Client success! Dispute over payment of remuneration won despite withdrawal of subsidy – judgment in favour of consulting company

The law firm’s client was a company engaged in consulting activities and with extensive experience in obtaining public aid, including funds from the European Union’s structural funds.

What was the dispute about?

The parties to the lawsuit signed a contract for the execution of a project application, the subject of which was the preparation by the clients of the law firm of an application with annexes as part of the Regional Operational Programme of the Warmian-Masurian Voivodeship for 2014-2020.

The claimant fulfilled its obligations under the contract and prepared the relevant application for the respondents, which resulted in the qualification of the project for co-financing under the project. In connection with the performance of the contract and the claimant’s acquisition of the right to commission remuneration, the claimant issued a VAT invoice.

The respondents did not pay the due remuneration in full, which became the basis for the claim. They disputed the claim submitted in the statement of claim both as to the principle and the amount , indicating that they had resigned from signing the agreement on co-financing with the implementing institution, thus the remuneration was not due. They also raised a plea of limitation.

Pursuant to the Agreement, in consideration of the execution of the application, the Defendants were to pay the law firm’s clients a commission remuneration in the amount of 2.75% of the amount of project co-financing. The consulting company acquired the right to the commission fee at the moment the project was qualified for co-financingunder the programme, by which the parties understood the announcement of the results of the competition by an authorised body and inclusion of the Defendants on the list of entities qualified for co-financing.

The agreement provided for payment of the commission remuneration in several tranches. The first of the tranches, i.e. 30% of the remuneration due, was to be paid within 30 days of the announcement of the competition results.

The Respondents argued that they had learnt about the qualification of the project for co-financing from a third party, and that additional security was required to obtain co-financing, which exceeded the Respondents’ financial capacity, and therefore they considered that they had no possibility of meeting these requirements and decided not to proceed with further actions leading to the implementation of the Project. Previously, the Defendants were allegedly unaware of what security would be required and considered that it was our Client who was negligent in failing to inform them of the conditions necessary to meet in order to obtain this funding.

Main points of dispute

The Court pointed out that the purpose of the agreement was the preparation of the application with appendices by the Law Firm’s clients and the elimination of possible deficiencies in its content at further stages of the procedure, and not the absolute purpose of causing the award of a grant. It is one thing to determine the remuneration – in this case, its successive tranches – of a success fee nature, and another thing to stipulate the condition of a result in the agreement – which in the present case we did not deal with.

At the same time, if due to the Defendants’ omission, the project was not implemented, and thus the target agreement was not signed and the funds were not paid out, the basis for calculating the remuneration was the amount of public co-financing applied for, as indicated on the list of entities qualified for co-financing – as the remuneration in question had already become due at the moment the project was qualified for co-financing under the programme, by which the parties understood the announcement of the results of the competition by an authorised institution and inclusion of the Defendants on the list of entities qualified for co-financing.

The Defendants also pointed out that the content of the agreement clearly indicated the method of representation of both Parties when entering into the obligation in question. On the Respondent’s side, it was both Partners in a civil partnership. However, at the end of the aforementioned contract on the side of the Employer (the Defendants), the signature of only one partner appears . One of the Defendants was allegedly never a signatory to this contract and never consented to or acknowledged it. And this was alleged to be the basis for its annulment.

Judgment in favour of the Advisory Firm

After a trial lasting approximately three years, the Court refused to give credence to the Defendants’ testimony with regard to their claims that one of the Partners had no knowledge of the agreement and that any actions the other Partner took took place without his knowledge and approval.

In view of the above , the Court held that the agreement was validly and effectively concluded, not only with respect to the Shareholder who signed the agreement, but also with respect to the Shareholder bound by the effect of his actions.

Moreover, the subject of dispute between the parties was the nature of the agreement concluded, i.e. whether the agreement was a contract for specific work (the position of the Respondents) or a contract of mandate (the position of the Claimant), which in the realities of this case had an impact on the limitation period. In the Court’s opinion, the agreement between the parties constituted a contract for the provision of services, which is not regulated by other provisions, and consequently, the provisions on commission apply accordingly.

This is a further confirmation that the contracts concluded by the beneficiaries with companies involved in the construction of grant applications should be viewed as contracts of mandate.

Clients were represented in the case by:

	dr Krzysztof Brysiewicz
	Magdalena Sienkiewicz