A company entered into a finder’s fee agreement with a middleman, under which it committed to pay him a commission in exchange for establishing a connection between the company and an investor who would invest in it or its affiliates. Approximately seven years after the contact initiated by the middleman between the company and a potential investor was severed, that same investor invested in an affiliated company without any further contribution from the middleman, who learned of the investment through media reports.
The Court dismissed the middleman 's claim for fees as he was not the "efficient factor" of the investment. A party claiming entitlement to business brokerage fees must prove two cumulative conditions: (a) that a brokerage contract was entered into between him and either or one or both parties to the transaction, and (b) that he was the efficient factor of the transaction. In the case of a "Finder" - a middleman whose role is limited to locating partners or investors and introducing them to his clients - there is an increased need to rely on supplementary tests to establish entitlement to a brokerage commission. One of the tests established for determining whether a middleman was the "efficient cause" is the lapse of time between the date of the original proposal and the date the transaction was concluded. In this case, although a contract was indeed signed between the middleman and a party to the transaction and the middleman performed his role by introducing the parties, the middleman failed to prove that he created the connection that led to the transaction. The lapse of 7 years from the introduction of the investor until the date of the investment, as well as the 2-year period from the time the middleman learned of the investment until his demand for commission, weakens the contention of a causal link between the introduction he made and the transaction concluded 7 years later. Accordingly, he is not entitled to a commission.