A success fee clause entitles a professional adviser to fees on transactions that were completed after the termination of the advisory contract, and which the adviser did not bring about. This clause, also known as a ‘tail gunner clause’ (see Edmond de Rothschild Securities (UK) Ltd v Exillon Energy plc [2010] EWHC 676; Eminent Investments (Asia Pacific) Limited v Dio Corporation [2020] HKCFA 38), is commonplace in financial advisory services.

The provision was considered in Deloitte Corporate Advisory Services Sdn Bhd v Lim Tham Cheng & Ors. [2024] 10 CLJ 408.

The tail gunner clause in the Deloitte case read as follows:

“The second element will be a success fee which is contingent upon the completion of the Transaction. The success fee (exclusive of GST or other applicable taxes and expenses), which will be payable on completion from the proceeds of the Transaction before these are remitted to the Client…”

“If we do not continue to work together to a successful completion, but you subsequently complete the Transaction within 24 months of termination of this agreement with any party previously approached by ourselves, either directly or indirectly, or with whom discussions were held during the term of this Engagement Letter (as advised to you in writing), we would consider this to be a successful completion and a fee would be payable to us on the same basis as if we had continued.”

Kenneth St. James J. held that the provision served as safeguards for the adviser:

“[30] It is a safeguard for P because if the Transaction does not go to completion for some reason or another, but later, also for some reason or another, the negotiation gets revived—and this time it leads to completion—then P still secures their Success Fee; P still gets paid the Success Fee.

[31] It is also a safeguard because if the Transaction does not get to completion because of some objectionable (improper) intention on the part of any of the contracting parties in the Transaction, namely either the intended buyer or any of Ds, to intentionally terminate the negotiations when it is close to completion, to avoid having to pay P their substantial Success Fee—this “Other term” will secure the payment of the Success Fee.

[32] To put it in another way, P’s work and services may have put all the legal terms and mechanisms and agreed particulars in place—for the Transaction to be completed. P is not a contracting party in the Transaction. The parties to the Transaction, however, could terminate negotiations, and later resume negotiations to completion, but this time side-lining P from being involved in completing the Transaction, perhaps rationalising that P’s services are no longer required.

[33] It is a safeguard for P also because this “Other term” provides that if the parties have in their minds to carry out such plans alluded to above— whatever may be the intention or purpose—then they have to wait for two years (the 24-month period stated in the “Other term”) to pass before they revive negotiations to bring the Transaction to a successful completion. Only then will Ds’ obligation to pay P the Success Fee lapse.”