In a case which turned on the placement of one word (Cantor Fitzgerald & Co v Yes Bank Limited), the Court of Appeal held that there is a natural assumption that an adjective at the start of a list qualifies the entire list.
The decision involved Cantor Fitzgerald & Co (Cantor), a US financial firm, and Yes Bank Limited (Yes Bank) – an Indian bank. In 2019, Yes Bank urgently needed capital and Cantor agreed to provide services in exchange for a USD500,000 retainer and 2% of the capital raised. The relevant wording stated:
“We have been advised by the Company that it contemplates one or more financing(s) through the private placement, offering or other sale of equity instruments in any form, including, without limitation, preferred or common equity, or instruments convertible into preferred or common equity or other related forms of interests or capital of the Company in one or a series of transactions (a Financing)”. (Emphasis added)
Funds were not raised in time and the bank’s regulator intervened, imposing a moratorium. Subsequently, the State Bank of India acquired a 49% shareholding in Yes Bank, which led to a public offer followed by a further public offer (FPO). Although Cantor was not involved in the FPO, it included three investors with whom Cantor had been in discussions. Cantor therefore claimed it was owed 2% (over USD7m) of the relevant investors’ subscriptions on the basis that the FPO fell under the Financing definition. Cantor argued that the word private was intended to apply only to the next word placement. However, Yes Bank contended that the word private at the beginning of the list qualified the entirety of the list.
In coming to its decision, the Court of Appeal referred to principles of contract construction, noting that the court must consider the ordinary meaning of the words used in the context of the contract as a whole and together with the factual and commercial background, which must exclude prior negotiations. The goal is to determine the objective intention of the parties and what a reasonable person with the background knowledge possessed by the parties would have understood by the language in the contract.
The court held that, although not a firm grammatical rule, a reader will naturally tend to assume that an adjective at the start of a list qualifies the entirety of it. In this case, the word “private” qualified all the subsequent list, meaning that the agreement between Cantor and Yes Bank applied only to private forms of financing and not to the FPO.
Cantor further argued that private placement was a term of art in India, however the Court of Appeal rejected this, holding that the term private placement is used internationally and is understood well beyond India.
This case serves as a reminder for practitioners to be mindful of contractual interpretation and the need for careful drafting. In practice, if only part of a list should be qualified then the adjective should not be placed at the start of the sentence. An even better option is to any divide distinct elements of a list completely. When using industry-specific “terms of art” contractually, it is advisable not to assume that they will be interpreted in the same way – either by another party or the court.
Daniel Fournier