P around USD 2 million, which the Court treated as the best evidence of market value for those preliminary services, representing Randgold's own "objective manifestation" of the value it placed on H&P's work.

Risk-Taking and Industry Norms

‍The Court underscored that it is common for investment banks to expend significant resources at their own risk, hoping to secure a "formal mandate" later, but rejected the "disappointed risk-taker" defence because in H&P’s representative's mind the risks had paid off when the basis of understanding arose, and his claim fell to be evaluated under that basis. Because H&P remained outside the formal mandate process, its restitution award was far lower than the success fee it had sought, with the Court rejecting both experts' valuation approaches in favour of the Defendant's own internal assessment.

‍Practical Lessons for M&A Disputes and Arbitration

• Document Fee Expectations: Even in a market tolerant ofupfront "free" pitch work, the Court emphasised that trulyenforceable fee rights require a clear written record of engagement terms,noting that every other adviser on the merger concluded an engagement letter.
• Risk of Informal "Pitch Work": Advisers who invest substantialtime and resources without a mandate do so at peril; if the deal closes, acourt may award restitution, but the sum could be modest relative to theadviser's success fee expectations.
• Unjust Enrichment vs. Contract: Courts can grant quantum meruitwhere no contract exists but a party confers real value, with this approachgrounded in whether both sides shared a "basis" (i.e., mutualunderstanding of payment obligations) that later failed, to be determined objectivelyby reference to whether a reasonable person in the defendant's position wouldhave understood that receipt of the enrichment was conditional.
• Industry Norms and Risk: In investment banking M&A,"at-risk" pitch work is standard practice, with the H&Pexperience demonstrating how a bank's substantial input before formalengagement might yield a partial award based on the client's own internalvaluation, though falling far short of matching the "lead adviser's"multi-million-dollar success fee where no binding agreement was concluded.