Unjust Enrichment – Quantum Meruit in the Formula 1 “Piranha Club”

In AMP Advisory and Management Partners v. Force India Formula One Team Limited the claimant sought a commission in respect of the introduction and negotiation of a sponsorship agreement. The claim was brought in both contract and (in the alternative) on the basis of a quantum meruit.

The claimant’s claim on a contractual basis failed because the Judge decided that there had been no concluded agreement. This left the claim to a quantum meruit as the claimant’s only possible remedy.

At the time of the introduction the defendant was in desperate need of funding but there was very little time to conclude any possible  agreement before the start of the 2017 Formula 1 season. The defendant used the claimant as its sole means of communicating with the sponsor for an initial period of time and also used the defendant as a sounding board for ideas and to gauge the attitude of the sponsor to certain issues. It did so because of the shortness of time and the importance of finalising the agreement.

During this period the claimant was repeatedly seeking reassurance that it was to be paid for the services it was providing and was pressing for written terms that it had sent to the defendant to be signed. The defendant never signed such terms, but (by its commercial director) deliberately gave the claimant the impression that it would be paid for its services when he had not believed that this was so. He did this because he was worried that if he had told the claimant that it would not be paid, it might use its influence to block the agreement and/or take it to another Formula 1 team.

The defendant nevertheless argued that the claimant was not entitled to a quantum meruit because within Formula 1 the attitude was that unless an agreement was signed it was not (even if orally agreed) binding. It contended that this was (in part) because of Formula 1’s reputation as the “Piranha Club”. The defendant argued that even if it had willingly benefited from the claimant’s services in the knowledge that the claimant expected to be paid for those services and even if the defendant had confirmed that expectation, the claimant could not recover a quantum meruit because the defendant had not signed an agreement. Expert evidence was called which confirmed that signed agreements were practically universal in Formula 1.

The Judge however agreed with the claimant’s submission that, while it may have taken the risk that genuine negotiations for a written contract would have broken down, it had not taken the risk that the appearance of genuine negotiations that had been given by the defendant masked a decision that no written contract would in fact be entered into. The fact that the defendant had sought, accepted and benefitted from the claimant’s services, knowing that the claimant expected to be paid, but failing to reveal that it would not be given a contract entitling it to payment, made it unjust to allow the defendant to retain the benefit of those services.

On the facts the Judge decided that the claimant had not introduced the sponsorship opportunity but awarded it the sum of £150,000 to reflect the claimant’s services in assisting in progressing the sponsorship.

The case is a reminder that where a party fails to deal in good faith with negotiations for a contract, whilst receiving services in expectation that a contract is genuinely in prospect, the court is able to deprive the receiving party of any benefit it obtains.

William McCormick QC and Max Cole, instructed by Sue Thackeray of Kinsley Napley LLP represented the claimant.

 

26th September 2019