Contractual interpretation: eSIMplified

In Kigen v NOR Capital, the High Court was asked to interpret a clause to determine whether a “Success Fee” was payable by one party to the other. In a useful illustration of how to apply the established principles of contractual interpretation, the court found no Success Fee was payable.

Background - financing for SIMs

The parties entered into an agreement for NOR Capital to assist Kigen, a leader in the eSIM market, in obtaining a capital investment. NOR Capital did not find any “external” investors. Ultimately, Kigen obtained additional funding from its parent, SoftBank Group. No breach of contract was alleged. The dispute arose over whether a Success Fee was due from Kigen to NOR Capital under a particular clause in the agreement.

The clause required Kigen to pay NOR Capital a Success Fee if a “Capital Raising Transaction” was completed within a certain period. In calculating the Success Fee, the clause indicated that there was “[n]o charge for funding provided by … Softbank Group Corp” but subsequently stated that “[t]here will be a minimum Success Fee of GBP 500,000 regardless of the source of the funding”.

High Court applies established principles

The court recalled the familiar principles of interpretation and accepted that the clause was capable of being read in two ways. Carrying out the iterative process of interpretation, the Court first considered the language of the clause by itself, then the clause within the wider agreement, and finally the factual background and commercial implications of the rival interpretations.

At the first stage, the court marginally favoured Kigen’s interpretation, noting the prominence of the words “no charge” in the description of the fee calculation, compared with the location of the sentence dealing with the minimum Success Fee. The court, however, stated that it was neither necessary nor appropriate to reach a conclusion based on the clause alone. 

Considering the wider agreement, the court held that its terms contemplated NOR Capital being engaged to find and “secure” external investors. This was also consistent with the factual background. For Kigen to pay a Success Fee in these circumstances would therefore make little commercial sense.

The court found that the minimum Success Fee was intended to apply only where a Success Fee was already payable. The words “regardless of the source of the funding” simply dealt with situations where funding had come from both internal and external investors. 

With this judgment, the High Court provides a neat illustration of the application of established principles of interpretation.

Judgment: Kigen v NOR Capital