Journal of International Banking & Financial Law/2010 Volume 25/Issue 2, February/Articles/Bank Fee
Dispute - (2010) 2 JIBFL 127
Journal of International Banking and Financial Law
(2010) 2 JIBFL 127
1 February 2010
Bank Fee Dispute
ING Bank NV v Ros Roca SA [2010] EWHC 50 (COMM) (Queen's Bench Division, Commercial Court)
(Walker J) (21 January 2010)
Jonathan Lawrence
K&L Gates LLP
jonathan.lawrence@klgates.com
www.klgates.com
© Reed Elsevier (UK) Ltd 2010
FACTS
Ros Roca SA ('Ros Roca') is a waste and environmental services company. Ros Roca wanted to purchase
an English company. ING Bank NV ('ING') acted as Ros Roca's financial adviser in respect of the acquisition.
A retainer letter dated 31 October 2006 stated that ING's fees would, in part, depend on a formula: 'the Enterprise Value/EBITDA 2006 entry multiple implicit in the Transaction'. This is called the 'Entry Ratio'.
The purchase did not complete until December 2007. Ros Roca argued that the current EBITDA (Earnings
before interest, taxes, depreciation and amortisation) at the time of the transaction in 2007 was the correct
denominator. ING's case was that the denominator must in all cases be EBITDA in 2006. Depending on the
interpretation of the Entry Ratio, the resulting fee would be approximately EUR 944,000 according to Ros
Roca or EUR 6,700,000 according to ING.
CONCLUSION
The court found in favour of Ros Roca's interpretation of the Entry Ratio. Walker J cited Lord Hoffmann in
Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38:
'...there is not... a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that
it should be clear what a reasonable person would have understood the parties to have meant.'
Ordinarily one compared like with like. If the denominator of the Entry Ratio was indeed an EBITDA for operations in 2006, then one might expect that the numerator would be an Enterprise Value of the same operations in 2006.
However, neither party considered this was a tenable construction of the words. It was clear that something
had gone wrong with the language and, therefore, what would a reasonable person have understood the par-
ties to have meant? Only by using EBITDA which was 'current' for the purchase could one measure the extent to which the purchase price constituted a true assessment of the company's intrinsic worth by reference
to its earnings. There was no obvious relationship between a denominator of EBITDA 2006 and a numerator
achieved by calculating the Enterprise Value when EBITDA 2006 was no longer current. A reasonable person would have understood the parties to have included references to 2006 by oversight.